Stock dividends and stock splits are similar in all of the following ways except:
A) they both involve a pro rata distribution of shares to existing stockholders.
B) they both reduce the stock price.
C) they both decrease Retained Earnings.
D) have no effect on cash.
A company that purchases inventory for $10,000 with terms 2/10, n/30. It then returns
$2,000 of the inventory purchased to the supplier and also receives an allowance for
defective inventory of $100. The company pays the amount due within the discount
period. What is the amount of the discount that will be taken?
A) $200
B) $158
C) $160
D) $198
Which of the following statements about liquidity and solvency ratios is correct?
A) Unlike solvency ratios, liquidity ratios relate to the company’s long-run survival.
B) Both liquidity ratios and solvency ratios measure a company’s ability to meet its
financial obligations.
C) Liquidity ratios include the return on equity ratio and the times interest earned ratio.
D) Solvency ratios include the current ratio and the net profit margin ratio.
Which of the following would be reported on the statement of cash flows, using the
direct method, as a cash flow from operating activities?
A) Payment of income taxes
B) Payment of cash dividends
C) Purchase of a building
D) Purchase of treasury stock
On January 1, your company issues a 5-year bond with a face value of $10,000 and a
stated interest rate of 7%. The market interest rate is 5%. The issue price of the bond
was $10,866. Using the effective-interest method of amortization and rounding to the
nearest dollar, the interest expense for the first year ended December 31 would be:
A) $700.
B) $543.
C) $667.
D) $759.
Which of the following statements about the benefits enjoyed by the owners of common
stock is not correct?
A) Some classes of common stock can carry more votes than others.
B) Investors in a corporation are called stockholders.
C) Stockholders receive a share of the corporation’s profits when distributed as
dividends.
D) If the company ceases operations, stockholders share in any assets remaining before
creditors have been paid.
A company issued 10-year, 7% bonds with a face value of $100,000. The company
received $97,947 for the bonds. Using the straight-line method of amortization, the
amount of interest expense for the first interest period is:
A) $7,000.00
B) $7,205.30
C) $6,794.70
D) $2,053.00
In January, the Huntington Beach Resort (HBR) accepts your reservation and receives
your $2,000 payment for a week of sun and fun in California during spring break. In
January, HBR will record a journal entry that includes a debit to:
A) Cash and a credit to Unearned Revenue.
B) Accounts Payable and a credit to Service Revenue.
C) Cash and a credit to Service Revenue.
D) Service Revenue and a credit to Cash.
Which of the following items appearing on a bank reconciliation require a journal entry
to bring the Cash account up-to-date?
A) Deposit in transit
B) Check from customers returned as NSF
C) Outstanding check
D) An error made by the bank in recording a deposit
Which of the following practices would not be considered ethical?
A) Failing to record an expense even though cash has been paid.
B) Recording 31 days of sales in April.
C) Using the cash basis of accounting.
D) Adjusting the accounts after a trial balance has been prepared.
How does an asset impairment loss impact a company’s financial statements?
A) It increases expenses and decreases both revenue and net income
B) It decreases assets, stockholders’ equity, and net income
C) It increases expenses and decreases net income with no effect on any other items
D) It increases liabilities and decreases stockholders’ equity
Use the information above to answer the following question. If the company sells the
machine at the end of 5 years and receives $11,500, the journal entry to record the sale
will include which of the following?
A) Debit to Accumulated Depreciation for $138,000
B) Credit to Machine for $138,000
C) Debit to Loss on Sale for $500
D) Credit to Residual Value for $12,000
Which of the following is a profitability measure?
A) Net income / Revenues
B) Total assets / Total stockholders’ equity
C) Total liabilities / Total stockholders’ equity
D) Cost of goods sold / Average inventory
An adjusting journal entry that includes an increase to an asset contra-account would
also include an increase in a(n):
A) related asset account.
B) liability account.
C) revenue account.
D) expense account.