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A toy store with a calendar year-end is likely to have:
A) unpredictable fluctuations in cash flow from quarter to quarter.
B) the largest cash inflow from operating activities in the second and third quarters
(April - September).
C) a fairly stable cash flow across all four quarters.
D) the largest cash inflow from operating activities in the fourth and firstquarters
(October - March).
Central Company sold goods for $5,000 to Western Company on March 12 on credit.
Terms of the sale were 2/10, n/30. At the time of the sale, Central recorded the
transaction by debiting Accounts Receivable for $5,000 and crediting Sales Revenue for
$5,000. Western paid the balance due, less the discount, on March 21. Central's journal
entry on March 21 would include a debit to:
A) Cash for $4,900.
B) Accounts Receivable for $4,900.
C) Cash for $5,000.
D) Accounts Receivable for $5,000.
Which of the following statements about tangible long-lived assets is not correct?
A) Depreciation and maintenance are expenses associated with the use of tangible
long-lived assets.
B) Assuming no additions, replacements, or extraordinary repairs, the carrying value of
a long-lived asset is never more than its original cost.
C) The cost of a long-lived asset minus the Accumulated Depreciation is called the
carrying value of the asset.
D) All long-lived assets are depreciated as they are used in the business.
Which of the following will happen if the accrual adjustment entry is not made to
record an expense incurred but not yet recorded?
A) Both expenses and liabilities will be overstated.
B) Both expenses and liabilities will be understated.
C) Expenses will be understated and liabilities will be overstated.
D) Expenses will be overstated and liabilities will be understated.
Which of the following is not one of the primary goals of inventory management?
A) Maintain a sufficient quantity of inventory to meet customer needs.
B) Ensure inventory quality meets customers' expectations and company standards
C) Minimize the cost of acquiring and carrying inventory (including costs related to
purchasing, production, storage, spoilage, theft, obsolescence, and financing).
D) Minimize the quantity of ending inventory.
When a company sells a long-lived asset, stockholders' equity will change by the:
A) amount of the sale.
B) amount of the asset's book value.
C) amount of the asset's Accumulated Depreciation.
D) difference between the sales price and the asset's book value.
Assume that a company chooses the indirect method to determine net cash flows from
operating activities.
Required:
Part a. Explain why net income is the starting point when the indirect method is used to
determine cash flows from operating activities.
Part b. Briefly explain why a company's net income is most likely different in amount
than its cash flows from operating activities.
When a company uses excess cash to buy back some of its outstanding common stock,
which of the following ratios will be affected directly in the manner described below?
A) Return on equity (ROE) will decrease.
B) Earnings per share (EPS) will increase.
C) The Price Earnings (PE) ratio will increase.
D) There will not be any effect on the three ratios.
During its first year of operations, Widgets Incorporated reported Sales Revenue of
$386,000 but collected only $303,000 from customers. At the end of the year, Accounts
Receivable equal:
A) $689,000.
B) $386,000.
C) $303,000.
D) $83,000.
Use the information above to answer the following question. What is the balance in the
Cash account at December 31, 2016?
The following account balances are taken from the December 31, 2015, financial
statements of ABZ Advertising Company. The company uses accrual basis accounting.
The following activities occurred in 2016:
1) Performed advertising services on account, $55,000.
2) Received cash payments on account, $10,400.
3) Received deposits from customers for advertising services to be performed in 2017,
$2,500.
4) Made payments to suppliers on account, $5,000.
5) Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on
account and unpaid as of the end of the year.
A) $46,116.
B) $41,516.
C) $10,416.
D) $46,916.
Which of the following assets would be amortized?
A) Land improvements
B) Trademarks
C) Goodwill
D) Franchise
Which of the following accounts does not have a normal debit balance?
A) Salaries and Wages Expense
B) Service Revenue
C) Accounts Receivable
D) Cash
Which one of the following is not likely to be a consequence of fraudulent financial
reporting?
A) The company's stock price drops once the fraud is discovered.
B) Innocent accountants who work for the company's CPA firm lose their jobs.
C) Creditors recover 100% of amounts owed to them.
D) Employees lose their retirement savings.
The direct write-off method for uncollectible accounts is required:
A) by the IRS.
B) by GAAP
C) by IFRS.
D) for external financial reporting.
Your company sells $50,000 of one-year, 10% bonds for an issue price of $52,000. The
journal entry to record this transaction will include a credit to Bonds Payable in the
amount of:
A) $50,000.
B) $52,000.
C) $55,000.
D) $57,000.
If a company's Cost of Goods Sold is $158,000 for the period, beginning and ending
Inventory balances are $18,000 and $13,000, respectively, and the beginning and
ending Accounts Payable balances are $19,000 and $7,500, respectively, what is the
amount of the cash paid to suppliers?
A) $157,000
B) $163,500
C) $164,500
D) $151,500
Which of the following statements regarding shrinkage is not correct?
A) Perpetual inventory systems can help managers detect shrinkage.
B) Shrinkage is another term for inventory loss due to theft, error, or fraud.
C) Shrinkage is detected by comparing the balance in the inventory ledger account and
the results of the physical inventory count.
D) It is easier to detect shrinkage in a periodic inventory system than in a perpetual
inventory system.
Use the information above to answer the following question. If the company pays a
$35,000 dividend, and the preferred stock is cumulative and two years' dividends are in
arrears, what is the amount the common stockholders will receive?
A) $17,000
B) $23,000
C) $29,000
D) $35,000
Which of the following is nota similarity of GAAP and IFRS?
A) They both generally require that an exchange take place before a transaction is
recorded.
B) They both promote information that is relevant and that faithfully represents the
underlying transactions.
C) They both include rules about recognition, classification, and measurement of
transactions.
D) They both allow fixed assets to be reported at fair values.
A company purchased money market funds with cash during the current year. Which of
the following statement is correct?
A) This transaction will result in a decrease in cash from operating activities.
B) This transaction will result in a decrease in cash from investing activities.
C) This transaction will result in a decrease in cash from financing activities.
D) This transaction will not cause a change in cash from operating, investing, or
financing activities.
