You are comparing three companies that use different depreciation methods. Which of
the following would help you the most in making a comparison of the companies?
a. The average earnings per share for the quarter.
b. Prospective cash receipts.
c. Claims to resources.
d. Disclosure of accounting policies.
If a company issues $5 par value common stock,
a. $5 per share is presented in the common stock account on the balance sheet.
b. the minimum selling price is $5.
c. the shareholders will receive $5 in dividends.
d. liabilities are increased as a result of the transaction.
Petty cash typically is composed of coins and currency kept on hand in a business to
make minor disbursements.
a. True
b. False
A T account for Cash cannot contain any credits.
a. True
b. False
For which of the following is the current ratio most useful?
a. In evaluating a company’s liquidity
b. In evaluating a company’s solvency
c. In evaluating a company’s profitability
d. In evaluating a company’s probability
If 20,000 shares are authorized, 15,000 shares are issued, and 500 shares are held as
treasury stock, a cash dividend of $1 per share would amount to $15,000.
a. True
b. False
A sole proprietorship is a separate entity for legal purposes.
a. True
b. False
How is income from operations determined?
a. By subtracting the cost of goods sold from sales
b. By subtracting the total operating expenses from sales
c. By subtracting the total operating expenses from gross profit
d. By subtracting selling expenses from operating revenues
Given below is a list of items that may be reported on a statement of cash flows.
Identify each as one of the following using the indirect method :
a. Operating
b. Investing
c. Financing
d. Not separately reported on a statement of cash flows
Depreciation expense
Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1,
2015. The amounts below are related to the equipment purchase. Match the items below
and explain why each revenue expenditure is not capitalized.
a. This item should be included as part of the cost of the equipment.
b. This item should be considered a revenue expenditure.
Terms of the purchase were 2/10, net 30. Edison paid for the purchase on March 8.
Which of the following is true concerning discontinued operations?
a. Only the gain or loss is reported on the income statement.
b. It must be both unusual in nature and infrequent in occurrence.
c. Analysts would not normally include this item in making their decisions.
d. Net income or loss from prior years must also be disclosed in the year of disposition.
Starship Inc.’s gross profit ratio increased from 36.5% in 2015 to 48.6% in 2016. What
is the trend in this change?
a. An upward trend
b. A downward trend
c. It depends on whether net sales increased or decreased during the period
d. Trends cannot be determined without the dollar amount of the increase provided
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Pablos
wants to save some money so that he can make a down payment of $3,000 on a car
when he graduates from college 4 years from now. If he opens a savings account and
earns 3% on his money, compounded annually, how much will he have to invest now?
a. $2,520
b. $2,664
c. $2,910
d. $3,000
Select the statement on which each of the items provided below would be reported.
a. Statement of retained earnings
b. Statement of stockholders’ equity
c. Items that may require reporting on either statement
d. Items not reported on either of the statements
Issuance of common stock.
From the following list, identify each item as operating (O), investing (I), financing (F),
or not separately reported on the statement of cash flows (N).
a. Operating-O
b. Investing-I
c. Financing-F
d. Not separately reported-N
Distribution of stock dividend
Choose from the following list of account titles the one that most accurately fits the des
cription of that account or is an example of that account.An account title may be used m
ore than once or not at all.
a. Cash
b. Prepaid Asset
c. Investments
d. Taxes Payable
e. Preferred Stock
f. Accounts Receivable
g. Land
h. Accounts Payable
i. Retained Earnings
j. Notes Receivable
k. Buildings
l. Notes Payable
m. Common Stock
Claims by the owners on the undistributed net income of a business
If a company chooses to treat small plant asset expenditures as expenses, GAAP are
being violated.
a. True
b. False