U.S. Treasury obligations are interest-bearing notes, bonds, and bills issued by the U.S.
federal government.
LIFO results in a more accurate valuation of ending inventory on the balance sheet than
does FIFO.
Coupon rate and nominal interest rate are both used to describe the rate of interest to be
paid on a bond.
The cost of equipment shall include all costs of acquisition and preparation for use.
The statement of cash flows reports on where cash came from and how it was used.
Warranty costs are expensed at the time the item covered by the warranty is sold.
The specific write-off method assumes all sales are fully collectible until proved
otherwise.
The process of allocating the cost of long-lived or fixed assets to expense is referred to
as depreciation.
Revenue collected in advance is usually a current asset.
A capital lease is a lease that transfers most of the risks and benefits of ownership to the
lessee.
The only accounts that are closed are income statement accounts.
Net income plus preferred dividends divided by average common equity is referred to
as rate of return on common equity.
When preparing the statement of cash flows under the direct method, all of the
following would be an inappropriate procedure except
A) add depreciation expense to net income under the operating activities.
B) subtract depreciation expense from net income under the operating activities.
C) add depreciation expense to net income under the financing activities.
D) subtract depreciation expense from net income under the financing activities.
E) ignore depreciation expense.
The double-declining-balance method of depreciation
A) causes less depreciation in the early years of an asset’s use as compared to other
depreciation methods.
B) causes the same amount of depreciation in the early years of an asset’s use as
compared to other depreciation methods.
C) causes more depreciation in the early years of an asset’s use as compared to other
depreciation methods.
D) is not an acceptable depreciation method according to generally accepted accounting
principles.
E) None of the above
Martin Optical has found that 2% of credit sales turn into bad debts and it costs the
company $2,000 in administration expenses per year to manage the bad debts. Martin
Optical obtains $30,000 of credit sales each year that it would not otherwise obtain if it
did not offer credit. In addition, the $30,000 of credit sales earns Martin Optical
$12,000 per year. What is the net gain (loss) of continuing to offer credit to its
customers?
A) $10,000
B) $12,000
C) $2,000
D) $9,400
E) $2,600
Manchester Technology has the following data available:
What is the percentage increase or (decrease) in inventory from 2012 to 2013 for
Manchester Technology?
A) (120.0)%
B) 120.0%
C) 40.0%
D) 62.5%
E) (40.0)%
Which statement is the major link between two balance sheets?
A) Statement of Retained Earnings
B) Statement of Stockholders Equity
C) Statement of Cash Flows
D) Statement of Balancing Equity
E) Income Statement
Useful Organizing began operations on January 1, 20X3, when the owners invested
$80,000 cash in the company. Also on January 1, the company paid for a $30,000
machine. The machine has a useful life of 4 years and a $2,000 residual value. During
its first year of operations, the company had sales of $96,000 and operating expenses
except depreciation of $67,000. All sales were cash sales and all non-depreciation
operating expenses were paid in cash. Useful Organizing has a 30% tax rate and pays
all taxes on December 31. What is the cash balance before taxes on December 31,
20X3, if Useful Organizing uses straight-line depreciation?
A) $72,000
B) $76,900
C) $79,000
D) $81,100
E) $86,000
Which statement is false?
A) Typically the par value of common stock is adjusted for a stock split.
B) There are no costs to the company when issuing stock splits or stock dividends.
C) In both a stock split and a stock dividend, the shareholders have the same ownership
interest after the stock split or stock dividend as they had before the stock split or stock
dividend.
D) Ignoring the effect of fractional shares, both stock splits and stock dividends issue
shares of common stock without any additional cash payments.
E) Stock splits are often used to keep a company’s stock price low enough to maintain
its price within a reasonable trading range.
Referring to Exhibit 5-1, what was the net cash flow from investing activities for Cartell
Paper Products in 2012?
A) $(9,100)
B) $9,100
C) $(13,000)
D) $(12,000)
E) $2,000
A liability for a cash dividend is recorded on the
A) stockholder appreciation date.
B) record date.
C) payment date.
D) declaration date.
E) dividends date.
Which of the following statements is true with respect to the gross profit percentage?
A) The gross profit percentage shows the relationship of net income to sales revenue.
B) The gross profit percentage is widely regarded as the ultimate measure of overall
accomplishment.
C) Retailers have high gross profit percentages because product costs are their main
expense.
D) The gross profit percentage is useful to retailers in choosing a pricing strategy and in
judging its results.
E) Gross profit percentages vary very little across industries.