The credit terms 2/4, n/30 means that the customers may take a 4% cash discount if
they pay within 30 days.
Some explicit transactions (e.g., the loss of assets due to fire) do not involve actual
exchanges of goods and services between parties.
Failure to adjust for an unrecorded expense such as interest expense will understate
liabilities.
Deposits in transit are added to the balance per books when preparing a bank
reconciliation.
Cash received from customers is a financing activity on the statement of cash flows.
Depreciation expense generates cash.
Frequently, the statement of retained earnings is added to the bottom of the balance
sheet.
Protective covenants are provisions in a bond that are intended to protect the
shareholders’ interests.
Compatibility Services acquired an $80,000 machine on January 1, 20X3. The machine
is estimated to have a useful life of 8 years, and a residual value of $4,000. For
units-of-production depreciation purposes, the machine is expected to produce 400,000
units. If Compatibility Services uses double-declining-balance depreciation, what is the
depreciation expense in 20X4?
A) $ 19,000
B) $ 10,000
C) $15,000
D) $9,500
E) $16,000
The interest rate that determines the amount of cash paid for interest to the bondholder
is referred to as the
A) effective rate.
B) market rate.
C) coupon rate.
D) daily rate.
E) imputed rate.
The entry to close revenue accounts involves
A) a debit to Income Summary and credits to all the revenue accounts.
B) debits to all the revenue accounts and a credit to Income Summary.
C) debits to all the expense accounts and credits to all the revenue accounts.
D) a debit to Retained Earnings and a credit to Income Summary.
E) a debit to Income Summary and a credit to Retained Earnings.
Cash and cash equivalents include all of the following except
A) an investment purchased in March, 2012 with a maturity of March, 2014.
B) money market funds.
C) cash balance in a savings account.
D) cash balance in a checking account.
E) Treasury bills.
Monday Corporation has the following data available:
What is the inventory turnover for Monday Corporation in 2013? Has the inventory
turnover improved or not improved since 2012?
A) 10.0, improved
B) 10.0, unknown
C) 10.0, not improved
D) 30.0, improved
E) 30.0, not improved
When the PEG ratio for a stock is less than 0.5, this indicates that the
A) market believes the earnings growth estimate reflected in the consensus forecast is
too low.
B) market expects the future EPS growth to be greater than currently reflected in the
analysts’ consensus forecast EPS.
C) stock is overvalued.
D) stock is undervalued.
E) stock is correctly valued.
________ requires all companies in an industry to follow similar accounting principles
and methods. For example, most companies in the department store industry use the
same inventory method.
A) Validity
B) Verifiability
C) Faithful representation
D) Consistency
E) Comparability
Verifiability is defined as
A) the quality of information that allows users to depend on it to represent the
conditions or events that it purports to represent.
B) the capability of information to make a difference to the decision maker.
C) choosing accounting policies without attempting to achieve purposes other than
measuring economic impact.
D) a correspondence between the accounting numbers and the resources or events those
numbers purport to represent.
E) a quality of information such that it can be checked to ensure it is correct.
IFRS prohibits the use of the ________ method of inventory valuation.
A) FIFO
B) weighted-average
C) moving average
D) specific identification
E) LIFO
The interest-coverage ratio is calculated by dividing pretax income plus interest
expense by
A) total shareholders’ equity.
B) total shareholders’ equity and long-term debt.
C) total assets.
D) interest expense.
E) total current assets.
The entry to record the cost of merchandise inventory sold involves a
A) debit to Merchandise Inventory and a credit to Sales Revenue.
B) debit to Cost of Goods Sold and a credit to Merchandise Inventory.
C) debit to Merchandise Inventory and a credit to Cost of Goods Sold.
D) debit to Cost of Goods Sold and a credit to Sales Revenue.
E) debit to Merchandise Inventory and a credit to Accounts Receivable.
Which of the following statements is false?
A) Corporations are business organizations created under federal law.
B) One of the most notable characteristics of a corporation is the limited liability of the
owners.
C) An advantage of corporations over other business entities is the ease of transfer of
ownership.
D) The laws governing corporations vary from state to state.
E) Individuals can sell stock to each other without corporate involvement.
A characteristic of preferred stock that gives the issuer of the stock the right to buy the
stock back from the owner at a fixed price is known as
A) participating.
B) cumulative.
C) convertible.
D) liquidating preference.
E) callable.
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 and December 31, 20X4.
Total dividends declared and paid were
If Jacklie Syndicate’s preferred stock were cumulative, how much of the 20X4
dividends would have been distributed to
Neslund Ornamentals offered a 2% trade discount to Parsons Retail Outlet for all
purchases over $200,000. Parsons Retail Outlet purchased $300,000 from Neslund
Ornamentals on account. Neslund uses the periodic inventory system. Which of the
following is the journal entry made by Neslund Ornamentals to recognize the sale and
the 2% trade discount?
On August 10, 20X9, Steel Wool, Inc., reacquired 1,000 shares of its own $3 par value
common stock at $28 per share. These shares were not permanently retired. On
November 3, 20X9, the company sold 600 of the treasury shares for $26 per share. On
December 15, 20X9, the company sold the remaining 400 shares for $32 per share.
Prepare journal entries for Steel Wool, Inc., for August 10, November 3, and December
15.
What is the purpose of a balance sheet?
List and explain why a company would create subsidiaries instead of integrating the
smaller companies into the larger parent to create a single entity.
Soxlette Company has 700,000 shares authorized and 250,000 shares issued and
outstanding of its $4 par value common stock. The stock is currently selling for $60 per
share. If Soxlette Company declared and issued a 5% stock dividend, what journal entry
would the company make?
Tablet Trade & Commerce has 100,000 shares of common stock authorized, 10,000
shares issued and outstanding. On June 1, 20X3, the company declared a $5.00 per
share dividend for those of record on July 1, 20X3, to be paid on August 1, 20X3.
Which of the following journal entries would Tablet Trade & Commerce make on
August 1, 20X3?
The following information pertains to results obtained during the month of October
20X9 for
Of the gross sales, $245,000 were sales made to customers who used their bank cards.
The bank card company charged Hawkins Hearing Center a 3% fee.
Prepare the revenue section of the income statement for Hawkins Hearing Center for
the month ended October 31, 20X9.