When a liability is accrued, the account debited in the transaction is a stockholders’
equity account.
a. True
b. False
Which one of the following is the last step in the accounting cycle?
a. Journalizing business transactions
b. Recording and posting adjustments
c. Closing the accounts
d. Preparing financial statements
When Company X buys stock in Company Y, Company X is referred to as the investee.
a. True
b. False
Guinther & Sons, Inc. Guinther & Sons, Inc. a retailer of men’s clothing, earned a net
profit of $77,000 for 2014. The balance sheet for Guinther & Sons includes the
following items:
Read the information for Guinther & Sons, Inc. Calculate the current ratio for Guinther
& Sons.
a. 2.58 to 1
b. 2.75 to 1
c. 3.00 to 1
d. 2.00 to 1
Back Company sold merchandise on credit. Its gross profit ratio is 23%. The effect of
this transaction is that the
a. earnings per share decreased
b. current ratio was unchanged
c. debt-to-equity ratio increased
d. earnings per share increased
Allowing only certain employees to order goods and services for the company is an
example of what internal control procedure?
a. Segregation of duties
b. Safeguarding of assets and records
c. Independent verifications
d. Proper authorizations
For each item listed, select the section of the balance sheet in which the item would be r
eported.
a. Current Assets
b. Property, Plant, and Equipment
c. Current Liabilities
d. Long-term Liabilities
e. Stockholders’ Equity
Interest payable
Dividends are a determinant of net income.
a. True
b. False
Which one of the following financial statements reports an entity’s financial position at
a specific date?
a. Balance sheet
b. Statement of retained earnings
c. Income statement
d. Both the income statement and the balance sheet
The Property, Plant, and Equipment category includes long-term investments.
a. True
b. False
Under certain conditions, an investment in common stock can be considered a cash
equivalent.
a. True
b. False
Weather Corp. issued 10-year, 8%, $100,000 bonds paying interest on an annual basis,
at a $5,200 premium. Which one of the following statements is true?
a. Weather’s annual interest expense on the bonds will be greater than the amount of
interest payments to bondholders each year.
b. Weather’s annual interest expense on the bonds will be less than the amount of
interest payments to bondholders each year.
c. Weather will receive $94,800 as the issue price.
d. The cash paid to bondholders will be $520 each interest period.
Chen’s Department Store Chen’s Department Store is a merchandising company that
uses the periodic inventory system. Selected account balances are listed below:
Refer to the account information for Chen’s Department Store Calculate Chen’s cost of
goods purchased
a. $ 84,000
b. $ 90,000
c. $ 103,000
d. $ 117,000
What are three specific ratios that are especially useful for creditors and lenders?
Given below are several ratios. Select the accounts or amounts that would be used in
order to calculate the ratio. You will have more than one response to each ratio. Some
accounts or amounts may not be used at all. (Select all that apply.)
Cory Harper, a newly hired accountant, wanted to impress his boss, so he stayed late
one night to analyze the office supplies expense account. He determined the cost by
month, for the past 12 months, of each of the following: computer paper, copy paper,
fax paper, pencils and pens, note pads, postage, corrections supplies, stationery, and
miscellaneous items. Why do companies not include information of this nature in
published financial statements?
Taryn Corporation The accountant for Taryn Corporation prepared the following list of
account balances from the company’s records for the year ended December 31, 2014:
Read the information for Taryn Corporation. Prepare an income statement for Taryn
Corporation in good form.
A purchase of raw materials from a supplier is a(n)event.
Craft Corp. began operations on January 1, 2015. The statement of cash flows for the
first year reported dividends paid of $160,000. The balance sheet at the end of the first
year reported $40,000 in dividends payable and $580,000 in ending retained earnings.
Determine Craft’s net income for its first year of operations.
describes a form used by the accountant to reconcile the balance shown on the bank
statement for a particular account with the balance shown in the accounting records.
have claims to an entity’s economic resources.
A(n)categorizes the various accounts receivable amounts by the length of time
outstanding.
Why do many companies use one method to calculate depreciation for the income
statement developed for stockholders and another method for income tax purposes?