The investing activities section of the statement of cash flows reports cash receipts and
payments that increase or decrease long-term liabilities.
The guidelines for accounting information are called Generally Accepted Accounting
Principles (GAAP).
A common-size statement reports the same percentages that appear in a vertical
analysis.
Buying property, plant, and equipment for cash is considered a cash outflow for the
financing activities section of the statement of cash flows.
The trial balance verifies the equality of debits and credits at a point in time.
Walker, Inc. uses the indirect method to prepare the statement of cash flows. Refer to
the following section of the comparative balance sheet:Walker, Inc.
Comparative Balance Sheet
December 31, 2017 and 2016
The change in Accounts Receivable is shown as a negative cash flow in the adjustments
to net income.
In practice, most companies face complex situations. In these cases, a spreadsheet can
help in preparing the statement of cash flows.
Balancing errors can be detected by computing the difference between total debits and
total credits on the trial balance.
Under the going concern principle, accountants must provide proof that the business
will remain in operations long enough to use existing resources for their intended
purpose.
A trial balance is the list of only a company’s debit accounts along with their account
numbers at a point in time.
When a company collects the face value of a bond investment at maturity, total assets
increase.
Interest on a $6,000 note at 8% for 4 months is $160.
On January 1, 2017, Simpson Sales issued $23,000 in bonds for $35,800. These are
eight-year bonds with a stated rate of 9% and pay semiannual interest. Simpson Sales
uses the straight-line method to amortize the bond premium. Immediately after the issue
of the bonds, the ledger balances are as follows:Bonds Payable
Premium on Bonds Payable
After the first interest payment on June 30, 2017, what is the balance of Premium on
Bonds Payable?
A) debit of $800
B) debit of $14,400
C) credit of $235
D) credit of $12,000
Which of the following components of internal control consists of work performed by
internal and external auditors?
A) monitoring of controls
B) information systems
C) control procedures
D) control environment
In a good internal control system, which of the following sets of documents is required
for proper approval of a payment to a supplier?
A) a journal entry, a supplier invoice, and a description of the goods being purchased
B) a receiving report, an invoice, and a purchase order
C) a purchase order, a journal entry, and a price catalog
D) a supplier invoice, a bill of lading, and the supplier’s financial statements
A company may invest in debt or equity securities of other companies to ________.
A) further enhance a business relationship with a key vendor
B) invest borrowed money in an effort to improve the company’s net income
C) to weaken the investing company’s supply chain source
D) to allow the company to use investment income to increase its annual dividend
The auditor’s report ________.
A) attests that the financial statements are error-free
B) is prepared by the internal auditors
C) states whether the financial statements are presented in accordance with GAAP
D) does not include an assessment of the effectiveness of the company’s internal
controls
Which of the following is the correct order of subtotals that appear on a multi-step
income statement?
A) Operating income, Gross profit, Net income
B) Gross profit, Net sales revenue, Net income
C) Net income, Operating income, Net income
D) Gross profit, Operating income, Net income
An adjusting entry is completed ________.
A) at the beginning of the accounting period
B) at the end of the accounting period
C) when the balance sheet is prepared
D) when accounts need to be balanced in the ledger
Which of the following is paid by the employer only?
A) OASDI tax
B) medicare tax
C) employee income tax
D) federal unemployment tax
The account title used for recording the payment of rent in advance for an office
building is ________.
A) Prepaid Rent
B) Rent Payable
C) Rent Revenue
D) Rent Expense
Get Out of Town Vacations signed a 14%, 10-year note for $157,000. The company
paid an installment of $2,100 for the first month. What portion of the first monthly
payment is interest expense? (Round your answer to the nearest whole number.)
A) $268
B) $35,063
C) $15,183
D) $1,832
Allen Company is hired on December 15, 2016 to perform services, beginning on
December 16, 2016. Under this agreement, Allen will earn $4,500 monthly and receive
payment on January 15, 2017. What amount of service revenue should be recorded for
the year ending December 31, 2016?
A) 0
B) $2,250
C) $4,500
D) There is not enough information to answer this.
Regarding the four-step closing process under the periodic inventory system, ________.
A) purchase Returns and Allowances and Purchase Discount accounts are closed with a
credit via the Income Summary account
B) Sales Revenue is closed with a credit via the Income Summary account
C) the beginning Merchandise Inventory, Purchases, and Freight In are closed with a
debit via the Income Summary account
D) the ending merchandise inventory balance must be recorded as a debit via the
Income Summary account
Regarding a classified balance sheet, which of the following statements is correct?
A) Accounts are classified by their purchase dates.
B) Account balances are listed from the highest amount to the lowest amount.
C) Assets are listed in the order of their liquidity.
D) Assets are listed in alphabetical order.
Which of the following statements is true of a corporation?
A) Shareholders can be required to pay debts of the corporation.
B) Shares of stock cannot be readily purchased and sold by investors on an organized
stock exchange.
C) Shareholders are authorized to sign contracts or make business commitments on
behalf of the corporation.
D) Corporations pay income tax on corporate earnings, and shareholders pay income
tax on corporate dividends.
The following contains information from the records of the Wellborn Engineers and
Architects.Wellborn Engineers and Architects
Selected Financial Information
December 31, 2017
Calculate the current ratio. (Round your answer to two decimals.)
A) 1.46
B) 2.28
C) 0.64
D) 3.00
The data of Franklin Brothers Corp. for two years are given below.
Based on the above information, which of the following statements is true?
A) Cash ratio has increased from 0.02 in 2016 to 0.03 in 2017.
B) Cash ratio has increased from 0.05 in 2016 to 0.08 in 2017.
C) Cash ratio has increased from 0.351 in 2016 to 0.221 in 2017.
D) Cash ratio has increased from0.221 in 2016 to 0.351 in 2017.
On October 1, 2017, Nurix, Inc. purchased a patent for $205,000 cash. Although the
patent gives legal protection for 20 years, the patent is expected to be used for only 10
years. What will be the balance in the patent account on September 30, 2018?
A) $184,500
B) $205,000
C) $194,750
D) $102,500
Which of the following statements is true of the worksheet?
A) The worksheet is a ledger.
B) The worksheet is a document used to summarize data to prepare financial
statements.
C) The worksheet is a financial statement issued to the public to communicate the
financial results of a company.
D) The worksheet is a journal.
When a periodic inventory system is used, ________.
A) an adjusting entry is needed to record the ending Merchandise Inventory account
balance
B) the process for closing the Income Summary and Dividends accounts differs from
the process used in the perpetual inventory system
C) beginning Inventory, Purchases, and Freight In accounts are closed via the Income
Summary Account
D) there is no need to take a physical count of inventory
Which of the following is a liability account?
A) Service Revenue
B) Building
C) Accounts Receivable
D) Unearned Revenue