Your company buys a computer server that it expects to use for eight years and then sell
when it upgrades to a more powerful model. The server would probably be used by the
business that buys it at that time for another three years. The useful life of the server for
your company is:
A) eight years.
B) eleven years.
C) five years.
D) three years.
The principles of internal control include which of the following?
A) Use only computerized systems
B) Establish responsibility
C) Maintain perpetual inventory records
D) Eliminate fraud
A company buys equipment for $48,000, expects to use it for ten years, and then sell it
for $6,000. Using the straight-line method, the company should report annual
depreciation for the equipment of:
A) $4,200.
B) $8,400.
C) $4,800.
D) $9,600.
Lansing Limited had a beginning balance in its Retained Earnings account of $385,600.
During the year, the company declared and paid a $4,700 dividend, and at the end of the
year, it reported Retained Earnings of $399,860. The company’s net income for the year
was:
A) $14,260.
B) $18,960.
C) $9,560.
D) $0.
Use the information above to answer the following question. What is the amount of cost
of goods available for sale?
A) $11,250
B) $17,500
C) $5,000
D) $13,750
Carrington Inc. reported net sales revenues of $19.8 billion and cost of goods sold of
$6.0 billion. Its gross profit percentage was:
A) 30.3%.
B) 69.7%.
C) 3.3%.
D) 2.3 %
The records of Dame Inc. included the account balances set forth in the table below as
of September 30.
Part a. Complete the two columns in the table set forth below by indicating (column 1)
whether it is reported in the income statement (I/S) or balance sheet (B/S) and (column
2) whether it is an asset (A), liability (L), stockholders’ equity (SE), revenue (R), or
expense (E) account.
Part b. Prepare an income statement for the year ended September 30.
Part c. Determine the company’s net profit margin expressed as a percent.
Which of the following is a correct statement?
A) The Sales Discounts account is a contra-asset account.
B) The Sales Returns & Allowances account is a contra-revenue account.
C) The Sales Returns & Allowances account is a credit balance account.
D) The Sales Discounts account is a contra-asset account.
Daisy Company’s trial balance was in balance at the end of the period and showed the
following accounts:
What is the balance of the credit column on Daisy Company’s trial balance?
A) $160,800.
B) $80,400.
C) $60,400.
D) $60,000.
A company has outstanding 9 million shares of $2 par value common stock and 1
million shares of $4 par value preferred stock. The preferred stock has an 8% dividend
rate. The company declares $600,000 in total dividends for the year. Which of the
following is correct if dividends in arrears are $30,000?
A) Preferred stockholders will receive $350,000; common stockholders will receive
$250,000.
B) Preferred stockholders will receive $60,000; common stockholders will receive
$540,000.
C) Preferred stockholders will receive $320,000; common stockholders will receive
$280,000.
D) Preferred stockholders will receive $90,000; common stockholders will receive
$510,000.
Use the information above to answer the following question. On January 1, which of
the following journal entries will be made by Brickyard to record the issuance of the
note?
A) Debit Interest Expense for $6,000, debit Cash $194,000, and credit Notes Payable
for $200,000
B) Debit Cash and credit Notes Payable for $200,000
C) Debit Cash for $200,000, debit Interest Expense for $6,000, and credit Notes
Payable for $206,000
D) Debit Cash for $200,000, debit Interest Expense for $6,000, credit Notes Payable for
$200,000, and credit Interest Payable for $6,000
Which of the following descriptions about a note payable is correct?
A) Written promise to repay a loan
B) A type of long-term asset
C) Generally informal in nature
D) Reported as part of stockholders’ equity on the balance sheet
Sparkling Pools received a bill for $1,200 for running newspaper ads during the last two
weeks of July; the bill will be paid on August 1. Advertising Expense should be:
A) credited for $1,200 in July.
B) credited for $1,200 in August.
C) debited for $1,200 in July.
D) debited for $1,200 in August.
The cash count sheet determines all of the following except the:
A) cash shortage or overage, if any.
B) amount of cash available for deposit in the bank
C) amount of cash to be reported on the balance sheet.
D) amount of cash received.
Which one of the following statements about amortization of discounts and premiums is
not correct?
A) Under straight-line amortization, when a bond is sold at a premium, the annual
premium amortization is the total premium divided by the number of years until bond
maturity.
B) When a bond is sold at a discount, interest expense recorded using the
effective-interest method is less than the interest paid on the bond.
C) The effective-interest method of amortization is considered to be conceptually
superior to straight-line amortization.
D) When a bond discount is amortized using the effective-interest method, the promised
interest payment is less than the interest expense, so the bond liability will increase as a
result of the contra-liability account decreasing.
Which of the following would not be added to net income in calculating cash flows
from operating activities on a statement of cash flows prepared using the indirect
method?
A) Amortization Expense
B) A decrease in Accounts Receivable
C) An increase in Salaries and Wages Payable
D) A gain on sale of equipment
Thompson Company updates its inventory records perpetually. The company’s records
showed a beginning inventory of $600, cost of goods sold of $1,400, and ending
inventory of $800. How much inventory was purchased during the year?
A) $1,200
B) $1,000
C) $900
D) $1,600