A local tennis club sells season memberships for $1,000 each. During January 2013, 50
season memberships were sold. As of March 31, 2013, only $25,000 of season
membership fees had been collected from customers. The tennis season runs for 6
months starting April 01, 201 Which one of the following is an amount reported on the
Balance Sheet dated March 31, 2013?
a. Unearned tennis membership revenue of $25,000.
b. Unearned tennis membership revenue of $50,000.
c. Accounts Receivable $50,000.
d. Tennis membership revenue of $25,000.
On June 1, 2014, the board of directors declared a $100,000 cash dividend to be
distributed to common stockholders of record on June 15, 2014. The dividend will be
paid on July 1, 2014. The required journal entry on June 1 includes a
a. $100,000 debit to retained earnings.
b. $100,000 debit to dividends payable.
c. $100,000 credit to cash.
d. $100,000 credit to common stock.
Costs incurred after putting the asset into service which would extend the asset’s useful
life.
For each of the following items, indicate whether each would be treated as capital
expenditure or revenue expenditure. (Choices may be used more than once.)
A company’s employees earn $5,000 per day, work 5 days per week (Monday through
Friday), and get paid each Friday. If the previous payday was January 26 and the
accounting period ends on January 31, what is the ending balance in the wages payable
account?
a. $ 9,000
b. $10,000
c. $15,000
d. $25,000
Determines operating cash flow by adjusting each item on the income statement by the
changes in the related current asset or liability accounts. Match these terms with their
correct definition.
a. Cash flow adequacy ratio
b. Cash flows from financing activities
c. Cash flows from investing activities
d. Cash flow from operating activities
e. Direct method
f. Free cash flow
g. Income statement
h. Indirect method
i. Noncash investing & financing activities
j. Statement of cash flows
A measure of the ability of a company to finance current obligations from cash from
operations.
Select the ratio that each definition most properly satisfies.
a. Dividend yield ratio
b. Operating cash flow ratio
c. Debt-to-total assets ratio
d. Return on common equity ratio
e. Times interest earned ratio
f. Asset turnover ratio
g. Debt-to-equity ratio
h. Dividend payout ratio
A consulting firm provided services last month and billed its client. This month, the
company received payment from the customer. What impact does this month’s
transaction have on the firm’s working capital?
a. increase
b. decrease
c. no net effect
d. Unable to determine with this limited information.
A company issued 10-year, 9%, $1,000,000 bonds paying interest on an annual basis, at
a premium. Which one of the following statements is true?
a. The annual interest expense on the bonds will be greater than the amount of interest
payments to bondholders each year.
b. The annual interest expense on the bonds will be less than the amount of interest
payments to bondholders each year.
c. The issue price will be less than $1,000,000.
d. The cash paid to bondholders will be based on the market rate of interest.
What are the effects on the accounting equation from the recognition of an unrealized
loss on trading securities?
a. Assets and stockholders’ equity decrease.
b. No effects; unrealized gains and losses should not be recorded.
c. Assets and liabilities decrease.
d. Stockholders’ equity decreases and liabilities increase.
A petty cash custodian maintains a $250 petty cash fund. At the end of each month, the
custodian tallies the records of the petty cash transactions and presents them for
reimbursement.
Which of the following entries is necessary for recording the replenishment of the fund?
a. Cash 229 Petty Cash Fund 229
b. Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Petty Cash
229
c. Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Cash 229
d. Postage Expense 48 Office Supplies Expense 146 Delivery Expense 35 Cash Over
and Short 21 Petty Cash Fund 250
Debt investments that management intends to hold until the debt contract requires the
borrower to repay the debt in its entirety
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Which statement presents financial information not based on accrual accounting?
a. Balance Sheet
b. Income Statement
c. Statement of Cash Flows
d. Statement of Retained Earnings
The asset account, Supplies, has a balance of $10,000 on January 1. During January,
$22,000 of supplies were purchased on account and the liability was appropriately
recorded. A count of supplies at the end of January indicates a balance of $2,000. What
adjusting entry is necessary at January 31?
a. Supplies Expense 22,000 Supplies 20,000 Accounts Payable 2,000
b. Supplies Expense 24,000 Supplies 24,000
c. Supplies Expense 30,000 Supplies 30,000
d. Supplies 22,000 Accounts Payable 22,000
This method minimizes taxable income Given the following list of methods of
depreciation, select the method that is best for the situation or purpose given. (Choices
may be used more than once.)
a. Straight-line
b. Units-of-production
c. Double-declining-balance
d. MACRS
Kay Animal Hospital leased a building to expand its services downtown. The 10-year
lease is recorded as a capital lease. The annual payments are $10,000 and the recorded
cost of the asset is $67,100. The straight-line method is used to calculate depreciation.
Which of the following statements is true?
a. The company will record depreciation expense of $6,710 each year.
b. The company will record depreciation expense of $10,000 each year.
c. No depreciation expense will be recorded.
d. No interest expense will be recorded.
Amounts collected from customers that must be passed along to the state. Match each
of the following current liabilities with its meaning.
a. Account payable
b. Note payable
c. Wages payable
d. Interest payable
e. Sales taxes payable
f. FICA taxes payable
g. Unemployment taxes payable
h. Unearned sales revenues
i. Estimated warranty liability
Refer to Dance Town Academy. How will the bank services charges be handled on a
bank reconciliation?
Dance Town Academy The items listed below were identified while preparing a bank
reconciliation for the company’s checking account as of March 31, 2013.
a. add to the balance from the company records
b. subtract from the balance from the company records
c. add to the bank statement balance
d. subtract from the bank statement balance
A tax service prepared tax returns for twenty clients at $200 each. By the end of June,
the service had collected from eight clients. Under the accrual basis, what amounts will
be reported on the income statement and the statement of cash flows for June? Income
StatementStatement of Cash Flows
a. $4,000 $1,600
b. $4,000 $4,000
c. $2,400 $2,400
d. $1,600 $1,600
Which internal control activity is followed when management authorizes the purchasing
department to order goods and services for the company?
a. segregation of duties
b. safeguarding of assets and records
c. checks on recorded amounts
d. clearly defined authority and responsibility
A sales invoice that bears the notation 2/10 means ____________________.
Refer to Fabulous Creations. Determine the book value of the company’s property, plant
and equipment at December 31, 2013 and 2012. What types of transaction(s) could
have caused the change in book value of property, plant, and equipment during 2013?
All authorized stock is issued.
Refer to Accutemp Heating & Air. Identify the maturity date of the note.
Accutemp Heating & Air
On May 1, 2013, the company sold merchandise to a customer and received a 8%,
6-month note with a principal amount of $100,000. The company’s yearend is
December 31.
The amortization of a bond premium increases the effective interest expense incurred
each period for the issuer.