1) The payback period method of evaluating an investment fails to consider cash
inflows after the point where an investment’s costs are fully recovered.
2) A purchase of land in exchange for shares of stock is disclosed at the bottom of the
statement of cash flows or in a note to the statement.
3) If cash was incorrectly debited for $100 instead of correctly crediting it for $100, the
cash account’s balance will be overstated (too high).
4) Intra-company analysis is based on comparisons with competitors.
5) When time ticket information is entered into the accounting system, the journal entry
is a debit to Factory Payroll and a credit to Work in Process Inventory.
6) Salvage value is an estimate of an asset’s value at the end of its benefit period.
7) Retained earnings are part of the stockholders’ claims on the company’s net assets.
8) When preparing the operating activities section of the statement of cash flows using
the indirect method, a decrease in accounts receivable is subtracted from net income.
9) The right side of an account is called the debit side.
10) A journal entry that affects no more than two accounts is called a compound entry.
11) Which of the following journals would a company use to record cash collections
from customers, net of discounts taken?
A.General journal.
B.Cash receipts journal.
C.Cash disbursements journal.
D.Purchases journal.
E.Sales journal.
12) Use the balance sheets of Glover shown below to calculate the following ratios for
2016 (round to the hundredths):
(a) Current ratio.
(b) Acid-test ratio.
(c) Debt ratio.
(d) Equity ratio.
13) Preferred stock with a feature allowing preferred stockholders to share with
common shareholders in any dividends in excess of the percent or dollar amount stated
on the preferred stock is called:
A.Cumulative preferred stock.
B.Callable preferred stock.
C.Participating preferred stock.
D.Convertible preferred stock.
E.Preferential preferred stock.
14) Uncertainties such as natural disasters are:
A.Not contingent liabilities because they are future events not arising from past
transactions or events.
B.Contingent liabilities because they are future events arising from past transactions or
events.
C.Disclosed because of their usefulness to financial statements.
D.Estimated liabilities because the amounts are uncertain.
E.Reported in the same way as debt guarantees.
15) On November 1, Alan Company signed a 120-day, 8% note payable, with a face
value of $9,000. What is the maturity value of the note on March 1?
A.$9,000
B.$720
C.$9,120
D.$9,720
E.$9,240
16) Use the following information about the current year’s operations of a company to
calculate the cash paid for merchandise.
A.$727,000.
B.$726,300.
C.$732,700.
D.$737,300.
E.$737,700.
17) The market value (price) of a bond is equal to:
A.The present value of all future cash payments provided by a bond.
B.The present value of all future interest payments provided by a bond.
C.The present value of the principal for an interest-bearing bond.
D.The future value of all future cash payments provided by a bond.
E.The future value of all future interest payments provided by a bond.
18) Landmark Corp. buys $300,000 of Schroeter Company’s 8% five-year bonds at par
value on September 1. Interest payments are made semiannually. All of the following
regarding accounting for the securities are true except:
A.The debt securities should be recorded at the cost $300,000.
B.The securities will have a maturity value of $300,000.
C.The semiannual interest payment amount is $12,000.
D.The semiannual interest payment amount is $24,000.
E.Interest Revenue should be credited when an interest payment is received.
19) A company’s flexible budget for 12,000 units of production showed sales, $48,000;
variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the
company produces and sells 16,000 units is:
A.$2,667.
B.$14,000.
C.$18,667.
D.$24,000.
E.$35,000.
20) Which of the following journals would a company use to record period-end
adjusting entries to accrue revenues?
A.General journal.
B.Cash receipts journal.
C.Cash disbursements journal.
D.Purchases journal.
E.Sales journal.
21) Labor costs in production can be:
A.Direct or indirect.
B.Indirect or sunk.
C.Direct or payroll.
D.Indirect or payroll.
E.Direct or sunk.
22) The debt ratio, the equity ratio, pledged assets to secured liabilities, and times
interest earned are all ___________________ ratios.
23) What are the general accounting procedures for recording asset disposals?
25) Explain the purpose and format of the statement of cash flows. Also describe its
relevance to decision makers.
26) Zhang Company has a loan agreement that provides it with cash today, and the
company must pay $25,000 4 years from today. Zhang agrees to a 6% interest rate. The
present value factor for 4 periods at 6% is 0.7921. What is the amount of cash that
Zhang Company receives today?
27) What are estimated liabilities? Cite at least two examples and explain why they are
classified as estimated liabilities.
28) Following are selected accounts and their balances for a company after the
adjustments made on May 31, the end of its fiscal year. (All accounts have normal
balances.)
Prepare all the necessary closing entries for this company.
29) A corporation had the following stock outstanding when the company’s board of
directors declared a $75,000 cash dividend in the current year:
Allocate the cash dividend between the preferred and common stockholders assuming
the preferred stock is noncumulative and nonparticipating.