1) what does each type of ratio measure?
(a)liquidity ratios.
(b)solvency ratios.
(c)profitability ratios.
2) the following totals for the month of march were taken from the payroll register of
kern company.
the entry to record the accrual of federal unemployment tax would include a
a.credit to federal unemployment taxes payable for $288
b.debit to federal unemployment taxes expense for $288
c.credit to payroll tax expense for $288
d.debit to federal unemployment taxes payable for $288
3) during the current year knight company incurred several expenditures. briefly
explain whether the expenditures listed below should be recorded as an operating
expense or as an intangible asset. if you view the expenditure as an intangible asset,
indicate the number of years over which the asset should be amortized. explain your
answer.
(a)spent $30,000 in legal costs in a patent defense suit. the patent was unsuccessfully
defended.
(b)purchased a trademark from another company. the trademark can be renewed
indefinitely. knight company expected the trademark to contribute to revenue
indefinitely.
(c)knight company acquires a patent for $2,000,000. the company selling the patent has
spent $1,000,000 on the research and development of it. the patent has a remaining life
of 15 years.
(d)knight company is spending considerable time and money in developing a different
patent for another product. so far $3,000,000 has been spent this year on research and
development. knight company is very confident they will obtain this patent in the next
few years.
4) ace company is a retailer operating in an industry that experiences inflation (rising
prices). ace wants the most realistic cost of goods sold. which inventory costing method
should ace consider using?
a.average because all inventory costs will then represent an average amount
b.specific identification is the most realistic method because it involves the actual costs
c.lifo because cost of goods sold represents the latest costs
d.fifo because cost of goods sold represents the earliest costs
5) for which of the following errors should the appropriate amount be added to the
balance per bank on a bank reconciliation?
a.check for $43 recorded as $34
b.deposit of $500 recorded by bank as $50
c.a returned $200 check recorded by bank as $20
d.check for $35 recorded as $53
6) the following totals for the month of april were taken from the payroll register of noll
company.
the entry to record the payment of net payroll would include a
a.debit to salaries and wages payable for $33,008
b.debit to salaries and wages payable for $34,000
c.debit to salaries and wages payable for $31,800
d.credit to cash for $36,200
7) the entry to record the receipt of payment within the discount period on a sale of
$500 with terms of 2/10, n/30 will include a
a.credit to sales discounts for $10
b.debit to sales revenue for $490
c.credit to accounts receivable for $500
d.credit to sales revenue for $500
8) the amount of cost of good available for sale during the year depends on the amounts
of
a.beginning merchandise inventory and cost of goods sold
b.beginning merchandise inventory, net cost of purchases, and ending merchandise
inventory
c.beginning merchandise inventory, cost of goods sold, and ending merchandise
inventory
d.beginning merchandise inventory and net costs of purchases
9) gipson furniture factors $400,000 of receivables to kwik factors, inc. kwik factors
assesses a 3% service charge on the amount of receivables sold. gipson furniture factors
its receivables regularly with kwik factors. what journal entry does gipson make when
factoring these receivables?
10) listed below are seven errors or problems that might occur in the processing of cash
transactions. also shown is a list of internal control principles. evaluate each possible
error and cite a principle that is listed that would reduce the probability of the error
occurring. if none of the principles given will correct the problem, write “none.” if you
think more than one principle is appropriate, list all principles that apply.
possible errors or problems
1>an employee steals the cash collected from a customer for an account receivable and
conceals this theft by issuing a credit memorandum indicating that the customer
returned the merchandise.
2>a small fire destroys 3 days of cash receipts.
3>the official designated to sign checks is able to steal blank checks and issue them
without fear of detection.
4>a salesclerk in serving customers often rings up a sale for less than the actual amount
and then keeps the additional cash collected from the customer.
5>three cashiers use one cash register drawer and the cash in the drawer is often short
of the balance kept on hand.
6>each cashier counts his own register drawer each day and verbally reports the results
to the supervisor.
7>cashiers with over 5-years experience are not bonded.
internal control principles
a.establishment of responsibility
b.segregation of duties
c.physical control devices
d.documentation procedures
e.independent internal verification
f.human resource controls
11) which of the following is not an intangible asset arising from a government grant?
a.goodwill
b.patent
c.trademark
d.trade name
12) at december 31, 2011, before any year-end adjustments, dallis company’s prepaid
insurance account had a balance of $2,700. it was determined that $1,000 of the prepaid
insurance had expired. the adjusted balance for insurance expense for the year would
be:
a.$1,000
b.$1,700
c.$2,700
d.$1,400
13) on january 1, edmiston corporation had 1,200,000 shares of $10 par value common
stock outstanding. on march 31 the company declared a 10% stock dividend. market
value of the stock was $15/share. as a result of this event,
a.edmistons paid-in capital in excess of par value account increased $600,000
b.edmistons total stockholders equity was unaffected
c.edmistons stock dividends account increased $1,800,000
d.all of the above
14) lackey company wrote checks totaling $12,810 during october and $13,988 during
november. $12,180 of these checks cleared the bank in october, and $13,665 cleared the
bank in november. what was the amount of outstanding checks on november 30?
a.$953
b.$173
c.$458
d.$1,485
15) the amount you must deposit now in your savings account paying 5% interest, in
order to accumulate $8,000 for your first tuition payment when you start law school in
3 years is
a.$6,800.00
b.$6,264.00
c.$6,910.72
d.$7,087.68