On June 1, a board of directors declared a $3 per share cash dividend, payable on June
30 to all common stockholders of record on June 15. The company has 10,000 shares of
common stock authorized, 1,000 shares issued, and 200 shares in the treasury. The entry
to record the dividend declaration increases
a. a liability account by $2,400.
b. an asset account by $3,000.
c. an expense account by $2,400.
d. a stockholders’ equity account by $3,000.
Term referring to transportation costs paid by the seller.
Match the terms with the descriptions provided.
a. Average days to sell inventory d. Inventory turnover ratio
b. Gross margin e. Freight-in
c. Gross profit ratio f. Freight-out
A company reported the following information:
How much cash was collected from customers during 2014?
a. $972,000
b. $841,000
c. $859,000
d. $963,000
Refer to HVAC Service. The journal entry to record payment of the salaries will include
a credit to
HVAC Service
The following transactions occurred during November:
a. salary expense.
b. salary payable.
c. prepaid salaries.
d. cash.
What is the impact on the accounting equation of recording the issuance of a short-term
note payable?
a. Both assets and liabilities increase.
b. Both assets and stockholders’ equity decrease.
c. Both assets and stockholders’ equity increase.
d. Liabilities increase and stockholders’ equity decreases.
Works to reduce differences in accounting standards throughout the world.
Organizations important to accounting are listed. Select the organization that most
closely achieves the role described. (Choices may be used more than once.)
a. Financial Accounting Standards Board (FASB)
b. International Accounting Standards Board (IASB)
c. Securities and Exchange Commission (SEC)
Refer to Delco Construction. What is net amount of the adjustments to the company’s
cash balance as a result of the bank reconciliation?
Delco Construction The following items relate to the company’s March bank
reconciliation:
a. $400 increase
b. $400 decrease
c. $900 increase
d. No adjustments are needed.
While preparing the February 28th bank reconciliation, the accountant identified the
following items:
In the process of preparing the reconciliation, the accountant discovered an error in
recording a customer’s check; the amount was incorrectly recorded on the books as a
cash receipt of $600, while the bank correctly recorded the amount as $650. What is the
company’s adjusted cash balance on February 28th?
a. $22,250
b. $21,700
c. $22,200
d. $22,150
Current assets are $200,000, long term assets are $300,000, current liabilities are
$100,000, long-term liabilities are $200,000, paid-in capital is $150,000, and retained
earnings total $50,000. What is the debt-to-total-assets ratio?
a. 0.4 or .4 to 1
b. 0.6 or .6 to 1
c. 0.2 or .2 to 1
d. 0.9 or .9 to 1
The principle of conservatism is concerned with
a. the avoidance of overstating assets or income in the preparation of financial
statements.
b. the minimization of costs associated with providing financial information.
c. the company’s ability to carry out its existing commitments.
d. the company’s procedures for recording activities at their initial exchange price.
Refer to Metalcrafts, Inc. What amount would be reported as the cash proceeds from the
sale of equipment?
Metalcrafts Inc.
Selected information from the company’s financial records is presented below:
During 2014, the company sold equipment with a cost of $50,000 and accumulated
depreciation of $30,000. A gain of $10,000 was recognized on the sale of the
equipment. This was the only equipment sale during the year. a. $50,000
b. $20,000
c. $10,000
d. $30,000
Unearned revenue
Several items from the financial statements of Fireside Tires are listed. Use the
following choices to identify the type of account for each item listed. (Choices may be
used more than once.)
a. Assets
b. Liabilities
c. Revenues
d. Expenses
e. Stockholders’ Equity
Hanson’s Pilings is planning to purchase a new dredge pump in 4 years. Billy Hanson,
the owner, invests $11,800 in an account that pays 8% interest compounded quarterly.
How much will Mr. Hanson have in the account at the end of 4 years?
a. $14,864.58
b. $16,198.92
c. $16,053.78
d. $21,840.97
Refer to Abbot Safe & Lock. What is the effect on liquidity when the company records
its estimate for bad debt expense using the allowance method?
Abbot Safe & Lock
The following information was obtained from the company’s records for 2013:
a. Liquidity decreases
b. Liquidity increases
c. Liquidity stays the same
d. Liquidity both increases and decreases
Arrangement whereby goods owned by one party are held and offered for sale by
another party.
Match the terms with the descriptions provided.
a. Consignment f. Purchase allowance
b. Discount period g. Purchase discounts
c. Inventory h. Purchase returns
d. LIFO Reserve i. Purchases
e. Lower of cost or market rule
The process of allocating the cost of a natural resource to each period in which the
resource is used Match these terms with their correct definition.
a. Book value e. Depreciation
b. Cost f. Impairment
c. Depletion g. Involuntary disposal
d. Depreciable cost h. Residual value
“You Decide’ Essay You are the accounting manager for a mid-sized electronics
retailer. Your accounting intern is having trouble understanding how your company
accounts for its investments in the stock of other companies. You just spent the better
part of the morning reviewing in detail all of the recording and reporting requirements
but the intern is still fuzzy. Complete the following table to compare and contrast for
your intern the requirements for the different types of stock investments that your
company might make. Be sure to use the legend provided. Investments in Equity
Securities
Legend:
Accounting Method: Equity method, Equity method + Consolidation, or Fair value
method
Impact of Dividend Recei
Reporting of unrealized gains/losses: Balance sheet, Income statement, or Not
recognized
The indirect method of preparing a statement of cash flows begins with net income and
then adjusts it for noncash items to produce net cash flow from
____________________.
A company’s internal control system must be designed and maintained by its external
auditors.
The six steps for preparing the worksheet are unadjusted trial balance, adjusting entries,
adjusted trial balance, ______________, retained earnings statement, and balance sheet.
If cost of goods sold does not equal the cost of merchandise purchased during the
period, an adjustment must be made to correct the error.
The statement of cash flows summarizes the operating, investing, and financing
activities of a business for a period of time.