Lasik Vision, Inc. began business on June 1, 2014. The corporate charter authorized
issuance of 1,000 shares of no-par common stock and 4,000 shares of $6 par, 6%
cumulative preferred stock. As of the beginning of 2015, 200 shares of common stock
had been issued and none of the preferred stock had been issued. If the company issues
400 shares of common stock on March 1, 2015 for $10 per share, the journal entry
would include a
a. $4,000 credit to paid-in capital in excess par-common stock.
b. $4,000 credit to common stock.
c. $2,400 credit to paid-in capital in excess of par-common stock.
d. $2,400 credit to common stock.
Which of the following is an example of a credit memo?
a. notice of a bank service charge
b. notice of interest earned on a checking account
c. outstanding checks
d. a company’s transposition error in the recording of a customer’s check
Refer to the Ace Computing Company. The net realizable value of receivables
appearing on the 2013 balance sheet will amount to
Ace Computing Company
On January 1, 2013, the Accounts Receivable and the Allowance for Doubtful Accounts
carried balances of $40,000 and $1,500 respectively. During the year, the company
reported $80,000 of credit sales. There were $500 of receivables written off as
uncollected in 2013. Cash collections of receivables amounted to $78,200. The
company estimates that it will be unable to collect 4% of the year-end accounts
receivable balanc
a. $40,648.
b. $39,648.
c. $41,300.
d. $39,800.
Sum of the dividend payout and stock repurchase payout ratios. Match these terms to
their correct definition.
Gross pay
For each of the types of payroll taxes and other payroll-related items listed, indicate
whether it is paid by the employee through a paycheck withholding, by the employer, or
both. (Choices may be used more than once.)
a. Employee
b. Employer
c. Both
Company A has equipment that cost $5,250,000 which has accumulated depreciation of
$500,000 while Company B has equipment that costs $4,600,000 and has accumulated
depreciation of $4,400,000. Assuming both companies use straight line depreciation and
estimated useful lives of 40 years with $100,000 residual values, which of the following
statements is true?
a. Both companies have relative old equipment.
b. Company A’s equipment is older than Company B.
c. Company A’s equipment is newer than Company B.
d. Company B’s equipment has a higher book value than Company A.
Cash and other resources that are expected to become cash or used up within a year’s
time or less
Match each statement to the item listed below.
a. Current assets e. Intangible assets
b. Current liabilities f. Long-term investments
c. Gross margin g. Long-term liabilities
d. Income from operations h. Net profit margin
On January 1, 2013, a machine with an estimated life of 5 years and an estimated
residual value of $5,000 was acquired for $40,000. On July 1, 2015, the machine was
sold for $7,000 cash. The journal entry to record the sale
a. decreases stockholder’s equity.
b. increases total assets.
c. decreases total expenses.
d. increases net income.
Borrowing cash
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
Refer to A&B Foods. If the company estimates its bad debts at 4% of net credit sales,
what amount will be reported as bad debt expense for 2013?
A&B Foods
Data for the year ended December 31, 2013, are presented below.
a. $50,000
b. $75,000
c. $78,000
d. $84,000
Exists when another entity owes the security holder some combination of interest and
principal
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
Accrued expenses originate from
a. paying off liabilities.
b. paying for items such as insurance in advance.
c. collecting cash from customers.
d. incurring expenses without yet having paid cash for them.
The two-column record used to accumulate monetary increases and decreases for
individual assets, liabilities, stockholders’ equity, revenue, expense, and dividends items
is a(n)
a. Chart of accounts
b. T-account
c. Trial Balance
d. Posting
The stockholders’ equity accounts at December 31, 2015 are provided below:
The market price of the stock was $8 per share at December 31, 2015. A) What journal
entry will be required to record the distribution of a 20% stock dividend on December
31, 2015?
B) What balance will be in the retained earnings account immediately following the
stock dividend?
C) Prepare the stockholders’ equity section of the balance sheet.
Which of the following is not a requirement of the Sarbanes-Oxley Act?
a. Internal audit outsourcing can no longer be provided by a publicly-traded
corporation’s external auditors.
b. All publicly-traded corporations must have an internal audit function.
c. All publicly-traded corporations must provide internal controls over financial
reporting that guarantees financial accuracy.
d. The audit committee of a publicly-traded corporation must report to the company’s
board of directors.
Furniture Barn and Furniture World purchased identical equipment having an estimated
useful life of 5 years. Furniture Barn uses the straight-line depreciation method whereas
Furniture World uses the double-declining-balance method of depreciation. Assuming
the two entities are similar in all other respects, which of the following statements is
correct concerning the equipment? Hint: Without worrying about amounts, graph
depreciation expense over the 5 years.
a. Furniture Barn’s depreciation expense will be greater in the second year.
b. Furniture World’s equipment book value will be greater at the end of year one.
c. Furniture Barn’s net income will be greater in year nine.
d. Furniture World’s equipment book value will be less at the end of year two.
Refer to Rio Imports. Return on equity for 2015 is
Rio Imports
Information from the financial statements are provided below:
a. 18.75%.
b. 21.43%.
c. 23.85%.
d. 27.26%.
Total stockholders’ equity
Select the ratio that would include each amount or account in its calculation. (Choices
may be used more than once.)
a. Times interest earned ratio
b. Operating cash flow ratio
c. Debt-to-equity ratio
d. Return on equity
Gross margin less operating expenses
Match each statement to the item listed below.
a. Current assets e. Intangible assets
b. Current liabilities f. Long-term investments
c. Gross margin g. Long-term liabilities
d. Income from operations h. Net profit margin
An abbreviated version of an account, which is useful for analyzing the effects of
business events, is the
a. Chart of Accounts.
b. T-account.
c. Journal.
d. Double-entry system.
Cash flows from operating activities often relate to an increase or decrease in either a
current asset or a current liability.
Treasury stock is reported as a reduction of stockholders’ equity.
The four basic financial statements are the Income Statement, Statement of Retained
Earnings, Balance Sheet, and Statement of Cash Flows.
InventorySelect the correct revenue recognition principle for each of the following.
(Choices may be used more than once.)
a. Recognize revenue over the passage of time.
b. Recognize revenue when the customer takes possession of the product.
c. Recognize revenue when cash is collected.
d. Recognize revenue when service is performed.
The terms “realized” and “realizable” mean that the selling price is fixed and
determinable and collectibility is reasonably assured.
On January 1, 2012, Parent, Inc., purchases all the outstanding common stock of Sub
Corporation for $750,000. Since Parent has control over Sub, a consolidated balance
sheet must be prepared from the individual balance sheets of both companies. Complete
the following worksheet to prepare the consolidated balance sheet on January 1, 2012.
