Choose from the following list of account titles the one that most accurately fits the des
cription of that account or is an example of that account.An account title may be used m
ore than once or not at all.
a. Cash
b. Prepaid Asset
c. Investments
d. Taxes Payable
e. Preferred Stock
f. Accounts Receivable
g. Land
h. Accounts Payable
i. Retained Earnings
j. Notes Receivable
k. Buildings
l. Notes Payable
m. Common Stock
A warehouse used to store equipment
Having only one person authorized to both prepare and sign checks is a violation of
what internal control procedure?
a. Segregation of duties
b. Independent review and appraisal
c. Independent verifications
d. Proper authorizations
Adjustments are necessary only if
a. the cash basis of accounting is used for all accounting periods.
b. cash receipts and payments occur before or after the point in time when revenues and
expenses should be recognized under the accrual basis of accounting.
c. management reports its adjustments on the statement of cash flows.
d. the company reports revenue in the same period cash is collected.
Deal Mart The 2014 income statement of Deal Mart shows operating revenues of
$130,800, selling expenses of $37,100, general and administrative expenses of $34,900,
interest expense of $900, and income tax expense of $11,430. Deal Mart’s stockholders’
equity was $280,000 at the beginning of the year and $320,000 at the end of the year.
The company has 20,000 shares of stock outstanding at December 31, 2014.
Read the information about Deal Mart. What is Deal Mart’s profit margin (to the closest
tenth of a percent)?
a. 2.8
b. 35.5
c. 61.2
d. 14.5
Which of the following statements regarding partnerships is true?
a. Partnerships must register with the federal government.
b. Partnerships pay taxes to the IRS.
c. Partners must register with the state government.
d. Partners must abide by the separate entity concept and keep their personal assets
separate from the partnership assets.
Vertical analysis is a comparison of financial statement items for a single company over
a period of time.
a. True
b. False
In a vertical analysis of the income statement, the 100% amount is
a. Net income
b. Gross profit
c. Operating income
d. Net sales
The most obvious risk to bond investors is that a company will fail and be unable to pay
its debts.
a. True
b. False
All of the following statements are true about inflation except :
a. The U.S. and Germany adjust their financial statements for inflation.
b. In recent years, inflation has been more rampant in Latin America and South America
than the rest of the world.
c. The FASB developed rules for companies in the United States to use to adjust for
inflation.
d. U.S. companies no longer present financial information adjusted for the effects of
inflation.
Which of the following is reported as a financing activity?
a. Declaration of dividends
b. Sale of preferred stock
c. Conversion of preferred stock to common stock
d. Stock split
If a company has $152,000 of revenues, declares and pays $55,000 in dividends, and
has net income of $89,000, how much were expenses for the year?
a. $ 8,000
b. $ 63,000
c. $144,000
d. Unable to determine the amount due to incomplete information.
Which of the following is an example of a contingent liability?
a. A liability for notes payable with interest included in the face amount.
b. The liability for future warranty repairs on computers sold during the current period.
c. A lawsuit pending against a restaurant chain for improper preparation of food.
d. A corporate long-term employment contract with the chief executive officer.
The following information is available from the balance sheets at the end of 2016 and
2015 for Riverside Company:
Net income for 2016 and 2015 was $340,000 and $300,000, respectively. Answer the
following: A) Calculate the return on common stockholders’ equity ratio for 2016. B)
What information is provided to users with the calculation in part A? Explain. C) What
is the difference between the return on stockholders’ equity ratio and the return on
assets ratio?
Hindsville Company reported revenues of $165,000 and net income of $20,000 for
2014. Cash generated by operations was $40,000. In addition, Hindsville Company
borrowed $24,000 from a bank. During 2014, Hindsville purchased new equipment for
$30,000 cash and paid cash dividends of $15,000 to stockholders. Hindsville’s cash
balance at the beginning of 2014 was $22,000.
Canyon Corporation
The accountant for the Canyon Corporation prepared the following list from the
company’s accounting records for the year ended December 31, 2014:
Read the information for Canyon Corporation. Determine the following amounts for
Canyon Corporation: A) Stockholders’ equity at the end of 2014. B) Retained earnings
at the end of 2014. _______________________ C) Name two
events that might cause stockholders’ equity to decrease.
When a bond is issued at a discount, the interest expense each year is less than the cash
payment for interest.
a. True
b. False
Flagg Company issued $500,000 of bonds for $498,351, Interest is paid semiannually.
The bond markets and the financial press are likely to state the bond issue price as
a. 498.35.
b. 100.00.
c. 99.67.
d. 49.84.
On a bank reconciliation, outstanding checks are added to the cash balance per the bank
statement.
a. True
b. False
The following accounts are listed in a company’s general ledger:
REQUIRED: 1> Which items are cash equivalents?
2> Explain where items that are not cash equivalents should be classified on the balance
sheet.
3> What are the amount and the direction of change in cash and cash equivalents for
2015? Is the company as liquid at the end of 2015 as it was at the end of 2014? Explain
your answer.
Read the information about Fasoli, Inc.
The excess of the value of a company’s inventory stated at FIFO over the value stated at
LIFO is called a(n)
_________________________.
is the body created by the Sarbanes-Oxley Act that was given the authority to set
auditing standards in the United States.
How does goodwill arise? How is it accounted for and reported on the financial
statements?