Information that is material means that an error in recording the dollar amount of a
transaction would
a. likely affect the judgment of someone relying on the financial statements.
b. not affect the decisions of financial statement users.
c. not impact a business decision of a creditor.
d. result in the overstatement of assets or income.
A used car dealer reported the following information:
Assuming there was no change in inventory during the period, how much cash was paid
for merchandise purchases during 2014?
a. $655,000
b. $610,000
c. $515,000
d. $605,000
Which of the following items would not be a reconciling item on a bank reconciliation?
a. canceled checks
b. NSF checks
c. outstanding checks
d. bounced checks
A percentage of the loan amount that compensates the lender for the use of his/her
money
Match the following terms with the appropriate definition.
a. Accrued liabilities f. Payroll taxes
b. Contingent liabilities g. Sales taxes
c. Current liabilities h. Warranty
d. Interest rate i. Withholdings
e. Liabilities
Information that clarifies and expands upon the information presented in the financial
statements
Match each statement to the item listed below.
a. Audit report
b. Fiscal year
c. Financial statements
d. Management’s discussion and analysis
e. Notes to the financial statements
A company declared and paid $1 million in dividends to its common stockholders. The
effect of this transaction is that the
a. earnings per share decreased.
b. earnings per share increased.
c. current ratio increased.
d. debt-to-equity ratio increased.
Fees charged by the bank for checking accounting services
Match the following terms with their correct definition.
a. Bank reconciliation d. Outstanding check
b. Deposit in transit e. Service charges
c. Non-sufficient funds check
Repaid a long-term bonds payable.
Use the following codes to indicate how the cash flow effect, if any, of each transaction
would be reported on a statement of cash flows if the operating activities section is
prepared using the direct method. (Choices may be used more than once.)
a. Inflow from operating activity
b. Outflow from operating activity
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
Equipment purchased at the beginning of 2013 for $200,000 with residual value of
$20,000 is being depreciated over a 5-year period using the double-declining-balance
method. Which of the following statements is correct concerning the financial
statements at December 31, 2013?
a. The equipment account now has a balance of $120,000.
b. The book value of the equipment is now $80,000.
c. The accumulated depreciation account balance is now $80,000.
d. Depreciation expense for 2013 is $72,000.
A company has property, plant, and equipment of $500,000, current liabilities of
$70,000, and long-term liabilities are $300,000. If the company’s current ratio is 3.0,
what are current assets?
a. $900,000
b. $690,000
c. $430,000
d. $210,000
Which of the following financing activities results in a cash inflow?
a. buying treasury stock
b. issuing bonds
c. repaying a bank loan
d. paying cash dividends
Cambridge Cleaners started business on January 1, 2013, and immediately purchased
$5,000 of supplies to use in the business. At the end of the month, 30 percent of the
supplies remains unpaid and 20% are still on hand. What amounts should appear as an
expense on the financial statements for January, 2013? Income StatementStatement of
Cash Flows
a. $5,000 $5,000
b. $5,000 $3,500
c. $4,000 $1,500
d. $4,000 $3,500
Refer to Georgia’s Salon. During May 2013, $10,000 of the gift cards were redeemed
for salon services. Which of the following is the correct journal entry to record the
redemption of the gift cards?
Georgia’s Salon The salon sells $50,000 of gift cards in May 2013. These gift cards
may be used anytime before their expiration on May 31, 2014. a. Unearned Sales
Revenue 10,000 Accounts Payable 10,000
b. Unearned Sales Revenue 10,000 Cash 10,000
c. Prepaid Sales Revenue 10,000 Sales Revenue 10,000
d. Unearned Sales Revenue 10,000 Sales Revenue 10,000
Refer to A2Z Events. What amount will the company show on its year-end balance
sheet for the net realizable value of its accounts receivable?
A2Z Events
The following data are from the company’s records for 2013:
a. $410,000
b. $285,000
c. $340,000
d. $355,000
When a company sells goods or provides services for a customer but the customer
intends to pay later, the company must record a current liability.
The weighted average cost is calculated by adding the units’ costs from each purchase
and then dividing by the number of purchases.
When a bank collects a note on behalf of a company, the bank is likely to issue a debit
memo.
Refer to Hatcher Tool Service. Prepare a trial balance in proper format. Assume that
there are no additional accounts or balances other than those created from the June
transactions.
Hatcher Tool Service
The following transactions occurred during June 2013:
Current liabilities should include any amounts that have been accrued as expenses but
not yet paid.
When an entity’s stock issuances exceed its expenses for a period of time, the entity will
report net income.
The ______________ depreciation method is the GAAP depreciation method used most
frequently.