1) In countries, like Japan and much of Europe, fewer differences between the amount
of income reported to stockholders and that reported to the taxing authorities exist than
in the U.S.
2) The Treasury Stock account should be considered an asset account.
3) If a company is concerned about minimizing its income tax burden, it would use the
straight-line depreciation method to accomplish this objective.
4) A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis
exceeds the cost of goods sold on a LIFO basis for the current year.
5) Debenture bonds are backed by specific collateral of the issuing company.
6) Regarding the valuation of operating assets, IFRS allows companies to use fair value.
7) Because plant and equipment are reported as long-term assets on the balance sheet,
they have no impact on net income for the period until they are sold.
8) Accounting controls primarily concern safeguarding of assets and ensuring the
reliability of the financial statements.
9) Treasury notes with a maturity of three months or less that are issued by the Federal
Government are cash equivalents.
10) A partnership is a business owned by two individuals; if three or more individuals
organize a business, it must be established as a corporation.
11) Gross margin as a percentage of sales is a common analytical tool for service
companies.
12) Compound interest is a repeated calculation of the interest on the principal over
certain periods of time.
13) Depreciation is a noncash expense that is added back to net income in determining
cash provided from operating activities under the indirect method.
14) Business entities and non-business entities are both organized to earn a profit.
15) On April 1, Blake Sales decides to establish a $275.00 Petty Cash Account to
relieve the burden on Accounting.
(a) Identify and analyze the effect of this event.
(b) On August 15th, the petty cash fund has receipts for mail and postage of $124.75,
contributions and donations of $53.25, meals and entertainment of $63.85 and $32.75 in
cash. Identify and analyze the effect of the replenishment of the fund.
(c) On August 16th, Blake Sales decides to increase petty cash to $400.00. Identify and
analyze the effect of this event.
16) Which of the following statements is true regarding valuation amounts on the
balance sheet?
A.Stockholders’ equity reflects the amount the stockholders would receive upon
liquidation.
B.Assets are recorded at current cost.
C.Stockholders’ equity reflects the current market value of the stock
D.There are a variety of assumptions used in determining amounts reported on the
balance sheet.
17) On January 1, 2012, Breaker, Inc. issued $400,000, 10-year, 10% bonds for
$354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%.
The cash payment on June 30, 2012 is
A.$20,000
B.$21,200
C.$24,000
D.$17,710
18) Utah Co. sold merchandise to Big Sky Corp. on December 1, 2014, for $9,000, and
accepted a promissory note for payment in the same amount. The note has a term of 90
days and a stated interest rate of 8%. Utahs accounting period ends on December 31.
What is the actual maturity date of the note?
A.December 31, 2014
B.January 29, 2015
C.February 28, 2015
D.March 1, 2015
19) All of the following accounts have normal credit balances except
A.Accounts Payable
B.Common Stock (Capital Stock)
C.Investments
D.Service Revenue
20) Morton & Associates
Use the following five transactions for Morton & Associates, Inc. to answer the
question(s).
See the transactions to Morton & Associates.
The journal entry to record the May 15 transaction will include a debit of $1,220 to
A.Salaries Expense
B.Salaries Payable
C.Prepaid Expenses
D.Accounts Payable
21) Checks returned by a bank because customers did not have sufficient funds in their
account are called
A.Canceled checks
B.Certified checks
C.NSF checks
D.Outstanding checks
22) Which of the following is a measure of the time that it takes to convert current
assets into cash?
A.accounts receivable turnover ratio
B.cash to cash operating cycle
C.number of days sales in inventory
D.working capital
23) Convertible bonds are attractive to investors because
A.they usually carry a higher rate of interest than non-convertible bonds
B.they carry a convertible interest rate that can be increased when the prime rate of
interest increases
C.they can be converted into stock at the issuers option
D.the issuing company cannot retire the bonds before maturity
24) Which of the following statements is true with regard to contributed capital?
A.Preferred stock is stock that has been retired
B.It is very unlikely corporations may have more than one class of stock outstanding
C.The outstanding number of shares is the maximum number of shares that can be
issued by a corporation
D.The shares that are in the hands of the stockholders are said to be outstanding
25) If receipts from cash sales of $7,500 were recorded incorrectly as $5,700 in the
companys books, then this item would be included on the bank reconciliation as a(n)
A.deduction from the balance per company’s records
B.addition to the balance per bank statement
C.deduction from the balance per bank statement
D.addition to the balance per company’s records
26) Fill in the table shown below indicating the period of time over which each
intangible asset should be amortized, and indicate the amount of amortization expense
that should be reported for 2013.
27) Mountainside Kafe Corporation
The following is the consolidated statements of income for Mountainside Kafe
Corporation for the years ending December 31, 2013 and 2014
Refer to the consolidated statements of income for Mountainside Kafe Corporation.
Required: Identify three specific accounts of Mountainside Kafe that might include
expenses accrued as adjustments.
28) Bonds were issued at a(n) _____________________ when the issue price exceeds
the face value.
29) Page Company
Use the deferred tax account that appears in the financial statements of Page Company
to answer the related questions.
[Appendix] Review the information for Page Company.
REQUIRED:
(1) In your opinion, are deferred income taxes an appreciable portion of both long-term
liabilities and total liabilities? Why?
(2) What difference between accounting income and taxable income produces the
Deferred Income Taxes account?
(3) Will Page eventually pay the deferred tax liability? When?
30) Why is cash management necessary?
31) On July 1, 2014, Craig Corporation takes out a 12%, two-month, $50,000 loan at
Seaside National Bank. Principal and interest are to be repaid on August 31.
Required
1> Identify and analyze the transactions for July 1 to record the borrowing, for July 31
to record the accrual of interest, and for August 31 to record repayment of the principal
and interest.
2> Evaluate the following statement: It would be much easier not to bother with an
adjusting entry on July 31 and simply record interest expense on August 31 when the
loan is repaid.
32) Glitter Fashions purchased a van on January 1, 2012 for $48,000. The company
decided to depreciate the van over a 5-year period using the straight-line method. The
company estimated its residual value at $3,000. Show how the costs should be
presented on Glitters balance sheet and income statement for the full year ended June
30, 2014. Label the statements properly.
