1) the convention of consistency pertains to the use of the same accounting principles
by firms in the same industry.
2) free cash flow is cash from operations less dividends.
3) a corporation is not an entity that is separate and distinct from its owners.
4) a note receivable is a written promise by the maker to the payee to pay a specified
amount of money at a definite time.
5) if prices never changed there would be no need for alternative inventory methods.
6) merchandise is sold for $5,000 with terms 1/10, n/30. if $1,000 of the merchandise is
returned prior to payment and the invoice is paid within the discount period, the amount
of the sales discount is $40.
7) in a period of declining prices, which of the following inventory methods generally
results in the lowest balance sheet figure for inventory?
a.average cost method
b.lifo method
c.fifo method
d.need more information to answer
8) present value is based on
a.the dollar amount to be received
b.the length of time until the amount is received
c.the interest rate
d.all of these
9) collection of a $600 accounts receivable
a.increases an asset $600; decreases an asset $600.
b.increases an asset $600; decreases a liability $600.
c.decreases a liability $600; increases stockholders equity $600.
d.decreases an asset $600; decreases a liability $600.
10) companies cannot use the
a.periodic inventory system under gaap
b.periodic inventory system under ifrs
c.perpetual system under ifrs
d.none of the above; both periodic and perpetual can be used under gaap and ifrs
11) the following amounts were taken from the financial statements of turner company:
the return on assets ratio for 2012 is
a.16%
b.14%
c.32%
d.28%
12) nance corporations december 31, 2012 balance sheet showed the following:
nances total paid-in capital was
a.$31,240,000
b.$31,660,000
c.$30,820,000
d.$18,040,000
13) the following information was available for camara company at december 31, 2012:
beginning inventory $80,000; ending inventory $120,000; cost of goods sold $840,000;
and sales $1,200,000. camaras days in inventory in 2012 was
a.36.5 days
b.30.4 days
c.43.5 days
d.52.1 days
14) it is assumed that the activities of ford motor corporation can be distinguished from
those of general motors because of the
a.going concern assumption
b.economic entity assumption
c.monetary unit assumption
d.periodicity assumption
15) bond discount should be amortized to comply with
a.the historical cost principle
b.the matching principle
c.the revenue recognition principle
d.conservatism
16) all of the following are interrelationships that are important to understand when
preparing financial statements except:
a.the net income from the income statement is used in the retained earnings statement
b.the ending retained earnings from the retained earnings statement is used in the
stockholder’s equity section of the balance sheet
c.the cash on the balance sheet should be equal to the cash at the end of the period on
the statement of cash flows
d.all of the payments on the balance sheet should be equal to the cash payments for
operating activities on the statement of cash flows
17) which of the following would not be considered an internal user of accounting data
for the xanadu company?
a.president of the company
b.production manager
c.merchandise inventory clerk
d.president of the employees’ labor union
18) the accounts receivable account has a beginning balance of $52,000 and an ending
balance of $74,000. if $42,000 was sold on account during the year, what were the total
collections on account?
a.$20,000
b.$64,000
c.$84,000
d.$94,000
19) the current portion of long-term debt should
a.be paid immediately
b.be reclassified as a current liability
c.be classified as a long-term liability
d.not be separated from the long-term portion of debt
20) corporations generally issue stock dividends in order to
a.increase the market price per share
b.exceed stockholders dividend expectations
c.increase the marketability of the stock
d.decrease the amount of capital in the corporation
21) the best definition of assets is the
a.cash owned by the company
b.collections of resources belonging to the company and the claims on these resources
c.owners investment in the business
d.resources belonging to a company have future benefit to the company
22) at march 1, i. repo inc. reported a balance in supplies of $200. during march, the
company purchased supplies for $950 and consumed supplies of $800. if no adjusting
entry is made for supplies:
a.stockholders’ equity will be overstated by $800
b.expenses will be understated by $950
c.assets will be understated by $350
d.net income will be understated by $800
23) dexter company reports the following:
if cost of goods sold for the year is $180,000, the amount of cash paid to suppliers using
the direct method is
a.$175,000
b.$185,000
c.$145,000
d.$215,000
24) on may 1, 2012, irwin company purchased the copyright to quick computer tutorials
for $75,000. it is estimated that the copyright will have a useful life of 5 years. the
amount of amortization expense recognized for the year 2012 would be
a.$15,000
b.$10,000
c.$7,500
d.$8,000
25) finney had the following transactions during march 2010.
1>finney sold and delivered $12,000 of merchandise to lj enterprises, terms 2/10, n30.
2>lj enterprises also ordered an additional $5,000 worth of goods on the last day of the
month.
3>finney lent $1,000 to its company president who promised to repay the loan on the
15th day of the next month.
4>finney sold old storage sheds to alt traders on 3/31. alt traders gave a $2,500
promissory note to finney agreeing to pay for the sheds in 3 months.
5>other current assets totaled $50,000.
finney received no cash arising from the above transactions during march. compute the
percentage accounts receivable is of the total current assets as of month end.
26) a gift shop signs a three-month note payable to help finance increases in inventory
for the christmas shopping season. the note is signed on november 1 in the amount of
$40,000 with annual interest of 6%. what is the adjusting entry to be made on december
31 for the interest expense accrued to that date, if no entries have been made previously
for the interest?
27) sales returns and allowances and sales discounts are both ______________
accounts and have normal _______________ balances.
28) on january 1, 2012, eberle company purchased at face value, a $1,000 7%, bond
that pays interest on january 1 and july 1. eberle company has a calendar year end. the
entry for the receipt of interest on july 1, 2012, is
29) what factors affect a company’s gross profit ratethat is, what can cause the gross
profit rate to increase and what can cause it to decrease?
30) match the items below by entering the appropriate code letter in the space provided.
1>process of allocating the cost of an intangible asset to expense over its useful life.
2>is recorded if the proceeds from the sale exceed the book value of the plant asset.
3>examples are franchises and licenses.
4>a long-term agreement allowing the lessee to use the lessors asset where the
arrangement is accounted for as a purchase.
5>can be identified only with a business as a whole.
6>a symbol that identifies a particular enterprise or product.
7>when book value of asset is greater than the proceeds received from its sale.
8>must be expensed when incurred.
9>computed by dividing net income by average assets.
10>indicates how efficiently a company is able to generate sales with a given amount of
assets.
31)
identify the impact on the balance sheet for that month if the following information is not
used to adjust the accounts.
1>supplies consumed during the month totalled $3,000.
2>interest accrues on notes payable at the rate of $200 per month.
3>insurance of $450 expired during the month.
4>plant and equipment are depreciated at the rate of $1,200 per month.