1) Francis Real Estate purchased a building for $600,000 in 200 At the end of 2013,
when it had a book value of $450,000, it was appraised for $1,000,000. A potential
buyer offered $900,000. Francis rejected the offer. What amount should is recorded on
Francis records at the end of 2013 in the account called Buildings?
A.$1,000,000
B.$900,000
C.$600,000
D.$450,000
2) Dardenelle, Inc. earned $600,000 profit during 2014. On which financial statement(s)
will you find the dollar amount of the profit earned by the company?
A.Balance sheet and income statement
B.Income statement only
C.Statement of retained earnings only
D.Income statement and statement of retained earnings
3) Meredith Corporation is in the business of providing dog and cat grooming services
to customers within the city of New York. The following information concerning
financial activities during 2014 is available at December 31, 2014:
A. Calculate net income for 2014.
B. Prepare a statement of retained earnings for the year ended December 31, 2014.
C. What information can you derive from the statement of retained earnings concerning
this company? Explain.
4) The system of accounting in which there are at least two accounts affected in every
transaction so that the accounting equation stays in balance is a(an).
A.Double-entry system
B.Debit
C.Credit
D.Journalizing
5) Santana Company issued additional shares of stock. The effect of the transaction is
A.the earnings per share increased
B.the debt-to-equity ratio increased
C.the price/earnings ratio was unchanged
D.the asset turnover ratio decreased
6) Below is information for Fargo Corp. for 2013 and 2014:
At the end of 2014, Fargo issued bonds at par value for $800,000 cash. The proceeds
from these bonds were used to retire the $500,000 bond issue outstanding at the end of
2013 (before their maturity date). All interest expense was paid in cash during 2014.
The following statements describe how Fargo reported the cash flow effects of the items
described above on its 2014 statement of cash flows. The indirect method is used to
prepare the operating activities section. Which of the following has been reported
incorrectly by Fargo?
A.Proceeds of $800,000 from the issuance of bonds were reported as a cash inflow in
the financing activities section
B.The loss on bond retirement of $15,000 was added to net income in the operating
activities section
C.Payments of $560,000 were reported as a cash outflow in the investing activities
section
D.Interest expense of $45,000 was not reported separately because it is included in net
income in the operating activities section
7) A company’s balance sheet shows the account, Notes Payable. This resulted from a
loan made by the company’s bank. If the end-of-year balance in the notes payable
account exceeds the beginning-of-year balance by $5,000, this is shown on the cash
flow statement as an
A.inflow of cash of $5,000 in the operating activities category
B.outflow of cash of $5,000 in the operating activities category
C.inflow of cash of $5,000 in the financing activities category
D.outflow of cash of $5,000 in the financing activities category
8) Tracy, Inc.
Tracy, Inc. adjusts its books each month but closes its books at the end of the year. The
trial balance at July 31 before adjustments is as follows:
Refer to the trial balance of Tracy, Inc.
On July 1, Tracy paid four months in advance for insurance. Which of the following is
included in the adjusting entry at July 31?
A.An increase to Prepaid Insurance for $780
B.A decrease to Prepaid Insurance for $2,340
C.An increase to Prepaid Insurance for $2,340
D.A decrease to Prepaid Insurance for $780
9) On January 1, 2014, Renshaw Avenue Associates, Inc. purchased a copier for $6,000
cash and decided to depreciate it over 5 years. What amounts associated with the copier
will appear on Renshaws financial statements for the year ending December 31, 2014?
Income Statement Statement of Cash Flows
A.($1,200) ($6,000)
B.($1,200) $0
C.($6,000) $0
D.$0 ($1,200)
10) If current assets amount to $150, total assets $350, current liabilities $65, and total
liabilities $100, then the current ratio is
A.2.12 to 1
B.2.31 to 1
C.3.03 to 1
D.3.50 to 1
11) Morton & Associates
Use the following five transactions for Morton & Associates, Inc. to answer the
question(s).
See the transactions to Morton & Associates.
The journal entry to record the May 23 transaction will include a credit of $430 to
A.Salaries Expense
B.Cash
C.Prepaid Expenses
D.Accounts Payable
12) The cost of goods purchased is equal to net purchases plus
____________________.
13) In a ____________________-step income statement, all expenses and losses are
added together, then deducted from the sum of all revenues and gains.
14) Beatrice Equipment
Beatrice Equipment sells merchandise only on credit. For the year ended December 31,
2014, the following data is available:
Refer to the data for Beatrice Equipment.
Determine the balance of Accounts Receivable at December 31, 2014.
15) Explain how the costs associated with operating assets are reported on the balance
sheet.
16) Explain the difference between authorized, issued, and outstanding shares.
17) The excess of the value of a company’s inventory stated at FIFO over the value
stated at LIFO is called a(n) _________________________.
18) What is the meaning of the word annuity? Can the present value of an annuity be
calculated as a series of single amounts? If so, how?
19) Motor Repair Shop uses the accrual basis of accounting, and had the following
account balances on its financial statements at December 31, 2014:
On January 1, there was a $0 balance in the salaries payable account. How much cash
did Motor Repair pay for salaries during the year?