Current accounting standards indicate that the costs of intangible assets with an
indefinite life, such as goodwill, should
a. not be amortized, but should be reviewed annually for impairment.
b. be reported on the statement of retained earnings in the year in which acquired.
c. be amortized over a reasonable period of time not to exceed 40 years.
d. be debited to an expense account entirely in the year in which acquired.
Tom Nelson invested $9,000 into an account yielding 6%. How long must he leave the
money in the account to obtain $12,060.90?
a. 2 years
b. 3 years
c. 4 years
d. 5 years
Common stock is issued to investors.
Select the choice that describes the type of transaction and whether it should be
recorded in the accounting system. (Choices may be used more than once.)
a. External event to be recorded as a transaction
b. Internal event to be recorded as a transaction
c. Event which should not be recognized in the accounting system
Cash register tapes are recorded daily by an employee from the accounting department.
The following set of items describes activities completed by a company in purchasing
and paying for merchandise and in collecting cash for merchandise sales. For each
activity, identify whether or not the activity adheres to or violates sound internal
control procedures. (Choices may be used more than once.)
a. Adheres to sound internal controls
b. Violates sound internal controls
c. Neither strengthens nor violates internal control
Which balance sheet accounts are most affected by financing activities?
a. Current assets.
b. Current liabilities.
c. Long-term assets.
d. Long-term liabilities and stockholders’ equity.
If a corporation declares a 2-for-1 stock split, which of the following is true?
a. A journal entry is required to show the effect on the stockholders’ equity accounts.
b. The stockholders will have a higher proportionate ownership share after the split.
c. The par value will be reduced to half of the pre-split par value.
d. The market price of the stock is expected to increase after the split.
Represents an ownership interest in a corporation, usually common stock
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
A company reported the following information:
If the indirect method is used to prepare the operating activities section of the statement
of cash flows, what amount will be reported as net cash inflow from operating activities
for 2014?
a. $92,000
b. $109,000
c. $111,000
d. $113,000
When the calculated present value is reversed, the resulting figure is the
a. interest accrued.
b. future value.
c. total interest earned.
d. total interest paid.
During January, Gaston Wholesalers experienced some difficulties with cash flow so it
approached one of its vendors about a payment extension. The vendor agreed to the
extension on the condition that the company sign a 30-day note that includes 9%
interest. What journal entry is needed to record the retirement of the note on the
maturity date?
a. Debit notes payable and credit cash
b. Debit notes payable, credit interest expense, and credit cash.
c. Debit notes payable, debit interest expense, and credit cash.
d. Debit accounts payable, debit interest expense, and credit notes payable.
Name given to the investee when an investor owns over 50% of the investee’s
outstanding common stock
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Total stockholders’ equity includes $50,000 of common stock with a stated value of
$0.50, and 5,000 shares of treasury stock with a total cost of $25,000. How many total
shares are outstanding?
a. 95,000
b. 100,000
c. 105,000
d. 150,000
A landscaping company operates five days per week with a daily payroll of $16,000.
Employees are paid every Saturday for the workweek just completed (Monday through
Friday). The last day of the month is Wednesday, March 31. What is the amount of
Wages Expense recorded on the next payday, Saturday, April 3?
a. $ -0-
b. $48,000
c. $32,000
d. $80,000
Refer to Designs on You. What is the net amount of the adjustments to the company’s
cash balance as a result of the bank reconciliation process?
Designs on You The following information relates to the company’s May bank
reconciliation:
In addition, a check was recorded in the accounting records as $1,200 but the correct
amount as recorded by the bank was only $1,000. a. $210 increase
b. $135 increase
c. $135 decrease
d. $65 decrease
Which of the following sets of factors is needed to calculate depreciation on plant and
equipment?
a. the asset’s acquisition cost, replacement cost, and its estimated residual value
b. the estimated residual value of the asset, its replacement cost, and its market value
c. the asset’s replacement cost, its estimated life, and its estimated residual value
d. the estimated life of the asset, its acquisition cost, and its estimated residual value
Providing services to customers for credit
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
On January 2, 2013, Kangaroo Convenience Stores issued 10-year, $5,000,000,
zero-coupon bonds at 75. What is the amount of interest expense recorded in 2013
using the straight line amortization method?
a. $5,000,000
b. $3,750,000
c. $1,250,000
d. $125,000
Costs of completed items that have been sold to customers.
Match the inventory-related accounts to costs that may be included in inventories for
retailers and manufacturers.
a. merchandise inventory d. finished goods
b. raw materials e. cost of goods sold
c. work-in-process
All Star Auto has an accounts receivable balance after posting net collections from
customers for 2013 of $180,000. The customers took advantage of sales discounts of
$15,000. Management aged the accounts receivable and estimate for uncollected
account percentages as follows:
The net realizable value of the accounts receivable is
a. $173,200
b. $170,200
c. $172,700
d. $180,000
Refer to Rapid Sign Corporation. What is the total payout ratio for 2015?
Rapid Sign Corporation
Selected data from the financial statements are presented below:
a. 102%
b. 88%
c. 66%
d. 30%
For liabilities, stockholders’ equity, and revenue accounts, debits will _____________
the account balance.
When the yield rate of interest is greater than the stated rate, then the bond will be
issued at a discount.
Groovy Swing is a retail store specializing in golf equipment and apparel. On February
1, 2014, the company borrows $250,000 cash from the bank with a six-month, 6% note
payable. The note is used to finance the acquisition of inventory for the spring selling
season. Prepare the company’s necessary journal entries on February 1st and the note’s
maturity date.
Free cash flow is equal to net cash flow from operating activities minus capital
expenditures and dividends.
Lending Branch, Inc. was incorporated as a new business on May 1, 2014. The
company is authorized to issue 50,000 shares of $1 par common stock and 10,000
shares of 4%, $5 par cumulative, participating preferred stock. On May 1, 2014, the
company issued 15,000 shares of common stock for $8 per share. Net income for the
period ended December 31, 2014 ,was $115,000. Cash dividends in the amount of
$30,000 were declared, but only $25,000 were paid as of year-end. Prepare the
stockholders’ equity section of the balance sheet at December 31, 2014.
