There are two types of leases: capital leases and financial leases.
With respect to dividends, the record date comes first and is always followed by the
declaration date, which is then always followed by the payment date.
A retailer accepting a bank card such as VISA or Master Card does not have the
responsibility of collecting cash on account.
Cash flows from financing activities include borrowing cash through a lender.
The cost-effectiveness constraint asserts that an item should be included in a financial
statement if its omission or misstatement would tend to mislead the reader.
A high current ratio means that a company is highly profitable.
ROE = Return on sales x Total asset turnover x Financial Leverage.
The schedule of noncash investing and financing activities is used by investors to
determine a company’s net worth.
In order to calculate depreciation, the current market value of the equipment, the
salvage value, and the estimated useful life must be known.
Non-interest-bearing notes do not make any interest payments over the life of the note.
A contingent liability
A) is a potential liability that depends on a future event arising out of a past transaction.
B) is a liability that can always be calculated with great precision (i.e., always has a
definite amount).
C) does not include product safety lawsuits.
D) does not include liabilities relating to environmental issues such as toxic landfills.
E) is not of interest to readers of financial statements.
Recording revenue in 2012 that is actually earned in 2013 will result in:
A) overstatement of net income in 2012
B) overstatement of net income in 2013
C) understatement of net income in 2013
D) an overstatement of net income in 2012 and an understatement in net income in
2013
E) an overstatement of net income in 2013 and an understatement in net income in 2012
Mason Manufacturing had 2012 earnings of $850,000. Cash dividends per share were
$1.25. The company had an average of 350,000 shares of common stock outstanding.
The market price of the stock at the end of the year was $30 per share. What was the
price-earnings ratio for Mason Manufacturing?
A) 24.0
B) 18.4
C) 9.36
D) 12.35
E) Cannot be determined from the information provided
The return on assets ratio measures
A) how effectively assets generate profits.
B) how effectively assets generate stockholders equity.
C) the relationship of total assets to current assets.
D) the relationship of total assets to total liabilities.
E) a company’s ability to generate sales.
Useful Organizing began operations on January 1, 20X3, when the owners invested
$80,000 cash in the company. Also on January 1, the company paid for a $30,000
machine. The machine has a useful life of 4 years and a $2,000 residual value. During
its first year of operations, the company had sales of $96,000 and operating expenses
except depreciation of $67,000. All sales were cash sales and all non-depreciation
operating expenses were paid in cash. Useful Organizing has a 30% tax rate and pays
all taxes on December 31. What is the net cash provided by operating activities after
taxes for 20X3, if Useful Organizing uses double-declining-balance depreciation?
A) $ 6,860
B) $ 9,800
C) $10,500
D) $24,500
E) $24,800
When a company sells goods and receives non-cash items in return,
A) the seller estimates the fair market value of the non-cash item or the cash equivalent
of the noncash item.
B) the seller receiving the non-cash item estimates its value as the original cost of the
inventory sold.
C) the seller uses the buyers’ cost for the non-cash item.
D) the seller uses one-half of the fair market value of the non-cash item.
E) both parties must realize that they are conducting a transaction that is not in
accordance with GAAP.
Which of the following items will NOT appear in the operating activities section of the
statement of cash flows when using the direct method?
A) Payments to employees
B) Collections from customers
C) Net income
D) Payments to suppliers
E) Income tax payments
Smith Lots, Inc., operates in a state where there is a 6% sales tax. If a customer pays
cash for merchandise with a sales price of $500, what effect will this transaction have
on Smith Lots’ balance sheet? (Ignore the effect on cost of goods sold.)
A) Assets increase by $530, current liabilities increase by $30, and stockholders’ equity
increases by $500.
B) Assets increase by $500, and stockholders’ equity increases by $500.
C) Assets increase by $500, long-term liabilities increase by $30, and stockholders’
equity increases by $500.
D) Assets increase by $500, current liabilities increase by $30, and stockholders’ equity
increases by $470.
E) Assets increase by $530, long-term liabilities increase by $30, and stockholders’
equity increases by $500.
Manchester Technology has the following data available:
What is the percentage increase or (decrease) in accounts receivable from 2012 to 2013
for Manchester Technology?
A) (120.0)%
B) (54.5)%
C) 27.3%
D) 54.5%
E) 120.0%
Biscuit Bakery had the following activity in its inventory account during August 20X3.
Cost per
What is the cost of goods sold for the month ended August 31, 20X3, for Biscuit
Bakery if the company uses periodic FIFO as its inventory valuation method?
A) $424.00
B) $485.00
C) $488.00
D) $500.00
E) $584.00
The issuance of a long-term debt for cash would appear on the statement of cash flows
as a(n)
A) investing activity.
B) operating activity.
C) financing activity.
D) equity activity.
E) debt activity.
Zeus Greek Foods purchased a $21,000 van for use in the business. The company made
a $15,000 cash down payment, and signed a note for the balance. The effect of this
transaction on Zeus Greek Foods would be to
A) increase the van account by $21,000, decrease the cash account by $15,000, and
decrease the notes receivable account by $6,000.
B) increase the van account by $21,000, decrease the cash account by $15,000, and
decrease the notes payable account by $6,000.
C) increase the van account by $15,000 and decrease the cash account by $15,000.
D) increase the van account by $21,000, decrease the cash account by $15,000, and
increase the notes payable account by $6,000.
E) decrease the van account by $15,000 and increase the cash account by $15,000.
Which of the following is not true of bonds issued at a premium?
A) The cash proceeds exceed the face amount of the bonds.
B) The amortization of bond premium decreases the interest expense.
C) The amount of the Premium on Bonds Payable account is subtracted from the face
amount of the bonds to determine the net liability reported in the balance sheet.
D) The market rate was below the coupon rate.
E) Amortization of the premium decreases the carrying value of the bond.
Which of the following transactions decrease cash?
1. Reduce prepaid expenses
2. Increase treasury stock
3. Lend money to an employee
4. Recognize cost of goods sold
5. Reduce long-term or short-term debt
A) 1 and 4
B) 3 and 5
C) 1, 3, and 5
D) 2, 3, and 5
E) 1, 2, 3, 4, and 5
Sandstone Company has the following stockholders’ equity section:
What is the book value per share for the Sandstone Company?
A) $1.40
B) $1.75
C) $25.80
D) $32.25
E) $14.00
The following single-step income statement for Balm Butters and Jellies needs to be
converted into a multiple-step income statement for the year ended December 31, 2012.
Assume the periodic inventory system is used. Sammy Company sold inventory on
account for $300. A week later, the inventory was returned and a full credit was given to
the customer. Which of the following would be Sammy’s journal entry to record the
return of the inventory?
Picture Perfect Videos acquired $18,000 of equipment by paying $6,000 in cash, with
the remaining balance on a note due in 6 months. Which set of T-accounts best
describes this transaction?
Lazareth Machine Metals sold inventory to Talla Manufacturing for $5,000 cash. Which
of the following is the journal entry made by Lazareth Machine Metals? Assume the
periodic inventory system is used.
Color Images, Inc. started March 1, 20X3 with an inventory balance of 20 pieces of
lumber originally purchased for $2.00 per piece. During the month, the company
purchased 100 pieces of lumber for $2.00 per piece for cash and sold 50 pieces of
lumber on account to one contractor for $5.00 per piece. At the end of March, 20X3,
Color Images, Inc. conducted a physical inventory of its lumber and accounted for 66
pieces of lumber. The company uses a perpetual inventory system. Make the necessary
journal entries for the month of March, 20X3.
Queen Mattresses, Inc. had the following transactions occur during May 20X3. Assume
there is no beginning inventory.
If Queen Mattresses, Inc. were using a perpetual inventory system, what is the journal
entry for May 15?
Jacklie Syndicate began operations on January 1, 20X3. The company has the following
items included in the stockholders’ equity section of its balance sheet on December 31,
20X3, December 31, 20X4 and December 31, 20X5.
Total dividends declared and paid were
If Jacklie Syndicate’s preferred stock were cumulative, how much of the 20X5
dividends would have been distributed to
On January 1, 20X3, Dierk Company issued $200,000 in long-term bonds at par. The
bonds pay interest of 12% annually on January 1. The term of the bond is 10 years.
What journal entry is necessary on December 31, 20X3?