Suppose a company generally records revenues and expenses before receiving or
making cash payments. Which of the following statements is not correct?
A) If revenues are falling, a net loss could result even though the company reports a net
cash inflow from operating activities.
B) If revenues are rising, net income could result even though the company reports a
net cash outflow from operating activities.
C) Net income and net cash flows provided by operating activities will always agree.
D) The income statement doesn’t explain changes in cash because it focuses on just the
operating results of the business.
Which of the following statements about treasury stock is correct?
A) When a company reissues treasury stock for more than it originally paid for the
stock, it does not report a gain.
B) When a company purchases treasury stock, it increases total stockholders’ equity.
C) Treasury stock is reported as an asset on the balance sheet.
D) Treasury stock is reported as issued and outstanding stock.
Which of the following statements about cash flows from financing activities is correct?
A) When a company borrows from lenders, a cash outflow from financing activities has
occurred.
B) When a company receives cash dividends, a cash inflow from financing activities
has occurred.
C) When a company repurchases its own stock, a cash outflow for financing activities
has occurred.
D) When a company pays cash dividends, a cash inflow from financing activities has
occurred.
Jay-Cee Corporation had 20,000 shares of $4 par value common stock outstanding on
January 1. On January 20, the company purchased 2,000 of its stock for $16 per share.
On July 3, the company reissued 1,000 of the shares at $20 per share. Jay-Cee uses the
cost method to account for its treasury stock. Assume the company paid a dividend of
$5 per share on August 3. What is the total amount of the dividends that would be paid
to the common stockholders?
A) $95,000
B) $100,000
C) $90,000
D) $76,000
Which of the following is not an expense?
A) Wages of employees
B) Interest incurred on a note payable
C) Dividends
D) Corporate income tax
Which of the following statements about the calculations used for the weighted average
inventory costing method is correct?
A) Under the weighted average cost method, if the goods in inventory were purchased
at three different prices, the three different prices would be added and then divided by
three to find the weighted average cost per unit.
B) When the weighted average inventory costing method is used, ending inventory and
cost of goods sold are calculated using different costs per unit.
C) There is no difference in the calculations under the weighted average method
whether a perpetual or periodic inventory system is used.
D) The weighted-average method will produce an inventory cost which is between the
results of FIFO and LIFO inventory costing methods.
A company receives $102,000 when it issues a bond with a face value of $100,000 and
a stated interest rate of 7%. Which of the following statements is correct?
A) The entry to record the issuance will include a credit to Bonds Payable for $102,000.
B) The market interest rate is 7%.
C) The annual interest expense is $7,000.
D) The carrying value of the bonds will be $100,000 at maturity.
Which of the following statements concerning financial reporting is correct?
A) The FASB requires all financial decision makers to adhere to a code of professional
conduct.
B) The Sarbanes-Oxley Act does not require businesses to maintain an audited system
of internal control.
C) A fundamental characteristic of useful financial information is that it fully depicts
the economic substance of business activities.
D) There is no attempt to eliminate the difference in accounting rules in the U.S. and
elsewhere as this would prevent investors from comparing financial statements of
companies from different countries.
Use the information above to answer the following question. What journal entry will be
recorded by Flynn Company on November 6?
A) Debit Inventory and credit Accounts Payable for $5,800
B) Debit Cost of Goods Sold and credit Accounts Payable for $5,684
C) Debit Purchases and credit Accounts Payable for $5,800
D) Debit Inventory and credit Accounts Payable for $5,684
A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for
$35,000 cash.
Required:
Part a. Prepare the journal entry to record this transaction.
Part b. Explain how this transaction would be reported on the statement of cash flows
prepared using the indirect method.
If cost of goods sold remains unchanged, an increase in the inventory turnover ratio is
indicative of a(n):
A) reduction in the cost of goods sold.
B) decrease in inventory.
C) increase in inventory.
D) increase in sales revenue.
Closing journal entries:
A) transfer revenues and expenses to Retained Earnings.
B) transfer assets and liabilities to Retained Earnings.
C) transfer net income (or loss) and Dividends to Retained Earnings.
D) close permanent and temporary accounts.
If a company achieves a small increase in its gross profit percentage from one year to
the next, the company:
A) will have a higher net income.
B) must be obtaining products at a lower cost per unit.
C) must have increased its sales revenue.
D) might not have had a sales volume increase.