1) If an investor company owns 35% of the common stock of another business, income
received from the investee company are generally recorded by the investor company
by:
A) decreasing the investor company’s Common Stock account
B) increasing the value of the investor’s Equity-Method Investment account
C) increasing the Dividend Revenue account
D) decreasing the value of the investor’s Equity-Method Investment account
2) Company A received cash and issued stock to a new stockholder In recording this
transaction:
A) Cash would be debited
B) Common Stock would be debited
C) Cash would be credited
D) Retained Earnings would be credited
3) In the cash budget, additional financing is needed if:
A) the cash available before new financing exceeds the budgeted cash balance
B) the budgeted cash balance exceeds the cash available before new financing
C) the cash used for investing exceeds the budgeted cash balance
D) the budgeted cash balances exceeds the cash used for investing
4) When classifying assets and liabilities:
A) assets are classified as liquid and non-liquid
B) for most businesses the operating cycle is two years
C) furniture and fixtures are long-term assets
D) current liabilities include accounts receivable
5) Examples of items purchased with petty cash are:
A) delivery cost for package
B) taxi fare for executive of company
C) box of name tags for convention
D) all of the above
6) The balance sheet is also known as the:
A) statement of profit and loss
B) operating statement
C) assets statement
D) statement of financial position
7) Which accounts are used in the adjusting entry to record salaries owed to employees,
but not paid until the next accounting period?
A) Salaries Expense and Salaries Payable
B) Unearned Salaries and Salaries Payable
C) Salaries Payable and Deferred Salaries Expense
D) Deferred Salaries Payable and Salaries Receivable
8) Bonds that mature on a single date are called ________. Bonds that mature on
multiple dates are called ________.
A) mortgage bonds; serial bonds
B) serial bonds; mortgage bonds
C) debentures; special bonds
D) term bonds; serial bonds
9) The capital charge in EVA is computed as:
A) Cost of capital – Notes payable – Current maturities of long-term debt – Long-term
debt – Stockholders’ equity
B) (Notes payable, beginning balance + Current maturities of long-term debt, beginning
balance + Long-term debt, beginning balance + Stockholders’ equity, beginning
balance) Cost of capital
C) Cost of capital + Current maturities of long-term debt + Loans payable + Long-term
debt + Stockholders’ equity
D) (Notes payable + Current maturities of long-term debt + Long-term debt +
Stockholders’ equity) Cost of capital
10) How does the journal entry to amortize a copyright affect the accounting equation?
A) increases assets and stockholders’ equity
B) decreases assets and stockholders’ equity
C) increases assets and decreases stockholders’ equity
D) decreases assets and increases stockholders’ equity
11) Coal mines and oil reserves are:
A) depleted using the straight-line method
B) depleted using an accelerated method
C) not depleted because they belong to the earth
D) depleted using the units-of-production method
12) If a buyer takes advantage of a sales discount, the journal entry recorded by the
seller will include a(n):
A) debit to Cash, credit to Sales Discount and credit to Accounts Receivable
B) debit to Cash, debit to Sales Discount and credit to Accounts Receivable
C) debit to Cash and credit to Accounts Receivable
D) debit to Cash, debit to Sales Returns and Allowances and credit to Accounts
Receivable
13) All of the following will appear on the book side of the bank reconciliation
EXCEPT for:
A) service charges
B) electronic funds transfers
C) deposits in transit
D) book errors
14) On a multiple-step income statement, several indicators of profitability are reported
that include:
A) operating income, income before taxes, and net income
B) selling expenses and general expenses
C) cost of goods sold and operating expenses
D) investment income and interest income
15) The aging-of-receivables method of estimating uncollectible accounts is:
A) not an acceptable method of estimating bad debts
B) a balance sheet approach, since it focuses on accounts receivable
C) an income statement approach, since it focuses on the amount of expense to be
reported on the income statement
D) not concerned with the balance in the Allowance for Doubtful Accounts
16) Income tax expense appears on the:
A) tax return
B) statement of stockholders’ equity
C) income statement
D) balance sheet
17) Google Inc. paid $10.6 billion to acquire other companies. They also paid $33
billion to purchase marketable securities. How are these cash outflows classified on the
statement of cash flows?
A) financing activities
B) operating activities
C) investing activities
D) noncash investing and financing activities
18) Serfleck Company reports the following data for the year ending December 31,
2015:
There were no retirements of common stock in 2015. On the statement of cash
flows(indirect method), what is the net cash provided by financing activities for the
year ending December 31, 2015?
A) $45,000
B) $55,000
C) $60,000
D) $70,000
19) During the year, Crapitto Engineering Corporation has operating expenses of
$50,000. There was an increase in prepaid expenses of $5,000 and an increase in
accrued liabilities of $7,000. What were Crapitto’s cash payments for operating
expenses?
A) $43,000
B) $48,000
C) $55,000
D) $57,000
20) On a statement of cash flows, which is considered an investing activity?
A) Depreciation expense
B) Increase in inventory
C) Sale of securities
D) Repayment of debt
21) The cost of inventory that is still on hand is called:
A) cost of goods sold, an expense that appears on the balance sheet
B) inventory, a long-term asset that appears on the balance sheet
C) inventory, a current asset that appears on the balance sheet
D) purchases, an asset that appears on the balance sheet
22) Examples of financing activities on a statement of cash flows do NOT include:
A) issuing stock
B) borrowing money
C) buying treasury stock
D) declaring stock dividends
23) Bonds with a 7% stated interest rate were issued when the market rate of interest
was 6%. This bond was issued at:
A) par value
B) a premium
C) a discount
D) face value
24) A realized gain on the sale of a trading security occurs when the:
A) sales price is greater than the trading investment’s carrying amount
B) sales price is less than the trading investment’s carrying amount
C) sales price is greater than the trading investment’s original cost
D) sales price is less than the trading investment.’s original cost
25) Assume it is the first year of operations. When taxable income exceeds pretax
accounting income, accountants record a(n):
A) Deferred Tax Asset
B) Deferred Tax Liability
C) Income Tax Payable
D) Prepaid Income Taxes
26) The following items are extraordinary items EXCEPT:
A) loss due to hurricane damage of plant in Wisconsin
B) loss of vehicles due to damage from blizzard in Southern California
C) loss due to expropriation of company assets by a foreign government
D) loss on lawsuit
27) A bank reconciliation included an outstanding check of $850 for the payment of
salaries. The journal entry to record this reconciling item:
A) should debit Salaries Expense and credit Cash for $850
B) should debit Cash and credit Salaries Expense for $850
C) should debit Accounts Payable and credit Cash for $850
D) is not required
28) If ending inventory is overstated by $6,000, then:
A) stockholders’ equity is overstated by $6,000
B) cost of goods sold is understated by $6,000
C) gross profit is understated by $6,000
D) A and B
29) The normal balance of an account:
A) falls on the side where decreases are recorded
B) falls on the side where increases are recorded
C) must be computed after every transaction
D) cannot be computed in a manual accounting system
30) On December 31, Sulfur Corporation has the following data available:
What is return on assets?
A) 11.25%
B) 12%
C) 12.5%
D) 13.3%