1) receivable turnover is useful in assessing the profitability of receivables.
2) alternative accounting methods affect the quality of earnings.
3) the primary accounting standard-setting body in the united states is the securities and
exchange commission.
4) the declining-balance method of depreciation is called an accelerated depreciation
method because it depreciates an asset in a shorter period of time than the asset’s useful
life.
5) the purchase of equipment is an example of a financing activity.
6) the percentage of receivables basis of estimating uncollectible accounts ignores the
existing balance in the allowance account when the bad debt adjusting entry is
recorded.
7) the cash basis measure of liquidity is the cash debt coverage ratio.
8) which of the following statements is not true?
a.comparability means using the same accounting principles from year to year within a
company
b.faithful representation is the quality of information that gives assurance that it is free
of error or bias
c.relevant accounting information must be capable of making a difference in the
decision
d.the fasbs overriding criterion is that the accounting rule adopted should be the one
that generates the most useful financial information for making a decision
9) which of the following terms best describes the assumption made in applying the
four inventory methods?
a.goods flow
b.cost flow
c.asset flow
d.physical flow
10) the statement of cash flows
a.is prepared instead of an income statement under generally accepted accounting
principles
b.is used to assess an entity’s ability to pay dividends and meet obligations
c.is prepared from comparative income statements
d.reflects earnings per share figures on a cash basis and on an accrual basis in the body
of the statement
11) the following is selected information from l corporation for the fiscal year ending
october 31, 2011.
based on the accrual basis of accounting, what is l corporations net income for the year
ending october 31, 2011?
a.$184,000
b.$154,000
c.$152,000
d.$170,000
12) in the month of november gavin company inc. wrote checks in the amount of
$9,250. in december, checks in the amount of $12, 658 were written. in november,
$8,468 of these checks were presented to the bank for payment, and $10,883 in
december. what is the amount of outstanding checks at the end of december?
a.$1,775
b.$782
c.$2,557
d.$3,550
13) the receivables turnover ratio is used to analyze
a.profitability
b.liquidity
c.risk
d.long-term solvency
14) which of the following would be added to net income using the indirect method?
a.an increase in accounts receivable
b.an increase in prepaid expenses
c.depreciation expense
d.a decrease in accounts payable
15) brewer company has the following selected accounts after posting adjusting entries:
instructions
(a)prepare the current liability section of brewer company’s balance sheet, assuming
$12,000 of the mortgage is payable next year.
(b)comment on brewers liquidity, assuming total current assets are $450,000.
16) the entry to record a sale of $900 with terms of 2/10, n/30 will include a
a.debit to sales discounts for $18
b.debit to sales revenue for $882
c.credit to accounts receivable for $900
d.credit to sales revenue for $900
17) what is a difference between the profit margin ratio and the gross profit rate?
a.none, these are interchangeable terms
b.the gross profit rate is computed by dividing net sales by gross profit and the profit
margin ratio is computed by dividing net sales by net income
c.the gross profit rate will normally be higher than the profit margin ratio
d.a profit margin ratio of 7% means that 7 cents of each net sales dollar ends up in net
income and a gross profit rate of 7% means that the cost of the goods were 7% of the
selling price
18) the following information pertains to bell company. assume that all balance sheet
amounts represent both average and ending balance figures. assume that all sales were
on credit.
what is the inventory turnover for this company?
a.2 times
b.2.25 times
c.1 time
d..44 times
19) for which of the following errors should the appropriate amount be added to the
balance per book on a bank reconciliation?
a.check written for $43, but recorded as $34
b.deposit of $500 recorded by bank as $50
c.a returned $200 check recorded by bank as $20
d.check written for $35, but recorded as $53
20) which one of the following would not be classified as a short-term investment?
a.marketable equity securities
b.marketable merchandise
c.marketable debt securities
d.short-term paper
21) under the cash basis of accounting:
a.revenue is recognized when services are performed
b.expenses are matched with the revenue that is produced
c.cash must be received before revenue is recognized
d. a promise to pay is sufficient to recognize revenue
22) snug-as-a-bug blankets has the following inventory data:
assuming that a perpetual inventory system is used, what is ending inventory (rounded)
under the average cost method for july?
a.$4,125
b.$4,176
c.$3,609
d.$4,158
23) the term “fob” denotes
a.free on board
b.freight on board
c.free only (to) buyer
d.freight charge on buyer
24) which of the following would not be classified as a contra account?
a.sales revenue
b.sales returns and allowances
c.accumulated depreciation
d.sales discounts
25) which of the following discount rates will produce the smallest present value?
a.6%
b.7%
c.8%
d.3%
26) the following information relates to neufeld company:
using the direct method of reporting cash flows from operating activities, what was the
amount of cash paid for insurance premiums by neufeld during 2012?
a.$1,358,000
b.$1,442,000
c.$1,680,000
d.$1,722,000
27) prepare year-end adjustments for the following transactions. omit explanations.
1>accrued interest on notes receivable is $30.
2>$1,000 of unearned revenues has been earned.
3>three years rent, totaling $42,000, was paid in advance at the beginning of the year.
4>services totaling $2,900 had been performed but not yet billed at the end of the year.
5>depreciation on equipment totaled $6,500 for the year.
6>supplies purchased totaled $850. by year end, only $150 of supplies remained.
7>salaries owed to employees at the end of the year total $960
28) par value of stock represents the __________________ per share that must be
retained in the business for the protection of corporate ___________________.
29) the requirement that companies use the same cost flow assumption of all goods of a
similar nature is found in
30) the sale of equipment at less than its book value is a(an) ______________ of cash
that is reported in the ______________ activities section.
31) using the indirect approach, noncash charges in the income statement are
___________ to net income and noncash credits are ______________ to compute cash
provided by operations.
32) two brothers, a small book publishing company, wrote off the debt of the learning
place, and the academy of basic education, both small private schools, after it
determined that the schools were facing serious financial difficulty. no notice of the
action was sent to the schools; two brothers simply stopped sending bills. nearly a year
later, the learning place was given a large endowment and a government grant. the
resulting publicity brought the school to the attention of two brothers, which
immediately reinstated the account, and sent a new bill to the school, including interest
for the entire time the debt was outstanding. no further action was taken regarding the
academy of basic education, which was still operational.
did two brothers act ethically in reinstating the debt of one client, and not the other?
explain.
33) listed below are some selected items that may appear on a corporate income
statement. indicate the order in which these items would appear on an income
statement. (the first one should be assigned the number 1, the second 2, etc.)
extraordinary item
income before income taxes
discontinued operations
net income
income from continuing operations
income tax expense
