Debt-to-equity ratio Indicate the type of each ratio listed. (Choices may be used more
than once.)
a. Liquidity ratio
b. Debt management ratio
c. Asset efficiency ratio
d. Profitability ratio
e. Stockholder ratio
Which of the following underlying assumptions for the conceptual framework is the
reason the dollar is used in the preparation of financial statements?
a. Economic Entity
b. Continuity
c. Time-Period
d. Monetary Unit
Cash was collected from customers for services to be performed next year
Match the following types of adjusting entries to the listed situation. (Choices may be
used more than once.)
a. a deferred (prepaid) expense
b. a deferred (unearned) revenue
c. an accrued expense
d. an accrued revenue
Refer to the information provided for Dollar Town. Calculate the company’s gross
margin.
Dollar Town
Dollar Town is a merchandising company that uses the periodic inventory system.
Selected account balances are listed below:
a. $40,800
b. $43,200
c. $46,800
d. $51,000
Advanced Technology reported the following on its balance sheet at December 31,
2013:
A) What is the net realizable value of the company’s accounts receivable?
B) What is the balance of the accounts receivable account?
C) Are you able to determine whether the company uses the allowance method or the
direct write off method for bad debts? Why or why not?
Which one of the following financial statements reports an entity’s financial position at
a specific date?
a. Balance Sheet
b. Statement of Retained Earnings
c. Income Statement
d. Both the Income Statement and the Balance Sheet
All supporting documents attached to an invoice are canceled when the check is signed.
The following set of items describes activities completed by a company in purchasing
and paying for merchandise and in collecting cash for merchandise sales. For each
activity, identify whether or not the activity adheres to or violates sound internal
control procedures. (Choices may be used more than once.)
a. Adheres to sound internal controls
b. Violates sound internal controls
c. Neither strengthens nor violates internal control
Refer to Dreammaker Kitchens. As a result of the bank reconciliation process, what is
the net increase or decrease in cash which must be recorded on the company’s books?
Dreammaker Kitchens The following information relates to the company’s November
bank reconciliation:
a. $100 decrease
b. $300 decrease
c. $400 decrease
d. $600 decrease
Payment is made for machinery purchases previously on credit. What effect does this
transaction have on the accounting equation?
a. Assets and liabilities increase.
b. Assets and contributed capital increase.
c. Liabilities decrease and retained earnings increase.
d. Assets and liabilities decrease.
A company reported net income for the current year. Which of the following business
transactions would cause its cash from operating activities to be higher than its net
income?
a. Cash dividends were paid to stockholders during the year.
b. Depreciation expense was recorded for the year.
c. A bank loan was repaid during the year.
d. Equipment was purchased for cash during the year.
Long-term notes payable
Several items from the financial statements of Fireside Tires are listed. Use the
following choices to identify the type of account for each item listed. (Choices may be
used more than once.)
a. Assets
b. Liabilities
c. Revenues
d. Expenses
e. Stockholders’ Equity
The auditor’s opinions regarding effectiveness of a public company’s internal controls
and appropriateness of its financial statements are found within the Form 10-K on
a. Item 1.
b. Item 7.
c. Item 8.
d. Item 9.
A company purchased a building for $900,000 on January 1, 2013. The building is
being depreciated over 40 years with an estimated residual value of $100,000. What
will be the book value of the building in 10 years?
a. $575,000
b. $600,000
c. $675,000
d. $700,000
Chuck is looking to invest $15,000 now so that he can purchase a new car in 4 years.
The expected price of the car, after tax, title and registration, is expected to be
$18,232.65. What is the interest rate required on Chuck’s investment to achieve this
amount?
a. 4%
b. 5%
c. 6%
d. 7%
Shipping terms of FOB Destination means that the shipping costs are paid by the
______.
For each of the following transactions, indicate the impact on the accounting equation
as a result of recording the related journal entry. Include an entry in each column for
each transactions, whether an increase (+), decrease (-), or no effect (NE). The first
transaction is shown as an example.
Differentiate a cumulative dividend preference from a participating dividend
preference. Describe the circumstances under which these preferences would be
utilized.
Capitalization of retained earnings occurs when a corporation’s stock is split.
When a company records the gross wages paid to its employees, the accounts to be
credited include various taxes payable and ____________________.
Explain how a company can control small cash payments that are made in cash rather
than by check.
During April, Downtown Iron Works engaged in the following transactions involving it
petty cash fund:
Prepare the journal entries necessary to record the company’s petty cash transactions.
A check written by a company but not yet presented to the bank for payment is called a
check in transit.
An adjusting entry to record accrued interest on a note payable includes a debit to
Interest Expense and a credit to ____________________.
The operating cash flow ratio is calculated by dividing the cash flows from operating
activities by current liabilities.