Accounting final 251

Classify each of the following items as an operating, investing, or financing activity. Dividends paid.

f

Classify each of the following items as an operating, investing, or financing activity. Issuance of common stock.

f

Classify each of the following items as an operating, investing, or financing activity. Repayment of notes payable.

f

The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows. State whether it is a cash inflow or a cash outflow and whether it is an operating, investing, or financing activity. Issued a million shares of common stock at $20 per share.

f, ci

The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows. State whether it is a cash inflow or a cash outflow and whether it is an operating, investing, or financing activity. Paid a dividend of $1 per share to common stockholders.

f, co

Allowance for Uncollectible Accounts is: A. An expense account. B. A contra asset account. C. A contra revenue account. D. A liability account.

b

A partial balance sheet ($s in thousands) for Captain D's Seafood Inc. is shown below. Assets: Liabilities: Cash $ 60 A/P 240 A/R (net) 170 Other liabilities 80 Notes receivable 50 Total current liabilities 320 Inventory 200 Long-term liabilities 110 Prepaid rent 25 Total liabilities 430 Total current assets 505 Stockholders' equity: Property & Equipment, (net) 255 Common stock 150 Retained earnings 180 Total stockholders' equity 330 Total assets 760 Total liabilities and equity 760 The acid-test ratio is: A. 0.25. B. 0.88. C. 1.17. D. 1.58.

?

Authorized common stock refers to the total number of shares: A. Outstanding. B. Issued. C. Issued and outstanding. D. That can be issued.

d

. Which of the following is an example of vertical analysis? A. Comparing gross profit across companies. B. Comparing income statement items as a percentage of sales. C. Comparing debt with industry averages. D. Comparing the change in sales over time

a

1. Which of the following is a reason that a corporation would prefer to issue stock instead of bonds? A. Dividend payments can be deducted for income tax purposes but interest payments cannot. B. Expansion is accomplished without surrendering ownership control. C. The risk of going bankrupt is less. D. All of the above are reasons for issuing stock.

a

For each transaction recorded in an accounting system, the basic equation that must be maintained at all times is: A. Assets = Liabilities + Stockholders' Equity. B. Cash Increases = Cash Decreases. C. Revenues = Expenses + Dividends. D. Assets = Liabilities.

a

Given the items below, which of the following is a subtraction from net income to arrive at Operating Cash Flows using the indirect method? I. Loss on sale of assets II. Increase in Supplies III. Increase in Accounts Payable IV. Depreciation expense A. II. only. B. IV. only. C. I. and II. D. II. and III.

a

Retained Earnings represent a company's: A. Net income less dividends since the company first started. B. Undistributed net assets. C. Extra paid-in capital. D. Undistributed cash.

a

Temporary accounts would not include: A. Salaries Payable. B. Advertising Expense. C. Supplies Expense. D. Dividends.

a

The matching principle is the principle that states: A. All costs that are used to generate revenue are recorded in the period the revenue is recognized. B. All transactions are recorded at the exchange price. C. The business is separate from its owners. D. The business will continue to operate indefinitely unless there is evidence to the contrary.

a

The primary difference between accrual-basis and cash-basis accounting is: A. The timing of when revenues and expenses are recorded. B. Cash-basis accounting is allowed for financial reporting purposes but not accrual-basis accounting. C. Accrual-basis accounting violates both the revenue recognition and matching principles. D. Adjusting entries are only a necessary part of cash-basis accounting.

a

The sale or disposal of a significant component of a company's operations is referred to as: A. A discontinued operation. B. An extraordinary item. C. Other revenues and expenses. D. Gain or loss on sale of assets.

a

Treasury Stock is normally reported as: A. A reduction of total stockholders' equity. B. An asset account. C. A liability account. D. An expense account.

a

What key piece of legislation was passed in response to corporate accounting scandals by Enron, WorldCom, and others? A. Sarbanes-Oxley Act. B. 1933 Securities Act. C. 1934 Securities Exchange Act. D. Regulation Fair Disclosure.

a

When cash payments are made to stockholders, what is the effect on the company's accounts? A. Cash decreases and dividends increase. B. Cash increases and dividends decrease. C. Cash decreases and common stock decreases. D. Cash increases and common stock increases.

a

When using vertical analysis, we express income statement accounts as a percentage of: A. Net income. B. Gross profit. C. Sales. D. Total assets.

a

Which of the following is NOT a correct practice when adjusting net income to net operating cash flows? A. Subtract depreciation expense. B. Add losses on sales of assets. C. Subtract increase in Accounts Receivable. D. Add increase in Accounts Payable.

a

Which of the following is a negative sign that a company is not selling its inventory quickly? A. A low inventory turnover ratio. B. A high inventory turnover ratio. C. A low average days in inventory. D. Both a high inventory turnover ratio and a low average days in inventory.

a

Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows? A. Salaries payable increase. B. Gain on the sale of land. C. Inventory increase. D. Accounts receivable increase.

a

Which of the following is an example of a cash inflow from a financing activity? A. Issuance of bonds. B. Sale of an intangible asset. C. Receipt of cash dividends. D. Purchase of land.

a

Which of the following is an example of horizontal analysis? A. Comparing COGS with sales. B. Comparing net income across companies. C. Comparing debt with equity. D. Comparing the growth in sales over time.

a

The following statements pertain to recording transactions. Which of them are true? A. Total debits should equal total credits. B. It is possible to have multiple debits or credits in one journal entry. C. Assets are always listed first in journal entries. D. Some journal entries will have debits only.

a and b

. At December 31, Gill Co. reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (credit). An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The amount of the adjustment for uncollectible accounts would be: A. $6,540. B. $7,800. C. $7,140. D. $7,740.

b

. _________ is an investing cash flow and ________ is a financing cash flow, as reported on the Statement of Cash Flows. A. Issuing bonds; selling investments. B. Purchasing land; repaying a bank loan. C. Receiving cash from the sale of inventory; paying cash dividends. D. Purchasing treasury stock; lending cash to an employee.

b

A partial balance sheet ($s in thousands) for Captain D's Seafood Inc. is shown below. Assets: Liabilities: Cash $ 60 A/P 240 A/R (net) 170 Other liabilities 80 Notes receivable 50 Total current liabilities 320 Inventory 200 Long-term liabilities 110 Prepaid rent 25 Total liabilities 430 Total current assets 505 Stockholders' equity: Property & Equipment, (net) 255 Common stock 150 Retained earnings 180 Total stockholders' equity 330 Total assets 760 Total liabilities and equity 760 12. The current ratio is: A. 1.98. B. 1.58. C. 1.17. D. 0.66.

b

Adjusting entries are primarily needed for: A. Cash-basis accounting. B. Accrual-basis accounting. C. Current value accounting. D. Manual accounting systems.

b

Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. Arrow would report cash outflows from activities, as follows: A. Operating, $2,000; Financing $16,000. B. Operating, $0; Financing $18,000. C. Operating, $12,000; Financing $6,000. D. Operating, $18,000; Financing $0.

b

Assuming Net Income for the year is $115,000, what is the Operating Cash Flows given the following information: Increase in Salaries Payable $ 15,000 Depreciation Expense 6,000 Increase in Prepaid Rent 24,000 Loss on sale of asset 1,000 Increase in Accounts Payable 25,000 Increase in Inventory 50,000 A. $112,000. B. $88,000. C. $118,000. D. $188,000.

b

Assuming a current ratio of 1.0, how will the purchase of inventory with cash affect the ratio? A. Increase the current ratio. B. No change to the current ratio. C. Decrease the current ratio. D. Could either increase or decrease the current ratio.

b

Assuming an acid-test ratio of 1.0, how will the purchase of inventory with cash affect the ratio? A. Increase the acid-test ratio. B. No change to the acid-test ratio. C. Decrease the acid-test ratio. D. Could either increase or decrease the acid-test ratio.

b

California Adventures issues 5,000 shares of 8%, $100 par value preferred stock at the beginning of 2011. All remaining shares are common stock. The company was not able to pay dividends in 2011, but plans to pay dividends of $100,000 in 2012. Assuming the preferred stock is cumulative, how much of the $100,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012? A. $40,000 to preferred stockholders and $60,000 to common stockholders. B. $80,000 to preferred stockholders and $20,000 to common stockholders. C. $20,000 to preferred stockholders and $80,000 to common stockholders. D. $100,000 to preferred stockholders and $0 to common stockholders.

b

Cash flows from investing activities do not include: A. Proceeds from the sale of land. B. Proceeds from the issuance of common stock. C. Proceeds from the sale of marketable securities. D. Cash outflows from acquiring land.

b

Dividends received from an investment is classified as a(an) __________ cash flow, and paying dividends on stock issued is classified as a(an) ____________ cash flow on the Statement of Cash Flows. A. Operating; Operating. B. Operating; Financing. C. Financing; Operating. D. Investing; Financing.

b

Good, Inc. sold inventory for $1,200 that was purchased for $700. Good records which of the following when it sells inventory using a perpetual inventory system? A. No entry is required for cost of goods sold and inventory. B. Debit Cost of Goods Sold $700; credit Inventory $700. C. Debit Cost of Goods Sold $1,200; credit Inventory $1,200. D. Debit Inventory $700; credit Cost of Goods Sold $700.

b

Horizontal analysis examines trends in a company: A. Over time. B. Between income statement accounts in the same year. C. Between balance sheet accounts in the same year. D. Between income statement and balance sheet accounts in the same year.

b

Net income can best be described as: A. Net cash received by a company during the year. B. Revenues minus expenses. C. The amount of profits retained in a company for the year. D. Resources owned by a company.

b

On July 1, 2012, Herzog Mining lends cash and accepts a $9,000 note receivable that offers 10% interest and is due in nine months. How would Herzog record the transaction on April 1, 2013, when the borrower pays Herzog the correct amount owed? A. Cash 9,675 Notes Receivable 9,000 Interest Revenue 675 B. Cash 9,675 Notes Receivable 9,000 Interest Revenue 255 Interest Receivable 450 C. Cash 9,675 Notes Receivable 9,000 Interest Receivable 675 D. Cash 9,675 Notes Receivable 9,675

b

On November 10 of the current year, Flores Mills sold carpet to a customer for $8,000 with credit terms 2/10, n/30. How would Flores record the sale on November 10? A. Accounts Receivable 7,840 Sales Revenue 7,840 B. Accounts Receivable 8,000 Sales Revenue 8,000 C. Accounts receivable 7,840 Cash discounts 160 Sales Revenue 8,000 D. Accounts Receivable 8,000 Cash discounts 160 Sales revenue 7,840

b

Operating cash flows exclude: A. Interest received. B. Interest paid. C. Dividends received. D. Dividends paid.

b

Panhandle Corporation was organized on January 3, 2012. The firm was authorized to issue 100,000 shares of $5 par value common stock. During 2012, Panhandle had the following transactions relating to shareholders' equity: Issued 30,000 shares of common stock at $7 per share. Issued 20,000 shares of common stock at $8 per share. Reported a net income of $100,000. Paid dividends of $50,000. What is total paid-in capital at the end of 2012? A. $420,000. B. $370,000. C. $470,000. D. $320,000.

b

Shively Mfg. Co. sold land costing $10,000 for $12,000. Shively would report: A. Operating cash inflows of $12,000. B. Investing cash inflows of $12,000. C. Financing cash inflows of $12,000. D. Financing cash inflows of $2,000.

b

The costs of providing goods and services to customers are referred to as: A. Assets. B. Expenses. C. Liabilities. D. Revenues.

b

The disadvantages of the corporate form of business include: A. Lack of mutual agency. B. Additional taxes. C. Limited liability. D. Ability to raise capital.

b

The following financial information is from Shovels Construction Company for 2012: Cash $ 10,500 Building 80,000 Accounts Receivable 9,500 Retained Earnings 47,500 Accounts Payable 15,000 Sales Tax Payable 4,500 Common Stock 35,000 Notes Payable (due in 18 months) 35,000 Interest Payable 3,000 Supplies 40,000 What is the amount of current assets, assuming the accounts above reflect normal activity? A. $20,000. B. $60,000. C. $140,000. D. $175,000.

b

The largest expense on a retailer's income statement is typically: A. Salaries. B. Cost of goods sold. C. Income tax expense. D. Depreciation expense.

b

The primary reason for the popularity of LIFO is that it gives: A. Better matching of physical flow and cost flow. B. A lower income tax obligation. C. Simplified recordkeeping. D. A simpler method to apply.

b

The revenue recognition principle states that: A. Revenue should be recognized in the period the cash is received. B. Revenue should be recognized in the period earned. C. Revenue should be recognized in the balance sheet. D. Revenue is a component of common stock.

b

Treasury Stock: A. has a normal credit balance. B. decreases stockholders' equity. C. is recorded as an investment. D. increases stockholders' equity.

b

Under the principle of lower-of-cost-or-market, when a company has 10 units of inventory A with market value of $50 and a cost of $60, what is the adjustment? A. Debit Inventory $100; credit Cost of Goods Sold $100. B. Debit Inventory $500; credit Cost of Goods Sold $500. C. Debit Cost of Goods Sold $100; credit Inventory $100. D. Debit Cost of Goods Sold $500; credit Inventory $500.

b

Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000. A. $6,000. B. $8,000. C. $4,000. D. $14,000.

b

Using the allowance method, writing off an actual bad debts would include a: A. Debit to Bad Debt Expense. B. Credit to Accounts Receivable. C. Debit to Accounts Receivable. D. Credit to Allowance for Uncollectible Accounts.

b

When a company makes an end-of-period adjusting entry which includes a credit to Prepaid Rent, the debit is usually made to: A. Cash. B. Rent Expense. C. Rent Payable. D. Rent Receivable.

b

When customers purchase products on account, Spitz Manufacturing offers them a 2% reduction in the amount owed if they pay within 10 days. This is an example of a: A. Bad debt. B. Sales discount. C. Sales return. D. Sales allowances

b

When using vertical analysis, we express balance sheet accounts as a percentage of: A. Sales. B. Total assets. C. Total liabilities. D. Total stockholders' equity.

b

Which of the following financing alternatives has the highest preference of payment in a case where the company liquidates its assets? A. Common Stock. B. Preferred Stock. C. Bonds. D. They have equal preference.

b

Which of the following is NOT a reason why a bank reconciliation is necessary? A. The company has transactions that the bank has not recorded. B. Petty cash has a low balance. C. The bank has transactions that the company has not recorded. D. Reconciliations provide a control over cash.

b

Which of the following is a sign that a company can quickly turn its receivables into cash? A. A low receivables turnover ratio. B. A high receivables turnover ratio. C. A high average collection period. D. Both a low receivables turnover ratio and a high average collection period.

b

Which of the following is an aggressive accounting practice? A. Change from straight-line to double-declining balance depreciation. B. Record sales revenue before it is actually earned. C. Adjust the allowance for uncollectible accounts to a larger amount. D. Record inventory at lower of cost or market rather than at cost.

b

Which of the following statements regarding the corporate form of business is correct? A. The disadvantages are that generating capital is difficult and that owners have limited liability. B. Disadvantages are that the business is subject to government regulations and double taxation on its income. C. One disadvantage is that ownership is easy to transfer. D. All of the other options are correct.

b

Which of the following would NOT represent good controls over cash receipts? A. Record all cash receipts as soon as possible. B. The employee that receives cash and checks should also deposit them in the bank. C. Open mail each day and make a list of checks received with the amount and payer's name. D. Verify cash receipts by comparing the bank deposit slip with the accounting records.

b

1. The Statement of Cash Flows: A. lists all cash flows over the life of a company. B. breaks down all cash transactions into Investing and Financing cash flows. C. shows that the change in total cash from one year to the next is equal to the net operating, investing, and financing cash flows. D. has two methods for Investing Cash Flows - direct and indirect.

c

An extraordinary item must meet which of the following criteria? A. Unusual in nature. B. Infrequent in occurrence. C. Unusual in nature and infrequent in occurrence. D. Unusual in nature or infrequent in occurrence.

c

Cash flows from financing activities include: A. Interest received. B. Interest paid. C. Dividends received. D. Dividends paid.

d

Boynton Jewelers reported the following amounts at the end of the year: total sales = $550,000; sales discounts = $12,000; sales returns = $44,000; sales allowances = $17,000. What was the company's net sales for the year? A. $489,000. B. $485,000. C. $477,000. D. $499,000.

c

Cash flows from investing activities do not include cash flows from: A. Lending. B. The sale of equipment. C. Borrowing. D. The purchase of land and buildings.

c

Cash may not include: A. Foreign currency. B. Money orders. C. Accounts receivable. D. Undeposited customer checks.

c

Creditors' claims to a corporation's resources are referred to as: A. Dividends. B. Assets. C. Liabilities. D. Stockholders' equity

c

Crossroads Mall had 100,000 outstanding shares of common stock. On June 16, 2012, Crossroads repurchased 20,000 shares of its own stock at $30 per share. On July 23, 2012, Crossroads resold 10,000 shares at $28 per share. What net effect did the repurchase and the resell of common stock have on the accounting equation? A. Increase in assets and decrease in stockholders' equity. B. Decrease in assets and increase in stockholders' equity. C. Increase in assets and increase in stockholders' equity. D. Decrease in assets and decrease in stockholders' equity.

c

If a company issues 1,000 shares of $1 par value common stock for $30 per share, what would be the effect on the accounting equation? A. Increase assets and increase liabilities. B. Increase assets and increase revenue. C. Increase assets and increase stockholders' equity. D. Increase assets and decrease stockholders' equity.

c

In a period when inventory costs are rising, the inventory method that most likely results in the highest ending inventory is: A. Lower-of-cost-or-market method. B. Weighted-average cost. C. FIFO. D. LIFO.

c

In a perpetual inventory system, at the time of a sale the cost of inventory sold is: A. Debited to Accounts Receivable. B. Credited to Cost of Goods Sold. C. Debited to Cost of Goods Sold. D. Not recorded at the time.

c

In a perpetual inventory system, the purchase of inventory is debited to: A. Purchases. B. Cost of Goods Sold. C. Inventory. D. Accounts Payable.

c

Permanent accounts would not include: A. Accounts Payable. B. Office Supplies. C. Utilities Expense. D. Common Stock.

c

Posting is the process of: A. Analyzing the impact of the transaction on the accounting equation. B. Obtaining information about external transactions from source documents. C. Transferring the debit and credit information from the journal to individual accounts in the general ledger. D. Listing all accounts and their balances at a particular date.

c

The Surf's Up issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2011. All remaining shares are common stock. The company was not able to pay dividends in 2011, but plans to pay dividends of $18,000 in 2012. Assuming the preferred stock is cumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2012? A. $6,000 to preferred stockholders and $12,000 to common stockholders. B. $18,000 to preferred stockholders and $0 to common stockholders. C. $12,000 to preferred stockholders and $6,000 to common stockholders. D. $9,000 to preferred stockholders and $9,000 to common stockholders.

c

The corporation's own stock that has been issued and then repurchased by the company is referred to as: A. Preferred Stock. B. Authorized Stock. C. Treasury Stock. D. Common Stock.

c

The ending Retained Earnings balance of Lambert Inc. increased by $1.5 million from the beginning of the year. The company's net income earned during the year is $3.5 million. What is the amount of dividends Lambert Inc. declared and paid? A. $1.5 million. B. $3.5 million. C. $2.0 million. D. $5.0 million.

c

The financial statement that represents activity over the entire life of the company is the: A. Income statement. B. Statement of financial accounting. C. Balance sheet. D. Statement of cash flows

c

The following information was taken from the bank reconciliation for Mooner Sooner Inc. at the end of 2012: Bank balance: $8,000 Checks outstanding: $5,800 Note collected by the bank: $1,500 Service fee: $20 Deposits outstanding: $4,000 NSF check (bad check) returned for $300 What is the correct cash balance that should be reported in Mooner Sooner's balance sheet at the end of 2012? A. $10,200. B. $7,400. C. $6,200. D. $6,160.

c

The form of business organization that is legally separate from its owners is a: A. Partnership. B. Sole proprietorship. C. Corporation. D. Separation entity.

c

When a company sells land for cash and makes a $25,000 gain: A. Its acid-test ratio decreases. B. Its current ratio decreases. C. Its debt to equity ratio decreases. D. Cannot determine from the given information.

c

Which of the following best describes credit sales? A. Cash sales to customers that are new to the company. B. Sales to customers using credit cards. C. Sales to customers on account. D. Sales with a high risk that the customer will return the product.

c

Which of the following is NOT a design feature of effective internal controls? A. Allow greater reliance by investors on reported financial statements. B. Prevent fraudulent or errant financial reporting. C. Ensure the company's price advantage over competitors. D. Prevent misuse of company funds by employees.

c

Which of the following items is reported in the statement of cash flows using the direct method? A. Depreciation expense. B. Gain on sale of an asset. C. Cash received from customers. D. Loss on sale of an asset.

c

Which of the following transactions would not create a cash flow? A. The company purchased some of its own stock from a stockholder. B. Payment of a dividend. C. The company purchased land by issuing common stock. D. Sale of equipment at book value.

c

Cost of goods sold equals: A. Beginning inventory - net purchases + ending inventory. B. Beginning inventory + accounts payable - net purchases. C. Net purchases + ending inventory - beginning inventory. D. Beginning inventory + net purchases - ending inventory.

d

. Given the information below, what is the company's gross profit? Accounts Receivable $ 50,000 Ending Inventory 100,000 Cost of Goods Sold 250,000 Sales Returns 20.000 A. $250,000. B. $70,000. C. $220,000. D. $50,000.

d

A company issued 1,000 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance? A. Debit Preferred Stock $5,000. B. Credit Cash $5,000. C. Credit Preferred Stock $5,000. D. Credit Additional Paid-In Capital $4,000.

d

A partial balance sheet ($s in thousands) for Captain D's Seafood Inc. is shown below. Assets: Liabilities: Cash $ 60 A/P 240 A/R (net) 170 Other liabilities 80 Notes receivable 50 Total current liabilities 320 Inventory 200 Long-term liabilities 110 Prepaid rent 25 Total liabilities 430 Total current assets 505 Stockholders' equity: Property & Equipment, (net) 255 Common stock 150 Retained earnings 180 Total stockholders' equity 330 Total assets 760 Total liabilities and equity 760 The debt to equity ratio is: A. 0.33. B. 0.77. C. 1.17. D. 1.30.

d

After preparing a bank reconciliation, the service fee charged by the bank would be recorded with: A. A credit to Service Fees Expense. B. A debit to Cash. C. A credit to Service Fees Revenue. D. A debit to Service Fees Expense.

d

An alternative form of the accounting equation is: A. Net Income = Revenues - Expenses. B. Stockholders' Equity = Assets + Liabilities. C. Assets = Liabilities - Stockholders' Equity. D. Assets - Liabilities = Stockholders' Equity

d

Credits sales are recorded as: A. Debit Cash; credit Unearned Revenue. B. Debit Service Revenue, credit Accounts Receivable. C. Debit Cash; credit Service Revenue. D. Debit Accounts Receivable, credit Service Revenue.

d

During 2012, Smithson Corp. had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What amount would be reported for investing cash flows on the Statement of Cash Flows? A. $5,000. B. $2,000. C. $6,000. D. ($8,000).

d

GAAP is an abbreviation for: A. Generally authorized accounting procedures. B. Generally applied accounting procedures. C. Generally accepted auditing practices. D. Generally accepted accounting principles.

d

Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting Accounts Receivable and debiting: A. Sales Revenue. B. Sales Discounts. C. Sales Returns. D. Sales Allowances.

d

Given the information below, what is the gross profit? Sales revenue $320,000 Cost of goods sold 250,000 Accounts receivable 50,000 Sales Returns 20,000 Ending inventory 100,000 A. $250,000 B. $70,000 C. $220,000 D. $50,000

d

In a period when inventory costs are falling, the lowest taxable income is most likely reported by using the inventory method of: A. Weighted average. B. LIFO. C. Moving average. D. FIFO.

d

Outstanding common stock is: A. Stock that is performing well on the New York Stock Exchange. B. Stock that has been authorized by the state for issue. C. Stock issued plus treasury stock. D. Stock in the hands of stockholders.

d

Preferred stock is called preferred because it usually has two preferences over common stock. These preferences relate to: A. Dividends and voting rights. B. Par value and dividends. C. The preemptive right and voting rights. D. Dividends and distribution of assets if the corporation is dissolved.

d

The accounts which represent the resources of the company are called: A. Liabilities. B. Revenues. C. Expenses. D. Assets.

d

The following financial information is from Bronco Company. All debt is due within one year unless stated otherwise. Retained Earnings $ 52,000 Supplies 37,000 Equipment 72,000 Accounts Receivable 8,600 Unearned Revenue 6,000 Accounts Payable 15,000 Common Stock 25,000 Notes Payable (due in 18 months) 35,000 Interest Payable 7,000 Cash 22,400 What is the amount of current liabilities? A. $63,000. B. $28,000. C. $45,600. D. $22,000.

d

The indirect and direct methods: A. are used by companies about equally in actual practice. B. affect the presentations of operating, investing, and financing activities. C. arrive at different amounts for net cash flows from operating activities. D. are two allowable methods to present operating activities in the statement of cash flows.

d

When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include: A. A debit to Cash for $25,000. B. A debit to Additional Paid-in Capital for $25,000. C. A credit to Common Stock for $250,000. D. A credit to Additional Paid-in Capital for $225,000.

d

When a company provides services on account, which of the following would be recorded using cash-basis accounting? a. Debit to cash b. Debit to Service Revenue c. Credit to unearned Revenue d. No entry would be required

d

Which of the following is NOT an example of applying conservatism in accounting? A. Recording contingent losses that are probable. B. Expensing all research and development costs are they are incurred. C. Using the lower-of-cost-or-market rules for inventory accounting. D. Increasing the useful life used in calculating depreciation.

d

Which of the following is a conservative accounting practice? A. The use of a longer service life for depreciation. B. Waiting to record a litigation loss. C. Adjust the allowance for uncollectible accounts to a smaller amount. D. The write-down of overvalued inventory.

d

Which of the following ratios is most useful in evaluating liquidity? A. Return on assets. B. Return on equity. C. Debt to equity ratio. D. Current ratio.

d

Classify each of the following items as an operating, investing, or financing activity. Purchase of intangibles.

i

Classify each of the following items as an operating, investing, or financing activity. Sale of equipment.

i

Classify each of the following items as an operating, investing, or financing activity. Sale of investments.

i

The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows. State whether it is a cash inflow or a cash outflow and whether it is an operating, investing, or financing activity. Purchased land and a building for $3 million.

i, co

The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows. State whether it is a cash inflow or a cash outflow and whether it is an operating, investing, or financing activity. Loaned $50,000 to an employee and accepted a note receivable.

i, co

Classify each of the following items as an operating, investing, or financing activity. Payment of income taxes.

o

Classify each of the following items as an operating, investing, or financing activity. Purchase of inventory.

o

Classify each of the following items as an operating, investing, or financing activity. Receipt of interest.

o

Classify each of the following items as an operating, investing, or financing activity. Sale of goods or services for cash.

o

The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows. State whether it is a cash inflow or a cash outflow and whether it is an operating, investing, or financing activity. Received $200,000 from a cash sale of merchandise to customers.

o, ci