Which one of the following items appears on a balance sheet?
a. service revenue
b. unearned revenue
c. dividends
d. cash flow from operations
Which of the following is not a requirement of a company’s top managers under the
Sarbanes-Oxley Act?
a. They must give an opinion about the effectiveness of the company’s internal control
over financial reporting.
b. They must certify that they are primarily responsible for the company’s internal
controls over financial reporting.
c. They must certify that the company’s financial statements are fairly presented.
d. They may deny responsibility for certain financial reporting matters if they are not
knowledgeable about the proper accounting procedures for those transactions.
Refer to A Better Mousetrap. What amount should the company recognize as interest
revenue on December 31, 2013?
A Better Mousetrap
The company sold merchandise to a customer on December 1, 2013, for $100,000. The
customer paid with a promissory note that has a term of 6 months and an annual interest
rate of 9%. The company’s accounting period ends on December 31. a. $ -0-
b. $ 750
c. $1,500
d. $9,000
The following costs were incurred to acquire and prepare land for a new parking lot:
purchase price of land, $900,000; cost to clear the land, $40,000; cost of paving,
$35,000; and cost of lighting for the parking lot, $20,000. How much should be
recorded in the Land Improvements account?
a. $20,000
b. $35,000
c. $55,000
d. $40,000
Companies such as Macy’s and Target.
Match the terms with the descriptions provided.
a. Manufacturers d. Wholesalers
b. Merchandisers e. Service companies
c. Retailers
In the periodic inventory system, the account used to record the cost of merchandise
acquired for resale.
Match the terms with the descriptions provided.
a. Consignment f. Purchase allowance
b. Discount period g. Purchase discounts
c. Inventory h. Purchase returns
d. LIFO Reserve i. Purchases
e. Lower of cost or market rule
Midtown Diner, Inc., purchased $10,000 of paper napkins for its restaurants. At the end
of the period, three-fourths of the bill for the napkins is unpaid while an inventory
revealed that 40% of the napkins were still on hand. What combination of amounts
would affect the income statement and statement of cash flows? Statement of Cash
FlowIncome Statement
a. $6,000 $6,000
b. $7,500 $4,000
c. $2,500 $6,000
d. $6,000 $2,500
An office building was acquired for cash
Match the following types of adjusting entries to the listed situation. (Choices may be
used more than once.)
a. a deferred (prepaid) expense
b. a deferred (unearned) revenue
c. an accrued expense
d. an accrued revenue
The payment of Accounts Payable results in a(n)
a. decrease in both liabilities and assets.
b. decrease in liabilities and increase in assets.
c. decrease in liabilities and increase in stockholders’ equity.
d. increase in liabilities and decrease in stockholders’ equity.
A measure of a company’s success in earning a return for the common stockholders.
Select the ratio that each definition most properly satisfies.
a. Dividend yield ratio
b. Operating cash flow ratio
c. Debt-to-total assets ratio
d. Return on common equity ratio
e. Times interest earned ratio
f. Asset turnover ratio
g. Debt-to-equity ratio
h. Dividend payout ratio
The lender of a note recognizes a note payable on the balance sheet and interest expense
on its income statement.
Distinguish between capital and revenue expenditures.
Long-term debt generally refers to obligations that extend beyond one year.
Internal users of accounting information include present creditors and management.
If the investor owns over 50% of the outstanding common stock, the investor is deemed
to have control over the operating and financial policies of the investee.
Federal income taxes payable is not a current liability.
The corporation’s retained earnings is computed by adding the beginning balance and
net income, then subtracting the current year ____________________.
Because the cash received from the sale of long-term assets is reported in the investing
activities section of the statement of cash flows, any gain or loss is ignored when
reporting the cash flow from operating activities under the indirect method.
Refer to California Condos. On January 1, the Utilities Payable Account had a zero
balance. The company paid cash for utilities totaling $50,000 during 20 How much
should be reported as utilities expense for the year ended December 31, 2013?
When accrual basis accounting matches an expense to a period before it is actually paid,
an adjusting entry is necessary to record the accrued expense and corresponding
liability.