A company had beginning accounts receivable of $175,000. All sales were on account
and totaled $550,000. Cash collected from customers totaled $650,000. Calculate the
ending accounts receivable balance.
a. $725,000
b. $275,000
c. $ 75,000
d. $175,000
A listing of all the account balances immediately before preparation of the financial
statements
Match each statement to the item listed below
a. Accrual basis accounting f. Depreciation
b. Adjusted trial balance g. Matching principle
c. Adjusting entries h. Revenue recognition principle
d. Cash basis accounting i. Time period assumption
e. Contra accounts j. Worksheet
Which of the following measures can be used to evaluate a company’s ability to meet
future debt obligations after paying operating expenses, dividends and making capital
expenditures?
a. earnings per share
b. net income
c. cash flow adequacy ratio
d. net increase or decrease in cash and cash equivalents
When using the direct method to determine operating cash flows, how is the collection
of cash from customers shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
Cozy Corporation purchased supplies at a cost of $15,000 during 2013. At January 1,
2013, supplies on hand were $5,000. At December 31, 2013, supplies on hand are
$2,000. Calculate supplies expense for 2013.
a. $18,000
b. $15,000
c. $13,000
d. $2,000
When an investor is evaluating whether to purchase stock in a company, which of the
following considerations is most important?
a. Will working capital be sufficient to support growth?
b. Will the key ratios be reported on the balance sheet?
c. Will cash flows from operations exceed net income in the coming years?
d. Will the company earn a satisfactory return on the amount invested by stockholders?
Paying for items previously purchased on credit
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
When using the direct method to determine operating cash flows, how is the retirement
of bonds payable at their maturity date shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
Refer to Fantasy Cruise Lines. What will be the book value of the ship after 10 years?
Fantasy Cruise Lines On January 1, 2013, the company purchased a ship for
$1,000,000. It has a 10-year useful life and a residual value of $100,000. The company
uses the double-declining-balance method. a. $200,000
b. $400,000
c. $ 0
d. $100,000
Assume that a company has a cash ratio of .45. Recording the estimated warranties
expense on the period’s sales would cause the cash ratio to
a. decrease.
b. increase.
c. be unchanged since the effects offset one another.
d. be unchanged since it has no impact on any current asset or liability accounts.
Land improvements
Identify where each of the following accounts would be reported on the financial
statements. (Choices may be used more than once.)
a. Balance Sheet-Property, Plant, and Equipment
b. Balance Sheet-Intangible Assets
c. Balance Sheet-Current Assets
d. Balance Sheet-Other Assets
e. Income Statement-Operating Section
f. Income Statement-Other Revenue and Expense Section
Refer to Memorial Corporation. How much cash was paid for dividends during 2014?
Memorial Corporation
Information from the financial records is presented below:
a. $40,000
b. $50,000
c. $60,000
d. $80,000
Times interest earned ratio
Indicate the type of each ratio listed. (Choices may be used more than once.)
a. Liquidity ratio
b. Debt management ratio
c. Asset efficiency ratio
d. Profitability ratio
e. Stockholder ratio
Jay has made a deal with his daughter to start a car fund for when she graduates college
in 6 years. He has found an investment that will yield an interest rate of 8% per year. If
he wants to have $25,000 to spend on the car for his daughter, how much must he
initially invest?
a. $15,754.28
b. $16,113.45
c. $13,772.55
d. $14,038.95
Merchandise held for sale in the normal course of business.
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
When using the indirect method to determine operating cash flows, how is the decrease
in accounts payable shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
Treasury shares represent the
a. number of previously issued shares that have been repurchased by the corporation.
b. number of shares that the corporation has sold.
c. number of shares that are currently held by stockholders.
d. maximum number of shares that can be sold by the corporation.
Which of the following is a reconciling item on the bank side of a bank reconciliation?
a. canceled checks
b. Outstanding checks
c. NSF checks
d. both b and c
Include cash received from the issuance of stock and cash used to pay dividends.
Match these terms with their correct definition.
a. Cash flow adequacy ratio
b. Cash flows from financing activities
c. Cash flows from investing activities
d. Cash flow from operating activities
e. Direct method
f. Free cash flow
g. Income statement
h. Indirect method
i. Noncash investing & financing activities
j. Statement of cash flows
Calculations of future values are projections of the future balance based upon
a. past cash flows.
b. future cash flows.
c. past and future cash flows.
d. expected future cash flows.
____________________ securities, such as bonds, exist when another entity owes the
security holder some combination of principal and interest.
express each financial statement line item in percentage terms in order to highlight
differences. Typically, this conversion from dollar amounts to percentages is done with
horizontal or vertical analysis.
Match these terms to their correct definition
What is the difference between trading securities and available-for-sale securities? What
are the similarities in terms of their accounting treatment?
“You Decide” Essay You are the owner of small chain of sporting goods. Currently,
you pay a media company to maintain the company’s website and Internet sales
processing software system. You are considering bringing that operation in-house by
hiring an Information Technology (IT) employee. What factors should you consider in
making this decision?
The time-period assumption assumes that a company prepares its financial statements
every month.
A company expects to receive a substantial cash settlement from a lawsuit. Therefore,
the company must record this on its accounting records if a reasonable estimate can be
made of the amount to be received.
A research consortium has a large portion of its plant assets concentrated in an area
where technology is rapidly changing. The organization wants to minimize taxable
income and maximize net income reported to shareholders. Recommend a course of
action for accomplishing this objective and provide support for your recommendation.
The fair value method should be used to account for stock investments of less than 20%
of the outstanding shares.
If a company has an internal audit function, it does not need to have external auditors.
The buyer must include goods purchased FOB shipping point in its inventory account if
the goods are still in transit.