A list of all active accounts and each account’s debit or credit balance.
Match the following terms with their correct definition.
a. Account f. Debit
b. Accounting cycle g. Event
c. Chart of accounts h. General ledger
d. Cost vs. benefit i. Journal
e. Credit j. Trial balance
Refer to Rags to Riches. Which of the following would result from a horizontal analysis
of the company’s balance sheet?
Rags to Riches
Selected data from the financial statements are provided below:
a. Accounts receivable increased $22,000 or 57.9% during 2015.
b. Accounts receivable is five times larger than inventory in 2015.
c. Accounts receivable is 13.3% of total assets in 2015.
d. The accounts receivable turnover ratio is 7.76 in 2015.
Match Incorporated recorded salary expense of $120,000 in 2013. However, additional
salaries of $9,000 had been earned, but not paid or recorded at December 31, 2013.
After the adjustments are recorded and posted at December 31, 2013, the balances in
the Salaries Expense and Salaries Payable accounts will be Salaries ExpenseSalaries
Payable
a. $129,000 $9,000
b. $120,000 $0
c. $120,000 $9,000
d. $109,000 $0
A reduction in the amount of goods available for sale caused by defective merchandise.
Match the terms with the descriptions provided.
a. Consignment f. Purchase allowance
b. Discount period g. Purchase discounts
c. Inventory h. Purchase returns
d. LIFO Reserve i. Purchases
e. Lower of cost or market rule
If the end-of-year supplies on hand totaled $200, and purchases totaled $300, and
supplies on hand at the beginning of the year amounted to $100, how much will be
reported as supplies expense for the current year?
a. $200
b. $400
c. $300
d. $600
Refer to HVAC Service. Based on these transactions, what is the total amount of
expense that should be reported on the company’s income statement for the month?
HVAC Service
The following transactions occurred during November:
a. $350
b. $2,500
c. $2,850
d. $3,000
This principle states that accountants should take care to avoid overstating assets or
income when they prepare financial statements.
Match the following principles with their correct definition.
Match the following principles with their correct definition.
a. Comparability g. Historical cost
b. Conservatism h. Matching
c. Double-entry accounting i. Monetary unit
d. Economic entity j. Revenue recognition
e. Going concern k. Time period
f. Full disclosure
Which of the following accounts would not be reported in the Property, Plant, and
Equipment section of a balance sheet?
a. accumulated depreciation-buildings
b. buildings
c. depreciation expense-buildings
d. land
Refer to the information presented above for La Paz Restaurants. The 2015 dividend
payout ratio is reported as
La Paz Restaurants
Selected data from the company’s financial statements are presented below:
a. 0.9%.
b. 1.1%.
c. 18.2%.
d. 19.1%.
Betty has received an inheritance from her uncle. She would like to invest some of the
inheritance to pay for her son’s college. To pay for college she will need to withdraw
$25,000 per year for 4 years beginning 1 year from today. How much must she invest if
she can earn 5%?
a. $77,397.37
b. $20,567.50
c. $31,913.55
d. $88,648.75
Cost less accumulated depreciation Match these terms with their correct definition.
a. Book value e. Depreciation
b. Cost f. Impairment
c. Depletion g. Involuntary disposal
d. Depreciable cost h. Residual value
Consists of the methods and records used to identify, measure, record, and
communicate financial information about a business
Match the following terms with their correct definitions.
a. Accounting system e. Internal control system
b. Business process risks f. Safeguarding
c. Control activities g. Segregation of duties
d. Control environment h. Strategic risks
With the Effective Interest Method of Amortization, the amortization of a bond discount
results in a(n)
a. increase in stockholders’ equity.
b. decrease in liabilities.
c. increase in interest expense.
d. decrease in interest expense.
Using the straight-line depreciation method will cause a company to incur ____ tax
expense in the early years of an asset’s life than they would experience using an
accelerated method of depreciation.
a. more
b. less
c. equal
d. This cannot be determined from the information given.
Refer to Rainsoft Company. What is the operating cash flow ratio for 2015?
Rainsoft Company
Selected data from the financial statements are provided below:
a. 4.0625
b. 0.246
c. 0.147
d. 0.072
The term for the process of recording business events in a book of original entry is
a. analyzing.
b. journalizing.
c. posting.
d. classifying.
The practice of monitoring activities within the internal control system is likely to be
carried out by each of the following groups except
a. external auditors.
b. internal auditors.
c. the board of directors.
d. managers.
Cost of goods sold is equal to
a. the total amount of merchandise purchased during the year.
b. the cost of merchandise purchased plus transportation costs less ending inventory.
c. the cost of merchandise purchased plus transportation costs plus beginning inventory
minus purchase returns and allowances and purchased discounts minus ending
inventory.
d. the cost of merchandise purchased plus transportation costs plus beginning inventory
minus purchase returns and allowances and purchase discounts.
It is important that the petty cash custodian
a. sign the check that reimburses the petty cash fund.
b. record all petty cash expenditures in the company’s accounting records.
c. prepare the bank reconciliation for the petty cash account.
d. maintain supporting documentation for all payments made from the petty cash fund.
What is the impact on the accounting equation of recording a payment to a supplier on
account?
a. Both assets and liabilities decrease.
b. Both assets and stockholders’ equity decrease.
c. Liabilities decrease and stockholders’ equity increases.
d. Liabilities increase and stockholders’ equity decreases.
Describe why the accrual basis of accounting is preferred for financial reporting over
the cash basis.
Bonds are issued at a ____________________ when the issue price exceeds the face
value.
Various financial ratios, including return ratios, are categorized as
____________________ ratios.
The net profit margin percentage reflects the amount of income for each dollar of sales.
Under the periodic inventory system, a physical inventory must be taken to determine
cost of goods sold.
The following stockholders’ equity information was available at January 1, 2014:
Record the purchase of the treasury stock on November 30, 2013 and the January 10,
2014 sale of 500 shares of treasury stock for $70 per share.
Refer to Rhodes Bakery. Calculate the following profitability ratios for 2015 and 2014:
Gross Profit Percentage, Operating Margin Percentage, Net Profit Margin Percentage,
Return on Assets, and Return on Equity. Express each ratio as a percentage and round
your answers to two decimal places, then comment on the company’s performance in
terms of profitability. Rhodes Bakery
The balance sheet taken from the company’s 2015 10-K is provided below:
The company’s income statements are available below. At December 31, 2013, total
assets and total stockholders’ equity were $325,000 and $287,500, respectively.
