1) Cerrato Company has assets of $350,000, liabilities of $130,000, and retained
earnings of $180,000. How much is total owners equity?
A.$ 40,000
B.$ 170,000
C.$ 220,000
D.$ 350,000
2) Which one of the following is correct?
A.Inventory losses can be identified and controlled better under the perpetual system
B.Inventory can only be sold at the end of an accounting period under the periodic
system
C.There is no difference in cost to implement a perpetual as compared to a periodic
system
D.The perpetual system eliminates the need for an annual inventory count
3) Which balance sheet accounts are most affected by financing activities
A.Current assets
B.Current liabilities
C.Long-term assets
D.Long-term liabilities and stockholders equity
4) Kennesaw Corporation borrowed $90,000 by issuing a 12%, six-month note payable,
all due at the maturity date. After one month, the company’s total liability for this loan
amounts to:
A.$91,800
B.$90,900
C.$90,450
D.$90,000
5) Utah Corp.
Use the following selected data and additional information from the records of Utah
Corp. to answer the questions that follow.
Additional information:
Review the data for Utah Corp.
REQUIRED:
(A) What amount was paid to retire bonds payable during 2014?
(B) How would the transaction to retire bonds by issuing common stock be reported on
the statement of cash flows for 2014 for Utah Corp.?
6) A file or book which contains a record for all accounts used by a company, including
the account balance, is called a
A.chart of accounts
B.general journal
C.general ledger
D.trial balance
7) The Holmes Company purchased a building for $75,000 in cash. What is the effect
on current assets?
A.Increase in current assets
B.Decrease in current assets
C.No effect on current assets
D.Unable to determine
8) An accountant describes the effects of an economic event on an entity by recording
the transaction and reporting the amount on the financial statements. What is this
called?
A.Measurement
B.Recognition
C.Disclosure
D.Matching
9) Megan Farms received a promissory note from a customer on March 1, 2014. The
face amount of the note is $8,000; the terms are 90 days and 9% interest.
What is the total amount of interest that Megan Farms will receive when the note is
paid?
A.$ 60
B.$ 90
C.$180
D.$720
10) On January 2, 2013, Hannah Company sold a machine for $1,000 that it had used
for several years. The machine cost $12,000, and had accumulated depreciation of
$9,000 at the time of sale. What gain or loss will be reported on the income statement
for the sale of the machine?
A.Gain of $2,000
B.Loss of $11,000
C.Loss of $2,000
D.Gain of $3,000
11) Knife Corp.
Use the selected data presented below from the financial statements of Knife Corp. for
2012 and 2011 to answer the questions that follow.
Refer to the data for Knife Corp.
REQUIRED:
(A) Calculate the dividend yield ratio for 2012 for Knife. Explain.
(B) What factors could have caused the change in the market value of Knifes stock
from 2011 to 2012? Explain.
12) Current liabilities are defined as those liabilities which will be satisfied
A.by the end of the operating cycle
B.within one year
C.within one year or within the operating cycle, whichever is longer
D.within one year or within the operating cycle, whichever is shorter
13) A decreasing long-term liability account is presented on the statement of cash flows
as
A.a decrease in cash in the Financing Activities category
B.an decrease in cash in the Investing Activities category
C.an increase in cash in the Operating Activities category
D.an increase in cash in the Financing Activities category
14) When a company purchases treasury stock, which of the following statements is
true?
A.Treasury stock is considered to be an asset because cash is paid for the stock
B.The cost of the treasury stock reduces stockholders’ equity
C.Dividends continue to be paid on the treasury stock because it is still issued
D.Since treasury stock is held by the original issuer, it is no longer considered to be
issued
15) If bonds are issued at 101.25, this means that
A.a $1,000 bond sold for $101.25
B.the bonds sold at a discount
C.a $1,000 bond sold for $1,012.50
D.the bond rate of interest is 10.13% of the market rate of interest
16) Yellow Dog Transit sold an old truck on December 31, 2013, for $18,400 cash. The
following data was available when the truck sold:
When this transaction is recorded, it should include a(n)
A.Loss on Disposal account for $3,000
B.Decrease of $21,400 to the Truck account
C.Gain on Disposal account for $3,000
D.Gain on Disposal account for $5,000
17) What is the operating cycle of a business? How does this impact the classification
of assets into current and noncurrent categories?
18) Marrow Company has a large portion of its plant assets concentrated in an area
where technology is changing rapidly. Marrow wants to minimize taxable income and
maximize net income reported to stockholders. Recommend a course of action for
Marrow. Support your recommendation.
19) Given below are several accounts and balances from Montag Corporations 2013
financial statements. Prepare the Property, Plant, and Equipment section of the balance
sheet and a partial income statement in the space provided below using the accounts
provided.
20) ____________________ is a rise in the general level of prices in the economy and
results in a decrease in purchasing power.
21) What is comprehensive income and what is contained in a statement of
comprehensive income?
22) A hospital corporation contracted with a private company to collect fees and
maintain health facilities that adjoin their property. Users of the health facility can pay
cash of $10 for a daily visit or they can purchase a pass. The pass has a magnetic strip
that is swiped through the entrance device each time an individual enters the facility.
This subtracts daily fee from the pass balance for each day used. The passes are issued
for a fee of $365, which are good for 365 days. Refunds are not issued on the pass. Last
year $18,650 was collected for daily visits, $438,000 of annual passes were issued, and
$206,225 of pass usage was registered on the scanning equipment. How much should
the company recognize as revenue for the year? Explain how the revenue recognition
rule should be applied in this case.
