Which of the following statements about stock dividends is correct?
A) Stock dividends are reported on the income statement.
B) Stock dividends are reported on the Statement of Stockholders’ Equity.
C) Stock dividends increase total stockholders’ equity.
D) Stock dividends decrease total stockholders’ equity.
When S. Dee Company bought B. Darin Company, the purchase price included a patent
valued at $15,000. The patent has 10 years remaining of its legal life, but its estimated
useful life to S. Dee Company was only 8 years. The journal entry to record the annual
patent amortization would include a:
A) debit to Patent, $1,875.
B) debit to Amortization expense, $1,875.
C) credit to Patent, $1,500.
D) credit to Amortization expense, $1,500.
Davidoff Company reported net credit of $735,000 on account for the year ending
December 31, 2016. On January 1, 2016, the Allowance for Doubtful Accounts had a
credit balance of $18,000. During 2016, $30,000 of uncollectible accounts receivable
were written off. Davidoff has experienced bad debt losses of 3% of credit sales in prior
periods. Using the percentage of credit sales method, what is the adjusted balance in the
Allowance for Doubtful Accounts at December 31, 2016?
A) $10,050
B) $10,500
C) $22,050
D) $34,500
Which of the following statements is correct?
A) A current ratio of 1.60 means the company’s current assets are probably not
sufficient to pay its current liabilities.
B) The separate entity assumption requires that the financial activities of the owners of
a company be reported on the company’s balance sheet.
C) The cost principle states that recording activities at cost will result in the balance
sheet representing the true value of the company.
D) A transaction is recorded if it has a measurable financial effect on the assets,
liabilities or stockholders’ equity of a business.
On January 1, 2016, a company issues 3-year bonds with a face value of $50,000 and a
stated interest rate of 7%. Because the market interest rate is 9%, the company receives
$47,469 for the bond.
Required:
Part a. Determine the interest expense, the cash payment for interest, and the amount of
the premium that will be amortized during the year ending December 31, 2016.
Part b. Prepare the journal entry to record the first interest payment on December 31,
2016.
This month, a company performed $517,000 of services and incurred total expenses of
$438,000. The company was paid in cash for all its services and paid cash for all its
expenses. These transactions would cause:
A) revenues to increase by $517,000, expenses to increase by $438,000, and Retained
Earnings to decrease by $79,000.
B) Cash to increase by $517,000, expenses to increase by $438,000, and Common
Stock to increase by $79,000.
C) revenues to increase by $517,000, expenses to increase by $438,000, and Cash to
increase by $79,000.
D) revenues to increase by $79,000, expenses to increase by $438,000, and Cash to
increase by $517,000.
A trial balance:
A) ensures that all journal entries have been posted.
B) is a way to check that no mistakes have been made during the accounting cycle.
C) is a report for internal use only.
D) is a way to check that all journal entries have been posted and that no mistakes have
been made during the accounting cycle.
Current liabilities are due:
A) but not receivable for more than one year or the current operating cycle, whichever
is longer.
B) but not payable for more than one year or the current operating cycle, whichever is
longer.
C) and receivable within the current operating cycle or one year, whichever is longer.
D) and payable within the current operating cycle or one year, whichever is longer.
Which of the following statements about a fiscal year is correct?
A) Companies can choose to end their fiscal year on any date they feel is most relevant.
B) Companies must end their fiscal year on March 31, June 30, September 30, or
December 31.
C) Companies can select any date except a holiday to end their fiscal year.
D) Companies must end their fiscal year on December 31.
The control components used by companies as a framework when analyzing their
internal control systems include all of the following except:
A) control environment.
B) compliance.
C) monitoring activities.
D) risk assessment.
If a company’s P/E ratio is 24 and the company’s EPS is $1.50, then the company’s
stock price is:
A) $36.00.
B) $25.50.
C) $16.00.
D) $6.25.
Which of the following is not a reason why it is especially important for companies to
have internal controls over cash?
A) Most businesses accept remote sources of payment on account.
B) The volume of cash transactions is enormous.
C) Cash is portable.
D) There is a high risk of theft of cash.
Which of the following statements is correct?
A) Valuing inventory under LIFO may produce different results depending on whether a
perpetual or periodic inventory system is used.
B) Valuing inventory under the weighted average cost method always produces the
same results using either a perpetual or periodic inventory system.
C) Valuing inventory under FIFO may produce different results depending on whether a
perpetual or periodic inventory system is used.
D) Using the specific identification method will produce different results depending on
whether perpetual or periodic inventory system is used.
Which of the following statements about gross profit is correct?
A) Gross profit = Net sales – Cost of goods sold.
B) Gross profit is recorded by a credit to the Gross Profit account.
C) A company sells $10,000 of goods. If the gross profit percentage is 32%, net income
would be $3,200.
D) If net sales are $100 and cost of goods sold is $50 then the gross profit percentage is
100%.
Which of the following statements about the use of financial statements is not correct?
A) When choosing between a company that pays steady dividends and one that retains
its earnings to support future growth, investors will always choose the company that
pays steady dividends.
B) Companies can develop reputations for honest financial reporting even when
conveying bad news.
C) Trends in a company’s net income from year to year can provide clues about its
future earnings, which can help investors to decide whether to buy stock in the
company.
D) Information in the notes to the financial statements can influence a user’s
interpretation of balance sheet and income statement information.
A company has long-lived tangible assets with a cost of $3.5 million; its Accumulated
Depreciation account has a balance of $1.1 million. Which of the following statements
is correct?
A) The book value of long-lived assets is $2.4 million.
B) The market value of long-lived assets is $3.5 million.
C) The carrying value of long-lived assets is $3.5 million.
D) The resale value of long-lived assets is $2.4 million.
Intel makes microchips from raw materials acquired from suppliers. Intel is a:
A) service company.
B) retail company.
C) manufacturer.
D) merchandising company.
Use the information above to answer the following question. The Price/Earnings ratio is
approximately:
A) 2.00.
B) 2.50.
C) 2.84.
D) 12.50.
On October 1, Robertson Company sold inventory in the amount of $5,800 to Alberta,
with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the
periodic inventory system. On October 4, Alberta returns some of the inventory. The
selling price of the inventory is $500 and the cost of the inventory returned is $350.
What journal entry (entries) will be recorded by Robertson October 4?
A) Debit Sales Returns & Allowances and credit Accounts Receivable for $500; debit
Inventory and credit Cost of Goods Sold for $350
B) Debit Sales Returns & Allowances and credit Accounts Receivable for $500
C) Debit Accounts Receivable and credit Sales Returns & Allowances for $500
D) Debit Accounts Receivable and credit Sales Returns & Allowances for $500; debit
Cost of Goods Sold and credit Inventory for $350