1) On November 2, 2014, Quaint General Store concluded that a customers $400
account receivable was uncollectible and that the account should be written off. What
effect will this write-off have on Quaints 2014 net income and balance sheet totals
assuming the allowance method is used to account for bad debts?
A.Decrease in net income; decrease in total assets
B.Increase in net income; no effect on total assets
C.No effect on net income; decrease in total assets
D.No effect on net income; no effect on total assets
2) Which one of the following is a sound internal control procedure for cash
disbursements?
A.Making copies of purchase orders for the receiving department so they know how
many items to be expected upon delivery
B.Using presigned checks to facilitate payment within the cash discount period
C.Comparing purchase requisitions, purchase orders, receiving reports, and invoices
D.Requiring the signature of the purchasing department supervisor on checks
3) A gain on bond redemption
A.is considered unusual and infrequent
B.should be treated as part of operating income
C.decreases a companys income
D.is always included when predicting a companys future income
4) Which of the following statements regarding bonds payable is true?
A.Generally, bonds are issued in denominations of $100
B.When an issuing company’s bonds are traded in the ‘secondary” market, the company
will receive part of the proceeds when the bonds are sold from the first purchaser to the
second purchaser
C.A debenture bond is backed by specific assets of the issuing company
D.Most bonds are term bonds, meaning that the entire principal amount will mature on
a single date
5) Lasiter Corp. reported net credit sales of $2,000,000 and cost of goods sold of
$1,400,000 for 2014. On January 1, 2014, accounts receivable was $250,000. Amounts
owed by customers increased by $20,000 during 2014. Rounding to two decimal places,
what is Lasiters accounts receivable turnover rate for 2014?
A.8.33
B.8.00
C.7.69
D.7.41
6) Which method assigns the same cost to all units whether sold or left in ending
inventory?
A.Specific identification
B.Weighted average cost
C.FIFO
D.LIFO
7) Cash flows from issuing and repurchasing stock or issuing and repaying (retiring)
debt are classified as
A.operating activities
B.investing activities
C.financing activities
D.borrowing activities
8) Leary Corporations end-of-year balance sheet consisted of the following amounts:
What is Learys retained earnings balance at the end of the current year?
A.$10,000
B.$3,000
C.$66,000
D.$110,000
9) Valor Company issued 5,000 shares of $1 par common stock for $30 per share,
providing the company with $150,000 in cash. What effect, in addition to the increase
in cash, does this transaction have on the accounting equation for Valor?
A.Common Stock increases $150,000
B.Common Stock increases $5,000; Additional Paid-in Capital – Common increases
$145,000
C.Common Stock increases $5,000; Retained Earnings increases $145,000
D.Common Stock increases $5,000; Gain on Sale of Common Stock increases
$145,000
10) Reddy Parts reported the following information at December 31, 2012:
Answer the following questions for Reddy Parts by placing the correct response in the
space provided.
___________ A) How many shares of common stock are issued?
___________ B) How many shares of preferred stock are issued?
___________ C) How many common shares are outstanding?
___________ D) How many preferred shares are outstanding ?
___________ E) How many of the common shares will receive dividends if an when
they are paid?
___________ F) How many of the preferred shares will receive dividends if and when
they are paid?
11) What is the effect of a stock dividend on stockholders’ equity?
A.Stockholders’ equity is decreased
B.Retained earnings is increased
C.Additional paid-in capital is decreased
D.Total stockholders’ equity stays the same
12) If the current ratio is 3 to 1, net income is $12,000, and current liabilities are
$24,000, how much is working capital?
A.$ 12,000
B.$ 36,000
C.$ 48,000
D.$ 72,000
13) Which of the following statements regarding amortization is true?
A.Amortization of the premium causes the premium on bonds payable account to
increase
B.Amortization of the premium causes the amount of interest expense to increase
C.Cash interest payments on bonds equals interest expense on the income statement
when there is amortization of bond premium
D.Amortization of premium continues over the life of the bond until the balance in the
account is reduced to zero
14) Eversoll Inc. uses the periodic inventory system.
If the June 30th inventory included 45 units from the June 5th purchase and 45 units
from the June 14th purchase, Eversolls cost of goods sold for June under the specific
identification method would be
A.$2,263.00
B.$2.373.00
C.$2,945.00
D.$3,626.50
15) The following is from Silverstein Inc.s 2014 income statement.
How much will Silverstein report as cost of goods purchased in its 2014 income
statement?
A.$184,600
B.$193,000
C.$201,400
D.$211,100
16) For several years, Shaun Corporation has had a current ratio that was consistent
with other companies in its industry. For the most recent year, Shauns current ratio was
significantly higher than that for the industry. What is the best possible explanation for
this situation?
A.The other companies in the industry were not as profitable
B.Shauns liquidity has improved or is not leveraging financial resources effectively
C.Shaun has less property, plant and equipment than other companies
D.Shaun has too much debt
17) Calzone, Inc. signs a 9% 4-month $50,000 loan with Reliable Bank on October 1,
2014. Determine the effects on the accounting equation for the following items:
18) The recognition of cost of goods sold expense in the same period that sales revenue
is recognized from the sale of merchandise is a good example of the
A.matching principle
B.full disclosure principle
C.revenue realization principle
D.historical cost principle
19) The maximum number of shares a company may issue are
______________________________.
20) An obligation that involves an existing condition for which the outcome is not
known with certainty and depends on some event that will occur in the future is call
a(n) ___________________________.
21) Eagle Corporation
Presented below are all of the items from Eagle Corporations income statement for the
years ending December 31, 2014 and 2013.
Read the information about Eagle Corporation.
Required:
Compare the profit margins for 2014 and 2013. Is the company becoming more or less
profitable or staying the same? What could be contributing to this?
22) Bonds payable are dated January 1, 2012, and are issued on that date. The face
value of the bonds is $200,000, and the face rate of interest is 8%. The bonds pay
interest semiannually. The bonds will mature in five years. The market rate of interest at
the time of issuance was 6%.
REQUIRED:
1> What is the bond issuance price?
2> Using the effective interest amortization method, what amount should be amortized
for the first six-month period? What amount of interest expense should be reported for
the first six-month period?
3> Using the effective interest amortization method, what amount should be amortized
for the period from July 1 to December 31, 2012? What amount of interest expense
should be reported for the period from July 1 to December 31, 2012?
23) _________________________ are cash and other assets that are reasonably
expected to be realized in cash during the normal operating cycle of the business.
24) Raponi, Inc.
The following balance sheet items from Raponi, Inc. are listed for December 31, 2014:
Read the information about Raponi, Inc.
Required:
Prepare the Assets section of the classified balance sheet.
25) Lear Flower Shop presented the stockholders’ equity section of its balance sheet on
January 1, 2012, as follows:
All common shares were originally sold for $6 each. The following transactions
occurred during 2012:
— Reacquired 3,000 shares of common stock at $15 per share on February 16.
— Sold 2,000 shares of treasury stock at $20 per share on June 1.
26) Springfield Companys comparative balance sheets included inventory of $89,700 at
December 31, 2013, and $73,300 at December 31, 2014. Springfields comparative
balance sheets also included accounts payable of $54,400 at December 31, 2013, and
$38,100 at December 31, 2014. Springfields accounts payable balances are composed
solely of amounts due to suppliers for purchases of inventory on account. Cost of goods
sold, as reported by Springfield on its 2014 income statement, amounted to $750,800.
What is the amount of cash payments for inventory that Springfield will report in the
Operating Activities section of its 2014 statement of cash flows assuming that the direct
method is used?
27) What is the purpose of an accounts receivable subsidiary ledger?