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Investors are often interested in the amount of net income distributed as dividends.
Where would investors look for this information in the company's annual report?
A) Statement of retained earnings
B) Balance sheet
C) Notes to the financial statements
D) Income statement
If a company returns an item to a supplier, the supplier will record the return as:
A) a sales return.
B) shrinkage.
C) a sales discount.
D) a purchase return.
Payroll taxes paid by employees include which of the following?
A) Federal income tax, federal unemployment tax, and Medicare
B) Social security, federal unemployment tax, and state unemployment tax
C) Social security, federal unemployment tax, and state unemployment tax
D) Federal income tax withheld, state income tax withheld, and Medicare
If net sales revenue rises 5% while the average book value of fixed assets falls 5%, the:
A) fixed asset turnover ratio will rise.
B) fixed asset turnover ratio will fall.
C) fixed asset turnover ratio will stay the same.
D) impact on the fixed asset turnover ratio cannot be determined since the beginning
values are unknown.
Cairo Co. uses the allowance method of accounting for uncollectible accounts. Cairo
Co. accepted a $5,000, 12%, 3-month note dated May 16, from Alexandria Co. in
exchange for its past-due account receivable.
Required:
Part a. Prepare the journal entry for the receipt of the note on May 16.
Part b. Prepare the journal entries for (1) the receipt of interest and (2) the receipt of the
principal balance at maturity on August 14.
Part c. Assume that Alexandria made the interest payment but not the principal payment
on August 14. On November 30, Cairo writes off the note when it becomes clear that
Alexandria will never pay. Prepare the journal entry to write-off the note receivable.
Mansfield Company has a periodic inventory system and uses the LIFO method to
assign costs to inventory and cost of goods sold. Consider the following information:
What amounts would be reported as the cost of goods sold and ending inventory
balances for the period?
A) Cost of goods sold $625; Ending inventory $175
B) Cost of goods sold $755; Ending inventory $225
C) Cost of goods sold $550; Ending inventory $250
D) Cost of goods sold $600; Ending inventory $200
On January 1, 2016, Morris Minerals paid $300,000 for a mineral deposit in Morris,
Illinois, and then spent $45,000 to develop the deposit for exploitation. It was estimated
that 690,000 total cubic yards could be extracted economically. During 2016, 69,000
cubic yards of minerals were extracted; the minerals have not yet been sold.
Required:
Part a. Compute the amount of depletion expense for 2016.
Part b. Prepare the journal entry to record the 2016 depletion.
Accumulated Depreciation is classified as a(n):
A) expense account.
B) contra-asset account.
C) liability account.
D) stockholders' equity account.
Assume accrual basis accounting is used. Which of the following statements about
income statement accounts is correct?
A) Costs incurred to help generate revenue are only reported as expenses on the income
statement if they are paid in cash in the same period as the revenue received.
B) Revenue accounts are shown after the amount of expense accounts on the income
statement.
C) Revenue accounts include Cash, Accounts Receivable, and Unearned Revenue.
D) There is no Net Income account.
A company has current assets of $5 million and net income of $10 million. Current
liabilities total $2.5 million, interest expense is $2 million, and income tax expense is
$3 million. What is the times interest earned ratio for this company?
A) 0.5
B) 7.5
C) 0.3
D) 2.0
Employee fraud includes all of the following categories except:
A) asset misappropriation.
B) corruption.
C) deception.
D) financial statement fraud.
The receivables turnover ratio:
A) is calculated as the average number of days from the time a sale is made on account
to the time cash is collected.
B) is calculated as the average number of days from the time a sale is made on account
to the time payment is due.
C) measures how many times a year receivables go uncollected.
D) measures how many times, on average, the process of selling and collecting is
repeated during the period.
Choose the appropriate letter to match the description with the purpose and accounting
effect of the type of stock transaction. Some letters will appear in more than one column
and not all letters will necessarily be used. Some blanks will require more than one
letter.
A. To obtain shares to reissue to employees as part of employee stock purchase plans.
B. To increase the number of shares outstanding and decrease the per-share market
price while managing a company that you expect will struggle financially in the future.
C. To reduce the number of outstanding shares to increase per-share measures of
earnings.
D. To increase the number of shares outstanding and decrease the per-share market
price while signaling to financial statement users that the company expects significant
future earnings.
E. To obtain shares that can be reissued as payment for purchases of other companies.
F. To send a signal to investors that the company itself believes its own stock is worth
acquiring.
G. Reduces stockholders' equity.
H. Changes par value per share.
I. Changes Additional Paid-in Capital account balance.
J. Reduces Retained Earnings.
K. Does not affect any of the account balances that comprise stockholders equity.
If a company borrows money from a bank and signs an agreement to repay the loan
several years from now, in which account would the company report the amount
borrowed?
A) Common Stock
B) Accounts Payable
C) Notes Payable (long-term)
D) Retained Earnings
Which of the following would be treated as an accounting transaction for a gardening
supply store?
A) The company signed an agreement to rent store space at $200 month.
B) The vice president of the company spoke at a luncheon that contributed to enhancing
the company's reputation as a responsible company.
C) The company ordered supplies for $500.
D) The company loaned $500 to an employee.
Adjusting entries affect:
A) only balance sheet accounts.
B) only income statement accounts.
C) only statement of cash flow accounts.
D) both income statement and balance sheet accounts.
The standard formatting for a journal entry lists the dollar amounts for:
A) credits underneath and to the right of the dollar amounts for debits.
B) debits and credits aligned equally to the right.
C) debits underneath and to the right of the dollar amounts for credits.
D) debits and credits aligned equally to the left.
A company has $72,500 in inventory at the beginning of the accounting period and
$65,500 at the end of the accounting period. Sales revenue is $986,400, cost of goods
sold is $572,700, and net income is $124,200 for the accounting period. On average, the
number of days to sell inventory is approximately:
A) 203.
B) 44.
C) 61.
D) 26.
Which of the following statements about the income statement is correct?
A) Expenses are listed before revenues on the income statement.
B) Revenues are listed before expenses on the income statement.
C) The income statement is prepared after the balance sheet.
D) Dividends are listed on the income statement.
Choose the appropriate letter to match the term and the definition. Not all definitions
will be used.
Term
1) _____ Full Disclosure Principle
2) _____ Ratio Analysis
3) _____ Liquidity
4) _____ Going-Concern Assumption
5) _____ Profitability
6) _____ Solvency
7) _____ Trend Analysis
8) _____ Vertical Analysis
Definition
A) The ability of a company to meet its short-run financial obligations.
B) A type of analysis that focuses on relationships within a single financial statement.
C) Also known as time-series analysis.
D) The standard that companies should present all relevant information needed to
interpret a company's financial position and performance.
E) The standard that expenses should be recognized when incurred.
F) A measure of current earnings performance.
G) A result from comparing a company's results to other companies in the industry.
H) A measure of long-run survivability.
I) The standard that revenue should be recorded when earned, provided payment is
reasonably expected.
J) Measures that relate financial variables reported in one or more of the financial
statements from the same year.
K) The characteristic that financial information needs to be valuable to decision makers.
L) The standard that takes for granted a company's near term financial survival.
