1) When merchandise is sold FOB shipping point, the buyer is responsible for the
shipping costs.
2) In the statement of cash flows, a decrease in accounts payable would be shown as an
increase in the Operating Activities category.
3) The cumulative feature of stock allows the firm to eliminate a class of stock by
paying the stockholders a specified amount.
4) The issuance of stock decreases a company’s assets and increases its stockholders
equity.
5) All intangible assets should be amortized.
6) For a given contingent liability, the company has the choice of either recording it on
the balance sheet or disclosing it in the notes.
7) The liability for a premium offer estimated to be redeemed is not a current liability.
8) A 15% stock dividend will increase the number of shares outstanding but the book
value per share will decrease.
9) Rock City Company began business on January 1, 2012. The corporate charter
authorized issuance of 500 shares of $1 par value common stock and 400 shares of $4
par value, 3% cumulative preferred stock. What is the maximum amount that can be
reported on the balance sheet for Common Stock and Preferred Stock, respectively, if
all of the stock is issued?
Common Stock Preferred Stock
A.$ 500 $1,600
B.$ 5,000 $ 120
C.$ 500 $ 120
D.Not enough information provided.
10) Marvel Shoes
Marvel Shoes reported the following items on its statement of cash flows for the current
year:
Read the information about Marvel Shoes. What was the amount of net increase or
decrease in the cash balance for Marvel Shoes for the current year?
A.$ 10,000 increase
B.$ 30,000 increase
C.$ 40,000 increase
D.$ 70,000 increase
11) Which of the following would appear on the balance sheet as a current liability?
A.A loss from an anticipated strike by employees
B.Potential damages from possible explosions in a fireworks factory
C.Premium offers in cereal boxes
D.The possible loss from a lawsuit
12) If a company uses the allowance method of accounting for bad debts, which one of
the following statements is true?
A.It violates the matching principle
B.It will record bad debts only when an account is determined to be uncollectible
C.It will reduce the accounts receivable at the end of the accounting period for
estimated uncollectible accounts
D.It will report accounts receivable in the balance sheet at their net realizable value
13) Walton Corporation shows the following in the stockholders’ equity section of its
balance sheet: The stated value of its common stock is $0.50 and the total balance in the
common stock account is $37,500. Also noted is that 5,000 shares are currently
designated as treasury stock. The number of shares outstanding is
A.80,000
B.75,000
C.72,500
D.70,000
14) Allowing only certain employees to order goods and services for the company is an
example of what internal control procedure?
A.Segregation of duties
B.Safeguarding of assets and records
C.Independent verifications
D.Proper authorizations
15) Assume that the current ratio is 2:1 for the company in question. Show the effect of
each of the transactions below on total assets and the current ratio by using one of the
following symbols in each box to complete the table. If the numerator and denominator
of a ratio both increase or both decrease by the same amount, the effect of the event on
the ratio is “insufficient data.”
16) Authorized stock represents the
A.maximum number of shares that can be issued
B.number of shares that have been sold
C.number of shares that are currently held by stockholders
D.number of shares that have been repurchased by the corporation
17) The cost of Fultons inventory at the end of the year was $145,000. Due to
obsolescence, the cost to replace the inventory was only $90,000. Net realizable
valuewhat the inventory could be sold foris $102,000.
REQUIRED:
Determine the amount Fulton should report on its year-end balance sheet for inventory
assuming the company follows (a) U.S. GAAP and (b) IFRS.
18) Ling Corp. started business at the beginning of 2013. Ling selected the FIFO
method for its inventory. In order to maximize its profits for 2013 under this method,
prices must be
A.Increasing
B.Decreasing
C.Stable
D.Fluctuating up and down at the same amount consistently over the year
19) Albertos Texas Cantina had the following results for December 31, 2013 and 2014,
respectively:
What was the amount of cash flows from investing activities for 2014?
A.Cash inflow of $378,000
B.Cash outflow of $378,000
C.Cash outflow of $7,000
D.Cash outflow of $391,000
20) Temporary accounts are also known as _________________ accounts.
21) What is conservatism and why is it important in accounting?
22) During the most recent year, Grace paid $109,000 in interest to its lenders and
$78,000 in dividends to its stockholders.
REQUIRED:
1> In which category of the statement of cash flows (operating, investing, or financing)
should each of these amounts be shown if Grace follows U.S. GAAP? If more than one
category is acceptable, indicate what the choices are.
2> In which category of the statement of cash flows (operating, investing, or financing)
should each of these amounts be shown if Grace follows IFRS? If more than one
category is acceptable, indicate what the choices are.
23) The date that a promissory note is due is the ____________________.
24) For each of the following sentences 3-10, select the word or group of words that
best completes the statement.
The success of accounting as a form of communication depends on two concepts,
____________________ and ____________________.
recognition, measurementor