1) the payout ratio is computed by dividing total cash dividends paid on common stock
by retained earnings.
2) an inventory turnover ratio that is too high may indicate that the company is losing
sales opportunities because of inventory shortages.
3) the current cash debt coverage ratio is considered a better representative of liquidity
than the current ratio because it involves the entire year rather than a balance at one
point in time.
4) a debit to an account always indicates an increase in that account.
5) companies get cash from just two sources: operating activities and financing
activities.
6) comprehensive income includes all changes in stockholders equity during a period
except those resulting from investments by stockholders and distributions to
stockholders.
7) other receivables include non-trade receivables such as loans to company officers.
8) the gross profit amount is generally considered to be more informative than the gross
profit rate.
9) nacron company borrowed $8,000 from the bank signing a 6%, 3-month note on
september 1. principal and interest are payable to the bank on december 1. if the
company prepares monthly financial statements, the adjusting entry that the company
should make for interest on september 30, would be:
a.debit interest expense, $40; credit interest payable, $40
b.debit interest expense, $480; credit interest payable, $480
c.debit note payable, $480; credit cash, $480
d.debit cash, $40; credit interest payable, $40
10) reed company acquires 80 holmes 10%, 5 year, $1,000 bonds on january 1, 2012 for
$82,000. this includes a brokerage commission of $2,000. the journal entry to record
this investment includes a debit to
a.debt investments for $80,000
b.debt investments for $82,000
c.cash for $82,000
d.stock investments for $80,000
11) given the following adjusted trial balance:
net income for the year is:
a.$98
b.$270
c.$324
d.$496
12) leyland realty company received a check for $12,000 on july 1, which represents a
6-month advance payment of rent on a building it rents to a client. unearned rental
revenue was credited for the full $12,000. financial statements will be prepared on july
31. leyland realty should make the following adjusting entry on july 31:
a.debit unearned rental revenue, $2,000; credit rental revenue, $2,000
b.debit rental revenue, $2,000; credit unearned rental revenue, $2,000
c.debit unearned rental revenue, $12,000; credit rental revenue, $12,000
d.debit cash, $12,000; credit rental revenue, $12,000
13) casin company sells $800 of merchandise on account to delta exploration with
credit terms of 2/10, n/30. if delta exploration remits a check taking advantage of the
discount offered, what is the amount of delta exploration’s check?
a.$560
b.$784
c.$720
d.$640
14) when preparing a set of financial statement, the statement of cash flows is prepared
a.first
b.second
c.third
d.fourth
15) all of the following statements are true regarding comprehensive income except
a.companies are required to report comprehensive income
b.a company would add an unrealized loss on available-for-sale securities to net income
to calculate comprehensive income
c.comprehensive income does not include changes resulting from investments by
stockholders
d.comprehensive income does not include dividends to stockholders
16) the mac company has four plants nationwide that cost $400 million. the current
market value of the plants is $300 million. the plants will be reported as assets at
a.$400 million
b.$800 million
c.$300 million
d.$500 million
17) which of the following accounts probably would be listed before the others in a
chart of accounts?
a.accumulated depreciation-buildings
b.insurance expense
c.dividends
d.notes payable
18) a corporation has the following account balances: common stock, $1 par value,
$60,000; paid-in capital in excess of par value, $2,700,000. based on this information,
the
a.legal capital is $2,760,000
b.number of shares issued is 60,000
c.number of shares outstanding is 2,760,000
d.average price per share issued is $4.60
19) under ifrs, the statement of comprehensive income can be prepared under
a. the one-statement approach only
b. the two-statement approach only
c. either the one-statement approach or the two-statement approach
d. either the two-statement approach or the stockholders’ equity statement approach
20) machinery was purchased for $85,000. freight charges amounted to $3,500 and
there was a cost of $10,000 for building a foundation and installing the machinery. it is
estimated that the machinery will have a $15,000 salvage value at the end of its 5-year
useful life. depreciation expense each year using the straight-line method will be
a.$19,700
b.$16,700
c.$14,300
d.$14,000
21) reed company acquires 80 holmes 10%, 5 year, $1,000 bonds on january 1, 2012 for
$82,000. this includes a brokerage commission of $2,000. assume holmes pays interest
semiannually and the july 1 entry was done correctly. the journal entry at december 31,
2012 would include a credit to
a.interest receivable for $4,000
b.interest revenue for $8,000
c.accrued expense for $8,000
d.interest revenue for $4,000
22) the purchase of a company in the same industry that does the same activity is called
a ______________ acquisition.
23) most publicly held corporations are required to make extensive disclosure of their
financial affairs to the _______________.
24) *turner corporation returned $110 of goods originally purchased on credit from
morgan industries. using the periodic inventory approach, turner would record this
transaction as:
25) employees of a company who evaluate the effectiveness of the company’s system of
internal controls on a year-round basis are called ______________.
26) torrey company uses the periodic inventory system to account for inventories.
information related to torrey company’s inventory at october 31 is given below:
instructions
1>show computations to value the ending inventory using the fifo cost assumption if
700 units remain on hand at october 31.
2>show computations to value the ending inventory using the weighted-average cost
method if 700 units remain on hand at october 31.
3>show computations to value the ending inventory using the lifo cost assumption if
700 units remain on hand at october 31.
27) which requires a two-tiered approach to test whether the value of loans and
receivables are impaired?
28) debt investments are investments in government and _____________ bonds.
29) an adjusting entry recording accrued salaries for a period indicates that salaries
expense has been ________________ but has not yet been ________________ or
recorded.