1) operating activities on a statement of cash flows include activities that create revenue
or expense in the entity’s business.
2) steve is an employee of panache inc. panache pays a portion of his health insurance
premium, and also contributes to a retirement plan in his name. the company’s share of
the health insurance premium is $600, and the company’s contribution to the retirement
plan is $780. the journal entry in the payroll cycle to record the employee benefits to be
paid by the company should include a debit to employee health insurance payable for
$1,380.
3) a sales allowance is recorded with a credit to accounts payable.
4) the specific identification method of inventory costing is recommended when a
business deals in unique and high-priced inventory items.
5) internal control is an organizational plan that ensures that the financial statements are
prepared and submitted in time.
6) using the last-in, first-out (lifo) method of inventory valuation will always produce
the same results whether a company uses perpetual or periodic inventory.
7) the system of accounting in which every transaction affects at least two accounts is
called the double-entry system.
8) in a bank reconciliation, outstanding checks will be shown on the bank side of the
reconciliation.
9) genity inc., located in texas, records business transactions in dollars and disregards
changes in the value of a dollar over time. which of the following accounting
assumptions does this represent?
a) economic entity assumption
b) going concern assumption
c) accounting period assumption
d) monetary unit assumption
10) steve, an employee of panache inc., has gross salary for may of $6,000. the entire
amount is under the oasdi limit of $110,100, and thus subject to fica. he is also subject
to federal income tax at a rate of 20%. which of the following is a part of the journal
entry for accrual of the employer payroll taxes? (assume a ficaoasdi tax of 6.2% and
ficamedicare tax of 1.45%.) steve’s income to date exceeds the futa and suta tax income
limits.
a) credit to salary payable for $6,000
b) debit to cash for $4,461
c) debit to employee income tax payable of $1,200
d) credit to ficamedicare tax payable of $87
11) which of the following entries would be made because of the matching principle?
a)
b)
c)
d)
12) tom’s gross pay for the month is $2,400. tom’s deduction for federal income tax is
based on a rate of 20%. tom has no voluntary deductions. tom’s yearly pay is under the
limit for oasdi. what is the amount of fica tax withheld from tom’s pay? (assume a
ficaoasdi tax of 4.2% and ficamedicare tax of 1.45%.)
a) $615.60
b) $135.60
c) $480.00
d) $296.40
13) berkley’s gross pay for this month is $8,750. his gross pay year-to-date, prior to this
month totaled $102,500. berkley’s rate for federal income tax is 20%. his voluntary
deductions total $950. what is berkley’s net pay? (assume an oasdi rate of 4.2%,
applicable on the first $110,100 earnings, and a medicare rate of 1.45%, applicable on
all earnings.)
a) $6,553.92
b) $6050.00
c) $7,000.00
d) $5,603.92
14) which of the following is true of a premium on bonds payable account?
a) it is added to the bonds payable balance and shown with long-term liabilities on the
balance sheet
b) it is added to the bonds payable balance and shown with stockholders’ equity on the
balance sheet
c) it is subtracted from the bonds payable balance and shown with long-term liabilities
on the balance sheet
d) it is subtracted from the bonds payable balance and shown with the current liabilities
on the balance sheet
15) mei tobacco company uses the direct method to prepare its statement of cash flows.
refer to the following information reported for the year 2014:
cost of goods sold, $155,000
inventory, beginning balance, $26,000
inventory, ending balance, $63,000
accounts payable, beginning balance, $8,100
accounts payable, ending balance, $5,100
operating expenses, $27,000
accrued liabilities, beginning balance, $2,500
accrued liabilities, ending balance, $6,000
in the operating activities section of the statement of cash flows, what amount will be
shown for payments to suppliers? (assume accrued liabilities relate to operating
expenses.)
a) $171,500
b) $160,000
c) $195,000
d) $218,500
16) the balance sheet is a snapshot of the entity. which of the following items are
included on the balance sheet?
a) revenues
b) expenses
c) assets
d) dividends
17) the fingertips inc. had the following financial data for the year ended december 31,
2015.
what is the cash ratio as of december 31, 2015, for fingertips inc.?
a) 0.30
b) 0.40
c) 0.53
d) 0.83
18) viva inc. had bought machine x for $15,500 two years ago. the machine had no
residual value and had an estimated useful life of 10 years. if the company uses the
straight-line depreciation method, calculate the current book value of the machine.
a) $12,400
b) $3,100
c) $18,600
d) $15,500
19) a company that uses a perpetual inventory system purchased inventory on account
and later returned goods worth $200 to the vendor. which of the following would be the
correct journal entry to record these returns?
a)
b)
c)
d)
20) a check of $300,000, deposited by a company, was returned to the bank for
nonsufficient funds. how would this information be included on the bank
reconciliation?
a) a deduction on the bank side
b) an addition on the bank side
c) an addition on the book side
d) a deduction on the book side
21) which of the following is true of stockholders?
a) stockholders have a right to access confidential information about the business before
the information is disseminated to the public
b) stockholders can claim a portion of the corporate assets after the corporation pays it
debts in the event the company is liquidated
c) stockholders may authorize a business contract on behalf of the corporation
d) stockholders may determine at what price the company issues stock
22) when does a company account for earned revenue if it follows cash basis
accounting?
a) when services are rendered, even though cash may be received at a later date
b) when cash is received after the service is completely rendered
c) when the services are being rendered
d) when cash is received, either prior to the services being rendered or at a time after
the services are rendered
23) synergy appliances sells dishwashers with a 4-year warranty. in 2013, sales revenue
for dishwashers is $85,000. the company estimates warranty expense at 4.5% of
revenues. what is the total estimated warranty payable of synergy appliances in 2013?
a) $3,825.00
b) $956.25
c) $1,400.00
d) $3,000.00
24) the accounting records of patricia event planning services include the following
select unadjusted balances on december 31, 2014: salaries expense, $6,000; service
revenue: $20,000; unearned revenue, $400; supplies expense, $600; rent expense, $300;
depreciation expenseequipment, $200.
later in december, the company worked with a new client and provided event planning
services for an upcoming event. it will receive the full amount of $1,200 when the event
is completed in january, 2015. as of the end of december, 2014, it rendered one-third of
the services covered by the contract. the company made the accrual adjustments. the
final adjusted balance of service revenue, as shown on the adjusted trial balance, should
be a ________.
a) debit balance of 21,200
b) credit balance of $20,000
c) debit balance of $1,200
d) credit balance of $20,400
25) gordon corporation reported the following equity section on its current balance
sheet. the common stock is currently selling for $11.50 per share.
after a 2-for-1 stock split, what would be the number of issued shares?
a) 240,000
b) 280,000
c) 260,000
d) 120,000
26) all assets that will not be converted to cash or used up within the business’s
operating cycle or one year, whichever is greater, are called ________.
a) long-term assets
b) fully depreciated assets
c) current assets
d) current liabilities
27) what is the acid-test ratio for a merchandiser having the following balances? (round
to two decimal places.)
a) 0.93
b) 0.40
c) 0.64
d) 1.76
28) campbell inc. has net income of $500,000 and 200,000 shares of common stock. the
company is considering a project which requires $800,000 and is considering two
options:
option 1 is to borrow $800,000 at 12%.
option 2 is to issue 100,000 shares of common stock for $800,000.
considering all relevant facts and figures, campbell’s management is of the opinion that
the funds raised can be used to increase income before interest and taxes by $300,000
each year. the company estimates income tax expense to be 40%. analyze the campbell
situation to determine which plan will result in higher earnings per share.
(round your answers to two decimal points.)
29) on november 1, 2014, oster inc. declared a dividend of $3.00 per share. oster inc.
has 20,000 shares of common stock outstanding and no preferred stock. the date of
record is november 15, and the payment date is november 30, 2014. provide the journal
entry needed on november 30.
30) rimsone inc. purchases 8,500 shares of the company’s $6 par common stock for $8
per share. journalize the transaction.
31) the adjusted trial balance of michael’s shutterbug photography at december 31, 2015
is as follows:
accountsdebitcredit
cash$ 15,000
accounts receivable30,000
prepaid insurance7,500
supplies3,200
building160,000
accumulated depreciationbuilding$ 12,000
equipment75,000
accumulated depreciationequipment8,500
land40,000
accounts payable12,000
salaries payable2,000
unearned service revenue25,000
mortgage payable100,000
common stock21,290
dividends23,000
service revenue289,000
salaries expense61,000
depreciation expensebuilding and equipment6,150
supplies expense14,040
insurance expense14,000
utilities expense20,900_______
total$469,790$469,790
using the information above, prepare a post-closing trial balance for shutterbug
photography (dated december 31, 2015.)
32) paramount inc. decided to reward its employees with a bonus of 7% on annual net
income, after deducting the bonus. the company reported net income of $513,600
before the calculation of the bonus. provide the journal entry to accrue employee bonus
expense.
33) the following is the adjusted trial balance as of december 31, 2015 of current times
watch inc.:
provide the closing entry for the income summary account.