If a company acquires a 40% common stock interest in another company,
a. the equity method is usually applicable.
b. all influence is classified as controlling.
c. the cost method is usually applicable.
d. the ability to exert significant influence over the activities of the investee does not
exist.
Answer:
Which of the following would be subtracted from net income using the indirect
method?
a. Depreciation expense
b. An increase in accounts receivable
c. An increase in accounts payable
d. A decrease in prepaid expenses
Answer:
In order to be considered extraordinary, an item must be
a. frequent and uninsured.
b. unusual and uninsured.
c. uninsured and infrequent.
d. infrequent and unusual.
Answer:
Assets normally show
a. credit balances.
b. debit balances.
c. debit and credit balances.
d. debit or credit balances.
Answer:
The use of common size financial statements is an example of
a. ratio analysis.
b. vertical analysis.
c. liquidity analysis.
d. horizontal analysis.
Answer:
Selected data for Irma’s Store appear below.
Instructions
Compute the following for 2016:
(a) Gross profit rate.
(b) Inventory turnover.
(c) Receivables turnover.
Answer:
Under the lower-of-cost-or-market basis in valuing inventory, market is defined as
a. current replacement cost.
b. selling price.
c. historical cost plus 10%.
d. selling price less markup.
Answer:
At March 31, account balances after adjustments for Vizzini Cinema are as follows:
Instructions
Prepare the closing journal entries for Vizzini Cinema.
Answer:
Unrealized loss on available-for-sale securities appears as a deduction
a. on the income statement as an expense.
b. from total assets on the balance sheet.
c. from revenues on the income statement.
d. from stockholders’ equity on the balance sheet.
Answer:
The following information pertains to Rural Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
What is the price-earnings ratio for Rural?
a. 8 times
b. 4.0 times
c. 7.0 times
d. 3.0 times
Answer:
Black Keys Company began the year with stockholders’ equity of $280,000. During the
year, the company recorded revenues of $375,000, expenses of $285,000, and paid
dividends of $30,000. What was Black Keys’ stockholders’ equity at the end of the
year?
a. $280,000.
b. $340,000.
c. $370,000.
d. $400,000.
Answer:
The income statement for the year 2015 of Fugazi Co. contains the following
information:
After the revenue and expense accounts have been closed, the balance in Income
Summary will be
a. $0.
b. a debit balance of $7,500.
c. a credit balance of $7,500.
d. a credit balance of $70,000.
Answer:
Dillon Corporation splits its common stock 2 for 1, when the market value is $40 per
share. Prior to the split, Dillon had 50,000 shares of $10 par value common stock issued
and outstanding. After the split, the par value of the stock
a. remains the same.
b. is reduced to $2 per share.
c. is reduced to $5 per share.
d. is reduced to $20 per share.
Answer:
Carey Company buys land for $50,000 on 12/31/14. As of 3/31/15, the land has
appreciated in value to $50,700. On 12/31/15, the land has an appraised value of
$51,800. By what amount should the Land account be increased in 2015?
a. $0
b. $700
c. $1,100
d. $1,800
Answer:
The income statement for the month of June, 2015 of Camera Obscura Enterprises
contains the following information:
The entry to close the expense accounts includes a
a. debit to Income Summary for $1,300.
b. credit to Rent Expense for $1,500.
c. credit to Income Summary for $5,700.
d. debit to Salaries and Wages Expense for $3,000.
Answer:
The entire group of accounts maintained by a company is called the
a. chart of accounts.
b. general journal.
c. general ledger.
d. trial balance.
Answer:
If a corporation’s stock is traded on the major stock exchanges, the corporation must
generally report periodically to a federal agency known as the ____________________.
Answer:
The account titles used in journalizing transactions need not be identical to the account
titles in the ledger.
Answer:
The following information is available for Queen Company, which has an accounting
year-end on December 31, 2015.
1> A truck was purchased on June 1, 2013, for $200,000. It was estimated to have a
$20,000 salvage value after being driven 120,000 miles. During 2015, the truck was
driven 20,000 miles. The units-of-activity method of depreciation used.
2> A building was purchased on January 1, 1988, for $3,000,000. It is estimated to have
a $30,000 salvage value at the end of its 40-year useful life. The straight-line method of
depreciation is being used.
3> Store equipment was purchased on January 1, 2014, for $280,000. It was estimated
that the store equipment would have a $28,000 salvage value at the end of its 5-year
useful life. The double-declining balance method of depreciation is being used.
Instructions
Complete the table shown below by filling in the appropriate amounts.
Answer:
A debt that is expected to be paid within one year through the creation of long-term
debt is a current liability.
Answer:
The adjusted trial balance of C.S. Financial Planners appears below. Using the
information from the adjusted trial balance, you are to prepare for the month ending
December 31, 2015:
1> an income statement.
2> a retained earnings statement.
3> a balance sheet.
Answer:
Waegelein Company identies the following items for possible
inclusion in the physical inventory. Indicate whether each item should
be included or excluded from the inventory taking.
1> Goods shipped on consignment by Waegelein to another company.
2> Goods in transit from a supplier shipped FOB destination.
3> Goods shipped via common carrier to a customer with terms FOB
shipping point.
4> Goods held on consignment from another company.
Answer: