1) on the maturity date, the bondholder is paid the face amount of the bond plus the last
interest payment.
2) burglar alarms, fire alarms, and security cameras improve internal control.
3) cash in the bank is more liquid than a petty cash fund.
4) in the case of a prepaid expense, the adjusting entry required at the end of a period
will consist of a debit to the prepaid expense account. assume the prepaid expense was
initially recorded as an asset.
5) the gross profit percentage is an indicator of how well a company is positioned to
pay off its short-term liabilities.
6) equity securities, in which the investor owns less than 20% ownership in the voting
stock of the investee, can be either trading investments or available-for-sale
investments.
7) the process of transferring data from the ledger to the journal is called posting.
8) in a bank reconciliation, a deposit in transit will be shown on the bank side of the
reconciliation.
9) if a bond is issued at a discount, it will sell for more than face value.
10) the asset turnover rate is a way to evaluate how well a company can pay its
short-term liabilities.
11) the fair value of a trading investment is the price that would be used if the company
were to sell the investments on the market.
12) a company has net credit sales of $1,012,500, beginning net accounts receivable of
$250,000, and ending net accounts receivable of $200,000. what is the days’ sales in
accounts receivable? (round to nearest whole day.)
a) 81 days
b) 99 days
c) 93 days
d) 90 days
13) if the fair value adjustment account for trading investments has a debit balance
________.
a) it is subtracted from the fixed asset account to determine carrying value
b) it is subtracted from the short-term investment-trading account to determine carrying
value
c) it is added to the short-term investment-trading account to determine carrying value
d) it is added to the fixed asset account to determine carrying value
14) a business makes a cash payment to a supplier on account for office supplies which
were purchased earlier. which of the following accounts will be credited?
a) cash
b) accounts payable
c) office supplies
d) utilities expense
15) steve, an employee of panache inc., has gross salary for march of $4,000. the entire
amount is under the oasdi limit of $110,100, and thus subject to fica. he is also subject
to federal income tax at a rate of 18%. steve has a deduction of $320 for health
insurance and $80 for united way. which of the following is included in the entry in the
payroll cycle to record the disbursement of his net pay?
a) credit to salaries and wages payable
b) debit to united way payable
c) debit fica tax payable
d) credit cash
16) the balance of stockholders’ equity at the beginning of the year and the end of the
year was $50,000 and $67,000, respectively. the company issued no common stock
during the year. dividends were $23,000. what was the net income or loss for the year?
a) net income of $90,000
b) net loss of $90,000
c) net loss of $40,000
d) net income of $40,000
17) swan song’s adjusted trial balance as of december 31, 2014 is given below:
compute the current ratio.
a) 2.07
b) 1.83
c) 1.64
d) 2.54
18) ragas inc. sold goods with a selling price of $50,000 in the year 2013 and estimated
4% warranty expense for the year. customers complained of defects and goods with a
cost of $1,500 had to be replaced. which of the following is the correct journal entry for
honoring the warranties with goods?
a)
b)
c)
d)
19) which of the following is a characteristic of a current liability?
a) it is due within one year or one operating cycle, whichever is longer
b) it is due within five years or five accounting periods, whichever is longer
c) it is due within five years or five accounting periods, whichever is shorter
d) it is due within one year or one operating cycle, whichever is shorter
20) which of the following is an attribute of the internal control procedure “assignment
of responsibilities”?
a) to validate their accounting records, a company should have an audit by an external
accountant
b) the company should separate the custody of assets from accounting
c) the external auditors will monitor internal controls
d) have clearly assigned responsibilities for each position
21) if a company is using the accrual basis accounting method, when should it record its
earned revenue?
a) when cash is received, even though services may be rendered at a later date
b) when services are rendered, even though cash may be received at a later date
c) when services are completely rendered and cash is received
d) when cash is received, 30 days after the completion of the services
22) which of the following actions will decrease the amount of total stockholders’
equity?
a) cash dividend declared
b) stock split
c) stock dividend declared
d) repayment of bond principal
23) equipment with a cost of $32,000 and accumulated depreciation of $7,000 was sold
for $45,000.
what was the amount of net cash provided by (used for) investing activities?
a) $120,000
b) $20,000
c) $(120,000)
d) $(20,000)
24) real weight losers, a diet magazine, collected $480,000 in subscription revenue in
may. each subscriber will receive an issue of the magazine for each of the next 12
months, beginning with the june issue. the company uses the accrual method of
accounting. provide the adjusting entry needed on june 30. (ignore explanation) assume
the magazine initially records a liability for the subscription revenue.
25) equipment was purchased for $24,000. the equipment’s estimated useful life was 5
years, and its residual value was $4,000. the straight-line method of depreciation was
used. calculate gain or loss on sale if the equipment is sold for $18,000 at the end of the
first year. give journal entry to record the sale of equipment at book value.
26) refer to the following information of harris inc. and calculate the free cash flow of
harris inc.
net cash from operating activities, $25,000
net cash from financing activities, $35,000
net cash used in investing activities, apart from investment in long-term assets, $12,000.
net cash used in investing activities, ($20,000)
investment in long-term assets, $12,000
cash dividend paid $10,000.
27) equipment was purchased for $24,000. the equipment’s estimated useful life was 5
years, and its residual value was $4,000. the straight-line method of depreciation was
used. give journal entry to record the sale of the equipment if it is sold for $25,000 at
the end of the first year.
28) samuel corp. has provided the following information for the year ended december
31, 2015.
samuel corp
comparative balance sheet
december 31, 2015 and 2014
increase /
20152014(decrease)
assets
current assets:
cash$33,000$13,000$20,000
accounts receivable29,00036,000(7,000)
inventory56,00029,00027,000
plants assets, net126,00092,00034,000
total assets$244,000$170,000$74,000
accounts payable$9,000$13,000$(4,000)
accrued liabilities7,0003,0004,000
long-term notes payable70,00079,000(9,000)
total liabilities$86,000$95,000$(9,000)
common stock$55,000$3,000$52,000
retained earnings115,00078,00037,000
treasury stock(12,000)(6,000)(6,000)
total stockholders’ equity$158,000$75,000$83,000
total liabilities and stockholders’ equity$244,000$170,000$74,000
samuel corp
income statement
year ended december 31, 2015
sales revenue$291,300
interest revenue1,000
gain on sale of plant assets6,000
total revenues and gains$298,300
cost of goods sold145,000
salaries and wages expense49,000
depreciation expenseplant assets16,000
other operating expense25,000
interest expense3,500
income tax expense7,800
total expenses246,300
net income$52,000
additional information provided by the company includes the following:
equipment costing $60,000 was purchased for cash.
equipment with a net asset value of $10,000 was sold for $16,000.
depreciation expense of $16,000 was recorded during the year.
during 2014, the company repaid $43,000 of long-term notes payable.
during 2014, the company borrowed $34,000 on a new long-term note payable
there were no stock retirements during the year.
there were no sales of treasury stock during the year.
all sales are on credit.
prepare a complete statement of cash flows using the indirect method.
29) on march 21, 2013, the bond accounts of urban sales showed the following
balances.
urban sales retires the bonds for $66,150. what will be the journal entry to retire the
bonds?
30) atlantis inc. has the following data:
atlantis inc.
comparative balance sheet
december 31, 2016 and 2015
20162015
assets
total current assets$200,000$100,000
property, plant, and equipment, net550,000500,000
other assets50,00050,000
total assets$800,000$650,000
liabilities
total current liabilities$150,000$100,000
long-term debt350,000250,000
total liabilities500,000350,000
stockholders’ equity
total stockholders’ equity300,000300,000
total liabilities and stockholders’ equity$800,000$650,000
perform a vertical analysis of atlantis’s balance sheet for each year. (round your
percentage answers to one decimal place.)
31) a truck costs $100,000 when new, and it has an accumulated depreciation of
$70,000. suppose the corporation exchanges the truck for a new truck. the new truck
has a market value of $120,000 and corporation pays cash of $100,000. assume the
exchange has commercial substance. journalize the transaction.
32) oscar packers received an allowance from the vendor for an amount of $400. give
the journal entry for this transaction. the company uses a perpetual inventory system.
33) avatar auto parts company is preparing its statement of cash flows using the indirect
method. refer to the following portion of the comparative balance sheet:
avatar company
comparative balance sheet
december 31, 2014 and 2013