1) An investor receives a stock dividend from a long-term available-for-sale investment.
Which journal entry is required?
A) a debit to Cash and a credit to Dividend Revenue
B) a debit to Cash and a credit to Unrealized Gain on Investments
C) a debit to Investment in Available-for-Sale Securities and a credit to Dividend
Revenue
D) a memorandum entry only
2) On October 1, 2014, Golde Company paid $12,000 for one year of insurance for the
period, October 1, 2014 through September 30, 2015. Which of the following will be
part of the adjusting entry on December 31, 2014?
A) Debit Prepaid Insurance for $3,000
B) Debit Prepaid Insurance for $9,000
C) Debit Insurance Expense for $3,000
D) Debit Insurance Expense for $9,000
3) Which of the following statements about the lapping of Accounts Receivable is
TRUE?
A) Lapping is a type of fraud perpetuated by an employee
B) Lapping is also referred to as a misappropriation of assets
C) Lapping arises from a weak internal control system
D) All of the above are true
4) If the trial balance does not balance, several steps can be taken to find the error.
Which step will probably NOT help you find the error?
A) Tracing each account back and forth from the journal to the ledger
B) Divide the out-of-balance amount by 2
C) Divide the out-of-balance amount by 9
D) Divide the out-of-balance amount by 5
5) ________ is the allocation of the cost of an asset over the asset’s useful life.
A) Accrual
B) Deferral
C) Depreciation
D) Expiration
6) The ending balance of Cash is reported on the:
A) Balance Sheet only
B) Statement of Retained Earnings only
C) Statement of Cash Flows only
D) A and C
7) Horizontal analysis is most closely related to:
A) trend analysis
B) economic value added analysis
C) vertical analysis
D) benchmarking
8) At the end of the year, a company has a short-term note payable outstanding that was
entered into earlier in the current year. What accounts relating to the note payable will
be reported on the financial statements at the end of the year?
A) Short-term notes payable will be reported on the balance sheet and interest payable
will be reported on the income statement
B) Interest receivable will be reported on the balance sheet
C) Short-term notes payable and interest payable will be reported on the balance sheet
D) Short-term notes payable, interest payable and interest expense will be reported on
the balance sheet
9) Which of the following combinations of ratios is preferable?
A) A low current ratio and a high debt ratio
B) A high current ratio and a low debt ratio
C) A low current ratio and a low debt ratio
D) A high current ratio and a high debt ratio
10) Financial statement fraud involving expense recognition involves:
A) understating the amount of expenses
B) failure to record and disclose some expenses
C) delaying the proper recognition of expenses
D) all of the above
11) On December 1, Macy Company sold merchandise with a selling price of $1,000 on
account to Mrs. Jorgensen, with terms 2/10, n/30. On December 3, Mrs. Jorgensen
returned merchandise with a selling price of $500. Mrs. Jorgensen paid the amount due
on December 19. What journal entry did Macy Company prepare on December 19?
A) Debit Cash for $500 and credit Sales Revenue for $500
B) Debit Cash for $500 and credit Accounts Receivable for $500
C) Debit Cash for $490, debit Sales Discounts for $10 and credit Accounts Receivable
for $500
D) Debit Sales Revenue for $490 and credit Cash for $490
12) The components of internal control do NOT include:
A) control environment
B) risk assessment
C) control procedures
D) safeguard assets
13) Summertime had the following data for the month of March:
At March 31, 300 units are still on hand. Determine the cost of goods sold for March if
Summertime uses the FIFO method.
A) $6,020
B) $7,525
C) $8,804
D) $10,434
14) The amount of a company’s net income earned for each share of its outstanding
common stock is termed the:
A) return on equity
B) price/earnings ratio
C) earnings per share
D) dividend yield
15) Desidero Corporation acquired 100% of the common stock of Basile Company for
$170,000. On the date of acquisition, Basile Company’s stockholders’ equity consisted
of: Common Stock, $100,000 and Retained Earnings, $70,000. On the date of the
acquisition, Desidero Company’s stockholders’ equity consisted of: Common Stock
$500,000 and Retained Earnings $1,000,000. On the acquisition date, the elimination
entry to be made on a worksheet to prepare a consolidated balance sheet would include
a:
A) debit to Common Stock for $100,000
B) debit to Investment in Basile for $170,000
C) credit to Common Stock for $100,000
D) credit to Retained Earnings for $70,000
16) A receptionist worked one month and was paid $2,000 at the end of the month. In
transaction analysis, how does this transaction affect the accounting equation?
A) Add $2,000 to Cash account and add $2,000 to Accounts Payable account
B) Add $2,000 to Accounts Receivable account and subtract $2,000 from Cash account
C) Add $2,000 to Salary Expense and subtract $2,000 from Retained Earnings account
D) Subtract $2,000 from Cash account and subtract $2,000 from Retained Earnings
account
17) A year-end review of Accounts Receivable and estimated uncollectible percentages
revealed the following:
At the end of the year, the credit balance in Allowance for Uncollectible Accounts was
$700. Under the aging-of-receivables method, the balance in the Allowance for
Uncollectible Accounts will be ________ after the adjusting entry is made.
A) $500
B) $6,600
C) $7,300
D) $8,000
18) The Allowance for Uncollectible Accounts is classified as:
A) a contra-expense account
B) a contra-revenue account
C) a contra-asset account
D) an asset account
19) Which of the following is a CORRECT statement about the petty cash fund?
A) To set up the petty cash fund, a check is issued to the chief financial officer
B) The custodian of the fund has sole responsibility for accounting for the fund
C) The cash in the fund must always equal the opening balance of the fund
D) The petty cash fund must be maintained at a bank
20) An example of a slide-type error is writing:
A) $1,200 as $2,100
B) $300 as $600
C) $1,000 as $2,000
D) $400 as $40
21) An imprest petty cash fund of $600 was established for minor disbursements. At the
end of the month, the fund included petty cash tickets for the purchase of $207 in
supplies, $82 for meals, $86 for fuel, and $76 for taxi fare. How much cash should be
left in the fund?
A) $108
B) $149
C) $451
D) $600
22) Shareholders of a corporation:
A) have limited liability for the corporation’s debts
B) have unlimited liability for the corporation’s debts
C) have unlimited liability for the actions of other stockholders
D) receive dividends from the corporation without having to pay tax on the distribution
23) When predicting a company’s future income, financial analysts exclude:
A) gains or losses from discontinued operations
B) extraordinary gains or losses
C) accounting changes in accounting principle
D) all of the above
24) On a common-size income statement, income taxes expense is expressed as a
percentage of:
A) net income
B) total stockholders’ equity
C) total assets
D) net sales
25) On December 1, Macy Company sold merchandise with a selling price of $1,000 on
account to Mrs. Jorgensen, with terms 2/10, n/30. On December 3, Mrs. Jorgensen
returned merchandise with a selling price of $500. Mrs. Jorgensen paid the amount due
on December 9. What journal entry did Macy Company prepare on December 9?
A) Debit Cash for $500 and credit Sales Revenue for $500
B) Debit Sales Revenue for $500 and credit Cash for $500
C) Debit Sales Revenue for $500, credit Sales Discount for $10 and credit Cash for
$490
D) Debit Cash for $490, debit Sales Discounts for $10 and credit Accounts Receivable
for $500
26) Acquisitions of treasury stock would be reported on a statement of cash flows as:
A) operating activities
B) investing activities
C) financing activities
D) noncash investing and financing activities
27) The following data was obtained from the records of Ivanovich Artists, Inc., for the
current year. Round all calculations to two decimal places. Sales during the year were
400 units.
Required:
1> Calculate the cost of the ending inventory using:
a.FIFO.
b.LIFO.
c.Average-cost.
2>Calculate the Cost of goods sold by:
a.FIFO.
b.LIFO.
c.Average-cost.
28) On January 1, 2015, plant assets, net are $200,000. On December 31, 2015, plant
assets, net are $300,000. Depreciation expense for the year is $20,000. During the year,
plant assets were acquired for $150,000 with cash. There is a Gain on Sale of Plant
Asset of $10,000. What is the book value of the plant asset sold during the year?
A) $0
B) $20,000
C) $30,000
D) $50,000
29) A company has return on assets of 10%. Return on sales are 5%. The leverage ratio
is 2.0. Following DuPont analysis, what is return on equity?
A) 5%
B) 10%
C) 20%
D) 25%
30) A company reports the following balances:
During 2016, dividends of $15,000 were declared and paid. What is net income for
2016?
A) $5,000
B) $10,000
C) $15,000
D) $25,000