Which of the following statements about stock options is not correct?
A) Stock options are intended to give upper management the same goals as
stockholders.
B) When stock options are exercised by upper management, existing stockholders lose
voting power.
C) Stock options may create an incentive for upper management to overstate net
income.
D) An expense is reported by the company when stock options are exercised.
Holders of common stock receive certain benefits, such as a residual claim, which is
the:
A) right of stockholders to be paid back for their investment before anyone else if the
company ceases operation.
B) right to oversee management of the company.
C) right to share in any remaining assets after creditors have been paid off, should the
company cease operations.
D) continuing right to receive a share of the company’s profits in the form of dividends.
A company had inventory on November 1 of 5 units at a cost of $20 each. On
November 2, the company purchased 10 units at $22 each. On November 5, the
company sold 8 units for $55 each. On November 6, the company purchased 6 units at
$25 each. The company uses a perpetual inventory system. Using the weighted average
method, what is the value of the ending inventory on November 30?(Round each per
unit cost to two decimal places and then round your answer to the nearest whole
dollar.)
A. $304
B. $404
C. $299
D. $280
One of the advantages of a partnership is:
A) limited liability.
B) the salaries of the partners can be written off as an expense.
C) ease of formation.
D) income tax is paid by the business.
Which of McGraw-Hill’s intangible assets gives it the legal right to prevent you from
borrowing a textbook from a friend and photocopying several chapters from the book?
A) Patent
B) Trademark
C) Franchise agreement
D) Copyright
Assume that a company chooses the indirect method to determine net cash flows from
operating activities.
Required:
Part a. Explain why net income is the starting point when the indirect method is used to
determine cash flows from operating activities.
Part b. Briefly explain why a company’s net income is most likely different in amount
than its cash flows from operating activities.
Davidoff Company reported net credit of $735,000 on account for the year ending
December 31, 2016. On January 1, 2016, the Allowance for Doubtful Accounts had a
credit balance of $18,000. During 2016, $30,000 of uncollectible accounts receivable
were written off. Davidoff has experienced bad debt losses of 3% of credit sales in prior
periods. Using the percentage of credit sales method, what is the adjusted balance in the
Allowance for Doubtful Accounts at December 31, 2016?
A) $10,050
B) $10,500
C) $22,050
D) $34,500
Manning Company updates its inventory periodically. The company ‘s beginning
inventory was $2,700 and purchases were $5,600 during the year. The company ‘s
ending inventory count was $5,000. What was the amount of its cost of goods sold?
A) $3,300
B) $8,300
C) $13,300
D) $2,100
A high accounts receivable turnover ratio indicates:
A) the company’s sales are increasing.
B) a large proportion of the company’s sales are on credit.
C) customers are making payments very quickly.
D) the company is taking longer to sell inventory.
A company that has a current ratio less than one cannot cover:
A) current liabilities with its current cash flow.
B) current expenses with its current sales revenue.
C) expenses with its current revenues.
D) current liabilities with its current assets.
All of the following bank reconciliation items would result in a journal entry on the
company’s books except:
A) interest earned.
B) deposits in transit.
C) service charge.
D) a customer’s check returned NSF.
On June 15, Oakley Inc. sells inventory on account to Sunglass Hut (SH) for $1,000,
terms 2/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased
for $300. On June 24, SH completely fulfills its obligation to Oakley by making a cash
payment. What is the amount of cash paid by SH to Oakley?
A) $680
B) $686
C) $700
D) $1,000
On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000,
terms 2/10, n/30. Both companies use the perpetual inventory system. Dee Company
pays the invoice on July 8 and takes the appropriate discount. What journal entry will
be recorded by Dee Company on July 8?
A) Debit Accounts Payable and credit Cash for $6,000
B) Debit Accounts Payable for $5,880, credit Inventory for $120, and credit Cash for
$6,000
C) Debit Accounts Payable for $6,000, credit Cash for $5,880, and credit Inventory for
$120
D) Debit Cost of Goods Sold and credit Cash for $4,500
Which of the following is an advantage of debt financing?
A) It does not have to be repaid.
B) Interest is discretionary.
C) Interest is tax deductible.
D) It reduces stockholder control.
If total debits are not equal to total credits in an adjusted trial balance, which of the
following errors may have occurred?
A) Posting an entry to Salaries and Wage Expense to Administrative Expenses
B) Debiting Interest Payable instead of debiting Interest Expense
C) Recording a transaction twice
D) Posting a credit to Salaries and Wages Payable as a debit to that account
When preparing this month ‘s bank reconciliation, you find that you failed to record a
$95 deposit for a payment you received from a customer. You immediately prepare a
journal entry to record the deposit. Which of the following describes the actions to be
taken when preparing next month ‘s bank reconciliation?
A) You must decrease the balance per bank by $95
B) You must increase the balance per bank by $95
C) You must increase the balance per books by $95
D) No further action is necessary.
During its first year of operations, a company entered into the following transactions:
Borrowed $5,000 from the bank by signing a promissory note.
Issued stock to owners for $10,000.
Purchased $1,000 of supplies on account.
Paid $400 to suppliers as payment on account for the supplies purchased.
Use the information above to answer the following question. What is the amount of
total assets at the end of the year?
A) $16,000.
B) $5,600.
C) $15,000.
D) $15,600.
A company purchased money market funds with cash during the current year. Which of
the following statement is correct?
A) This transaction will result in a decrease in cash from operating activities.
B) This transaction will result in a decrease in cash from investing activities.
C) This transaction will result in a decrease in cash from financing activities.
D) This transaction will not cause a change in cash from operating, investing, or
financing activities.