1) Comfort Shoes received a promissory note from a customer on April 1, 2014. The
face amount of the note is $2,000; the terms are 12 months and 8% annual interest.
At the maturity date, the customer pays for the note and interest. Comfort Shoes made
the proper adjustment at the end of December for interest. The effect of recognizing the
transaction on the maturity date is
A.A decrease to Cash
B.An increase to Notes Receivable
C.An increase to Discount on Notes Receivable
D.A decrease to Notes Receivable
2) Select the letter of the term each statement best describes.
1>Net income that has been earned by the corporation but not paid out as dividends. A.
convertible stock
2>The number of shares issued less the number of shares held as treasury stock. B.
treasury stock
3>The maximum number of shares a corporation may issue as indicated in the
corporate charter. C. stock split
4>Total stockholders equity divided by the number of shares of common stock
outstanding. D. issued shares
5>Allows preferred stock to be returned to the corporation in exchange for common
stock. E. par value
6>When the stock of a corporation is repurchased with no intention to reissue at a later
date. F. retained earnings
7>Allows the issuing firm to eliminate a class of stock by paying the stockholders a
fixed amount. G. book value per share
8>Stock that has a provision allowing the stockholders to share in the distribution of an
abnormally large dividend on a percentage basis. H. authorized shares
9>The amount received for the issuance of stock in excess of the par value of the stock.
I. outstanding shares
10>An arbitrary amount stated on the face of the stock certificate that represents the
legal capital of the firm. J. additional paid-in capital
11>Stock issued by the firm then repurchased but not retired. K. participating feature
12>The number of shares sold or distributed to stockholders. L. callable stock
13>Creation of additional shares of stock with a concurrent reduction of the par value
of the stock. M. retirement of stock
3) Which of the following is an internal event (transaction)?
A.Life guard salaries are paid by a swim club
B.Dividends are distributed to shareholders
C.Eggs used to make omelets in a restaurant are purchased
D.Potato chips are transferred from the production line to the packaging area
4) Quan uses a periodic inventory system. At the end of April, Quan had 20 units on
hand.
If Quan uses the LIFO inventory method, how much is inventory on the balance sheet
as of April 30?
A.$40
B.$50
C.$58
D.$60
5) Idaho.com accepts VISA for payments of purchases made by students. The credit
card drafts are deposited directly in a bank account. VISA charges a 2% collection fee.
Credit card drafts totaling $12,000 are deposited during September. The effect on the
accounting equation to record the sales and deposits will include
A.An increase in Cash for $12,000
B.An increase to Sales for $11,760
C.An increase to Accounts Receivable for $11,760
D.An increase in Collection Fee Expense for $240
6) If an investor can use accounting information for two different companies to evaluate
the types and amounts of expenses, the information is said to have the quality of
A.Comparability
B.Consistency
C.Neutrality
D.Understandability
7) Which of the following should be considered when a company decides to declare a
cash dividend on common stock?
A.The retained earnings balance only
B.The amount of authorized shares of common stock
C.The book value of the company’s stock
D.The cash available and the retained earnings balance
8) The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
Winston wins the lottery. He wins $20,000 per year to be paid to him for 10 years. The
state offers him the choice of a cash settlement now instead of the annual payments for
10 years. If the interest rate is 6%, what is the amount the state will offer for a
settlement today?
A.$147,200
B.$154,440
C.$175,000
D.$200,000
9) The following data concerns Cubano Corporation for 2014:
What amount will Cubano show on its year-end balance sheet for the net realizable
value of its accounts receivable?
A.$253,000
B.$235,000
C.$224,000
D.$217,000
10) If a company borrows money from its bank and the bank deducts the interest in
advance, the company would record the amount of the interest deduction as
A.a discount
B.an expense
C.a loss
D.prepaid interest
11) The following is from Silverstein Inc.s 2014 income statement.
How much will Silverstein report as its cost of goods sold in its 2014 income
statement?
A.$179,900
B.$182,300
C.$186,900
D.$190,700
12) Which of the following statements regarding serial bonds is true?
A.They are likely to be issued by food companies
B.They have shorter lives than term bonds
C.They are strongly backed by the issuer’s collateral
D.The bonds do not all mature on the same date
13) Comfort Shoes received a promissory note from a customer on April 1, 2014. The
face amount of the note is $2,000; the terms are 12 months and 8% annual interest.
How much total interest revenue will Comfort Shoes recognize for the year ended
December 31, 2014?
A.$ 40
B.$ 107
C.$ 120
D.$ 160
14) Ramos Corp. started business at the beginning of the year, with assets of $600,000
and stockholders’ equity of $240,000. By the end of the year, assets increased by
$80,000 and liabilities increased by $60,000. Other than net income or loss, the only
change in stockholders’ equity was dividends declared and paid of $55,000.
A) What was the amount of Ramos Corp. stockholders equity at the end of the year?
B) What was the amount of Ramos Corp. net income or net loss for the year?
15) The accountant for Darden Corp. was preparing a bank reconciliation as of April 30,
2014. The following items were identified:
In addition, Darden made an error in recording a customer’s check; the amount was
recorded in cash receipts as $150; the bank recorded the amount correctly as $510.
What amount will Darden report as its adjusted cash balance at April 30, 2014?
A.$44,650
B.$45,890
C.$46,110
D.$46,250
16) Which internal control procedure is followed when the work of one department acts
as a check on the work of another?
A.Segregation of duties
B.Safeguarding assets and records
C.Independent verifications
D.Proper authorizations
17) Crystal, Inc.
Crystal, Inc. reported $52,000 of net income for 2014. Crystals balance sheet at
December 31, 2014 includes the following amounts:
Read the information about Crystal, Inc. Has Crystal been profitable since it began
operations? How do you know?
18) Please answer the following questions regarding depreciation:
______________________________ is the GAAP depreciation method considered
accelerated?
19) The following information is available from the records of Focus Seascapes, Inc. at
the end of the 2014 calendar year:
Required:
(1) What is Focus net income for the year ended December 31, 2014?
(2) What is Focus retained earnings balance for the year ended December 31, 2014?
20) The two groups of users that are especially interested in profitability are
____________________ and ____________________.
21) The normal balance of revenue is a(n) ____________________.
22) In a vertical analysis, the base, or benchmark, on which all other items in the
income statement are compared is: ___________________.
23) Columbus Company prepays the rent on various office facilities. The beginning
balance in Prepaid Rent was $9,500, and the ending balance was $7,200. The income
statement reports Rent Expense of $45,800.
Required:
Under the direct method, what amount would appear for cash paid in rent in the
Operating Activities section of the statement of cash flows? Show your work.
24) Grenada Corporation
Use the note on Disclosure of Leases for the Grenada Corporation to answer the
questions that follow.
The Corporation leases office, warehouse and showroom space, retail stores and office
equipment under operating leases, which expire no later than 2025. The Corporation
normalizes fixed escalations in rental expense under its operating leases. Minimum
annual rentals under non-cancelable operating leases, excluding operating cost
escalations and contingent rental amounts based upon retail sales, are payable as
follows:
Fiscal year ending March 31,
Rent expense was $12,551,000; $8,911,000; and $5,768,000 for the years ended March
31, 2010, 2009,and 2008 respectively.
Review the information for Grenada Corporation.
REQUIRED:
Determine the effect on the accounting equation when recording each type of lease
described in the previous question.
25) The ____________________ principle says that, with a few exceptions, assets are
not carried at market values, but at their original cost.