1) unearned revenues are received before goods are delivered or services are rendered.
2) for accounting purposes, business transactions should be kept separate from the
personal transactions of the stockholders of the business.
3) all reconciling items in determining the adjusted cash balance per books require the
depositor to make adjusting journal entries to the cash account.
4) companies report most changes in accounting principle currently.
5) a trial balance is prepared at the beginning of an accounting period.
6) under the periodic inventory system, cost of goods sold is treated as an account.
7) if the unit price of inventory is increasing during a period, a company using the lifo
inventory method will show less gross profit for the period, than if it had used the fifo
inventory method.
8) the concept of materiality permits a large company to report amounts in its financial
statements to the nearest thousand of dollars.
9) an installment note calling for equal total payments each period will result in an
interest portion that decreases in each successive period.
10) under the direct write-off method, no attempt is made to match bad debt expense to
sales revenues in the same accounting period.
11) if $150,000 face value bonds are issued at 102, the proceeds received will be
$102,000.
12) the present value of $10,000 to be received in 5 years will be smaller if the discount
rate is
a.increased
b.decreased
c.not changed
d.equal to the stated rate of interest
13) if the single amount of $800 is to be received in 2 years and discounted at 11%, its
present value is
a.$727.28
b.$649.30
c.$720.72
d.$661.16
14) danford trucking purchased a tractor trailer for $147,000. danford uses the
units-of-activity method for depreciating its trucks and expects to drive the truck
1,000,000 miles over its 12-year useful life. salvage value is estimated to be $21,000. if
the truck is driven 80,000 miles in its first year, how much depreciation expense should
danford record?
a.$9,333
b.$11,760
c.$10,080
d.$10,889
15) eusey company owns 10% interest in the stock of knight corporation. during the
year, knight pays $40,000 in dividends to eusey, and reports a net loss of $100,000.
eusey companys investment in knight will affect eusey net income by a
a.$40,000 increase
b.$10,000 increase
c.$10,000 decrease
d.$40,000 decrease
16) racer corporations december 31, 2012 balance sheet showed the following:
racers total paid-in capital was
a.$46,860,000
b.$47,490,000
c.$46,230,000
d.$27,060,000
17) which of the following statements concerning bonds is not a true statement?
a.bonds are generally sold through an investment company
b.the bond indenture is prepared after the bonds are printed
c.the bond indenture and bond certificate are separate documents
d.the trustee keeps records of each bondholder
18) most business enterprises in the united states are
a.proprietorships and partnerships
b.partnerships
c.corporations
d.government units
19) at september 1, 2014, baxter inc. reported retained earnings of $282,000. during the
month, baxter generated revenues of $40,000, incurred expenses of $24,000, purchased
equipment for $10,000 and paid dividends of $4,000. what is the balance in retained
earnings at september 30, 2014?
a.$282,000 debit
b.$16,000 credit
c.$284,000 credit
d.$294,000 credit
20) one of your accounting professors has alerted you about a job opportunity as an
internal auditor.
a. what is the role of an internal auditor?
b. is this position justified? why or why not?
21) the allowance for doubtful accounts is necessary because
a.when recording uncollectible accounts expense, it is not possible to know which
specific accounts will not pay
b.uncollectible accounts that are written off must be accumulated in a separate account
c.a liability results when a credit sale is made
d.management needs to accumulate all the credit losses over the years
22) payments of expenses that will benefit more than one accounting period are
identified as
a.expenses
b.revenues
c.prepaid expenses
d.liabilities
23) holland corporation’s trading portfolio at the end of the year is as follows:
the year-end adjusting entry to reflect a decrease in the value of stock trading securities
includes a
a.credit to market adjustmenttrading
b.debit to market adjustmenttrading
c.debit to unrealized gainincome
d.credit to stock investments
24) all of the following are true regarding the management and monitoring of cash
except:
a.companies may have plenty of sales, but insufficient cash to support operations
b.the cash to cash operating cycle for a manufacturer is generally shorter than that of a
merchandising company
c.manufacturers may experience a significant lag between the purchase of raw materials
and the receipt of cash from customers
d.companies should have sufficient cash to meet payments but minimize the amount of
non-revenue-generating cash on hand
25) if indiana ink, inc. has net sales of $400,000 and cost of goods sold of $280,000,
indiana inks gross profit rate is
a.70%
b.43%
c.30%
d.100%
26) the following items were taken from the financial statements of clarke, inc., over a
three-year period:
instructions
compute the following for each of the above time periods.
a.the amount and percentage change from 2011 to 2012
b.the amount and percentage change from 2012 to 2013
27) the net effects on the corporation of the declaration and payment of a cash dividend
are to
a.decrease liabilities and decrease stockholders equity
b.increase stockholders equity and decrease liabilities
c.decrease assets and decrease stockholders equity
d.increase assets and increase stockholders equity
28) the following information is available for mehring corporation for the year ended
december 31, 2012:
collection of principal on long-term loan to a supplier$35,000
acquisition of equipment for cash10,000
proceeds from the sale of long-term investment at book value22,000
issuance of common stock for cash20,000
depreciation expense25,000
redemption of bonds payable at carrying (book) value34,000
payment of cash dividends14,000
net income30,000
purchase of land by issuing bonds payable40,000
in addition, the following information is available from the comparative balance sheet
for mehring at the end of 2012 and 2011:
instructions
prepare mehring’s statement of cash flows for the year ended december 31, 2012, using
the indirect method.
29) holcomb company expects to have a cash balance of $43,000 on january 1, 2012.
these are the relevant monthly budget data for the first two months of 2010.
1> collections from customers: january $85,000, february $132,000
2> payments to suppliers: january $40,000, february $55,000
3> wages: january $34,000, february $40,000. wages are paid in the month they are
incurred.
4> administrative expenses: january $21,000, february $31,000. these costs include
depreciation of $1,000 per month. all other costs are paid as incurred.
5> selling expenses: january $15,000, february $20,000. these costs are exclusive of
depreciation. they are paid as incurred.
6> sales of short-term investments in january are expected to realize $12,000 in cash.
holcomb has a line of credit at a local bank that enables it to borrow up to $40,000. the
company wants to maintain a minimum monthly cash balance of $25,000.
instructions
prepare a cash budget for january and february.
30) match the items below by entering the appropriate code letter in the space provided.
1>a reduction given by the seller for prompt payment of a credit sale.
2>provides support for a credit sale.
3>gross profit divided by net sales.
4>sales less sales returns and allowances and sales discounts.
5>specifies the amount of cash discount and time period during which it is offered.
6>net sales less cost of goods sold.
7>freight cost to deliver goods to customers reported as an operating expense.
8>requires a physical count of goods on hand to compute cost of goods sold.
9>a cash discount claimed by a buyer for prompt payment of a balance due.
10>an account that is offset against a revenue account on the income statement.
31) adjusting entries are not necessary if the trial balance debit and credit columns
balances are equal.
32) at the beginning of the year, costello corporation acquired 15% of hudson company
common stock for $600,000. hudson company reported net income for the year of
$60,000 and paid $20,000 cash dividends during the year. the balance of the stock
investments account on the books of the costello corporation at the end of the year
should be $______________.
33) when preparing a statement of cash flows using the indirect method, why is
depreciation added back to net income within the operating activities section when
using the indirect method?
34) inventory on hand can be obtained from detailed inventory records when a
________________ inventory system is maintained.
35) in preparing a bank reconciliation, outstanding checks are ______________ from
the cash balance per ______________.
36) the chart of accounts used by norton printing company is listed below. you are to
indicate the proper accounts to be debited and credited for the following transactions by
writing the account number(s) in the appropriate boxes.
