Earnings per share is an indication of how much
a. cash the company has for each share of all outstanding stock.
b. earnings the company has for each share of outstanding common stock.
c. earnings the company has for each share of all outstanding stock.
d. dividends the company paid for each share of outstanding common stock.
Refer to Happy Heights Country Club
b. On which date did the country club sell a club membership for cash?
a. July 2nd
b. July 3rd
c. July 5th
d. July 7th
Internal control systems provide assurance in each of the following areas except
a. effectiveness and efficiency of the company’s operations.
b. compliance with applicable laws and regulations.
c. consolidation of departments within the accounting function.
d. reliability of financial reporting.
Barrett Oil Company reported the following balances as of December 31, 2013:
What is the company’s current ratio?
a. 0.48 to 1
b. 2.00 to 1
c. 2.55 to 1
d. 2.86 to 1
Which one of the following correctly represents one of the basic financial statement
models?
a. Assets Liabilities = Net Income
b. Assets + Liabilities = Total Assets
c. Revenues + Expenses = Net Income
d. Beginning Retained Earnings + Net Income Dividends = Ending Retained Earnings
Which of the following is an intangible asset?
a. oil
b. goodwill
c. retained Earnings
d. accounts Receivable
Which one of the following is notone of the activities on the Statement of Cash Flows?
a. operating activities
b. investing activities
c. business activities
d. financing activities
Refer to the information provided for Paschal Exports. If the moving average cost
method of inventory costing is used, determine the following amounts:
A) Cost of goods sold for the units sold on July 10th?
B) Ending inventory on July 31st?
Refer to Labor Finders, Inc. The company’s 2015 dividend yield is reported as
a. 2.67%.
b. 2.80%.
c. 26.67%.
d. 28.00%.
Which of the following profitability ratios would be determined through a common size
vertical analysis of the income statement?
a. gross profit percentage
b. return on assets
c. return on equity
d. earnings per share
Which of the following is notan investing activity?
a. Purchase of investments for cash.
b. Purchase of equipment for cash.
c. Sale of merchandise for cash.
d. Sale of land for cash.
How are cash equivalents reported or disclosed in the financial statements?
a. They are included with cash as a current asset on the balance sheet.
b. They are only reported on the statement of cash flows.
c. They are only disclosed in the notes to the financial statements.
d. They are included with short-term investments as a current asset on the balance sheet.
The practice of monitoring activities within the internal control system is likely to be
carried out by each of the following groups except
a. external auditors.
b. internal auditors.
c. the board of directors.
d. managers.
Refer to General Lighting. When the company records this transaction, what is the
impact on the accounting equation?
a. Both assets and liabilities decrease.
b. Assets decrease and liabilities increase.
c. Assets, liabilities, and stockholders’ equity will all increase.
d. Assets increase and stockholders’ equity decreases.
Strategic risk assessment is primarily concerned with
a. possible external threats to the company’s success in accomplishing its objectives.
b. allocation of the company’s resources to accomplish its internal processes.
c. safeguarding of the company’s computerized assets and records.
d. achieving operating efficiencies in the areas of production and human resources.
Depreciation is a process by which
a. replacement funds are accumulated for plant and equipment.
b. the decline in market value of plant and equipment is determined and recorded.
c. the cost of plant and equipment is allocated to expense over the time periods which
benefit from the use of the asset.
d. the difference between current market value and historical cost of plant and
equipment.
A company uses the direct write-off method to account for bad debts. What are the
effects on the accounting equation of the entry to record the write-off of a customer’s
account balance?
a. Assets and liabilities decrease
b. Assets and Stockholders’ equity decrease
c. Stockholders’ equity and liabilities decrease
d. Assets increase and Stockholders’ equity decrease
A company reported a net loss of $30,000 for 2014, yet its cash balance increased
during the year. Which financial statement should management refer to for an
explanation of this situation?
a. Balance Sheet
b. Income Statement
c. Statement of Retained Earnings
d. Statement of Cash Flows
Cash Express had no supplies on January 1 but purchased $2,581 in supplies during the
year. At December 31, supplies on hand are $1,492. What amount for supplies will be
reported on the firm’s balance sheet?
a. $0
b. $1,089
c. $1,492
d. $2,581
What types of accounts are Treasury Stock and Paid-in Capital from Treasury Stock
Transactions?
Treasury Stock Paid-in Capital from Treasury Stock Transactions
a. contra equity stockholders’ equity
b. contra equity contra equity
c. stockholders’ equity stockholders’ equity
d. retained earnings retained earnings
Which allowance method approach is considered to be an income statement approach to
estimating bad debts?
a. The percentage of accounts receivable approach
b. The percentage of accounts written off approach
c. The percentage of net credit sales approach
d. The direct write off method
Which of the following is notconsidered to be a Cash Equivalent?
a. corporate commercial paper due in 60 days after purchase
b. U.S. Treasury bills with an original maturity of six months
c. a money market account with a stock brokerage firm
d. a certificate of deposit with a term of 75 days when acquired
Which one of the following is an example of a deferred revenue?
a. Sales are made to customers on credit.
b. Revenue has been earned but not yet recorded.
c. Payments are received prior to providing the services to customers.
d. Cash sales are made to customers.
Refer to Bargain Spot Fabrics. What is the retained earnings balance at the end of the
current year?
a. $50,000
b. $550,000
c. $800,000
d. $850,000
Which of the following is a transposition error?
a. writing $89 as $98
b. writing $10 as $100
c. debiting or crediting an amount to the wrong account
d. debiting or crediting the right account with the wrong amount
The two-column record used to accumulate monetary increases and decreases for
individual assets, liabilities, stockholders’ equity, revenue, expense, and dividends items
is a(n)
a. Chart of accounts
b. T-account
c. Trial Balance
d. Posting
Which one of the following statements regarding changing inventory costing methods is
true?
a. A change in inventory methods can be justified if the change is made to better match
profits with revenue.
b. Changing inventory costing methods violates consistency.
c. One place that the reader of an annual report would be able to identify that a
company changed inventory costing methods is the statement of stockholders’ equity.
d. Tax advantages are valid justification for changing inventory costing methods.
Which of the following best describes the term “retained earnings” of a company?
a. The amount of total profits earned by a company since it began operations.
b. The amount of claim that the owners have on the assets of the company.
c. The future economic resources of a company.
d. The accumulated net income of a company that has not been distributed to owners in
the form of dividends.
When the calculated present value is reversed, the resulting figure is the
a. interest accrued.
b. future value.
c. total interest earned.
d. total interest paid.
A company bought machinery on January 1, 2011, for $200,000. On January 2, 2013,
the machinery had a book value of $100,000. It is estimated that the machine will
generate future cash flows of $70,000 and its current fair value is $60,000. How much
impairment loss should be recorded?
a. $0
b. $30,000
c. $40,000
d. $100,000
The lender of a note recognizes a note receivable on the balance sheet and interest
revenue on its income statement.
____________________ statements highlight differences by expressing each financial
statement item in percentage terms.
Three months before its year-end, a company signed a $250,000, 12%, 8-month note.
Principal and interest will be paid at maturity. No interest should be accrued at year-end
because the company has no obligation to pay the interest until the note matures.
Match the terms with the descriptions related to merchandise sales and purchases.
a. Transportation-in e. Cost of goods available for sale
b. Perpetual inventory system f. Periodic inventory system
c. Net purchases g. FOB shipping point
d. FOB destination h. Delivery expense
6/ Requires updating of the inventory account at the time of each purchase and each
sale.
7/ Shipping costs paid to acquire merchandise.
8/ The seller is responsible for the cost of delivering the merchandise to the buyer.
9/ Relies on a count of inventory on the last day of the year to determine the amount
on hand.
10/ The buyer must pay the shipping costs.
You are the Chief Financial Officer of Laser Craft Technology. Your company needs to
raise capital to pursue an expansion project, but the company does not want to sell
additional common stock. What factors should you consider in deciding whether to
issue debt or preferred stock?
Under the periodic method, the information on sales can be combined within any period
because all purchases are assumed to occur before any sales transactions.
The intangible asset called ____________________ can only exist if one company
purchases another business and the cost exceeds the fair market values of the
identifiable net assets at the time acquired.
With the perpetual inventory system, the inventory account is updated after each sale or
purchase.
A good system of internal control requires that the physical custody of assets be
separated from the accounting for those assets. This concept is known as safeguarding
of assets and records.
Federal income taxes payable is nota current liability.
Accountants define the market value of inventory as its ____________________.
A company’s bank statement balance shows that there is $4,230 in the checking account
at the end of the month. Comparing the company’s records with the bank statement
reveals several additional items, such as outstanding checks of $2,880, deposits in
transit of $1,280, an NSF check of $160, and a bank service charge of $40. Calculate
the adjusted cash balance for this checking account.
Cash flows from operating activities correspond to the cash effects of items that
determine ____________________.
Describe the process that allocates the costs of the tangible and intangible operating
assets to expense.
One effect of recognizing depreciation is to decrease net income.
Refer to the information presented for White Appliances. On August 12th, White sold
10 dishwashers to customers for $550 each. White paid $200 each for these dishwashers
when it purchased them from the supplier on August 1st. On August 15th, customers
returned 2 of these dishwashers for a cash refund.
Record the journal entries for this sale and sales return.
A corporation had several transactions affecting its stockholders’ equity accounts during
the year. The transactions are presented in chronological order. In the space provided,
indicate the impact on the equity accounts shown by placing the respective dollar
amounts along with a plus sign (+) for an increase in the account balance, minus sign (-)
for a decrease, or N/A if there is no impact on the account balance.
Paid-in
Common Capital
in Retained
Transactions: Stock Excess of
Par Earnings
Received authorization to issue 10,000 shares of $2 par common
stock.
Issued 500 shares of common stock for $15 per share
Issued 400 shares of common stock for $16 per share
Declared and paid a 10% stock dividend when the market price of the common stock
was $17 per share
Declared and paid a cash dividend of $0.50 per share
Issued additional shares in a 2-for-1 stock split
When stockholders exchange their shares of stock for additional shares, and there is a
corresponding reduction in the par value of the stock, a stock ____________________
has occurred.
What is treasury stock and how is it reported in the financial statements?