The income statement tells the reader about the actual cash inflows during a period of
time.
a. True
b. False
Harvest Catering is a local catering service. Conceptually, when should Harvest
recognize revenue from its catering service?
a. At the date the customer places the order
b. At the date the meals are served
c. At the date the invoice is mailed to the customer
d. At the date the customer’s payment is received
Identify where each of the following accounts would be reported on CocaÂCola’s
financial statements.
a. Balance Sheet-Property, Plant, and Equipment
b. Balance Sheet-Intangible Assets
c. Balance Sheet-Current Assets
d. Balance Sheet-Other Assets
e. Income Statement-Operating Section
f. Income Statement-Other Revenue and Expense Section
g. Statement of Cash Flows
Building
Which of the following is considered a liquidity analysis tool?
a. gross profit ratio
b. acid-test ratio
c. dividend yield ratio
d. return on assets ratio
Failure to record depreciation expense for the period results in which of the following?
a. Net income being overstated
b. No effect on total assets
c. Stockholders’ equity being overstated
d. Both a and c above
Which one of the following items appears on a balance sheet?
a. Accounts payable
b. Sales revenue
c. Utilities expense
d. Cost of goods sold
Adam Inc. uses a perpetualinventory system.
If Adam uses the FIFO method, how much is cost of goods sold for the month of
January?
a. $204
b. $208
c. $212
d. $560
Using the future value table, a student found that the future value amount of $1 for 5
years at an annual interest rate of 10% is 1.611. The student also observed that the
future value of $1 for 5 years at 10% compounded semiannually is 1.629. This means
that
a. the more often the compounding, the higher the future value.
b. the student was looking in the wrong column; the second amount should be 1.611/2.
c. there was an error in the table.
d. when interest is compounded semiannually, more money must be deposited to have a
desired ending balance.
A good system of internal control is important to make a company’s accounting records
completely foolproof.
a. True
b. False
Which of the following best describes the term “retained earnings”?
a. The amount of total profits earned by a business since it began operations.
b. The amount of interest or claim that the owners have on the assets of the business.
c. The future economic resources of a business entity.
d. The cumulative profits earned by the business less any dividends distributed.
Which one of the following best describes the external auditor’s report?
a. The external auditor’s report is an opinion.
b. The external auditor’s report is a statement of fact.
c. The external auditor’s report must comply with both FASB and IASB standards.
d. The firms that provide external audit reports are restricted to 20 partners, based on
authoritative standards issued by the PCAOB.
Information must be timely to be relevant.
a. True
b. False
Roman Industries’ plant operates five days per week with a daily payroll of $6,000.
Employees are paid every Saturday for the workweek just completed (Monday through
Friday). The last day of the month is Wednesday, March 31. What is the amount of
Wages Expense recorded on the next payday, Saturday, April 3?
a. $ -0-
b. $ 30,000
c. $ 12,000
d. $ 18,000
Match the following terms with the best definitions for questions 212 through 219. a.
Purchase requisition.
b. Receiving Report.
c. Vendor Invoice.
d. Check.
e. Control procedures.
f. Inventory count.
g. Segregation of duties.
h. Source document control.
An example of independent verification.
Interim financial statements are prepared annually.
a. True
b. False
Indicate the type of each ratio listed below.
a. liquidity ratio
b. solvency ratio
c. profitability ratio
Price/earnings ratio
Items should be reported as part of the company’s “inventory” at year end, if they are
a. Purchased from a creditor, available for sale, and paid for the following year.
b. Held in anticipation of an increase in market value.
c. Determined to be part of cost of goods sold.
d. Sold during the period.
Premium on Bonds Payable is a balance sheet item for Ohio Products Company. How
would it most likely be classified on the balance sheet?
a. An increase to a long-term liability
b. Revenue
c. Long-term asset
d. Contra liability
From the following list, identify each item as operating (O), investing (I), financing (F),
or not separately reported on the statement of cash flows (N).
a. Operating-O
b. Investing-I
c. Financing-F
d. Not separately reported-N
Reissuance of common stock (held as treasury stock)
When reconciling a bank account, the company does not have to prepare an adjusting
entry for outstanding checks.
a. True
b. False
Write a short paragraph explaining the following: 1> When bad debts are estimated,
why is the balance in Allowance for Doubtful Accounts considered when the percentage
of accounts receivable approach is used but not when the percentage of net credit sales
approach is used? 2> When estimating bad debts on the basis of a percentage of
accounts receivable, what is the advantage of using an aging schedule?
Under theinventory system, the inventory account is updated after each purchase or
sale.
Music Company’s only asset as of January 1, 2014, was a copyright. During 2014, only
the following three transactions occurred: Royalties earned from copyright use,
$510,000 in cash
Cash paid for advertising and salaries, $62,500
Amortization, $50,000Required1> What amount of income will Music report in 2014?
2> What is the amount of cash on hand at December 31, 2014?
3> Explain how the cash balance increased from zero at the beginning of the year to its
year-end balance. Why does the increase in cash not equal the income?
The following information is available from the records of Focus Seascapes, Inc. at the
end of the 2014 calendar year:
(1) What is Focus’ net income for the year ended December 31, 2014?
(2) What is Focus’ retained earnings balance for the year ended December 31, 2014?
Tasty Catering purchased a van on January 1, 2014 for $48,000. The company decided
to depreciate the van over a 5-year period using the straight-line method. The company
estimated its residual value at $3,000. Show how the costs should be presented on
Tasty’s balance sheet and income statement for the full year ended June 30, 2016. Label
the statements properly.
What is the typical composition of a board of directors of a publicly held corporation?
Under the indirect method, a loss from the retirement of bonds isto net income in the
operating activities section of the statement of cash flows.
A(n)results when cash is received before the related amount is reported on the income
statement.
List three different groups of users of accounting information. Indicate the type of
decisions each group typically makes from accounting information.
Rogers Corporation starts the year with a Retained Earnings balance of $55,000. Net
income for the year is $27,000. The ending balance in Retained Earnings is $70,000.
What was the amount of dividends declared and paid for the year?