Posting is the transferring of amounts from the journal to the appropriate accounts in
the ledger.
The market interest rate is affected by general economic conditions.
Outstanding checks should be added to the balance per bank when preparing a bank
reconciliation.
Market value per share divided by book value per share is commonly referred to as
earnings per share.
Negotiable instruments are legal financial contracts that can be transferred from one
lender to another.
The AICPA Code of Professional Ethics is especially concerned with integrity and
independence.
A loan from a financial institution will increase assets and increase liabilities.
The Allowance for Uncollectible Accounts may have a debit balance before the
adjusting entry is prepared.
Trademarks are distinctive identifications of a manufactured product or of a service,
taking the form of a name, a sign, a slogan, a logo, or an emblem.
Net sales is equal to total sales revenue plus sales returns and allowances and sales
discounts.
Units-of-production depreciation is the most popular form of accelerated depreciation.
Regardless of the depreciation method used, accumulated depreciation will be the same
when the asset is fully depreciated.
The use of debt is generally less costly to corporations than is preferred stock because
interest is tax-deductible.
Net income is always used in determining a company’s cash flow from operations.
If replacement costs rise after the inventory is written down, then the inventory value
must be increased.
Suppose Hyton, Inc. purchases a $50,000 vehicle and estimates its useful life to be 8
years with a $2,000 salvage value. After 2 full years of use, Hyton, Inc. puts in a new
engine costing $6,000 in the vehicle extending its life from a total of 8 years to a total
of 10 years. The company uses straight-line depreciation. What is the depreciation
expense in year 4?
A) $5,500
B) $5,250
C) $4,750
D) $4,500
E) $5,000
With respect to creditors and equity investors, which of the following statements is
incorrect?
A) Creditors are concerned with assessing the short-term liquidity of a company.
B) Creditors are concerned with assessing the long-term solvency of a company.
C) Equity investors are concerned about dividend payments.
D) Both creditors and equity investors are concerned about profitability.
E) Creditors are more concerned about future security prices than equity investors.
The discount on bonds payable
A) serves to reduce interest expense on the income statement.
B) serves to increase interest expense on the income statement.
C) is never allowed by investment bankers when debt is issued.
D) serves to increase the cash interest payment.
E) is an adjunct account to bonds payable.
Repurchasing shares
A) has no effect on the number of shares outstanding or on earnings per share.
B) increases the number of shares outstanding and increases earnings per share.
C) reduces the number of shares outstanding and reduces earnings per share.
D) increases the number of shares outstanding and decreases earnings per share.
E) reduces the number of shares outstanding and increases earnings per share.
A corporation is an organization
A) with owners assuming personal liability for business losses.
B) that joins two or more people together as co-owners.
C) that is an “artificial being” created by individual state laws.
D) that gives stockholders control of everyday management decisions.
E) that does not sell stock to raise capital.
Manchester Technology has the following data available:
If a common size balance sheet were prepared, what percentage would be attributable to
the 2013 inventory of Manchester Technology?
A) 19.0%
B) 21.6%
C) 38.7%
D) 52.2%
E) 60.0%
Which of the following transactions decrease cash?
1. Purchase inventory from cash
2. Pay trade accounts payable
3. Accruing operating expenses
4. Purchase stock in R&D partner with cash
5. Charging depreciation
A) 1, 2, and 5
B) 1, 2, and 4
C) 1, 2, 3, and 5
D) 1, 2, 3, and 4
E) 1, 2, 4, and 5
An amount that is calculated by multiplying an interest rate by a principal amount that
is increased each interest period by the previously accumulated interest is known as
A) interest.
B) simple interest.
C) compound interest.
D) nominal interest rate.
E) stated interest.
Given the following data, what is cost of goods sold?
A) $585,000
B) $145,000
C) $570,000
D) $175,000
E) $555,000
Which of the following would not be found in a general journal?
A) The ending balance in an account
B) Separate columns for debits and credits
C) The date of the transaction
D) The account names in a transaction
E) A posting reference
An entity
A) is a separate economic unit.
B) allows a section of an organization to be a separate economic unit.
C) helps accountants relate events to a defined area of accounting.
D) All of the above
E) None of the above
In times of economic stress and instability, companies typically have
A) higher operating expenses.
B) lower gross profits.
C) stable revenues.
D) higher current ratios.
E) lower current ratios.
Which of the following accounts may be thought of as stored costs that are carried
forward to future periods rather than immediately recorded as an expense?
A) Prepaid insurance
B) Utilities expense
C) Salaries expense
D) Depreciation expense
E) Cost of goods sold
Why is it difficult to compare accounts receivable turnover across companies?
A) companies do not typically differentiate credit sales from total sales
B) companies do not typically differentiate net sales from total sales
C) companies do not typically differentiate beginning retained earnings from total
retained earnings
D) it violates SEC regulation to calculate accounts receivable turnover for public
companies
E) it is not difficult to compare accounts receivable turnover across companies
Which of the following transactions do not affect cash?
1. Purchase inventory on credit
2. Accrue operating expenses
3. Collection of accounts receivable
4. Accrue taxes and interest
5. Reclassify long-term debt to short-term debt
A) 1 and 2
B) 1, 2, and 4
C) 1, 2, 3, and 5
D) 1, 2, 4, and 5
E) 1, 2, 3, 4, and 5
Accumulated depreciation is classified as a(n)
A) asset account.
B) liability account.
C) contra asset account.
D) contra liability account.
E) equity account.
Consider the following information:
What is the accounts receivable turnover?
A) 1.20
B) 2.92
C) 11.33
D) 12.64
E) 13.78
MLJ Manufacturing has prepared the following depreciation schedule:
Straight-line depreciation schedule of snow blowers
Suppose at the beginning of year 3, MLJ Manufacturing no longer believes the snow
blowers will last 4 years, but instead decides the snow blowers will last 6 total years.
Assume the residual value of the snow blowers is $0.
Required:
1) What is the new depreciation expense for Year 3 and Year 4?
2) What is the new book value after Year 4 records depreciation expense?
3) What is the accumulated depreciation amount after Year 6 records depreciation
expense?
On January 1, 2X13, Soothing Massage Company acquired, as a long-term investment,
20 bonds with a face value of $1,000 each. The bonds have a 10-year life, a 10%
coupon rate, and pay interest semi-annually every June 30 and December 31. If the
bonds were purchased by Soothing Massage Company to yield 12% and were acquired
for $17,705.90, what journal entry would Soothing Massage Company make on June
30, 2X13, if the company sold the bonds for $18,000.00? Assume the bonds were sold
after Soothing Massage Company properly recorded the receipt of the June 30, 2X13,
interest payment.
Indicate whether each of the following accounts normally possesses a debit (DR) or a
credit (CR) balance.
Presented below are the income statements for Saldron Manufacturing for the years
ended December 31, 20X3, 20X2, and 20X1.
In 20X4 it was discovered that the 20X1 ending inventory was understated by $20, and
the 20X3 ending inventory was overstated by $10. The 20X1 beginning inventory and
the 20X2 ending inventory were correctly stated.
Identify the accounts which are incorrect on the 20X1, 20X2, and 20X3 income
statements. State the dollar error (by how much they are incorrect) and whether the
amounts overstate or understate balances.
Determine the net cash flow from operations for Bearington Motors, assuming the
company uses the indirect method.
Higgins Company accepts bank cards, which charge a fee of 4% on sales. The company
had gross sales of $60,000, of which 25% were cash sales and the remainder was credit
sales that are solely attributable to bank cards. The company uses the periodic inventory
system. Which of the following is the journal entry for Higgins Company?
On March 1, 20X3, Environmental Impacts acquired inventory on account. The cost of
the inventory was $85,000. The terms of the purchase were 2/10, n/30. Upon inspection
of the inventory on March 2, $4,800 worth of inventory was returned. Environmental
Impacts paid for the inventory on March 8. The company uses a periodic inventory
system. What journal entry will Environmental Impacts make on March 8, 20X3?
Name and define the subtotals that appear on a multiple-step income statement and not
on a single-step income statement. Explain why income tax expense is usually the final
deduction on both single-step and multiple-step income statements.