1) Crimson Company declared and paid $1,000,000 in dividends to the common
stockholders. The effect of this transaction is that the
A.earnings per share decreased
B.current ratio increased
C.debt-to-equity ratio increased
D.earnings per share increased
2) Stein Corp. reported the following information for 2013 and 2014.
How much cash was paid for merchandise purchases during 2014?
A.$421,000
B.$462,000
C.$467,000
D.$472,000
3) A company would repurchase its own stock for all of the following reasons except
A.it needs the stock for employee bonuses
B.it wishes to make an investment in its own stock
C.it wishes to prevent unwanted takeover attempts
D.it wishes to improve the company’s financial ratios
4) Listed below are selected accounts from the financial statements of Bargain Mart for
the year ended December 31, 2014. In the blank space provided for each account,
indicate what type of account it is, its normal balance, and the debit/credit rules for
increasing and decreasing it. Use the following abbreviations for your answers:
Type ofAccount NormalBalance Rule toIncrease Rule toDecrease
Example: Cash A Dr Dr Cr
(a) Income Taxes _______ _______ _______ _______
(b) Accounts Payable _______ _______ _______ _______
(c) Retained Earnings _______ _______ _______ _______
(d) Prepaid Expenses _______ _______ _______ _______
(e) Sales Revenues _______ _______ _______ _______
(f) Long-term Debt _______ _______ _______ _______
(g) Intangibles _______ _______ _______ _______
(h) Common Stock _______ _______ _______ _______
5) The following set of items describes activities completed by a company in collecting
cash for merchandise sales. For each activity, identify whether or not the activity
adheres to or violates sound internal control procedures.
An employee from the accounting department compares the control list and the cash
register tapes with the bank deposit slip.
A.Adheres to sound internal control procedures
B.Violates sound internal control procedures
C.Neither strengthens nor violates internal control
6) Which of the following accounts would not be reported in the Property, Plant, and
Equipment section of a balance sheet?
A.Accumulated Depreciation–Buildings
B.Buildings
C.Depreciation Expense–Buildings
D.Land
7) How will the payee of the promissory note record the note on its books?
A.The promissory note will be recorded as an asset
B.The promissory note will be recorded as a liability
C.The promissory note will be recorded as revenue
D.The promissory note will be recorded as an expense
8) When using the direct method, how is the purchase of equipment for cash shown on
the statement of cash flows?
A.Operating activity
B.Investing activity
C.Financing activity
D.Noncash investing and financing activity
9) Which of the following statements regarding contingencies is true?
A.Contingencies that are probable and not estimable appear on the balance sheet
B.Contingencies that are probable and not estimable are disclosed in the notes to the
financial statements
C.Contingencies that are remote but estimable are disclosed in the notes to the financial
statements
D.Contingent assets are recorded on the balance sheet, but not in the notes to the
financial statements
10) Pinecrest Company
Use the selected data from Pinecrest Companys financial statements to answer the
following question.
Refer to the data for Pinecrest Company.
Which of the following statements is true?
A.The current ratio increased from 2013 to 2014
B.The acid-test ratio decreased from 2013 to 2014
C.The amount of working capital decreased from 2013 to 2014
D.Assuming extreme conditions do not exist, the company appears to be in a worse
position to pay its current debts at the end of 2014 compared to 2013
11) Eversoll Inc. uses the periodic inventory system.
If Eversoll uses the weighted average cost inventory method, the amount assigned to
the June 30th inventory would be
A.$1,359.90
B.$1,486.50
C.$1,549.00
D.$1,591.50
12) Why are increases in accounts receivable reported as an adjustment to net income in
the operating activities section of a statement of cash flows?
13) Explain how a company can control small payments that must be made in cash
rather than by check.
14) Under the effective interest method of amortization, the interest expense for each
period is the carrying value times the ______________________.
15) Oreon Services was organized on May 1, 2014. The company received a
contribution of $2,000 from each of the two principal owners. During the month, Oreon
Services provided services for cash of $1,400 and services on account for $600,
received $350 from customers in payment of their accounts, purchased supplies on
account for $800 and equipment on account for $1,050, received a utility bill for $150
that will not be paid until June, and paid the full amount due on the equipment.
REQUIRED: Show your work to determine the companys Cash balance on May 31,
2014.
16) _________________________ provide the evidence needed in an accounting
system to record a transaction.
17) Bower Corp.s cost of sales has remained steady over the last two years. During this
same time period, however, its inventory has increased considerably. What does this
information tell you about the companys inventory turnover? Explain your answer.