Use the information above to answer the following question. Which line items would be
classified as noncurrent on a classified balance sheet?
A) Cash; Supplies; Accounts Payable
B) Equipment; Other Assets; Notes Payable
C) Supplies; Equipment; Notes Payable
D) Accounts Receivable; Equipment; Other Assets
Goodwill:
A) should be treated like most other intangible assets and amortized over a useful life of
not more than 40 years.
B) is an accounting measurement of how well a company’s employees behave towards
the company’s customers.
C) should be recorded as a negative value if a company is purchased for less than the
net carrying value of its assets.
D) is recorded when the purchasers of a business pay more than the fair value of the
assets purchased.
During November 2015, Asler Inc. performs consulting services. The client does not
pay Asler until January, 2016.
A) Using the accrual basis of accounting, the revenue is reported in January 2016.
B) Using the cash basis of accounting, the revenue is reported in November 2015.
C) Using the accrual basis of accounting, the revenue is reported in November 2015.
D) Using the accrual basis of accounting, the revenue is reported when Asler’s expenses
are paid.
When a company uses the direct method to determine the cash flows from operating
activities, cash flows from operating activities will:
A) be identical to the amount reported using the indirect method.
B) be larger if there is a net cash inflow and smaller if there is a net cash outflow
compared to the amount reported using the indirect method.
C) always be larger than the amount reported using the indirect method.
D) be larger if there is a net cash outflow and smaller if there is a net cash inflow
compared to the amount reported using the indirect method.
Which transaction would be reported on the income statement for the current year?
A) The revenue earned from selling sold goods in the current year to customers who
have not yet paid for those goods (that is, they have promised to pay for those goods
next year).
B) The amount of cash received from customers this year as payment for goods that
were sold to those customers last year.
C) The proceeds from a borrowing from the bank that was to be used to finance
business activities during the current year.
D) The proceeds from the issuance of common stock to owners that was to be used to
finance business activities during the current year.
How do stock splits and stock dividends impact Retained Earnings?
A) Stock splits increase Retained Earnings and stock dividends have no effect on
Retained Earnings.
B) Stock splits have no effect on Retained Earnings and stock dividends decrease
Retained Earnings.
C) Stock splits and stock dividends both decrease Retained Earnings.
D) Stock splits and stock dividends have no effect on Retained Earnings.
The following information is taken from the income statement of Muir Company:
Based on this information, what is the amount of net cash flow provided by operating
activities?
A) $149,000
B) $140,000
C) $146,000
D) $134,000
Accrual adjustments involve increasing:
A) assets and revenues or increasing liabilities and expenses.
B) assets and expenses or increasing liabilities and revenues
C) assets and decreasing revenues or increasing liabilities and decreasing expenses
D) assets and decreasing expenses or increasing liabilities and decreasing revenues
Use the above information to answer the following question. What is the amount of
gross profit?
A) $94,200
B) $98,700
C) $105,000
D) $32,700
Solvency ratio data are primarily concerned with the ability of a company to:
A) produce profits.
B) maintain long-term survival and repay its debt.
C) manage its cash flow.
D) provide income for stockholders.
Companies with the same asset may report different amounts of depreciation in a given
year for all of the following reasons, except:
A) They use different residual values.
B) They use different estimated useful lives.
C) They use different depreciation methods.
D) They are in different industries.
Which of the following statements about a company’s fiscal year is correct?
A) All companies have a December 31 year end.
B) It usually corresponds to a company’s slow period.
C) It always corresponds to the calendar year.
D) The Financial Accounting Standards Board assigns a year end to each company.
The days to collect receivables increased from 32 last year to 48 this year. Which of the
following statements is correct?
A) The company is likely to see its Bad Debt Expense decrease.
B) The company is becoming more efficient at collecting payment.
C) The receivables turnover rate must have increased from last year to this year.
D) The receivables turnover rate decreased from approximately 11.4 to 7.6 from last
year to this year.
Net income appears on which of the following financial statements?
A) Balance sheet and income statement
B) Balance sheet and statement of retained earnings
C) Balance sheet and statement of cash flows
D) Income statement and statement of retained earnings
Which of the following are the three basic elements of the balance sheet?
A) assets, liabilities, and retained earnings.
B) assets, liabilities, and common stock.
C) assets, liabilities, and revenues.
D) assets, liabilities, and stockholders’ equity.
Company A uses an accelerated depreciation method while Company B uses the
straight-line method for an asset of the same cost and useful life. Other things being
equal, which of the following is correct?
A) Company A will have higher net income in the early years, but Company B will
have higher net income towards the end of the asset’s useful life.
B) Company A will consistently have the larger net income until residual value is
reached.
C) Company B will have higher net income in the early years, but Company A will have
higher net income towards the end of the asset’s useful life.
D) Company B will consistently have the larger net income until residual value is
reached.
The college campus bookstore uses a periodic inventory system. The bookstore
purchases 400 copies of a textbook at $70 each in June, 1,000 copies in August at $72
each, and 600 copies in December at $75 each. The bookstore sold 1,900 copies of the
textbook during the year.
Required:
Calculate the company’s ending inventory and cost of goods sold using the each of
following inventory costing methods.
Part a. FIFO
Part b. LIFO
Part c. Weighted Average
If a company’s Sales Revenue was $171,356 and cash collected from customers was
$167,803, which of the following would be consistent with this difference?
A) Accounts Receivable could have decreased.
B) Cash payments could have been larger than the related expense accounts.
C) Accounts Receivable could have increased.
D) Cash payments could have been smaller than the related expense accounts.
Which of the following statements about business forms is correct?
A) A sole proprietorship is an unincorporated business owned by one person.
B) All partnerships are owned by two people.
C) A corporation is not a legal entity.
D) An LLC (or limited liability company) has the same tax treatment as a corporation.
An error must have been made if which of the following accounts appears on the
post-closing trial balance with a balance other than zero?
A) Equipment
B) Common Stock
C) Accumulated Depreciation
D) Depreciation Expense