ACCT 2101 Final Exam Study Guide Chapters 1 - 12
2022 2021 Inventory $ 54,000 $ 48,000 Current assets 81,000 106,000 Total assets 382,000 326,000 Current liabilities 27,000 36,000 Total liabilities 102,000 88,000 Common stockholders' equity 240,000 198,000 Net sales 784,000 697,000 Cost of goods sold 306,000 277,000 Net income 134,000 90,000 Income tax expense 22,000 18,000 Interest expense 12,000 12,000 Dividends paid to preferred stockholders 4,000 4,000 Dividends paid to common stockholders 15,000 10,000 13.15 Compute the profit margin for 2022. (a)17.1%. (b)18.1%. (c)37.9%. (d)5.9%.
(a)17.1%.
13.12 Plano Corporation reported net income $24,000, net sales $400,000, and average assets $600,000 for 2022. What is the 2022 profit margin?(a)6%.(b)12%.(c)40%.(d)200%.
(a)6%
13.8 In vertical analysis, the base amount for depreciation expense is generally:(a)net sales.(b)depreciation expense in a previous year.(c)gross profit.(d)fixed assets.
(a)net sales.
13.1 In reporting discontinued operations, the income statement should show in a special section:(a)gains on the disposal of the discontinued component.(b)losses on the disposal of the discontinued component.(c)Neither (a) nor (b).(d)Both (a) and (b).
(b).(d)Both (a) and (b).
2022 2021 Inventory $ 54,000 $ 48,000 Current assets 81,000 106,000 Total assets 382,000 326,000 Current liabilities 27,000 36,000 Total liabilities 102,000 88,000 Common stockholders' equity 240,000 198,000 Net sales 784,000 697,000 Cost of goods sold 306,000 277,000 Net income 134,000 90,000 Income tax expense 22,000 18,000 Interest expense 12,000 12,000 Dividends paid to preferred stockholders 4,000 4,000 Dividends paid to common stockholders 15,000 10,000 13.14 Compute the current ratio for 2022. (a)1.26:1. (b)3.0:1. (c)0.80:1. (d)3.75:1.
(b)3.0:1.
2022 2021 Inventory $ 54,000 $ 48,000 Current assets 81,000 106,000 Total assets 382,000 326,000 Current liabilities 27,000 36,000 Total liabilities 102,000 88,000 Common stockholders' equity 240,000 198,000 Net sales 784,000 697,000 Cost of goods sold 306,000 277,000 Net income 134,000 90,000 Income tax expense 22,000 18,000 Interest expense 12,000 12,000 Dividends paid to preferred stockholders 4,000 4,000 Dividends paid to common stockholders 15,000 10,000 13.13 Compute the days in inventory for 2022. (a)64.4 days. (b)60.8 days. (c)6 days. (d)24 days.
(b)60.8 days.
13.11 Which of these is not a liquidity ratio?(a)Current ratio.(b)Asset turnover.(c)Inventory turnover.(d)Accounts receivable turnover.
(b)Asset turnover.
13.3 Which of the following would be considered an "Other comprehensive income" item?(a)Gain on disposal of discontinued operations.(b)Unrealized loss on available-for-sale securities.(c)Loss related to flood.(d)Net income.
(b)Unrealized loss on available-for-sale securities.
13.6 Adams Corporation reported net sales of $300,000, $330,000, and $360,000 in the years 2020, 2021, and 2022, respectively. If 2020 is the base year, what percentage do 2022 sales represent of the base?(a)77%.(b)108%.(c)120%.(d)130%.
(c)120%.
2022 2021 Inventory $ 54,000 $ 48,000 Current assets 81,000 106,000 Total assets 382,000 326,000 Current liabilities 27,000 36,000 Total liabilities 102,000 88,000 Common stockholders' equity 240,000 198,000 Net sales 784,000 697,000 Cost of goods sold 306,000 277,000 Net income 134,000 90,000 Income tax expense 22,000 18,000 Interest expense 12,000 12,000 Dividends paid to preferred stockholders 4,000 4,000 Dividends paid to common stockholders 15,000 10,000 13.17 Compute the times interest earned for 2022. (a)11.2 times. (b)65.3 times. (c)14.0 times. (d)13.0 times.
(c)14.0 times
13.9 Which measure is an evaluation of a company's ability to pay current liabilities?(a)Accounts receivable turnover.(b)Current ratio.(c)Both (a) and (b).(d)None of the above.
(c)Both (a) and (b)
13.10 Which measure is useful in evaluating the efficiency in managing inventories?(a)Inventory turnover.(b)Days in inventory.(c)Both (a) and (b).(d)None of the above.
(c)Both (a) and (b).
13.4 Which situation below might indicate a company has a low quality of earnings?(a)The same accounting principles are used each year.(b)Revenue is recognized when the performance obligation is satisfied.(c)Maintenance costs are capitalized and then depreciated.(d)The company's P-E ratio is high relative to competitors.
(c)Maintenance costs are capitalized and then depreciated.
13.7The following schedule is a display of what type of analysis? Amount Percent Current assets $200,000 25% Property, plant, and equipment 600,000 75% Total assets $800,000 (a)Horizontal analysis.(b)Differential analysis.(c)Vertical analysis.
(c)Vertical analysis.
13.2 Cool Stools Corporation has income before taxes of $400,000 and a loss on discontinued operations of $100,000. If the income tax rate is 25% on all items, the statement of comprehensive income should show income from continuing operations and discontinued operations, respectively, of (a)$325,000 and $100,000.(b)$325,000 and $75,000.(c)$300,000 and $100,000.(d)$300,000 and $75,000.
(d)$300,000 and $75,000.
2022 2021 Inventory $ 54,000 $ 48,000 Current assets 81,000 106,000 Total assets 382,000 326,000 Current liabilities 27,000 36,000 Total liabilities 102,000 88,000 Common stockholders' equity 240,000 198,000 Net sales 784,000 697,000 Cost of goods sold 306,000 277,000 Net income 134,000 90,000 Income tax expense 22,000 18,000 Interest expense 12,000 12,000 Dividends paid to preferred stockholders 4,000 4,000 Dividends paid to common stockholders 15,000 10,000 13.16 Compute the return on common stockholders' equity for 2022. (a)54.2%. (b)52.5%. (c)61.2%. (d)59.4%.
(d)59.4%.
13.5 In horizontal analysis, each item is expressed as a percentage of the:(a)net income amount.(b)stockholders' equity amount.(c)total assets amount.(d)base-year amount.
(d)base-year amount.
CHP. 6 7. Peach Pink Inc. has the following inventory data: July 1 Beginning inventory 20 units at $20 $ 400 7 Purchases 70 units at $21 1,470 22 Purchases 10 units at $22 220 $2,090 A physical count of merchandise inventory on July 30 reveals that there are 30 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is a. $1,450 b. $1,480 c. $1,490. d. $1,470.
a. $1,450 (20*20=400; 50*21=1050; 400+1050=1450)
CHP. 12 10. Wilma's Vegetable Market had the following transactions during 2012: 1. Issued $25,000 of par value common stock for cash. 2. Recorded and paid wages expense of $10,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $1,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $20,000. 7. Bought inventory for cash of $2,000. 8. Acquired an investment in IBM stock for cash of $6,000. 9. Converted bonds payable to common stock in the amount of $10,000. 10. Repaid a 6 year note payable in the amount of $11,000. What is the net cash provided by financing activities? a. $13,000. b. $25,000. c. $14,000. d. $9,000.
a. $13,000. (25000-1000-11000)
CHP. 2 3. In 2012 Grider Corporation had cash receipts of $28,000 and cash disbursements of $16,000. Grider's ending cash balance at December 31, 2012 was $44,000. What was Grider's beginning cash balance? a. $32,000 b. $40,000 c. $60,000 d. $56,000
a. $32,000 (X+28000-16000=44000; X=32000)
CHP. 1 7. Jackson Company recorded the following cash transactions for the year: Paid $135,000 for salaries. Paid $60,000 to purchase office equipment. Paid $15,000 for utilities. Paid $6,000 in dividends. Collected $225,000 from customers. What was Jackson's net cash provided by operating activities? a. $75,000 b. $15,000 c. $90,000 d.$69,000
a. $75,000 (225000-135000-15000)
CHP. 9 11. A machine with a cost of $240,000 has an estimated salvage value of $15,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours? a. $75,000. b. $45,000. c. $65,000. d. $80,000.
a. $75,000. (225000 / 15000 = 15; 15 * 5000 = 75000)
CHP. 9 2. A company purchased land for $72,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the cost principle, the cost of land would be recorded at a. $82,800. b. $72,000. c. $77,800. d. $84,000.
a. $82,800. (72000 + 5000 + 7000 - 1200)
CHP. 2 11. Which of the following would not be classified as a long-term liability? a. Current maturities of long-term debt b. Bonds payable c. Mortgage payable d.Lease liabilities
a. Current maturities of long-term debt
CHP. 3 19. Which of the following accounts is increased with a debit? a. Dividends b. Service Revenue c. Interest payable d. Common Stock
a. Dividends
CHP. 12 13. Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, dividends received on securities held would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.
a. Operating activities section.
CHP. 1 5. When expenses exceed revenues, which of the following is true? a. a net loss results b. a net income results c. assets equal liabilities d. assets are increased
a. a net loss results
CHP. 1 1. The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n) a. account payable. b. account receivable. c. revenue. d.expense
a. account payable.
CHP. 5 1. Under a perpetual inventory system a. accounting records continuously disclose the amount of inventory. b. increases in inventory resulting from purchases are debited to purchases. c. there is no need for a year-end physical count. d. the account purchase returns and allowances is credited when goods are returned to vendors.
a. accounting records continuously disclose the amount of inventory.
CHP. 9 10. Cost allocation of an intangible asset is referred to as a. amortization. b. depreciation. c. accretion. d. capitalization.
a. amortization.
CHP. 5 3. A company using a perpetual inventory system that returns goods previously purchased on credit would a. debit Accounts Payable and credit Inventory. b. debit Sales and credit Accounts Payable. c. debit Cash and credit Accounts Payable. d. debit Accounts Payable and credit Purchases.
a. debit Accounts Payable and credit Inventory.
CHP. 5 8. The collection of an $800 account within the 2 percent discount period will result in a a. debit to Sales Discounts for $16. b. debit to Accounts Receivable for $784. c. credit to Cash for $784. d. credit to Accounts Receivable for $784.
a. debit to Sales Discounts for $16.
CHP. 3 12. When a company has performed a service but has not yet received payment, it a. debits accounts receivable and credits revenue from services. b. debits revenue from services and credits accounts receivable. c. debits revenue from services and credits accounts payable. d. makes no entry until the cash is received.
a. debits accounts receivable and credits revenue from services.
CHP. 11 7. The date on which a cash dividend becomes a binding legal obligation is on the a. declaration date. b. date of record. c. payment date. d. last day of the fiscal year end.
a. declaration date.
CHP. 12 6. In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is a. deducted from net income. b. added to net income. c. ignored because it does not affect income. d. ignored because it does not affect expenses.
a. deducted from net income.
CHP. 10 13. If bonds are issued at a premium, the stated interest rate is a. higher than the market rate of interest. b. lower than the market rate of interest. c. too low to attract investors. d. adjusted to a higher rate of interest.
a. higher than the market rate of interest.
CHP. 3 6. The double-entry system requires that each transaction must be recorded a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger. d. first as a revenue and then as an expense.
a. in at least two different accounts.
CHP. 4 7. Accrued expenses are: a. incurred but not yet paid or recorded. b. paid and recorded in an asset account after they are used or consumed. c. paid and recorded in an asset account before they are used or consumed. d. incurred and already paid or recorded.
a. incurred but not yet paid or recorded.
CHP. 12 14. The order of presentation of activities on the statement of cash flows is a. operating, investing, and financing. b. operating, financing, and investing. c. financing, operating, and investing. d. financing, investing, and operating.
a. operating, investing, and financing.
CHP. 5 2. Under a perpetual inventory system, acquisition of merchandise for resale is debited to a. the Inventory account. b. the Purchases account. c. the Supplies account. d. the Cost of Goods Sold account
a. the Inventory account.
CHP. 6 2. Alpha First Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is a. $1,300 b. $1,365 c. $1,650 d. $1,620
b. $1,365 (780 + (1170 / 2) = 1365)
CHP. 2 4. At December 31, 2012 Lowery Company had retained earnings of $2,184,000. During 2012 they issued stock for $98,000, and paid dividends of $34,000. Net income for 2012 was $402,000. The retained earnings balance at the beginning of 2012 was: a. $2,552,000 b. $1,816,000 c. $1,914,000 d. $2,454,000
b. $1,816,000 (X+402000-34000=2184000; X=1816000)
CHP. 9 7. Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be a. $14,160. b. $11,760. c. $9,840. d. $9,600.
b. $11,760. (60000 + 2800 + 8000 - 12000 = 58800; 58800 / 5 = 11760)
CHP. 12 1. Barber Company reported net income of $120,000 for the year ended December 31, 2012. During the year, inventories decreased by $24,000, accounts payable decreased by $36,000, depreciation expense was $40,000 and a gain on disposal of equipment of $18,000 was recorded. Net cash provided by operating activities in 2012 using the indirect method was a. $238,000. b. $130,000. c. $154,000. d. $110.000.
b. $130,000. (120000+24000-36000+40000-18000)
CHP. 1 17.Benedict Company compiled the following financial information as of December 31, 2012: Revenues $280,000 Common stock 60,000 Equipment 80,000 Expenses 250,000 Cash 70,000 Dividends 20,000 Supplies 10,000 Accounts payable 40,000 Accounts receivable 30,000 Retained earnings, 1/1/12 150,000 Benedict's stockholders' equity on December 31, 2012 is: a. $210,000 b. $220,000 c. $160,000 d.$240,000
b. $220,000 (150000+280000-250000-20000+60000)
CHP. 3 20. Crawford Company started the year with $30,000 in its Common Stock account and a credit balance in Retained Earnings of $12,000. During the year, the company earned net income of $24,000 and declared and paid $10,000 of dividends. In addition, the company sold additional common stock amounting to $14,000. As a result, the amount of its retained earnings at the end of the year would be: a. $70,000 b. $26,000 c. $56,000 d. $40,000
b. $26,000 (12000+24000-10000)
CHP. 3 10. Barnes Company showed the following balances at the end of its first year: Cash $11,000 Prepaid insurance 700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Common stock 5,400 Dividends 700 Revenues 21,000 Expenses 17,500 What did Barnes Company show as total credits on its trial balance? a. $34,100 b. $33,400 c. $32,700 d. $34,800
b. $33,400 (2800+4200+5400+21000)
CHP. 11 2. CAB Inc. has 1,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2012. What is the annual dividend on the preferred stock? a. $40 per share. b. $4,000 in total. c. $400 in total. d. $0.40 per share.
b. $4,000 in total. (1000*100*.04)
CHP. 6 9. Nelson Corporation sells three different products. The following information is available on December 31: Inventory Item Units Cost per unit Market value per unit X 200 $4.00 $3.50 Y 400 $2.00 $1.50 Z 1,000 $3.00 $4.00 When applying the lower of cost or market rule to each item, what will Nelson's total ending inventory balance be? a. $4,600 b. $4,300 c. $5,300 d. $4,400
b. $4,300 (200*3.50=700; 400*1.50=600; 1000*3.00=3000; 700+600+3000=4300)
CHP. 3 17. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,200 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a a. $800 credit balance. b. $400 debit balance. c. $1,200 debit balance. d. $400 credit balance.
b. $400 debit balance. (1200-800)
CHP. 8 9. The interest on a $4,000, 10%, 1-year note receivable is a. $4,000. b. $400. c. $4,400. d. $4,040.
b. $400. (4000 * .10 * 1)
CHP. 12 12.Henson Company began the year with retained earnings of $350,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year? a. $510,000 b. $430,000 c. $810,000 d. $470,000
b. $430,000 (350000+500000-380000-40000)
CHP. 2 7. Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office Supplies Balance Sheet December 31, 2012 Cash $ 130,000 Accounts Payable $ 140,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 100,000 Mortgage Payable 160,000 Inventory 140,000 Total Liabilities $320,000 Land held for Investment 150,000 Land 180,000 Buildings $200,000 Common Stock $240,000 Less Accumulated Retained Earnings 500,000 Depreciation (40,000) 160,000 Total Stockholders' Equity $740,000 Trademarks 140,000 Total Liabilities and Total Assets $1,060,000 Stockholders' Equity $1,060,000 a. $580,000. b. $430,000. c. $360,000. d. $290,000.
b. $430,000. (130000+60000+100000+140000)
CHP. 12 5. The net income reported on the income statement for the current year was $410,000. Depreciation recorded on plant assets was $76,000. Accounts receivable and inventories increased by $4,000 and $16,000, respectively. Prepaid expenses and accounts payable decreased by $2,000 and $22,000, respectively. How much cash was provided by operating activities? a. $370,000. b. $446,000. c. $410,000. d. $478,000.
b. $446,000. (410000+76000-4000-16000+2000-22000)
CHP. 4 10. Walton Company collected $7,200 in May of 2010 for 4 months of service which would take place from October of 2010 through January of 2011. The revenue reported from this transaction during 2010 would be: a. $0 b. $5,400 c. $7,200 d. $1,800
b. $5,400 (7200 / 4 = 1800, 1800 * 3 = 5400)
CHP. 1 14. Gilkey Corporation began the year with retained earnings of $155,000. During the year, the company issued $210,000 of common stock, recorded expenses of $600,000, and paid dividends of $40,000. If Gilkey's ending retained earnings was $165,000, what was the company's revenue for the year? a. $610,000 b. $650,000 c. $820,000 d.$860,000
b. $650,000 (155000+X-600000-40000=165000, X=650000)
CHP. 5 4. Conway Company purchased merchandise inventory with an invoice price of $8,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Conway Company pays within the discount period? a. $8,000 b. $7,840 c. $7,200 d. $7,360
b. $7,840 (8000 * .02 = 160, 8000 - 160 = 7840)
CHP. 8 8. The interest on a $8,000, 6%, 60-day note receivable is a. $480. b. $80. c. $160. d. $240.
b. $80. (8000 * .06 * (60/360))
CHP. 8 2. When an account becomes uncollectible and must be written off a. Allowance for Doubtful Accounts should be credited. b. Accounts Receivable should be credited. c. Bad Debts Expense should be credited. d. Sales should be debited.
b. Accounts Receivable should be credited.
CHP. 1 15. The accounting equation may be expressed as: a. Assets = Stockholders' Equity - Liabilities. b. Assets = Liabilities + Stockholders' Equity. c. Assets + Liabilities = Stockholders' Equity. d.Assets + Stockholders' Equity = Liabilities
b. Assets = Liabilities + Stockholders' Equity.
CHP. 8 7. Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? a. Bad Debts Expense 10,000 Allowance for Doubtful Accounts 10,000 b. Bad Debts Expense 8,000 Allowance for Doubtful Accounts 8,000 c. Bad Debts Expense 8,000 Accounts Receivable 8,000 d. Bad Debts Expense 10,000 Accounts Receivable 10,000
b. Bad Debts Expense 8,000 Allowance for Doubtful Accounts 8,000
CHP. 10 3. Mohling Company typically sells subscriptions on an annual basis, and publishes eight times a year. The magazine sells 60,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscriptions? a. Subscriptions Receivable 600,000 Subscription Revenue 600,000 b. Cash 600,000 Unearned Subscription Revenue 600,000 c. Subscriptions Receivable 75,000 Unearned Subscription Revenue 75,000 d. Prepaid Subscriptions 600,000 Cash 600,000
b. Cash 600,000 Unearned Subscription Revenue 600,000
CHP. 3 7. Which of the following describes the classification and normal balance of the Unearned Revenue account? a. Asset, debit b. Liability, credit c. Revenues, credit d. Expense, debit
b. Liability, credit
CHP. 3 21. On March 1, 2012, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not? a. Yes, the company is now obligated to pay the employee, thus that event must be recorded. b. No, hiring an employee is an important event; however it is not an economic event that should be recorded. c. Yes, failure to record the event would cause the financial statements to be misleading. d. No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known.
b. No, hiring an employee is an important event; however it is not an economic event that should be recorded.
CHP. 10 9. On October 1, Sam's Painting Service borrows $80,000 from National Bank on a 3-month, $80,000, 4% note. The entry by Sam's Painting Service to record payment of the note and accrued interest on January 1 is a. Notes Payable 80,800 Cash 80,800 b. Notes Payable 80,000 Interest Payable 800 Cash 80,800 c. Notes Payable 80,000 Interest Payable 3,200 Cash 83,200 d. Notes Payable 80,000 Interest Expense 800 Cash 80,800
b. Notes Payable 80,000 Interest Payable 800(80000*.04*(3/12)) Cash 80,800
CHP. 11 1. Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60 per share. The entry to record the transaction will consist of a debit to Cash for $3,000,000 and a credit or credits to a. Preferred Stock for $3,000,000. b. Preferred Stock for $2,500,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $500,000. c. Preferred Stock for $2,500,000 and Retained Earnings for $500,000. d. Paid-in Capital from Preferred Stock for $3,000,000.
b. Preferred Stock for $2,500,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $500,000.
CHP. 9 4. Which one of the following items is not considered a part of the cost of a truck purchased for business use? a. Sales tax. b. Truck license. c. Freight charges. d. Cost of lettering on side of truck.
b. Truck license.
CHP. 3 15. A trial balance will not balance if a. a correcting journal entry is posted twice. b. a $50 cash dividend is debited to dividends for $500 and credit to cash for $50. c. a $300 payment on accounts payable is debited to accounts payable for $30 and credited to cash for $30. d. a transaction is not posted at all.
b. a $50 cash dividend is debited to dividends for $500 and credit to cash for $50.
CHP. 1 2. The right to receive money in the future is called a(n) a. account payable. b. account receivable. c. liability. d. revenue.
b. account receivable.
CHP. 10 6. The current portion of long-term debt should a. be paid immediately. b. be reclassified as a current liability. c. be classified as a long-term liability. d. not be separated from the long-term portion of debt.
b. be reclassified as a current liability.
CHP. 8 6. You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to a. debit Allowance for Doubtful Accounts and credit Bad Debt Expense. b. debit Allowance for Doubtful Accounts and credit Accounts Receivable. c. debit Bad Debt Expense and credit Allowance for Doubtful Accounts. d.debit Bad Debt Expense and credit Accounts Receivable
b. debit Allowance for Doubtful Accounts and credit Accounts Receivable.
CHP. 8 5. To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a a. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. b. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts. c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. d. debit to Loss on Credit Sales and a credit to Accounts Receivable.
b. debit to Bad Debts Expense and a credit to Allowance for Doubtful Accounts.
CHP. 1 3. Borrowing money is an example of a(n) a. delivering activity. b. financing activity. c. investing activity. d. operating activity.
b. financing activity.
CHP. 1 10. To show how successfully your business performed during a period of time, you would report its revenues and expense in the a. balance sheet. b. income statement. c. statement of cash flows. d. retained earnings statement.
b. income statement.
CHP. 10 14. If bonds are issued at a discount, it means that the a. financial strength of the issuer is suspect. b. market interest rate is higher than the contractual interest rate. c. market interest rate is lower than the contractual interest rate. d. bondholder will receive effectively less interest than the contractual rate of interest.
b. market interest rate is higher than the contractual interest rate.
CHP. 11 9. Dividends in arrears on cumulative preferred stock a. never have to be paid, even if common dividends are paid. b. must be paid before common stockholders can receive a dividend. c. should be recorded as a current liability until they are paid. d. enable the preferred stockholders to share equally in corporate earnings with the common stockholders.
b. must be paid before common stockholders can receive a dividend.
CHP. 11 3. On the dividend record date a. a dividend becomes a current obligation. b. no entry is required. c. an entry may be required if it is a stock dividend. d. Dividends Payable is debited.
b. no entry is required.
CHP. 11 6. The board of directors of Bosco Company declared a cash dividend on November 15, 2012, to be paid on December 15, 2012, to stockholders owning the stock on November 30, 2012. Given these facts, the date of November 30, 2012, is referred to as the a. declaration date. b. record date. c. payment date. d. ex-dividend date.
b. record date.
CHP. 4 1. The revenue recognition principle dictates that revenue should be recognized in the accounting records: a. when cash is received. b. when it is earned. c. at the end of the month. d. in the period that income taxes are paid.
b. when it is earned
CHP. 5 9. Aber Company sells merchandise on account for $1,500 to Borth Company with credit terms of 2/10, n/30. Borth Company returns $250 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? a. $1,220 b. $1,230 c. $1,225 d. $1,125
c. $1,225 (1500 - 250 = 1250, 1250 * .02 = 25, 1250 - 25 = 1225)
CHP. 6 3. Baker Bakery Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is a. $1,300 b. $1,365 c. $1,620 d. $1,650
c. $1,620 (990 + (1260 / 2) = 1620)
CHP. 9 12. Danford Trucking purchased a tractor trailer for $147,000. Danford uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $21,000. If the truck is driven 80,000 miles in its first year, how much depreciation expense should Danford record? a. $9,333. b. $11,760. c. $10,080. d. $10,889.
c. $10,080. (147000 - 21000=126000; 126000 / 1000000=.126; .126 * 80000=10080)
CHP. 2 5. Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Carne Auto Supplies Balance Sheet December 31, 2012 Cash $ 60,000 Accounts Payable $ 65,000 Prepaid Insurance 40,000 Salaries Payable 10,000 Accounts Receivable 50,000 Mortgage Payable 90,000 Inventory 70,000 Total Liabilities $165,000 Land held for investment 80,000 Land 95,000 Buildings $100,000 Common Stock $120,000 Less Accumulated Retained Earnings 250,000 Depreciation (30,000) 70,000 Total stockholders' equity $370,000 Trademarks 70,000 Total Liabilities and Total Assets $535,000 Stockholders' Equity $535,000 a. $315,000. b. $245,000. c. $165,000. d. $195,000.
c. $165,000. (95000+70000)
CHP. 6 8. Jenks Company developed the following information about its inventories in applying the lower of cost or market (LCM) basis in valuing inventories: Product Cost Market A $55,000 $60,000 B 40,000 38,000 C 80,000 81,000 If Jenks applies the LCM basis, the value of the inventory reported on the balance sheet would be a. $175,000. b. $171,000. c. $173,000. d. $181,000.
c. $173,000. (55000+38000+80000)
CHP. 3 8. On June 1, 2012, England Inc. reported a cash balance of $18,000. During June, England made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance at the end of June? a. $2,000 credit balance. b. $26,000 debit balance. c. $2,000 debit balance. d. $6,000 credit balance.
c. $2,000 debit balance. (18000+8000-24000)
CHP. 6 5. A company purchased inventory as follows: 200 units at $20 300 units at $22 The average unit cost for inventory is a. $20.00. b. $21.00. c. $21.20 d.$22.00
c. $21.20. (200*20=4000; 300*22=6600; 6600+4000=10600; 10600/500=21.20)
CHP. 1 13. Finney Company began the year by issuing $20,000 of common stock for cash. The company recorded revenues of $185,000, expenses of $160,000, and paid dividends of $10,000. What was Finney's net income for the year? a. $15,000 b. $35,000 c. $25,000 d. $45,000
c. $25,000 (185000-160000)
CHP. 12 4. The net income reported on the income statement for the current year was $210,000. Depreciation was $25,000. Accounts receivable and inventories decreased by $5,000 and $15,000, respectively. Prepaid expenses and accounts payable increased, respectively, by $500 and $4,000. How much cash was provided by operating activities? a. $240,500. b. $250,500. c. $258,500. d. $219,500.
c. $258,500. (210000+25000+5000+15000-500+4000)
CHP. 9 8. A company purchased factory equipment on April 1, 2012, for $72,000. It is estimated that the equipment will have a $9,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2012, is a. $7,200. b. $6,300. c. $4,725. d. $5,400.
c. $4,725. (72000 - 9000 = 63000; 63000 / 10 = 6300; 6300 * (9/12) = 4725
CHP. 3 11. During 2012, its first year of operations, Jane's Bakery had revenues of $60,000 and expenses of $33,000. The business paid cash dividends of $18,000. What is the balance in Retained Earnings at December 31, 2012? a. $0. b. $18,000 debit. c. $9,000 credit. d. $27,000 credit.
c. $9,000 credit. (60000-33000-18000)
CHP. 11 8. Outstanding stock of the Hall Corporation included 30,000 shares of $5 par common stock and 15,000 shares of 6%, $10 par non-cumulative preferred stock. In 2011, Hall declared and paid dividends of $6,000. In 2012, Hall declared and paid dividends of $18,000. How much of the 2012 dividend was distributed to preferred shareholders? a. $12,000. b. $21,000. c. $9,000. d. None of the above.
c. $9,000. (15000*10*.06=9000)
CHP. 12 9. Wilma's Vegetable Market had the following transactions during 2012: 1. Issued $25,000 of par value common stock for cash. 2. Recorded and paid wages expense of $10,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $1,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $20,000. 7. Bought inventory for cash of $2,000. 8. Acquired an investment in IBM stock for cash of $6,000. 9. Converted bonds payable to common stock in the amount of $10,000. 10. Repaid a 6 year note payable in the amount of $11,000. What is the net cash provided by investing activities? a. $6,000. b. $16,000 c. ($3,000). d. $3,000.
c. ($3,000). (3000-6000)
CHP. 9 3. Which of the following is not properly classified as property, plant, and equipment? a. Building used as a factory. b. Land used in ordinary business operations. c. A truck held for resale by an automobile dealership. d. Land improvement, such as parking lots and fences.
c. A truck held for resale by an automobile dealership.
CHP. 1 9. Ending retained earnings for a period is equal to: a. Beginning retained earnings + Net income + Dividends b. Beginning retained earnings - Net income - Dividends c. Beginning retained earnings + Net income - Dividends d. Beginning retained earnings - Net income + Dividends
c. Beginning retained earnings + Net income - Dividends
CHP. 10 12. Four thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is a. Cash ......................................................................... 4,080,000 Bonds Payable................................................................ 4,080,000 b. Cash ......................................................................... 4,000,000 Premium on Bonds Payable............................................. 80,000 Bonds Payable................................................................ 4,080,000 c. Cash ......................................................................... 4,080,000 Premium on Bonds Payable............................................ 80,000 (cash-face) Bonds Payable................................................................ 4,000,000 4000*1000 d. Cash ......................................................................... 4,080,000 Discount on Bonds Payable............................................ 80,000 Bonds Payable................................................................ 4,000,000
c. Cash ......................................................................... 4,080,000 (4,000*1,000*1.02) Premium on Bonds Payable............................................ 80,000 (cash-face) Bonds Payable................................................................ 4,000,000 4000*1000
CHP. 10 10. West County Bank agrees to lend Drake Builders Company $100,000 on January 1. Drake Builders Company signs a $100,000, 6%, 6-month note. The entry made by Drake Builders Company on January 1 to record the proceeds and issuance of the note is a. Interest Expense 3,000 Cash. 97,000 Notes Payable 100,000 b. Cash 100,000 Notes Payable 100,000 c. Cash 100,000 Interest Expense 3,000 Notes Payable 103,000 d. Cash 100,000 Interest Expense 3,000 Notes Payable 100,000 Interest Payable 3,000
c. Cash 100,000 Interest Expense 3,000 Notes Payable 103,000
CHP. 11 11. Dawson Company issued 800 shares of no-par common stock for $7,200. Which of the following journal entries would be made if the stock has stated value of $2 per share? a. Cash 7,200 Common Stock 7,200 b. Cash 7,200 Common Stock 1,600 Paid-in Capital in Excess of Par 5,600 c. Cash 7,200 Common Stock 1,600 Paid-in Capital in Excess of Stated Value 5,600 d. Common Stock 7,200
c. Cash 7,200 Common Stock 1,600 (800*2) Paid-in Capital in Excess of Stated Value 5,600
CHP. 10 5. On January 1, 2012, Keisler Company, a calendar-year company, issued $500,000 of notes payable, of which $125,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2012, is a. Current Liabilities, $500,000. b. Long-term Debt , $500,000. c. Current Liabilities, $125,000; Long-term Debt, $375,000. d. Current Liabilities, $375,000; Long-term Debt, $125,000.
c. Current Liabilities, $125,000; Long-term Debt, $375,000.
CHP. 12 15. Harden Corporation engaged in the following transaction. Assume that the Harden Corporation uses the indirect method to depict cash flows. Indicate where, if at all, long-term debt retired with cash would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.
c. Financing activities section.
CHP. 10 11. West County Bank agrees to lend Drake Builders Company $100,000 on January 1. Drake Builders Company signs a $100,000, 6%, 6-month note. What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30? a. Interest Expense 3,000 Interest Payable 3,000 b. Interest Expense 3,000 Cash 3,000 c. Interest Expense 1,500 Interest Payable 1,500 d. Interest Payable 1,500 Interest Expense 1,500
c. Interest Expense 1,500 (100000*.06*(3/12)) Interest Payable 1,500
CHP. 4 2. A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? a. December 5 b. December 10 c. November 30 d. December 1
c. November 30
CHP. 3 16. Which of the following accounts has a normal credit balance? a. Prepaid Rent b. Notes Receivable c. Rent Revenue d. Rent Expense
c. Rent Revenue
CHP. 1 11. Net income results when a. Assets > Liabilities. b. Revenues = Expenses. c. Revenues > Expenses. d.Revenues < Expenses
c. Revenues > Expenses.
CHP. 1 6. The retained earnings statement shows all of the following except: a. The amounts of changes in retained earnings during the period. b. The causes of changes in retained earnings during the period. c. The time period following the one shown for the income statement. d. Beginning retained earnings on the first line of the statement.
c. The time period following the one shown for the income statement.
CHP. 2 2. Generally accepted accounting principles a. are accounting rules formulated by the Internal Revenue Service. b. are sound in theory but rarely used in real life. c. are accounting rules that are recognized as a general guide for financial reporting. d. have eliminated all errors in accounting.
c. are accounting rules that are recognized as a general guide for financial reporting.
CHP. 3 1. If total liabilities increased by $5,000, then a. assets must have decreased by $5,000. b. stockholders' equity must have increased by $5,000. c. assets must have increased by $5,000, or stockholders' equity must have decreased by $5,000. d. assets and stockholders' equity each increased by $2,500.
c. assets must have increased by $5,000, or stockholders' equity must have decreased by $5,000.
CHP. 3 2. Courtney Company purchased equipment for $1,800 cash. As a result of this event, a. equity decreased by $1,800. b. assets increased by $1,800. c. assets remained unchanged. d.Both a and b
c. assets remained unchanged.
CHP. 4 3. Under the cash basis of accounting: a. Revenue is recognized when services are performed. b. Expenses are matched with the revenue that is produced. c. cash must be received before revenue is recognized. d. a promise to pay is sufficient to recognize revenue.
c. cash must be received before revenue is recognized.
CHP. 9 9. The book value of a plant asset is the difference between the a. replacement cost of the asset and its historical cost. b. cost of the asset and the amount of depreciation expense for the year. c. cost of the asset and the accumulated depreciation to date. d. proceeds received from the sale of the asset and its original cost.
c. cost of the asset and the accumulated depreciation to date.
CHP. 5 6. Under the perpetual inventory system, in addition to making the entry to record a sale, a company would a. debit Inventory and credit Cost of Goods Sold. b. debit Cost of Goods Sold and credit Purchases. c. debit Cost of Goods sold and credit Inventory. d. make no additional entry until the end of the period.
c. debit Cost of Goods sold and credit Inventory.
CHP. 4 9. Greese Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,100 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a. debit Office Supplies Expense, $1,100; credit Office Supplies, $1,100. b. debit Office Supplies, $2,900; credit Office Supplies Expense, $2,900. c. debit Office Supplies Expense, $2,900; credit Office Supplies, $2,900. d. debit Office Supplies, $1,100; credit Office Supplies Expense, $1,100.
c. debit Office Supplies Expense, $2,900; credit Office Supplies, $2,900.
CHP. 8 3. An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debts Expense for $4,000. b. debit to Allowance for Doubtful Accounts for $2,800. c. debit to Bad Debts Expense for $2,800. d. credit to Allowance for Doubtful Accounts for $4,000.
c. debit to Bad Debts Expense for $2,800. (4000 - 1200)
CHP. 8 12. On April 5 Donna's Boutique accepted a Visa card for a $500 purchase. Visa charges a 2% service fee. The entry to record this transaction would include a a. credit to Cash of $490. b. debit to Cash of $500. c. debit to Service Charge Expense of $10. d. credit to Service Charge Expense of $10.
c. debit to Service Charge Expense of $10. (500 * .02)
CHP. 3 13. A company that receives money in advance of performing a service a. debits cash and credits prepaid fees. b. debits unearned fees and credits accounts payable. c. debits cash and credits unearned fees. d. debits cash and credits accounts receivable.
c. debits cash and credits unearned fees.
CHP. 9 6. The term applied to the periodic expiration of a plant asset's cost is a. amortization. b. depletion. c. depreciation. d. cost expiration.
c. depreciation.
CHP. 4 8. Accrued revenues are: a. received and recorded as liabilities before they are earned. b. earned and recorded as liabilities before they are received. c. earned but not yet received or recorded. d. earned and already received and recorded.
c. earned but not yet received or recorded.
CHP. 4 4. Under the accrual basis of accounting: a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.
c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
CHP. 12 12. The payment of a cash dividend would be classified as a(n) a. operating activity. b. investing activity. c. financing activity. d. significant noncash activity.
c. financing activity.
CHP. 8 1. Under the allowance method, Bad Debt Expense is recorded a. when an individual account is written off. b. when the loss amount is known. c. for an amount that the company estimates it will not collect. d. several times during the accounting period.
c. for an amount that the company estimates it will not collect.
CHP. 2 12. On a classified balance sheet, companies usually list current assets a. in alphabetical order. b. with the largest dollar amounts first. c. in the order in which they are expected to be converted into cash. d. in the order of acquisition.
c. in the order in which they are expected to be converted into cash.
CHP. 12 2. When equipment is sold for cash, the amount received is reflected as a cash a. inflow in the operating section. b. inflow in the financing section. c. inflow in the investing section. d. outflow in the operating section.
c. inflow in the investing section.
CHP. 12 7. Landis Company reported a net loss of $6,000 for the year ended December 31, 2012. During the year, accounts receivable decreased $14,000, merchandise inventory increased $10,000, accounts payable increased by $20,000, and depreciation expense of $10,000 was recorded. During 2012, operating activities a. used net cash of $2,000. b. used net cash of $28,000. c. provided net cash of $28,000. d. provided net cash of $18,000.
c. provided net cash of $28,000. (-6000+14000-10000+20000+10000)
CHP. 10 7. Unearned Rental Revenue is a. a contra account to Rental Revenue. b. a revenue account. c. reported as a current liability. d. debited when rent is received in advance.
c. reported as a current liability.
CHP. 3 5. The normal balance of any account is the a. left side. b. right side. c. side which increases that account. d. side which decreases that account.
c. side which increases that account.
CHP. 3 3. The left side of an account is a. blank. b. a description of the account. c. the debit side. d. the balance of the account.
c. the debit side.
CHP. 6 1. The LIFO inventory method assumes that the cost of the latest units purchased are a. the last to be allocated to cost of goods sold. b. the first to be allocated to ending inventory. c. the first to be allocated to cost of goods sold. d. not allocated to cost of goods sold or ending inventory.
c. the first to be allocated to cost of goods sold.
CHP. 3 14. A list of accounts and their balances at a given time is called a(n) a. journal. b. posting. c. trial balance. d. income statement.
c. trial balance.
CHP. 6 6. Quiet Phones Company has the following inventory data: July 1 Beginning inventory 20 units at $19 $ 380 7 Purchases 70 units at $20 1,400 22 Purchases 10 units at $22 220 $2,000 A physical count of merchandise inventory on July 30 reveals that there are 40 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is a. $780. b. $820. c. $1,180. d. $1,220.
d. $1,220. (10*22=220; 50*20=1000; 220+1000=1220)
CHP. 6 4. Charlene Cosmetics Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is a. $1,463. b. $1,620. c. $1,575. d. $1,500.
d. $1,500. (4200 / 700 = 6, 6 * 250 = 1500)
CHP. 10 1. A bond with a face value of $200,000 and a quoted price of 98½ has a selling price of a. $196,500. b. $196,100. c. $196,010. d. $197,000.
d. $197,000. (200000*.985)
CHP. 10 2. A bond with a face value of $200,000 and a quoted price of 102¼ has a selling price of a. $240,450. b. $204,050. c. $200,450. d. $204,500.
d. $204,500. (200000*1.0225)
CHP. 9 1. A company purchased land for $210,000 cash. Real estate brokers' commission was $15,000 and $21,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the cost principle, the cost of land would be recorded at a. $231,000. b. $210,000. c. $225,000. d. $246,000.
d. $246,000. (210000 + 15000 + 21000)
CHP. 1 16.Elston Company compiled the following financial information as of December 31, 2012: Revenues $420,000 Common stock 90,000 Equipment 120,000 Expenses 375,000 Cash 105,000 Dividends 30,000 Supplies 15,000 Accounts payable 60,000 Accounts receivable 45,000 Retained earnings, 1/1/12 225,000 Elston's assets on December 31, 2012 are: a. $705,000 b. $510,000 c. $240,000 d. $285,000
d. $285,000 (120000+105000+15000+45000)
CHP. 4 5. La More Company had the following transactions during 2011: · Sales of $4,500 on account · Collected $2,000 for services to be performed in 2012 · Paid $1,375 cash in salaries for 2011 · Purchased airline tickets for $250 in December for a trip to take place in 2012 What is La More's 2011 net income using accrual accounting? a. $3,375 b. $5,375 c. $5,125 d. $3,125
d. $3,125 (4500 - 1375)
CHP. 8 11. The maturity value of a $30,000, 9%, 40-day note receivable dated July 3 is a. $30,000. b. $33,000. c. $32,700. d. $30,300.
d. $30,300. (30000 * .09 * (40/360))
CHP. 11 13. Denson, Inc. has 10,000 shares of 8%, $100 par value, non-cumulative preferred stock and 40,000 shares of $1 par value common stock outstanding at December 31, 2012. There were no dividends declared in 2011. The board of directors declares and pays a $120,000 dividend in 2012. What is the amount of dividends received by the common stockholders in 2012? a. $0. b. $80,000. c. $120,000. d. $40,000.
d. $40,000. (10000*100*.08=80000; 120000-80000=40000)
CHP. 10 8. The interest charged on a $50,000 note payable, at the rate of 6%, on a 60-day note would be a. $3,000. b. $1,500. c. $750. d. $500.
d. $500. (50000*.06*(60/360))
CHP. 9 5. Shaffer Company acquires land for $56,000 cash. Additional costs are as follows. Removal of shed $ 300 Filling and grading 1,500 Salvage value of lumber of shed 120 Broker commission 1,130 Paving of parking lot 10,000 Closing costs 560 Shaffer will record the acquisition cost of the land as a. $56,000. b. $57,690. c. $59,610. d. $59,370.
d. $59,370. (56000 + 300 + 1500 - 120 + 1130 + 560)
CHP. 4 6.La More Company had the following transactions during 2011. · Sales of $4,500 on account · Collected $2,000 for services to be performed in 2012 · Paid $1,125 cash in salaries · Purchased airline tickets for $250 in December for a trip to take place in 2012 What is La More's 2011 net income using cash basis accounting? a. $5,375 b. $875 c. $5,125 d. $625
d. $625 (2000 - 1125 - 250)
CHP. 12 8. Milton Company reported net income of $80,000 for the year. During the year, accounts receivable increased by $14,000, accounts payable decreased by $6,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is a. $60,000. b. $90,000. c. $78,000. d. $70,000.
d. $70,000. (80000-14000-6000+10000)
CHP. 12 11. Wilma's Vegetable Market had the following transactions during 2012: 1. Issued $25,000 of par value common stock for cash. 2. Recorded and paid wages expense of $10,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $1,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $20,000. 7. Bought inventory for cash of $2,000. 8. Acquired an investment in IBM stock for cash of $6,000. 9. Converted bonds payable to common stock in the amount of $10,000. 10. Repaid a 6 year note payable in the amount of $11,000. What is the net cash provided by operating activities? a. $20,000. b. $18,000. c. $10,000. d. $8,000.
d. $8,000. (-10000+20000-2000)
CHP. 2 13. These are selected account balances on December 31, 2012. Land $100,000 Land (held for future use) 150,000 Buildings 600,000 Inventory 200,000 Equipment 450,000 Furniture 100,000 Accumulated Depreciation 300,000 What is the total amount of property, plant, and equipment that will appear on the balance sheet? a. $1,300,000 b. $1,100,000 c. $1,600,000 d. $950,000
d. $950,000 (100000+600000+450000+100000-300000)
CHP. 5 5. The journal entry to record a credit sale is a. Cash Sales Revenue b. Cash Service Revenue c. Accounts Receivable Sales Returns and Allowances d. Accounts Receivable Sales Revenue
d. Accounts Receivable Sales Revenue
CHP. 3 9. Which of the following correctly identifies normal balances of accounts? a. Assets Debit Liabilities Credit Common Stock Credit Revenues Debit Expenses Credit b. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Credit c. Assets Credit Liabilities Debit Common Stock Debit Revenues Credit Expenses Debit d. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit
d. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit
CHP. 11 5. Which of the following is the appropriate general journal entry to record the declaration of cash dividends? a. Cash Dividends Cash b. Dividends Payable Cash c. Paid-in Capital Dividends Payable d. Cash Dividends Dividends Payable
d. Cash Dividends Dividends Payable
CHP. 3 18. Which account below is not a subdivision of stockholders' equity? a. Dividends b. Revenues c. Expenses d. Liabilities
d. Liabilities
CHP. 3 22. Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? a. Yes, they are treated as revenue at the time of receipt because the company has access to the cash b. No, the amount of revenue cannot be adequately determined until the company completes the work. c. Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed. d. No, revenue cannot be recognized until the work is performed.
d. No, revenue cannot be recognized until the work is performed.
CHP. 8 10. Rosen Company receives a $3,000, 3-month, 6% promissory note from Bay Company in settlement of an open accounts receivable. What entry will Rosen Company make upon receiving the note? a. Notes Receivable 3,045 Accounts Receivable—Bay Company 3,045 b. Notes Receivable 3,045 Accounts Receivable—Bay Company 3,000 Interest Revenue 45 c. Notes Receivable 3,000 Interest Receivable 45 Accounts Receivable—Bay Company 3,000 Interest Revenue 45 d. Notes Receivable 3,000 Accounts Receivable—Bay Company 3,000
d. Notes Receivable 3,000 Accounts Receivable—Bay Company 3,000
CHP. 1 8. Which of the following financial statements is divided into major categories of operating, investing, and financing activities? a. The income statement. b. The balance sheet. c. The retained earnings statement. d. The statement of cash flows.
d. The statement of cash flows.
CHP. 11 10. Treasury stock is a. stock issued by the U.S. Treasury Department. b. stock purchased by a corporation and held as an investment in its treasury. c. corporate stock issued by the treasurer of a company. d. a corporation's own stock, which has been reacquired and held for future use.
d. a corporation's own stock, which has been reacquired and held for future use.
CHP. 12 3. To determine the net cash provided (used) by operating activities, it is necessary to analyze a. the current year's income statement. b. a comparative balance sheet. c. additional information. d. all of the above.
d. all of the above.
CHP. 4 11. The closing entry process consists of closing: a. all asset and liability accounts. b. out the Retained Earnings account. c. all permanent accounts. d. all temporary accounts.
d. all temporary accounts.
CHP. 5 7. The entry to record a sale of $900 with terms of 2/10, n/30 will include a a. debit to Sales Discounts for $18. b. debit to Sales Revenue for $882. c. credit to Accounts Receivable for $900. d. credit to Sales Revenue for $900.
d. credit to Sales Revenue for $900.
CHP. 2 10. Liabilities are generally classified on a balance sheet as a. small liabilities and large liabilities. b. present liabilities and future liabilities. c. tangible liabilities and intangible liabilities. d. current liabilities and long-term liabilities.
d. current liabilities and long-term liabilities.
CHP. 2 6. What is the order in which assets are generally listed on a classified balance sheet? a. current and long-term b. current; property, plant and equipment; long-term investments; intangibles c. current; property, plant and equipment; intangibles; long-term investments d. current; long-term investments; property, plant and equipment, intangibles
d. current; long-term investments; property, plant and equipment, intangibles
CHP. 10 4. Gomez Corporation issues 600, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 96. The journal entry to record the issuance will show a a. debit to Cash of $600,000. b. credit to Discount on Bonds Payable for $24,000. c. credit to Bonds Payable for $576,000. d. debit to Cash for $576,000.
d. debit to Cash for $576,000. (600*1,000=600,000 total bonds; 600,000*.96=576,000)
CHP. 11 12. The board of directors of Benson Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on August 15, 2014, to stockholders of record on July 31, 2014. The correct entry to be recorded on August 15, 2014, will include a a. debit to Cash Dividends. b. credit to Cash Dividends. c. credit to Dividends Payable. d. debit to Dividends Payable.
d. debit to Dividends Payable.
CHP. 8 4. Two methods of accounting for uncollectible accounts are the a. allowance method and the accrual method. b. allowance method and the net realizable method. c. direct write-off method and the accrual method. d. direct write-off method and the allowance method.
d. direct write-off method and the allowance method.
CHP. 2 8. A current asset is a. the last asset purchased by a business. b. an asset which is currently being used to produce a product or service. c. usually found as a separate classification in the income statement. d. expected to be converted to cash or used in the business within a relatively short period of time.
d. expected to be converted to cash or used in the business within a relatively short period of time
CHP. 2 1. The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the a. economic entity assumption. b. monetary unit assumption. c. periodicity assumption. d. going concern assumption.
d. going concern assumption.
CHP. 3 4. A debit to an asset account indicates a(n) a. error. b. credit was made to a liability account. c. decrease in the asset. d. increase in the asset.
d. increase in the asset.
CHP. 11 4. A corporation records a dividend-related liability a. on the record date. b. on the payment date. c. when dividends are in arrears. d. on the declaration date.
d. on the declaration date.
CHP. 2 9. Which of the following is not classified properly as a current asset? a. Supplies b. Marketable securities c. A fund to be used to purchase a building within the next year d.A receivable from the sale of an asset to be collected in two years
d.A receivable from the sale of an asset to be collected in two years
CHP. 1 4. Which activities involve putting the resources of the business into action to generate a profit? a. Delivering b. Financing c. Investing d.Operating
d.Operating
