Which number is potentially the largest?
A) The number of shares authorized.
B) The number of shares issued.
C) The number of shares outstanding.
D) The number of shares certified.
Use the information above to answer the following question. What is the amount of
total liabilities at the end of the year?
A) $6,000.
B) $15,600.
C) $16,000.
D) $5,600.
Your company receives advance payment in October for services that are provided
during November. Which of the following statements is correct?
A) A liability is recorded in October; revenue will be recorded in November.
B) Revenue is recorded in October and an expense will be recorded in November.
C) An expense is recorded in October; revenue will be recorded in November.
D) Revenue and expenses are recorded in October.
Which of the following statements about disposal of long-lived assets is not correct?
A) The gain or loss resulting from the disposal of a long-lived asset always appears
below the “Income from Operations” line on the income statement.
B) A journal entry is usually needed to update depreciation expense on a long-lived
asset at the time of disposal.
C) A company may dispose of long-lived assets by selling them, trading them in on new
assets, or by scrapping them.
D) The amount of the gain or loss on disposal of a long-lived asset before the end of its
useful life will be influenced by the depreciation method that had been used.
On January 1, a company lends $90,000 to a customer for one year at a 7% annual
interest rate. The note requires the payment of interest twice each year on June 30 and
December 31. The company records adjusting entries on a monthly basis. At the end of
each month in which the company does not receive any interest payments, the
company:
A) records an entry with a debit to Cash of $525 and a credit to Interest Revenue of
$525.
B) records an entry with a debit to Notes Receivable of $525 and a credit to Cash of
$525.
C) records an entry with a debit to Interest Receivable of $525 and a credit to Interest
Revenue of $525.
D) does not record an adjusting entry, since no transaction has occurred.
The Farley Corporation starts the year with a beginning inventory of 3,000 units at $5
per unit. The company purchases 5,000 units at $4 each in February and 2,000 units at
$6 each in March. Farley sells 1,500 units during this quarter. Farley has a perpetual
inventory system and uses the FIFO inventory costing method. What is the cost of
goods sold for the quarter?
A) $6,000
B) $9,340
C) $7,500
D) $9,000
A company purchased land for its natural resources at a cost of $1,500,000. It expects to
mine 2,000,000 tons of ore from this land. The residual value of the land is estimated to
be $250,000. What is the amount of depletion per ton of ore?
A) $0.75
B) $0.875
C) $1.14
D) $0.625
Each item in the statement of retained earnings can appear on another financial
statement. Choose the appropriate letter to match the item in the statement of retained
earnings with the related financial statement.
ITEM ON STATEMENT OF RETAINED EARNINGS
1) ____ Retained earnings, January 1, Year 3
2) ____ Net income for Year 3
3) ____ Dividends for Year 3
4) ____ Retained earnings, December 31, Year 3
FINANCIAL STATEMENT
A. Balance sheet at end of Year 3
B. Statement of cash flows for Year 3
C. Income statement for Year 2
D. Balance sheet at end of Year 2
E. Income statement for Year 3
Use the information above to answer the following question. What is the amount of net
income for Year 4?
A) $3,825.
B) $1,825.
C) $10,300.
D) $5,625.
Criminally minded employees have been known to override internal controls or do
which of the following to get around them?
A) Collude
B) Segregate duties
C) Disarm
D) Restrict access
Before reconciling its bank statement, Lauren Cosmetics Corporation’s general ledger
had a month-end balance in the cash account of $5,250. The bank reconciliation for the
month contained the following items:
Given the above information, what up-to-date ending cash balance should Lauren report
at month-end?
A) $4,500
B) $4,820
C) $5,160
D) $5,590
The Buddy Burger Corporation owes $1.5 million to the Texas Wholesale Meat
Company from whom Buddy Burger buys its burger meat. Which account would Buddy
Burger use to report the amount owed?
A) Cash
B) Accounts Payable
C) Notes Payable
D) Accounts Receivable
Which of the following is not a reason that a business needs an effective internal control
system?
A) Ensure that work is completed efficiently and effectively
B) Produce reliable and timely accounting information for use by people external to the
organization
C) Protect assets by reducing the risk of fraud
D) Identify ways to circumvent applicable laws and regulations