1) Adjusting entries are recorded at the end of each accounting period so that net
income is accurately reflected in the financial statements for the period
2) A high accounts receivable turnover ratio could mean that the companys credit
policies may be too stringent.
3) All assets are tangible in nature.
4) If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are held as
treasury stock, a cash dividend of $1 per share would amount to $15,000.
5) When a bond issue is retired early, the amount of unamortized discount or premium
is not considered in the calculation of a gain or loss.
6) When land and building are acquired for a lump sum, the purchase amount should be
allocated on the basis of the market values of the two assets.
7) The analysis of common-size statements is called horizontal analysis.
8) Creation Corp. stands to receive a sufficient cash settlement from a law suit. Creation
needs to record this on its accounting records.
9) Rocky Corporation employs 14 workers in its retail service center. Each employee is
paid $10 per hour and works 6 hours per day, Monday through Friday. Employees are
paid every Friday for the workweek just ending. The last payday was Friday, December
26, on which day the employees were paid through that date.
10) Which one of the following items is not included in cash?
A.A bank certificate of deposit for one year
B.A savings account at the bank
C.A checking account at the bank
D.All of the above are included in cash
11) A gain or loss that qualifies for extraordinary treatment on the income statement
must have which of the following qualities?
I. Unusual in Nature
II. Discontinued Segment
III. Infrequent in Occurrence
IV. Nonoperating in Nature
V. Never Occurred
A. I and V
B. III and IV
C. I and III
D. I, II, and III
12) Which of the following statements is true regarding horizontal analysis?
A.Horizontal analysis can only be used with balance sheet accounts.
B.Horizontal analysis can only be used with income statement accounts.
C.Horizontal analysis can only be used with retained earnings accounts.
D.Time series analysis is an advanced statistical technique for horizontal analysis.
13) Trend analysis is analysis
A.of dollar changes and percentage changes over several years.
B.in which all items are presented as a percentage of one selected item on a financial
statement.
C.in which a statistic is calculated for the relationship between two items on a single
financial statement or for two items on different financial statements.
D.of all ratios that increased or decreased over past accounting periods.
14) Leary Corporations end-of-year balance sheet consisted of the following amounts:
What is Learys owners equity balance at the end of the current year?
A.$3,000
B.$110,000
C.$63,000
D.$173,000
15) Using the concept of comprehensive income, which of the following items is
included as part of comprehensive income but not as part of net income?
A.Extraordinary items
B.Accounting changes
C.Unrealized holding gains or losses
D.Loss on sale of investments
16) During 2012, the accounts payable balance of Bennington Corp. decreased. Which
of the following statements is true?
A.This decrease indicates that Bennington paid less during the period than it recognized
as expenses on the income statement
B.This decrease is added to net income in the operating activities section of a statement
of cash flows prepared under the indirect method
C.This decrease is deducted from net income in the operating activities section of a
statement of cash flows prepared under the indirect method
D.This decrease is considered only when the operating activities section of a statement
of cash flows is prepared under the direct method
17) All of the following statements are true except:
A.International accounting standards are more flexible in allowing the use of fair
market values for intangible assets
B.FASB standards require all research and development costs to be expensed
C.IFRS requires all research and development costs to be expensed
D.Under IFRS, fair market values for intangibles require an active market
18) Melos purchased a $25,000 truck for catering from its restaurant. It made a down
payment of one-fourth of the price. What combination of amounts would affect the
income statement and statement of cash flows for the purchase of the truck?
Statement of Income
Cash Flow Statement
A.$ -0- $25,000
B.($25,000) $ -0-
C.($ 6,250) $25,000
D.($ 6,250) $ -0-
19) What are the effects on the accounting equation from the purchase of a short-term
investment?
A.Assets and stockholders equity decrease
B.No effects–assets increase and decrease by the same amount
C.Assets and liabilities decrease
D.Stockholders’ equity decreases and liabilities increase
20) Upon review of Youngs Garden Center statement of cash flows, the following was
noted:
From this information, the most likely explanation is that Youngs is
A.using cash from operations and selling long-term assets to pay back debt
B.using cash from operations and borrowing to purchase long-term assets
C.using its profits to expand growth
D.using cash from investors to provide for operations
21) What are two difficulties that are encountered when two companies are compared?
22) What is the difference between comparability and consistency?
23) The _______________ the accounts receivable turnover ratio, the quicker the each
dollar of accounts receivable can be collected.
24) Describe the benefit(s) of using the accrual process as compared to the cash basis.
25) The names of the four major types of adjusting entries are
_________________________, _________________________,
_________________________, and _________________________.
26) The ____________________ method most nearly approximates replacement cost of
inventory on the balance sheet.
27) Park Avenue Toys reported the following information at December 31, 2013:
Answer the following questions for Park Avenue Toys.