Short-term liquidity ratios include the
a. profit margin ratio.
b. payout ratio.
c. debt to assets ratio.
d. acid-test ratio.
Answer:
Either the straight-line method or the effective-interest method of amortization will
always result in
a. the same amount of interest expense being recognized over the term of the bonds.
b. the same amount of interest expense being recognized each year.
c. more interest expense being recognized than if premium or discounts were not
amortized.
d. the same carrying value each year during the term of the bonds.
Answer:
A corporation is not committed to a legal obligation when it declares
a. a cash dividend.
b. either a cash dividend or a stock dividend.
c. a stock dividend.
d. a distribution date.
Answer:
A general rule to use in assessing the average collection period is that
a. it should not exceed 30 days.
b. it can be any length as long as the customer continues to buy merchandise.
c. it should not greatly exceed the discount period.
d. it should not greatly exceed the credit term period.
Answer:
The term “receivables” refers to
a. amounts due from individuals or companies.
b. merchandise to be collected from individuals or companies.
c. cash to be paid to creditors.
d. cash to be paid to debtors.
Answer:
On October 3, Karl Schickele, a carpenter, received a cash payment for services
previously billed to a client. Karl paid his telephone bill, and he also bought equipment
on credit. For the three transactions, at least one of the entries will include a
a. credit to Retained Earnings.
b. credit to Notes Payable.
c. debit to Accounts Receivable.
d. credit to Accounts Payable.
Answer:
In the balance sheet, ending inventory is reported
a. in current assets immediately following accounts receivable.
b. in current assets immediately following prepaid expenses.
c. in current assets immediately following cash.
d. under property, plant, and equipment.
Answer:
The corporate charter of Martin Corporation allows the issuance of a maximum of
4,000,000 shares of $1 par value common stock. During its first three years of
operation, Martin issued 3,200,000 shares at $15 per share. It later acquired 30,000 of
these shares as treasury stock for $25 per share.
Instructions
Based on the above information, answer the following questions:
(a) How many shares were authorized?
(b) How many shares were issued?
(c) How many shares are outstanding?
(d) What is the balance of the Common Stock account?
(e) What is the balance of the Treasury Stock account?
Answer:
Delta72 Company received a cash advance of $700 from a customer. As a result of this
event,
a. assets increased by $700.
b. stockholders’ equity increased by $700.
c. liabilities decreased by $700.
d. assets and stockholders’ equity increased by $700.
Answer:
The accounting for warranty costs is based on the
a. going concern principle.
b. expense recognition principle.
c. conservatism principle.
d. full disclosure principle.
Answer:
All of the following are characteristics of accounting information except
a. faithful representation.
b. comparability.
c. relevance.
d. flexibility.
Answer:
Indicate which of these items is an asset (A), liability (L) or stockholders’ equity (SE)
account.
_______ (1) Supplies
_______ (2) Dividends
_______ (3) Buildings
_______ (4) Notes Payable
_______ (5) Salaries and Wages Payable
Answer:
In recording the acquisition cost of an entire business,
a. goodwill is recorded as the excess of cost over the fair value of identifiable net assets.
b. assets are recorded at the seller’s book values.
c. goodwill, if it exists, is never recorded.
d. goodwill is recorded as the excess of cost over the book value of identifiable net
assets.
Answer:
The income statement and balance sheet columns of Iron and Wine Company’s
worksheet reflect the following totals:
To enter the net income (or loss) for the period into the above worksheet requires an
entry to the
a. income statement debit column and the balance sheet credit column.
b. income statement credit column and the balance sheet debit column.
c. income statement debit column and the income statement credit column.
d. balance sheet debit column and the balance sheet credit column.
Answer:
A $100 petty cash fund has cash of $17 and receipts of $86. The journal entry to
replenish the account would include a
a. debit to Cash for $86.
b. credit to Petty Cash for $86.
c. credit to Cash Over and Short for $3.
d. credit to Cash for $86.
Answer:
In the Buans Company, land decreased $80,000 because of a cash sale for $80,000, the
equipment account increased $35,000 as a result of a cash purchase, and Bonds Payable
increased $60,000 from an issuance for cash at face value. The net cash provided by
investing activities is
a. $80,000.
b. $165,000.
c. $45,000.
d. $25,000.
Answer:
The time period assumption states that
a. a transaction can only affect one period of time.
b. estimates should not be made if a transaction affects more than one time period.
c. adjustments to the company’s accounts can only be made in the time period when the
business terminates its operations.
d. the economic life of a business can be divided into artificial time periods.
Answer:
Using _______________ documents is a control measure which helps in accounting for
all documents in a series and also prevents a document from being recorded more than
once.
Answer:
A lawyer collected $710 of legal fees in advance. He erroneously debited Cash for $170
and credited Accounts Receivable for $170. The correcting entry is
Answer:
The acquisition of treasury stock by a corporation increases total assets and total
stockholders’ equity.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
1> Small expenditures which primarily benefit the current period.
2> Cost less accumulated depreciation.
3> An accelerated depreciation method used for financial statement purposes.
4> Tangible resources that are used in operations and are not intended for resale.
5> Equal amount of depreciation each period.
6> Expected cash value of the asset at the end of its useful life.
7> Allocation of the cost of a plant asset to expense over its useful life.
8> Material expenditures which increase an asset’s operating efficiency, productive
capacity, or useful life.
9> An accelerated depreciation method used for tax purposes.
10> Useful life is expressed in terms of units of production or expected use.
Answer:
Current liabilities are obligations that the company is to pay within the coming year.
Answer:
A credit balance in a liability account indicates that an error in recording has occurred.
Answer:
The adjustments columns of the worksheet for Mandy Company are shown below.
Instructions
[a] Prepare the adjusting entries.
[b] Assuming the adjusted trial balance amount for each account is normal, indicate the
financial statement column to which each balance should be extended.
Answer:
Sales revenues are recognized during the period cash is collected from the buyer.
Answer: