MGT 11A Final Study Guide

What are the Tools of Financial Analysis?

-Horizontal Analysis -Vertical Analysis -Ratio Analysis

What are the Building Blocks of Analysis?

-Liquidity and efficiency -Solvency -Profitability -Market Prospects

A company sold a machine that originally cost $100,000 for $60,000 cash. The accumulated depreciation on the machine was $40,000. The company should recognize a: A. $0 gain or loss B. $20,000 gain C. $20,000 loss D. $40,000 loss E. $60,000 gain

A. $0 gain or loss

On October 10, 2013, Printfast Company sells a commercial printer for $2,350 with a one-year warranty that covers parts. Warranty expense is projected to be 4% of sales. On February 28, 2014, the printer requires repairs. The cost of the parts for the repair is $80 and Printfast pays their technician $150 to perform the repair. What is the warranty liability for this printer at the at the end of 2014? A. $14.00. B. $84.80. C. $94.00. D. $0, there is no liability at the end of 2014. E. $230.00.

A. $14 $2,350 × 0.04 = $94.00 original estimated warranty liability $94.00 - 80.00 = $14.00 remaining

On January 1, 2013, Lane issues $700,000 of 7%, 15-year bonds at a price of 106¾. The interest payments are made on June 30 and December 31. Lane elects a fiscal year ending September 30. What is the amount that would be recorded as cash paid in the December 31, 2013, journal entry? A. $24,500 B. $22,925 C. $12,250 D. $11,462 E. $13,458

A. $24,500 (700,000 x 0.07 x 6/12 = 24,500)

On January 1, Acme College received $1,200,000 in Unearned Tuition Revenue from its students for the spring semester, which spans four months beginning on January 2. What amount of tuition revenue should the college recognize on January 31? A. $300,000 B. $600,000 C. $800,000 D. $900,000 E. $1,200,000

A. $300,000 ($1,200,000/4=$300,000)

Conner Company borrows $185,600 cash on November 1, 2013, by signing a 120-day, 8% note. What is the total amount of interest that Conner will recognize for this note? A. $4,949. B. $14,848. C. $2,467. D. $0, no interest expense is recognized. E. $1485.

A. $4949 ($185,600 × 0.08 × 120/360 = $4,949)

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: A. $50,000. B. $5,000. C. $45,000. D. Zero. This is an operating activity. E. Zero. This is a financing activity.

A. $50,000

A company's current assets were $17,980, its quick assets were $11,420, and its current liabilities were $12,190. Its quick ratio equals: A. 0.94. B. 1.07. C. 1.48. D. 1.57. E. 2.40.

A. 0.94 (quick ratio=quick assets/current liabilities)

A company paid $0.48 in cash dividends per share. It has earnings per share of $4.20 and a market price per share of $30.00. Its dividend yield equals: A. 1.60% B. 6.25% C. 8.75% D. 11.40% E. 14.00%

A. 1.60% (0.48/$30=1.6%)

The following data regarding its common stock were reported by a corporation: Authorized shares: 20,000 Issued shares: 15,000 Treasury Shares: $3,000 The number of outstanding shares is: A. 12,000 B. 15,000 C. 17,000 D. 20,000 E. 23,000

A. 12,000 (15,000 issued - 3,000 treasury = 12,000 outstanding)

Which of the following statements best describes how GAAP and IFRS treat cash? A. Accounting definitions for cash are similar for U.S. GAAP and IFRS. B. IFRS is more strict about what is considered cash than GAAP. C. GAAP is more strict about what is considered cash than IFRS. D. IFRS requires a cash balance of at least 10% of total assets; GAAP requires a cash balance of at least 5% of total assets. E. GAAP requires anything other than coins and bills in hand to be classified as cash equivalents while IFRS classifies coins and bills as cash equivalents.

A. Accounting definitions for cash are similar for US GAAP and IFRS

A post-closing trial balance includes: A. All ledger accounts with balances, none of which can be temporary accounts. B. All ledger accounts with balances, none of which can be permanent accounts. C. All ledger accounts with balances, which include some temporary and some permanent accounts. D. Only revenue and expense accounts. E. Only asset accounts.

A. All ledger accounts with balances, none of which can be temporary accounts

Amortizing a bond discount: A. Allocates a part of the total discount to each interest period. B. Increases the market value of the Bonds Payable. C. Decreases the Bonds Payable account. D. Decreases interest expense each period. E. Increases cash flows from the bond.

A. Allocates a part of the total discount to each interest period.

An employer's federal unemployment taxes (FUTA) are reported: A. Annually. B. Semiannually. C. Quarterly. D. Monthly. E. Weekly.

A. Annually

Employee vacation benefits: A. Are estimated liabilities. B. Are contingent liabilities. C. Are recorded as an expense when the employee takes a vacation. D. Are recorded as an expense when the employee retires. E. Increase net income.

A. Are estimated liabilites

Resources owned or controlled by a company that are expected to yield benefits are: A. Assets B. Revenues C. Liabilities D. Stockholder's equity E. Expenses

A. Assets

A financial statement providing information that helps users understand a company's financial status and lists the types and amounts of assets, liabilities, and equity as of a specific date is called a(n): A. Balance sheet. B. Income statement. C. Statement of cash flows. D. Statement of retained earnings. E. Financial status statement.

A. Balance sheet

Electron borrowed $75,000 cash from TechCom by signing a promissory note. TechCom's entry to record the transaction should include a: A. Debit to Notes Receivable for $75,000. B. Debit to Accounts Receivable for $75,000. C. Credit to Notes Receivable for $75,000. D. Debit Notes Payable for $75,000. E. Credit to Sales for $75,000.

A. Debit to Notes Receivable for $75,000

On May 1, 2014, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2015. The cash receipt was recorded as unearned fees. At December 31, 2014, $500 of the fees had been earned. The adjusting entry on December 31, 2014, should include a: A. Debit to Unearned Fees for $500. B. Credit to Unearned Fees for $500. C. Credit to Earned Fees for $1,000. D. Debit to Earned Fees for $1,000. E. Debit to Earned Fees for $500.

A. Debit to Unearned fees for $500

When two clerks share the same cash register, which internal control principle is violated? A. Establish responsibilities B. Maintain adequate records C. Insure assets D. Bond key employees E. Apply technological controls

A. Establish responsibilities

The annual federal unemployment tax return is: A. Form 940. B. Form 1099. C. Form 104. D. Form W-2. E. Form W-4.

A. Form 940

The principle prescribing that financial statements reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the: A. Going-concern principle. B. Business entity principle. C. Objectivity principle. D. Cost principle. E. Monetary unit principle.

A. Going-concern principle

The International Accounting Standards Board (IASB): A. Hopes to create harmony among accounting practices of different countries. B. Is the government group that establishes reporting requirements for companies that issue stock to the public. C. Has the authority to impose its standards on companies. D. Is the only source of U.S. generally accepted accounting principles (GAAP). E. Applies only to companies that are members of the European Union.

A. Hopes to create harmony among accounting practices of different countries

A limited partnership: A. Includes a general partner with unlimited liability. B. Is subject to double taxation. C. Has owners called stockholders. D. Is the same as a corporation. E. Must only have two partners.

A. Includes a general partner with unlimited liability

Reporting of discontinued segments includes: A. Income or loss from operating the discontinued segment net of tax and gain or loss from disposal of the segment's net assets net of tax. B. Extraordinary items. C. Changes in accounting principle. D. Items that are both unusual and infrequent. E. Writing off of receivables.

A. Income or loss from operating the discontinued segment net of tax and gain or loss from disposal of the segment's net assets net of tax

Which of the following statements is true? For the issuer: A. Interest paid on bonds is tax deductible. B. Interest paid on bonds is not tax deductible. C. Dividends paid to stockholders are tax deductible. D. Bonds are assets. E. Bonds always decrease return on equity.

A. Interest paid on bonds is tax deductible

Social responsibility: A. Is a concern for the impact of one's actions on society as a whole. B. Is a code that helps in dealing with confidential information. C. Is required by the SEC. D. Requires that all businesses conduct social audits. E. Is mandated by the federal government.

A. Is a concern for the impact of one's actions on society as a whole

The accrual basis of accounting: A. Is generally accepted for external reporting since it is more useful for most business decisions. B. Is flawed because it gives complete information about cash flows. C. Recognizes revenues when received in cash. D. Recognizes expenses when paid in cash. E. Eliminates the need for adjusting entries at the end of each period.

A. Is generally accepted for external reporting since it is more useful for most business decisions

The direct method of reporting operating cash flows: A. Is recommended but not required by the FASB. B. Must be used by all companies. C. Is used by most companies. D. Is considered supplementary disclosure. E. Is not recommended by the FASB, but is commonly used.

A. Is recommended but not required by the FASB

A premium on common stock: A. Is the amount paid in excess of par by purchasers of newly issued stock. B. Is the difference between par value and issue price when the amount paid is below par. C. Represents profit from issuing stock. D. Represents capital gain on sale of stock. E. Is prohibited in most states.

A. Is the amount paid in excess of par by purchasers of newly issued stock.

The number of days' sales uncollected: A. Is used to evaluate the liquidity of receivables. B. Is calculated by dividing accounts receivable by sales. C. Measures a company's ability to pay its bills on time. D. Measures a company's debt to income. E. Is calculated by dividing sales by accounts receivable.

A. Is used to evaluate the liquidity of receivables

A corporation's minimum legal capital is often defined to be the total par value of the shares: A. Issued B. Authorized C. Subscribed D. Outstanding E. In treasury

A. Issued

The inventory valuation method that results in the lowest taxable income in a period of inflation is: A. LIFO method. B. FIFO method. C. Weighted average cost method. D. Specific identification method. E. Gross profit method.

A. LIFO method

The objectivity principle: A. Means that information is supported by independent, unbiased evidence. B. Means that information can be based on what the preparer thinks is true. C. Means that financial statement should contain information that is optimistic. D. Means that a business may not recognize revenue until cash is received. E. Means the assets acquired must be recorded at what the company paid for them.

A. Means that information is supported by independent, unbiased evidence

A discount on bonds payable: A. Occurs when a company issues bonds with a contract rate less than the market rate. B. Occurs when a company issues bonds with a contract rate more than the market rate. C. Increases the Bond Payable account. D. Decreases the total bond interest expense. E. Is not allowed in many states to protect creditors.

A. Occurs when a company issues bonds with a contract rate less than the market

Intracompany standards for financial statement analysis are: A. Often based on a company's prior performance. B. Often set by competitors. C. Set by the company's industry. D. Based on rules of thumb. E. Published in Dun and Bradstreet.

A. Often based on a company's prior performance

The appropriate section in the statement of cash flows for reporting the cash payment of wages is: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these as this is not reported on the statement of cash flows.

A. Operating activities

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these as this is not reported on the statement of cash flows.

A. Operating activities

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n): A. Operating activity. B. Investing activity. C. Financing activity. D. Noncash investing and financing activity. E. None of these. This is not reported in the statement of cash flows.

A. Operating activity

An example of an operating activity is: A. Paying wages. B. Purchasing office equipment. C. Borrowing money from a bank. D. Selling stock. E. Paying off a loan.

A. Paying wages

The deferred income tax liability: A. Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. B. Is a contingent liability. C. Can result in a deferred income tax asset. D. Is never recorded. E. Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary.

A. Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules.

The direct method for the preparation of the operating activities section of the statement of cash flows: A. Separately lists each major item of operating cash receipts and cash payments. B. Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement. C. Reports an amount of cash flows from operations different from the amount determined using the indirect method. D. Is required if the company is a merchandiser. E. Is required by the FASB.

A. Separately lists each major item of operating activities section of the statement of cash flows.

Ethical behavior requires: A. That an auditor's pay not depend on the figures in the client's reports. B. Auditors to invest in businesses they audit. C. Analysts to report information favorable to their companies. D. Managers to use accounting information to benefit themselves. E. That an auditor provides a favorable opinion.

A. That an auditor's pay not depend on the figures in the client's reports.

Total asset turnover is used to evaluate: A. The efficiency of management's use of assets to generate sales. B. The need for asset replacement. C. The number of times operating assets were sold during the year. D. The cash flows used to acquire assets. E. The relation between asset cost and book value.

A. The efficiency of management's use of assets to generate sales

The amount of federal income taxes withheld from an employee's paycheck is determined by: A. The employee's annual earnings rate and number of withholding allowances. B. The employer's merit rating. C. The employee's annual earnings rate and merit rating. D. Multiplying gross pay by 6.2%. E. The employee's credit rating.

A. The employee's annual earnings rate and number of withholding allowances.

A good system of internal control: A. Urges adherence to prescribed managerial policies. B. Insures profitable operations. C. Eliminates the need for an audit. D. Requires the use of a manual accounting system. E. Is not necessary if the company uses a computerized system.

A. Urges adherence to prescribed managerial policies

Rocky Industries received its telephone bill in the amount of $300 and immediately paid it. Rocky's journal entry to record this transaction will include a: A. Debit to Telephone Expense for $300. B. Credit to Accounts Payable for $300. C. Debit to Cash for $300. D. Credit to Telephone Expense for $300. E. Debit to Accounts Payable for $300.

A. debit to telephone expense for $300

The full disclosure principle: A. Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made, and its effect on net income. B. Requires that companies use the same accounting method for inventory valuation period after period. C. Is not subject to the materiality principle. D. Is only applied to retailers. E. Is also called the consistency principle.

A. requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made, and its effect on net income

Common-size statements: A. Reveal changes in the relative magnitude of each financial statement item. B. Do not emphasize the relative magnitude of each item. C. Compare financial statements over time. D. Show the dollar amount of change for financial statement items. E. Consist of two or more balance sheets arranged side-by-side.

A. reveal changes in the relative magnitude of each financial statement item

Common Size Financial Statements

All individual accounts are shown in common size percents

A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company's current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company's inventory at the lower of cost or market. A. $2,550 B. $2,600 C. $2,700 D. $3,000 E. $3,200

B $2600 (200 UNITS @ $13 PER UNIT =$2600)

A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is: A. $0.75 B. $0.625 C. $0.875 D. $6.00 E. $8.00

B. $0.625 (1,500,000-250,000)/2,000,000 tons=$0.625 per ton (cost at purchase-salvage value)/estimated total unit output=depletion expense

A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000, net income totaled $263,500, and cost of goods sold of $420,000. What is the net sales amount for the period? A. $1,500,000 B. $1,275,000 C. $1,725,000 D. $1,521,000 E. $1,479,000

B. $1,275,000 (Sales-sales discounts-sales returns=net sales)

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold? A. $120 B. $124 C. $128 D. $130 E. $140

B. $124 ((10 units x $10) + (2 units x $12) =124)

Herald Company had sales of $135,000, sales discounts of $2,000 and sales returns of $3,200. Herald Company's net sales equal: A. $5,200. B. $129,800. C. $133,000. D. $135,000. E. $140,200.

B. $129,800 (Net sales=sales-sales discounts - sales returns)

A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in error? A. $150 understated B. $135 overstated C. $150 overstated D. $15 understated E. $135 understated

B. $135 overstated

Alpha Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Alpha's net sales for this period equal: A. $94,275. B. $172,550. C. $174,250. D. $176,025. E. $177,725.

B. $172,550 (cash sales + credit sales - sales returns and allowances and sales discounts = net sales)

On January 1, Able Company purchased equipment costing $135,000 with an estimated salvage value of $10,500, and an estimated useful life of five years. Using the straight-line method, what is the amount that should be recorded as depreciation on December 31?

B. $24,900 ($135,000-$10,500=$124,500/5=$24,900) (equipment cost - salvage value divided by useful life)

On December 1, Martin Company signed a $5,000, 3-month, 6% note payable, with the principle plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note? A. $0 B. $25 C. $50 D. $75 E. $300

B. $25 ($5000x0.06x1/12)

A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. A. $0 B. $33,750 C. $67,500 D. $750,000 E. $1,550,000

B. $33,750 ($750,000 x .09 x .5)

On April 30, 2014, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31, 2014? A. $500 B. $4,000 C. $6,000 D. $14,000 E. $18,000

B. $4,000 ($18,000 x 8/36 = $4,000)

The interest accrued on $3,600 at 7% for 60 days is: A. $36. B. $42. C. $252. D. $180. E. $420.

B. $42 (3,600 x .07 x 60/360)

Smitty Museum purchased the copyright to a piece of artwork for $922,000. Smitty plans to reproduce 1.8 million posters of the artwork over a period of 12 years. Calculate the amortization for the year assuming the Museum plans to reproduce and sell 130,000 posters the first year. A. $78,633 B. $76,833 C. $66,589 D. $74,125 E. $0, copyrights are not amortized.

B. $76,833 ($922,000/12 years=$76,333.33)

A company discarded a display case that it had originally purchased for $8,000. The case had $7,200 worth of accumulated depreciation. The company should recognize a(n): A. $0 gain or loss B. $800 loss C. $800 gain D. $8,000 loss E. $7,200 loss

B. $800 loss

Dell reported net sales of $8,739 million and average accounts receivable of $864 million. Its accounts receivable turnover is: A. 0.9 B. 10.1 C. 36.1 D. 50.0 E. 3,686.0

B. 10.1 (net sales/average accounts receivable=accounts receivable turnover)

A company paid $0.75 in cash dividends per share. It has earnings per share of $3.50 and a market price per share of $37.50. Its dividend yield equals: A. 11.7% B. 2.0% C. 10.9% D. 21.4% E. 46.7%

B. 2.0% (0.75/$37.50=2%)

A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: A. 2% B. 20% C. 200% D. 500% E. $8,000

B. 20% ($2000/$10000=0.20=20%) (NET INCOME/NET SALES=PROFIT MARGIN)

A company's gross profit was $83,750 and its net sales were $347,800. Its gross margin ratio equals: A. 4.2%. B. 24.1%. C. 75.9%. D. $83,750. E. $264,050.

B. 24.1% (gross margin ratio=gross profit/net sales)

A company has net sales of $870,000 and average accounts receivable of $174,000. What is its accounts receivable turnover for the period? A. 0.2 B. 5.0 C. 20.0 D. 73.0 E. 1,825.0

B. 5.0 ($870,000/$174,000=5) (net sales/average accounts receivable=accounts receivable turnover)

Unearned revenue is reported on the financial statements as: A. A revenue on the balance sheet. B. A liability on the balance sheet. C. An unearned revenue on the income statement. D. An asset on the balance sheet. E. An operating activity on the statement of cash flows.

B. A liability on the balance sheet

Which of the following statements is true? A. Retained earnings must be closed each accounting period. B. A post-closing trial balance should include only permanent accounts. C. Information on the work sheet can be used in place of preparing financial statements. D. By using a work sheet to prepare adjusting entries, you need not post these entries to the ledger accounts E. Closing entries are only necessary if errors have been made.

B. A post-closing trial balance should include only permanent accounts

Which of the following is true regarding the effective interest amortization method? A. Allocates bond interest expense using a changing interest rate. B. Allocates bond interest expense using a constant interest rate. C. Allocates a decreasing amount of interest over the life of a discounted bond. D. Allocates bond interest expense using the current market rate for each period. E. Is not allowed by the FASB.

B. Allocates bond interest expense using a constant interest rate.

Which of the following financial statement sections includes information on the background on a company, its industry, and its economic setting? A. Executive summary B. Analysis overview C. Evidential conclusions D. Factor analysis E. Inferences

B. Analysis overview

Physical inventory counts: A. Are not necessary under the perpetual system. B. Are necessary to measure and adjust for inventory shrinkage. C. Must be taken at least once a month. D. Require the use of hand-held portable computers. E. Are not necessary under the cost-to benefit constraint.

B. Are necessary to measure and adjust for inventory shrinkage.

Business can take all of the following forms except: A. Sole proprietorship. B. Common stock. C. Partnership. D. Corporation. E. Limited liability corporation.

B. Common stock

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the amount of cash or cash equivalent given in exchange is the: A. Accounting equation. B. Cost principle. C. Going-concern principle. D. Realization principle. E. Business entity principle.

B. Cost principle

A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a: A. Credit to Interest Income. B. Credit to Premium on Bonds Payable. C. Credit to Discount on Bonds Payable. D. Debit to Premium on Bonds Payable. E. Debit to Discount on Bonds Payable.

B. Credit to Premium on Bonds Payable

The private board that currently has the authority to establish U.S. generally accepted accounting principles is the: A. APB B. FASB C. AAA D. AICPA E. SEC

B. FASB

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these as this is not reported on the statement of cash flows.

B. Financing activities

The Federal Insurance Contributions Act (FICA) requires that each employer file a: A. W-4. B. Form 941. C. Form 1040. D. Form 1099. E. Form 521B.

B. Form 941

The owners of a partnership: A. Have created an entity that can also be called a sole proprietorship. B. Have unlimited liability. C. Have to have a written agreement in order to be legal. D. Have created a legal organization separate from its owners. E. Are called shareholders.

B. Have unlimited liability

Rent expense that is paid with cash appears on which of the following statements? A. Balance sheet. B. Income statement. C. Statement of retained earnings. D. Schedule of accounts receivable. E. Statement of cash received.

B. Income statement

A company acquires equipment for $75,000 cash. This represents a(n): A. Operating activity. B. Investing activity. C. Financing activity. D. Revenue activity. E. Expense activity.

B. Investing activity

A check: A. Involves the writer, the signers, the cashier, and the bank. B. Involves the maker, the payee and the bank. C. Involves the maker and the payee. D. Involves the bookkeeper, the payee, and the bank. E. Involves the signer, the cashier, and the company.

B. Involves the maker, the payee and the bank

Merchandise inventory: A. Is a long-term asset. B. Is a current asset. C. Includes supplies. D. Is classified with investments on the balance sheet. E. Must be sold within one month.

B. Is a current asset

A sales invoice: A. Is a type of use document. B. Is a source document. C. Is not needed by buyers. D. Gives rise to an entry in the accounting process. E. Is not necessary in accounting.

B. Is a source document

A promissory note: A. Is a short-term investment for the maker. B. Is a written promise to pay a specified amount of money at a certain date. C. Is a liability to the payee. D. Is another name for an installment receivable. E. Cannot be used in payment of an account receivable.

B. Is a written promise to pay a specified amount of money at a certain date

The Cash Over and Short account: A. Is used to record a credit balance in the cash account. B. Is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and from missing petty cash receipts. C. Is not necessary in a computerized accounting system. D. Can never have a debit balance. E. Can never have a credit balance.

B. Is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and from missing petty cash receipts.

An error in the period-end inventory causes an offsetting error in the next period and therefore: A. Managers can ignore the error. B. It is sometimes said to be self-correcting. C. It affects only income statement accounts. D. It affects only balance sheet accounts. E. Is immaterial for managerial decision making.

B. It is sometimes said to be self-correcting

Once the estimated depreciation expense for an asset is calculated: A. It cannot be changed due to the historical cost principle. B. It may be revised based on new information. C. Any changes are accumulated and recognized when the asset is sold. D. The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes. E. It cannot be changed due to the consistency principle.

B. It may be revised based on new information

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of: A. Items that require contra accounts. B. Items that require adjusting entries. C. Asset and equity. D. Asset accounts. E. Income statement accounts.

B. Items that require adjusting entries

Source documents include all of the following except: A. Sales tickets B. Ledgers C. Checks D. Purchase orders E. Bank statements

B. Ledgers

U.S. government bonds are: A. High-risk and high-return investments. B. Low-risk and low-return investments. C. High-risk and low-return investments. D. Low-risk and high-return investments. E. High risk and no-return investments.

B. Low-risk and low-return investments

Prenumbered printed checks are an example of which internal control principle? A. Technological controls. B. Maintain adequate records. C. Perform regular and independent reviews. D. Establish responsibilities. E. Divide responsibility for related transactions.

B. Maintain adequate records

Internal users of accounting information always include: A. Shareholders B. Managers C. Lenders D. Suppliers E. Customers

B. Managers

Recording the items on the financial statements in dollars is done because of the: A. Objectivity principle. B. Monetary unit principle. C. Revenue recognition principle. D. Going-concern principle. E. Cost principle.

B. Monetary unit principle

A company's internal control system: A. Eliminates the risk of loss. B. Monitors and controls business activities. C. Eliminates human error. D. Eliminates the need for audits. E. Is not necessary in large companies.

B. Monitors and controls business activities

To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: A. Safe deposit boxes B. Mortgages C. Equity D. The FASB E. Debentures

B. Mortgages

Liabilities: A. Must be certain. B. Must sometimes be estimated. C. Must be for a specific amount. D. Must always have a definite date for payment. E. Must involve an outflow of cash.

B. Must sometimes be estimated.

An example of a financing activity is: A. Buying office supplies. B. Obtaining a long-term loan. C. Buying office equipment. D. Selling inventory. E. Buying land.

B. Obtaining a long-term loan

General standards of comparisons (rules-of-thumb) are developed from: A. Industry statistics from the government. B. Past experience. C. Analysis of competitors. D. Relations between financial items. E. Dun and Bradstreet.

B. Past experience

Which of the following items is reported on the statement of cash flows under financing activities? A. Declaration of a cash dividend. B. Payment of a cash dividend. C. Declaration of a stock dividend. D. Payment of a stock dividend. E. Stock split.

B. Payment of a cash dividend

The primary objective of financial accounting is to A. Serve the decision-making needs of internal users. B. Provide financial statements to help external users analyze and interpret an organization's activities. C. Monitor and control company activities. D. Provide information on both the costs and benefits of managing products and services. E. Know what, when and how much to produce.

B. Provide financial statements to help external users analyze and interpret an organization's activities.

The main purpose of adjusting entries is to: A. Record external transactions and events. B. Record internal transactions and events. C. Recognize assets purchased during the period. D. Recognize debts paid during the period. E. Correct errors.

B. Record internal transactions and events

Which of the following statements is true regarding the documents in a voucher system? A. All voucher systems are the same. B. Recording a purchase is initiated by an invoice approval. C. A well-designed voucher system will allow department managers to place orders directly with suppliers for control purposes. D. A voucher system is most commonly used in very small companies to make up for the lack of other internal controls. E. A well designed voucher system will eliminate all fraud and error.

B. Recording a purchase is initiated by an invoice approval

A stock dividend transfers: A. Contributed capital to retained earnings. B. Retained earnings to contributed capital. C. Retained earnings to assets. D. Contributed capital to assets. E. Assets to contributed capital.

B. Retained earnings to contributed capital

Increases in retained earnings from a company's earnings activities are: A. Assets B. Revenues C. Liabilities D. Stockholder's equity E. Expenses

B. Revenues

An asset is: A. Only acquired with cash. B. Something the company owns. C. Only contributed by stockholders. D. A company's obligation to pay. E. Is also called contributed capital.

B. Something the company owns

The financial statement that describes where a company's cash came from and how it was spent during the period is the: A. Statement of financial position. B. Statement of cash flows. C. Balance sheet. D. Income statement. E. Statement of retained earnings.

B. Statement of cash flows

The dollar change for a financial statement item is calculated by: A. Subtracting the analysis period amount from the base period amount. B. Subtracting the base period amount from the analysis period amount. C. Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, and then multiplying that amount by 100. D. Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, and then multiplying that amount by 100. E. Subtracting the base period amount from the analysis amount, then dividing the result by the base amount.

B. Subtracting the base period amount from the analysis period amounts

A company issued 7% preferred stock with a $100 par value. This means that: A. Preferred shareholders have a guaranteed dividend. B. The amount of the potential dividend is $7 per year per preferred share. C. Preferred shareholders are entitled to 7% of the annual income. D. The market price per share will approximate $100 per share. E. Only 7% of the total contributed capital can be preferred stock.

B. The amount of the potential dividend is $7 per year per preferred share

When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for merchandise inventory is: A. The ending inventory amount. B. The beginning inventory amount. C. Equal to the cost of goods sold. D. Equal to the cost of goods purchased. E. Equal to the gross profit.

B. The beginning inventory amount

A bond traded at 102½ means that: A. The bond pays 2.5% interest. B. The bond traded at $1,025 per $1,000 bond. C. The market rate of interest is 2.5%. D. The bonds were retired at $1,025 each. E. The market rate of interest is 2½% above the contract rate.

B. The bond traded at $1,025 per $1,000 bond

Which of the following is the primary purpose of accounting? A. To establish a business. B. To identify, record, and communicate business transactions. C. To earn a large profit. D. To reduce taxes owed for the business. E. To establish credit for a company.

B. To identify, record, and communicate business transactions

The debt ratio is used: A. To measure the amount of equity relative to the expenses. B. To reflect the risk associated with a company's debts. C. Only by banks when a business applies for a loan. D. To determine how much debt a firm should pay off. E. To determine who a company owes.

B. To reflect the risk associated with a company's debts.

A company failed to post a $50 debit to the Office Supplies account. The effect of this error will be that the: A. Office Supplies account balance will be overstated. B. Trial balance will not balance. C. Error will overstate the debits listed in the journal. D. Total debits in the trial balance will be larger than the total credits. E. Trial balance will be in balance.

B. Trial balance will not balance.

Prior period adjustments to financial statements can result from: A. Changes in estimates. B. Using unacceptable accounting principles. C. Discontinued operations. D. Changes in tax law. E. Extraordinary items.

B. Using unacceptable accounting principles

Owners of preferred stock often do not have: A. Ownership rights to assets of the corporation. B. Voting rights. C. Preference to dividends. D. The right to sell their stock on the open market. E. Preference to assets at liquidation.

B. Voting rights

The inventory valuation method that tends to smooth out erratic changes in costs is: A. FIFO B. Weighted average C. LIFO D. Specific identification E. WIFO

B. Weighted average

Goods in transit are included in a purchaser's inventory: A. At any time during transit. B. When the purchaser is responsible for paying freight charges. C. When the supplier is responsible for freight charges. D. If the goods are shipped FOB destination. E. After the halfway point between the buyer and seller.

B. When the purchaser is responsible for paying freight charges

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of paid-in capital in excess of par is: A. $100 B. $600 C. $1,000 D. $6,000 E. $7,000

C. $1,000 ($7,000 - (60 shares x $100 par)=$1000)

A company had no office supplies at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year? A. $75 B. $125 C. $175 D. $250 E. $325

C. $175 ($250-$75=$175)

A company's board of directors votes to declare a cash dividend of $0.75 per share. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is: A. $375 B. $4,125 C. $7,125 D. $7,500 E. $11,250

C. $7,125 ($0.75 x 9,5000 shares = 7,125) (annual cash dividends per share/market price per share)

ABC Corporation had total quick assets of $5,888,000, current assets of $11,700,000, and current liabilities of $8,000,000. Its acid-test ratio equals: A. 0.50. B. 0.68. C. 0.74. D. 1.50. E. 2.20.

C. 0.74 (acid test ratio=quick assets/current liabilities)

A machine originally had an estimated useful life of 5 years, but after 3 complete years it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining: A. 2 years B. 5 years C. 7 years D. 8 years E. 10 years

C. 7 years (10 years of total life estimate - 3 years already depreciated =7 years)

A change in an accounting estimate is: A. Reflected in past financial statements. B. Reflected in future financial statements and also requires modification of past statements. C. A change in a calculated amount that is part of current and future financial statements that results from new information or subsequent developments and from better insight or improved judgment. D. Not allowed under current accounting rules. E. Considered an error in the financial statements.

C. A change in a calculated amount that is part of current and future financial statements that results from developments and from better insight or improved judgment

Adidas issued 10-year, 8% bonds with a par value of $200,000, where interest is paid semiannually. The market rate on the issue date was 7.5%. Adidas received $206,948 in cash proceeds. Which of the following statements is true? A. Adidas must pay $200,000 at maturity and no interest payments. B. Adidas must pay $206,948 at maturity and no interest payments. C. Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each. D. Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each. E. Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.

C. Adidas must pay $200,000 at maturity plus 20 interest payments of $8000 each. (semiannual interest payment: $200,000 x 0.08 x 0.5 year = 8,000)

Which of the following is a TRUE statement concerning a company's financial statements? A. Balance sheet and income statement data combined contain the complete financial picture of a given company. B. A trial balance is another name for a balance sheet. C. Another name for the income statement is the earnings statement. D. Dividends paid to a company's shareholders are shown on the income statement. E. he balance sheet shows the financial position of a company for a period of time.

C. Another name for the income statement is the earnings statement

Industry standards for financial statement analysis: A. Are based on a company's prior performance. B. Are set by the government. C. Are set by the financial performance and condition of the company's industry. D. Are based on rules of thumb. E. Compare a company's income with the prior year's income.

C. Are set by the financial performance and condition of the company's industry

Expenses: A. Increase retained earnings. B. Are increases in retained earnings from a company's earning activity. C. Are the costs of assets or services used to earn revenues. D. Occur when retained earnings exceed revenue. E. Are creditors' claims on assets.

C. Are the costs of assets or services used to earn revenues.

Extraordinary items: A. Are not reported on a corporate income statement. B. Are included in income from operations. C. Are unusual and infrequent. D. Include changes in accounting principle. E. Are disclosed before discontinued operations on the income statement.

C. Are unusual and infrequent

The income statement reports all of the following except: A. Revenues earned by a business. B. Expenses incurred by a business. C. Assets owned by a business. D. Net income or loss earned by a business. E. The time period over which the earnings occurred.

C. Assets owned by a business

The cash flow on total assets ratio: A. Is the same as return on assets. B. Is the same as profit margin. C. Can be an indicator of earnings quality. D. Is highly affected by accounting principles of income recognition and measurement. E. Is average net assets divided by cash flows from operations.

C. Can be an indicator of earnings quality

A statement of cash flows should reconcile the differences between the beginning and ending balances of: A. Net income. B. Equity. C. Cash and cash equivalents. D. Working capital. E. Cash, cash equivalents and short-term investments.

C. Cash and cash equivalents

The main purpose of the wage bracket withholding table is to: A. Compute social security withholding. B. Compute Medicare withholding. C. Compute federal income tax withholding. D. Prepare the W-4. E. Compute gross earnings.

C. Compute federal income tax withholding

A bond sells at a discount when the: A. Contract rate is above the market rate. B. Contract rate is equal to the market rate. C. Contract rate is below the market rate. D. Bond has a short-term life. E. Bond pays interest only once a year.

C. Contract rate is below the market rate.

Which of the following accounting principles would prescribe that all goods and services purchased are recorded at cost? A. Going-concern principle. B. Continuing-concern principle. C. Cost principle. D. Business entity principle. E. Consideration principle.

C. Cost principle

On a bank reconciliation, an unrecorded debit memorandum for printing checks is: A. Noted as a memorandum only. B. Added to the book balance of cash. C. Deducted from the book balance of cash. D. Added to the bank balance of cash. E. Deducted from the bank balance of cash.

C. Deducted from the book balance of cash

An error is indicated if the following account has a balance appearing on the post-closing trial balance: A. Office Equipment. B. Accumulated Depreciation-Office Equipment. C. Depreciation Expense-Office Equipment. D. Common Stock. E. Salaries Payable.

C. Depreciation expense-office equipment

The statement of changes in stockholders' equity: A. Is part of the statement of retained earnings. B. Shows only the ending balances in stockholders' equity. C. Describes changes in contributed capital and retained earnings subcategories. D. Does not include changes in treasury stock. E. Is reported by very few companies.

C. Describes changes in contributed capital and retained earnings subcategories.

The common-size percent is computed by: A. Dividing the analysis amount by the base amount. B. Dividing the base amount by the analysis amount. C. Dividing the analysis amount by the base amount and multiplying the result by 100. D. Dividing the base amount by the analysis amount and multiplying the result by 1,000. E. Subtracting the base amount from the analysis amount and multiplying the result by 100.

C. Dividing the analysis amount by the base amount and multiplying the result by 100.

Which of the following accounts would be closed at the end of the accounting period? A. Accounts Receivable B. Unearned Consulting Fees C. Fees Earned D. Retained Earnings E. Land

C. Fees earned

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: A. Operating activities B. Investing activities C. Financing activities D. Direct activities E. Indirect activities

C. Financing activities

What ethics are crucial to accounting? A. Ethical behavior creates the most profit for the business. B. Ethics are a tool that helps the accountants balance the accounting equation. C. For accounting information to be useful, it must be trusted and therefore the result of ethical decisions. D. Ethics are important to consider when applying GAAP, but do not apply to international accounting issues. E. Ethics are a way to compute revenues and expenses, but they do not apply to assets, liabilities, and owners' equity.

C. For accounting information to be useful, it must be trusted and therefore the result of ethical decisions.

The accounting principle that requires significant noncash financing and investing activities be reported on the statement of cash flows is the: A. Historical cost principle B. Materiality principle C. Full disclosure principle D. Going concern principle E. Business entity principle

C. Full disclosure principle

Technological advancement has A. Has replaced accounting. B.Has not changed the work that accountants do. C. Has freed accounting professionals to concentrate more on the analysis and interpretation of information. D. In accounting has replaced the need for decision makers. E. In accounting is only available to large corporations.

C. Has freed accounting professionals to concentrate more on the analysis and interpretation of information.

Congress passed the Sarbanes-Oxley Act to A. Provide jobs to U.S. accountants and limit the number of jobs sent outside the country. B. Impose penalties on CEO's and CFO's who knowingly sign off on bogus accounting reports, although at this time the penalties are token amounts. C. Help curb financial abuses at companies that issue their stock to the public. D. Force auditors to attest to the absolute accuracy of the financial statements. E. Require that all companies publicly disclose their internal control plans.

C. Help curb financial abuses at companies that issue their stock to the public

Which financial statements are prepared for a period of time? A. Income statement, statement of retained earnings, balance sheet and statement of cash flows. B. Balance sheet. C. Income statement, statement of retained earnings, and statement of cash flows. D. Income statement and balance sheet. E. Statement of retained earnings and statement of cash flows.

C. Income statement, statement of retained earnings, and statement of cash flows

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these as this is not reported on the statement of cash flows.

C. Investing activities

The carrying value of a long-term notes payable: A. Is computed as the future value of all remaining future payments, using the market rate as interest. B. Is the face value of the long-term note less the total of all future interest payments. C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance. D. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest. E. Decreases each time period the discount on the note is amortized.

C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance

Many companies use accelerated depreciation in computing taxable income because: A. It is required by the tax rules. B. It is required by financial reporting rules. C. It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due. D. Using it causes a company to use higher income in the early years of the asset's useful life. E. The results are identical to straight-line depreciation.

C. It postpones tax payments until later years, and the company can use the resources now to earn additional income before payment is due

Which of the following assets is not depreciated? A. Store fixtures B. Computers C. Land D. Buildings E. Vehicles

C. Land

Another name for equity is: A. Net income B. Expenses C. Net assets D. Revenue E. Net loss

C. Net assets

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: A. Financing activities B. Investing activities C. Operating activities D. Direct activities E. Indirect activities

C. Operating activties

An example of an investing activity is: A. Paying wages of employees. B. Paying dividends. C. Purchasing land. D. Selling inventory. E. Contribution from owner.

C. Purchasing land.

The indirect method for the preparation of the operating activities section of the statement of cash flows: A. Separately lists each major item of operating cash receipts. B. Separately lists each major item of operating cash payments. C. Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities. D. Is required if the company is a merchandiser. E. Must not be used in all circumstances.

C. Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities

Accounting standards: A. Allow companies to omit the statement of cash flows from a complete set of financial statements if cash is an insignificant asset. B. Require that companies omit the statement of cash flows from a complete set of financial statements if the company has no investing activities. C. Require that companies include a statement of cash flows in a complete set of financial statements. D. Allow companies to include the statement of cash flows in a complete set of financial statements if the cash balance makes up more than 50% of the current assets. E. Allow companies to omit the statement of cash flows from a complete set of financial statements if the company has no financing activities.

C. Require that companies include a statement of cash flows in a complete flows in a complete set of financial statements.

According to IFRS, comparative information on financial statements is: A. Not required. B. Required for publicly traded companies only. C. Required for the preceding period only. D. Required for the last five years. E. Not required, but considered a hallmark for companies of excellence.

C. Required for the preceding period only.

The principle that (A) requires revenue to be recognized at the time it is earned, (B) allows the inflow of assets associated with revenue to be in a form other than cash, and (C) measures the amount of revenue as the cash plus the cash equivalent value of any non-cash assets received from customers in exchange for goods or services is called the: A. Going-concern principle. B. Cost principle. C. Revenue recognition principle. D. Objectivity principle. E. Business entity principle.

C. Revenue recognition principle

Prior period adjustments are reported in the: A. Income statement. B. Balance sheet. C. Statement of retained earnings. D. Statement of cash flows. E. Notes to the financial statements.

C. Statement of retained earnings

A bondholder that owns a $100, 10%, 10-year bond has: A. Ownership rights in the company who issued the bond. B. The right to receive $10 per year until maturity. C. The right to receive $1,000 at maturity. D. The right to receive $10,000 at maturity. E. The right to receive dividends of $1,000 per year.

C. The right to receive $1,0000 at maturity.

A balance sheet lists: A. The types and amounts of the revenues and expenses of a business. B. Only the information about what happened to retained earnings during a time period. C. The types and amounts of assets, liabilities and equity of a business as of a specific date. D. The cash inflows and outflows during the period. E. The assets and liabilities of a company, but not the equity.

C. The types and amounts of assets, liabilities and equity of a business as of a specific date.

The matching principle requires: A. That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user. B. The use of the direct write-off method for bad debts. C. The use of the allowance method of accounting for bad debts. D. That bad debts be disclosed in the financial statements. E. That bad debts not be written off.

C. The use of the allowance method of accounting for bad debts

Which of the following statements best describes the relationship of U.S. GAAP and IFRS? A. They are identical. B. They are entirely different conceptual frameworks. C. They are similar but not identical. D. Neither has anything to do with accounting. E. They both relate only to publicly traded companies.

C. They are similar but not identical.

What is the difference between GAAP and IFRS presentations of the current assets section on the balance sheet? A. Under IFRS it is mandatory to present current assets first while under GAAP it is customary (but not required) to present noncurrent assets first. B. Both IFRS and GAAP require that current assets are listed first. C. Under GAAP it is mandatory to present current assets first, while under IFRS it is customary (but not required) to present noncurrent assets first. D. It is customary (but not required) under both IFRS and GAAP to present noncurrent assets first. E. GAAP requires that current assets be presented first, while IFRS requires that current assets be presented last.

C. Under GAAP it is mandatory to present current assets first, while under IFRS it is customary (but not required) to present noncurrent assets first

Amounts received in advance from customers for future products or services: A. Are revenues. B. Increase income. C. Are liabilities. D. Are not allowed under GAAP. E. Require an outlay of cash in the future.

C. are liabilities

On November 15, 2013, Betty Corporation accepted a note receivable in place of an outstanding accounts receivable in the amount of $138,460. The note is due in 90 days and has an interest rate of 7.5%. What would be the amount required for the December 31, 2013, adjusting journal entry? A. $35,913.06 B. $34,615.00 C. $10,384.50 D. $1,298.06 E. $2,596.13

D. $1,298.06 ($138,460 × .075 × 45/360 = $1,298.06)

A company has 40,000 shares of common stock outstanding. The stockholders' equity applicable to common shares is $470,000 and the par value per common share is $10. The book value per share is: A. $0.09 B. $1.75 C. $10.00 D. $11.75 E. $47.50

D. $11.75 ($470,000/40,000 shares=$11.75 per share)

A company had sales of $375,000 and gross profit of $157,500. Its cost of goods sold was: A. $(217,000). B. $375,000. C. $157,500. D. $217,500. E. $532,500.

D. $217,500 (cost of goods sold=Sales-gross profit)

Ending liabilities were $67,000, beginning equity was $87,000, common stock issued during year totaled $31,000, expenses for the year were $22,000, dividends declared totaled $13,000, ending equity for the year was $181,000, and beginning assets for the year were $222,000. What are the ending assets for the year? A. $154,000 B. $134,000 C. $212,000 D. $248,000 E. $155,000

D. $248,000 (67,000+181,000=248,000)

Temper Company has credit sales of $3.10 million for year 2013. Temper estimates that .9% of the credit sales will not be collected. On December 31, 2013, the company's Allowance for Doubtful Accounts has an unadjusted credit balance of $2,222. Assuming the company uses the percent of sales method, what is the amount that Temper will enter as the Bad Debt Expense in the December 31 adjusting journal entry? A. $25,246.40 B. $27,468.40 C. $23,024.40 D. $27,900.00 E. $24,420.40

D. $27,900 (3,100,000 x 0.09 = 27,900)

A company had sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals: A. $(417,000). B. $695,000. C. $278,000. D. $417,000. E. $973,000.

D. $417,000 (Gross profit=sales-cost of goods sold)

The amount due on the date of maturity for a $6,000, 60-day, 8%, note receivable is: A. $6,000 B. $6,480 C. $5,520 D. $6,080 E. $5,920

D. $6,080 (Interest: $6,000 × .08 × 60/360 = $80 Amount due at maturity = $6,000 + $80 = $6,080)

Beginning assets were $437,600, beginning liabilities were $262,560, common stock issued during the year totaled $45,000, revenue for the year was $414,250, expenses for the year were $280,000, dividends declared were $22,700, and ending liabilities were $350,000. What were the ending assets for the year? A. $700,160 B. $612,560 C. $787,600 D. $681,590 E. $1,159,410

D. $681,590 (437,600-262,560+45,000+414,250-280,000-22,700=331590 end equity + 350,000=681,590)

A company has net sales of $1,500,000, sales commissions in the amount of $194,000, net income of $366,400, and the gross profit ratio of 60%. What amount is listed as gross profit on the income statement for the period? A. $563,760 B. $600,000 C. $783,600 D. $900,000 E. $1,119,840

D. $900,000 (net sales x gross profit ratio = gross profit)

Stride Rite has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio. A. 38.6% B. 13.4% C. 34.9% D. 25.9% E. 14.9%

D. 25.9%

Treasury stock is classified as: A. An asset account. B. A contra asset account. C. A revenue account. D. A contra equity account. E. A liability account.

D. A contra equity account

Which of the following accounts would not be impacted by adjusting journal entries? A. Accounts Receivable B. Consulting Fee Earned C. Unearned Consulting Fees D. Cash E. Wages Payable

D. Cash

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n): A. Short-term marketable equity security. B. Operating activity. C. Common stock. D. Cash equivalent. E. Financing activity.

D. Cash equivalent

Wisconsin Rentals purchased office supplies on credit. The journal entry made by Wisconsin Rentals to record this transaction will include a: A. Debit to Accounts Payable. B. Debit to Accounts Receivable. C. Credit to Cash. D. Credit to Accounts Payable. E. Credit to Retained Earnings.

D. Credit to accounts payable

Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for a six-month contract in advance. Management Services' journal entry to record this transaction will include a: A. Debit to Unearned Management Fees for $60,000. B. Credit to Management Fees Earned for $60,000. C. Credit to Cash for $60,000. D. Credit to Unearned Management Fees for $60,000. E. Debit to Management Fees Earned for $60,000.

D. Credit to unearned management fees for $60,000

The days' sales uncollected ratio is used to: A. Measure how many days of sales remain until the end of the year. B. Determine the number of days that have passed without collecting on accounts receivable. C. Identify the likelihood of collecting sales on account. D. Estimate how much time is likely to pass before the amount of accounts receivable is collected. E. Measure the amount of layaway sales for a period.

D. Estimate how much time is likely to pass before the amount of accounts receivables is collected

Generally accepted accounting Principles: A.Focus on the review of a situation. B. Do not require financial statements. C. Never change. D. Intend to make information on the financial statements relevant, reliable, and comparable. E. Oversees Security and Exchange Commission.

D. Intend to make information on the financial statements relevant, reliable, and comparable

The current ratio: A. Is used to measure a company's profitability. B. Is used to measure the relation between assets and long-term debt. C. Measures the effect of operating income on profit. D. Is used to help evaluate a company's ability to pay its short-term obligations. E. Is calculated by dividing current assets by equity.

D. Is used to help evaluate a company's ability to pay its short-term obligations

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is: A. Cash. B. Cash received from customers. C. Increase (decrease) in accounts receivable. D. Net income. E. Adjustments to net income.

D. Net income

The accounting guideline prescribing that financial statement information be supported by independent, unbiased evidence other than someone's belief or opinion is the: A. Business entity principle B. Monetary unit principle C. Going-concern principle D. Objectivity principle E. Full disclosure principle

D. Objectivity principle

Under IFRS, cash outflows for interest expense are classified as A. Operating. B. Investing. C. Financing. D. Operating or investing, assuming that the classification is applied consistently across all periods. E. Investing or financing, depending upon who is the recipient of the interest paid.

D. Operating or investing, assuming that the classification is applied consistently across all periods

The major activities of a business include: A. Operating, investing, making a profit. B. Investing, making a profit, operating. C. Making a profit, operating, borrowing. D. Operating, investing, financing. E. Investing, making a profit, financing.

D. Operating, investing, financing

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash financing and investing activities. E. None of these as this is not reported on the statement of cash flows.

D. Schedule of noncash financing and investing activities

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is: A. Operating activities. B. Financing activities. C. Investing activities. D. Schedule of noncash investing or financing activity. E. None of these as this is not reported on the statement of cash flows.

D. Schedule of noncash investing or financing activity

Cash investments by owners in exchange for stock are listed on which of the following statements? A. Balance sheet B. Income statement C. Statement of retained earnings D. Statement of cash flows E. Statement of cash received

D. Statement of cash flows.

In horizontal analysis the percent change is computed by: A. Subtracting the analysis period amount from the base period amount. B. Subtracting the base period amount from the analysis period amount. C. Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, and then multiplying that amount by 100. D. Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, and then multiplying that amount by 100. E. Subtracting the base period amount from the analysis amount, then dividing the result by the analysis period amount.

D. Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, and then multiplying that amount by 100

If the Debit and Credit column totals of a trial balance are equal, then: A. All transactions have been recorded correctly. B. All entries from the journal have been posted to the ledger correctly. C. All ledger account balances are correct. D. The total debit entries and total credit entries are equal. E. The balance sheet would be correct.

D. The total debit entries and total credit entries are equal.

Which of the following statements is not true about assets? A. They are economic resources owned or controlled by the business. B. They are expected to provide future benefits to the business. C. They appear on the balance sheet. D. They appear on the statement of retained earnings. E. Claims on them are shared between creditors and owners.

D. They appear on the statement of retained earnings

Western Company has an annual reporting period that runs from July 1 through June 30. Based on this information, which of the following is a true statement? A. Western probably has little seasonal variation in their sales. B. Western has violated the time period principle. C. Western must prepare financial statements as of December 31 each year. D. Western has adopted a fiscal year. E. Western does not have an accountant.

D. Western has adopted a fiscal year.

The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses is called a(n): A. Balance sheet. B. Statement of retained earnings. C. Statement of cash flows. D. Income statement. E. Statement of financial position.

D. income statement

A company issued 8%, 15-year bonds with a par value of $550,000. The current market rate is 8%. The journal entry to record each semiannual interest payment is:

Debit Bonds Interest 22,000 Credit cash 22,000 ($550,000 x 0.08 x 6/12 =)

On January 1, 2013, Jacob issues $600,000 of 11%, 15-year bonds at a price of 102½. What is the journal entry to record the issuance of these bonds?

Debit Cash 615,000 Credit bonds payable 600,000 premium on bonds payable 15,000 (issue price: 600,000 x 1.025=615,000) (premium: 615,000 - 600,000 = 15,000)

Robert Haddon contributed $70,000 in cash and some land worth $130,000 to open a new business, RH Consulting. Which of the following general journal entries will RH Consulting make to record this transaction?

Debit Cash 70,000 Debit Land 130,000 Credit Common stock 200,000

A company that uses the perpetual inventory system purchased merchandise inventory at a cost of $4,300 with credit terms 3/15, net 45. If the company elects to pay within the discount period, what would be the appropriate journal entry to record the payment?

Debit accounts payable 4,300 Credit merchandise inventory 129 credit cash 4,171

On July 22, a company that uses the perpetual inventory system purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 30. If the company pays for the purchase on August 1, what would be the appropriate journal entry?

Debit accounts payable 5,250 Credit Merchandise inventory 105 Credit Cash 5,145

On July 22, a company purchased merchandise inventory at a cost of $5,250 with credit terms 2/10, net 30. If the company pays for the purchase on August 7, what would be the appropriate journal entry?

Debit accounts payable 5,250 Credit cash 5,250

On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the perpetual inventory system. The journal entry or entries that Robertson will make on October 1 is:

Debit accounts receivable $5800 Credit Sales $5800 Debit Cost of goods sold $4000 Credit Merchandise inventory $4000

On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. The journal entry or entries that Robertson will make on October 1 is:

Debit accounts receivable 5,800 credit sales 5,800

On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. Alberts pays the invoice on October 8 and takes the appropriate discount. The journal entry that Robertson makes on October 8 is:

Debit cash 5,684 debit sales discounts 116 credit accounts receivable 5,800

Mix Recording Studios purchased $7,800 in electronic components from TechCom. Mix Recording Studios signed a 60-day, 10% promissory note for $7,800. TechCom's journal entry to record the sales portion of the transaction is:

Debit notes receivable 7800 credit sales 7800

On October 1, Robertson Company sold merchandise in the amount of $5,800 to Alberts, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. On October 4, Alberts returns some of the merchandise. The selling price of the merchandise is $500 and the cost of the merchandise returned is $350. The entry or entries that Robertson must make on October 4 is:

Debit sales returns and allowances 500 credit accounts receivable 500

Ending liabilities were $67,000, beginning equity was $87,000, common stock issued during year totaled $31,000, expenses for the year were $22,000, dividends declared totaled $13,000, ending equity for the year was $181,000, and beginning assets for the year were $222,000. What were beginning liabilities for the year? A. $154,000 B. $155,000 C. $212,000 D. $248,000 E. $135,000

E. $135,000 (222,000-87,000=135,000)

Beginning assets were $437,600, beginning liabilities were $262,560, common stock issued during the year totaled $45,000, revenue for the year was $414,250, expenses for the year were $280,000, dividends declared were $22,700, and ending liabilities were $350,000. What was the beginning equity for the year? A. $700,160 B. $787,600 C. $187,600 D. $612,560 E. $175,040

E. $175,040 (437,600-262,560=175,040)

Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, debit cash over/short $2.19. If the original amount in petty cash is $320, how much is in petty cash before the reimbursement? A. $320.00 B. $202.44 C. $37.56 D. $275.87 E. $278.06

E. $278.06 (petty cash-debit postage expense-debit office supplies expense - cash over and short=278.06)

Triple Company's accountant made an entry that included the following items: debit postage expense $12.42, debit office supplies expense $27.33, debit cash over/short $2.19. If the original amount in petty cash is $320, how much was the credit to cash for the reimbursement? A. $320.00 B. $202.44 C. $37.56 D. $39.75 E. $41.94

E. $41.94 (Debit postage expense + debit office supplies expense + cash over/short)

A company purchased equipment and signed a seven-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value factor for an annuity for seven years at 9% is 5.0330. What value for this equipment should be recorded on the company's books on the day the contract is signed? A. $9,000 B. $5,033 C. $63,000 D. $57,330 E. $45,297

E. $45,297 (Annual payments x present factor)(9000 x 5.0330)

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital is: A. $100 B. $600 C. $1,000 D. $6,000 E. $7,000

E. $7,000

What is the amount that Mission Company will withhold from Smith's August gross pay? A. $62.00 B. $138.50 C. $443.20 D. $581.70 E. $76.50

E. $76.50 ($1000 x 0.0765 = 76.50)

A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000, net income of $263,500, and cost of goods sold of $420,000. What is the gross profit/margin for the period? A. $806,000 B. $1,031,000 C. $1,182,000 D. $1,080,000 E. $855,000

E. $855,000 (Sales - sales discounts - sales returns = net sales - cost of goods sold = gross profit/margin)

Changes in accounting estimates are: A. Considered accounting errors. B. Reported as prior period adjustments. C. Accounted for with a cumulative "catch-up" adjustment. D. Extraordinary items. E. Accounted for in current and future periods.

E. Accounted for in current and future

Expenses incurred but unpaid that are recorded during the adjusting process with a debit to an expense and a credit to a liability are: A. Intangible expenses B. Prepaid expenses C. Unearned expenses D. Net expenses E. Accrued expenses

E. Accrued Expenses

A company borrows $125,000 from the Eastside Bank and receives the loan proceeds in cash. This represents a(n): A. Revenue activity. B. Operating activity. C. Expense activity. D. Investing activity. E. Financing activity.

E. Financing activity

The organization that attempts to create more harmony among the accounting practices of different countries by identifying preferred practices and encouraging their worldwide acceptance is the: A. AICPA B. FASB C. CAP D. SEC E. IASB

E. IASB

During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is: A. Specific identification method. B. Average cost method. C. Weighted average method. D. FIFO method. E. LIFO method.

E. LIFO method

A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is equal to the: A. Acid-test ratio. B. Merchandise turnover. C. Price earnings ratio. D. Accounts receivable turnover. E. Profit margin ratio.

E. Profit margin ratio

Which one of the following is representative of typical cash flows from operating activities? A. Proceeds from collecting the principal amount of loans. B. Repayment of principal on loans. C. Proceeds from the issuance of bonds and notes payable. D. Payments by a merchandiser to acquire equity securities of other companies. E. Receipts of cash sales.

E. Receipts of cash sales

Which of the following elements are found on the balance sheet? A. Service revenue. B. Net income. C. Operating activities. D. Utilities expense. E. Retained earnings.

E. Retained earnings

Which of the following elements are found on the income statement? A. Cash B. Accounts receivable C. Common stock D. Retained earnings E. Salaries expense

E. Salaries expense

Which of the following accounts would be closed with a debit? A. Sales Discounts B. Sales Returns and Allowances C. Cost of Goods Sold D. Operating Expenses E. Sales

E. Sales

If an issuer sells a bond at any other date than the interest payment date: A. This means the bond sells at a premium. B. This means the bond sells at a discount. C. The issuing company will report a loss on the sale of the bond. D. The issuing company will report a gain on the sale of the bond. E. The buyer normally pays the issuer the purchase price plus any interest accrued since the last interest payment date.

E. The buyer normally pays the issuer the purchase price plus any interest accrued since the last interest payment date.

Which assumption assumes that all accounting information can be reported monthly or yearly? A. Business entity assumption B. Monetary unit assumption C. Value assumption D. Cost assumption E. Time period assumption

E. Time period assumption

The comparison of a company's financial condition and performance to a base amount is known as: A. Financial reporting. B. Horizontal ratios. C. Investment analysis. D. Risk analysis. E. Vertical analysis.

E. Vertical Analysis

Under the alternative method for accounting for unearned revenues, which of the following pairs of journal entry formats is correct?

Initial entry: Debit cash, credit consulting revenue Adjusting entry: debit consulting revenue, credit unearned revenue

Under the alternative method for recording prepaid expenses, which is the correct set of journal entries?

Initial entry: debit insurance expense, credit cash Adjusting entry: debit prepaid insurance, credit insurance expense

Comparative Financial Statements

Shows financial accounts side by side in columns on a single statement

A company issued five year, 5% bonds with a par value of $100000. The company received $95735 for the bonds. Using the straight line method, the company's interest expense for the first semiannual interest period is a. $2,926.50 b. $5,853.50 c. $2,500 d. $5,000 e. $9,573.50

a. $2,926.50

On January 1, 2013, Lane issued $700,000 of 7%, 15-year bonds at a price of 1063⁄4. The interest payments are made on June 30 and December 31. Lane elects a fiscal year ending September 30. What is the amount that would be recorded as cash paid in the December 31, 2013, journal entry? a. $24,500 b. $22,925 c. $12,250 d. $11,462 e. $13,458

a. $24,500

On January 1, 2013, Lane issues $700,000 of 7%, 15-year bonds at a price of 106¾. The interest payments are made on June 30 and December 31. Lane elects a fiscal year ending September 30. What is the amount that would be recorded as cash paid in the December 31, 2013, journal entry? a. $24,500 b. $22,925 c. $12,250 d. $11,462 e. $13,458

a. $24,500

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is: a. $50,000. b. $5,000. c. $45,000. d. Zero. This is an operating activity. e. Zero. This is a financing activity.

a. $50,000.

A company paid cash dividends of $0.81 per share. Its earnings per share is $6.95 and its market price per share is $45. Its dividend yield is a. 1.8% b. 11.7% c. 15.4% d. 55.6% e. 8.6%

a. 1.8%

Amortizing a bond discount: a. Allocates a part of the total discount to each interest period. b. Increases the market value of the Bonds Payable. c. Decreases the Bonds Payable account. d. Decreases interest expense each period. e. Increases cash flows from the bond.

a. Allocates a part of the total discount to each interest period.

If the credit balance of the Allowance for Doubtful Accounts account exceeds the amount of a bad debt being written off, the entry to record the write-off against the allowance account results in: a. An increase in the expenses of the current period b. A reduction in current assets c. A reduction in equity d. No effect on the expenses of the current period e. A reduction of current liabilities

a. An increase in the expenses of the current period

A company issued 60 shares of $30 par value preferred stock for $6000 cash. The journal entry to record the issuance is: a. Debit Cash 6000; Credit Preferred Stock par $1800; Credit Paid-In capital in excess of par value $4200 b. Debit cash 4000; Credit Preferred stock 4000 c. Debit Preferred stock 1800; Credit cash 1800. d. Debit Cash $1800; Debit Paid-In capital in excess of par value $4200; Credit Preferred Stock par $6000 e. Credit Cash $6000; Credit Investment in Preferred stock $6000.

a. Debit Cash 6000; Credit Preferred Stock par $1800; Credit Paid-In capital in excess of par value $4200

Electron borrowed $75,000 cash from TechCom by signing a promissory note. TechCom's entry to record the transaction should include a: a. Debit to Notes Receivable for $75,000. b. Debit to Accounts Receivable for $75,000. c. Credit to Notes Receivable for $75,000. d. Debit Notes Payable for $75,000. e. Credit to Sales for $75,000.

a. Debit to Notes Receivable for $75,000.

The ability to meet short-term obligations and to efficiently generate revenues is called: a. Liquidity and efficiency b. Solvency c. Profitability d. Market prospects e. Credit worthiness

a. Liquidity and efficiency

A company's ability to meet short term obligations and efficiently generate revenues is: a. Liquidity. b. Solvency. c. Profitability. d. Market prospects.

a. Liquidity.

The ability to generate positive future expectations in the industry is called: a. Market prospects b. Profitability c. Liquidity and efficiency d. Creditworthiness e. Solvency

a. Market prospects

Cash flows from interest received on loans are reported in the statement of cash flows as part of: a. Operating activities b. Financing activities c. Investing activities d. Noncash activities e. Not reported in the statement of cash flows

a. Operating activities

A stock dividend transfers: a. Retained earnings to contributed capital. b. Contributed capital to retained earnings. c. Retained earnings to assets. d. Contributed capital to assets. e. Assets to contributed capital.

a. Retained earnings to contributed capital.

A bondholder that own a $1,000, 6% 15 year bond has a. The right to receive $1,000 at maturity b. Ownership rights in the bond issuing maturity c. The right to receive $60 a month until maturity d. The right to receive $1,900 at maturity e. The right to receive $600 per year until maturity

a. The right to receive $1,000 at maturity

Par value of a stock refers to the: a. Value assigned per share by the corporate charter b. Issue price of the stock c. Maximum selling price of the stock d. Dividend value of the stock e. Market value of the stock on the date of the financial statements

a. Value assigned per share by the corporate charter

Employer payroll taxes: a. are added expenses beyond that for the wages and salaries earned by employees b. represent the federal taxes withheld from employees c. represent the Social Security taxes withheld from employees d. are paid by the employee e. are payable for up to a maximum $132,000 of employee earnings

a. are added expenses beyond that for the wages and salaries earned by employees

A company reports net income of $75,000. Its weighted average common shares outstanding is 19,000. It has no other stock outstanding. Its earnings per share is a. $4.69 b. $3.95 c. $3.75 d. $2.08 e. $4.41

b. $3.95

Morgan Company issues 9% 20-year bonds with a par value of $750,000 that pay interest semiannually. The current market rate is 8%. The amount paid to the bondholders for each semiannual interest payment is: a. $60,000 b. $33,750 c. $67,500 d. $30,000 e. $375,000

b. $33,750

A company paid $0.65 in cash dividends per share. It has earnings per share of $3.50 and a market price per share of $37.50. Its dividend yield equals: a. 46.7% b. 1.73% c. 9.33% d. 21.4% e. 1.70%

b. 1.73%

A company paid $0.72 in cash dividends per share. It has earnings per share of $4.20 and a market price per share of $28.00. Its dividend yield equals: a. 17.14% b. 2.57% c. 8.75% d. 11.40% e. 15.00%

b. 2.57%

A check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794. How should this error be treated on the bank reconciliation? a. Subtract $45 from the bank's balance b. Add $45 to the bank's balance c. Subtract $45 from the book balance d. Add $45 to the book balance e. Subtract $45 from the bank balance and add $45 to the book balance

b. Add $45 to the bank's balance

Three of the most common tools of financial analysis are: a. Ratio analysis, horizontal analysis, financial reporting b. Horizontal analysis, vertical analysis, ratio analysis c. Trend analysis, financial reporting, ratio analysis d. Financial reporting, ratio analysis, vertical analysis e. Vertical analysis, political analysis, horizontal analysis

b. Horizontal analysis, vertical analysis, ratio analysis

The review of financial statement data across time is: a. Financial reporting. b. Horizontal analysis. c. Investment analysis. d. Risk analysis. e. Vertical analysis.

b. Horizontal analysis.

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: a. Debentures b. Installment notes c. Indentures d. Investment notes e. Discounted notes

b. Installment notes

A company is making interest payments on loan given by a bank. The interest payments are considered a: a. Short-term marketable equity security. b. Operating activity. c. Common stock. d. Cash equivalent. e. Financing activity.

b. Operating activity.

A company forgot to record accrued and unpaid wages of $350,000 at period-end. This oversight will: a. Understate net income by $350,000 b. Overstate net income by $350,000 c. Have no effect on net income d. Understate assets by $350,000 e. Overstate assets by $350,000

b. Overstate net income by $350,000

A company made no adjusting entry for accrued and unpaid employee wages of $88,000 on December 31st this oversight would: a. Understate net income by $88,000 b. Overstate net income by $88,000 c. Have no effect on net income d. Overstate assets by $88,000 e. Understate assets by $88,000

b. Overstate net income by $88,000

A company issued 7% preferred stock with a $100 par value. This means that: a. Preferred shareholders have a guaranteed dividend. b. The amount of the potential dividend is $7 per year per preferred share. c. Preferred shareholders are entitled to 7% of the annual income. d. The market price per share will approximate $100 per share. e. Only 7% of the total contributed capital can be preferred stock.

b. The amount of the potential dividend is $7 per year per preferred share.

A bond traded at 1021⁄2 means that: a. The bond pays 2.5% interest. b. The bond traded at $1,025 per $1,000 bond. c. The market rate of interest is 2.5%. d. The bonds were retired at $1,025 each. e. The market rate of interest is 21⁄2% above the contract rate.

b. The bond traded at $1,025 per $1,000 bond.

A bond traded at 102½ means that: a. The bond pays 2.5% interest. b. The bond traded at $1,025 per $1,000 bond. c. The market rate of interest is 2.5%. d. The bonds were retired at $1,025 each. e. The market rate of interest is 2½% above the contract rate.

b. The bond traded at $1,025 per $1,000 bond.

Which of the following ratios measures the efficiency of assets in producing sales and is expressed as the ratio of net sales to average total assets? a. Inventory turnover b. Total asset turnover c. Equity ratio d. Times interest earned e. Return on total assets

b. Total asset turnover

A machine with an original cost of $120,000 and no salvage value had an estimated useful life of 6 years, but after 4 complete years it was decided that the original estimate of useful life should have been 8 years. Assuming the company uses straight-line depreciation the amount of depreciation expense in year 5 is: a. $20,000 b. $80,000 c. $10,000 d. $12,000 e. $5,000

c. $10,000

A company's board of directors votes to declare a cash dividend of $1.25 per share. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is: a. $375 b. $18,750 c. $11,875 d. $12,500 e. $11,250

c. $11,875

A company's board of directors votes to declare a cash dividend of $1.25 per share. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is: a. $375 b. $18,750 c. $11,875 d. $12,500 e. $11,250

c. $11,875

The company issues 8%, 20 year bonds with a par value of $500,000. The current market rate for bonds is 8%. The amount of interest owed to the bondholders for each semiannual interest payment is a. $40,000 b. $0 c. $20,000 d. $800,000 e. $400,000

c. $20,000

On Dec 31 of the current year, the assets and liabilities of Smita Inc. are as follows: Cash $20,500; Accounts Receivable $7250; Supplies $650, Equipment $12,000; Accounts Payable $9,300. What is the amount of equity on Dec 31 of the current year? a. $49,700 b. $20,500 c. $31,100 d. $13,050 e. $40,400

c. $31,100

A machine with a cost of $175,000 and accumulated depreciation of $94,000 is sold for $87,000 cash. The amount reported as a source of cash under flows from investing activities is a. $81,000 b. $6,000 c. $87,000 d. Zero; this is a financing activity e. Zero; this is an operating activity

c. $87,000

A machine with a cost of $175,000 and accumulated depreciation of $94,000 is sold for $87,000 cash. The amount reported as a source of cash under cash flows from investing activities is a. $81,000. b. $6,000. c. $87,000. d. Zero; this is a financing activity. e. Zero; this is an operating activity.

c. $87,000.

A company's shares have a market value of $85 per hare. Its net income is $3,500,000, and its weighted-average common shares outstanding is 700,000. Its price-earnings ratio is a. 5.9 b. 425 c. 17 d. 10.4 e. 41.2

c. 17

A company purchased a truck for $35,000 on 01/01/2018. The truck has a useful life of 4 years and an estimated salvage value of $1,000. Assuming straight line depreciation, what is the depreciation expense for the year ending 12/31/2019? a. 8,750 b. 17,500 c. 8,500 d. 17,000 e. 25,500

c. 8,500

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called: a. Asset comparative statements b. Percentage comparative statements c. Common-size comparative statements d. Sales comparative statements e. General-purpose comparative statements

c. Common-size comparative statements

Preparation of the statement of cash flows does not involve: a. Computing the net increase or decrease in cash b. Computing and reporting net cash provided or used by operations c. Computing the profit compared to the net increase or decrease in cash d. Computing and reporting net cash provided or used by financing activities e. Computing and reporting net cash provided or used by investing activities

c. Computing the profit compared to the net increase or decrease in cash

A bond sells at a discount when the: a. Contract (coupon) rate is above the market rate b. Contract (coupon) rate is equal to the market rate c. Contract (coupon) rate is below the market rate d. Bond has a short-term life e. Bond pays interest only once a year

c. Contract (coupon) rate is below the market rate

A bond sells at a discount when the: a. Contract rate is equal to the market rate b. Bond has a short term life c. Contract rate is below the market rate d. Contract rate is above the market rate e. Bond pays interest only once a year

c. Contract rate is below the market rate

Which of the following ratios measures the liquidity of receivables and is a ratio of net accounts receivables to net sales times the total days in a year? a. Accounts receivable turnover b. Total asset turnover c. Days' sales uncollected d. Equity ratio e. Times interest earned

c. Days' sales uncollected

At the end of the day, the cash register tape shows $1,000 in cash sales but the amount of cash in the register is $1,010. The proper entry to record the cash sales is: a. Debit Cash $1,000; credit Sales $1,000 b. Debit Cash $1,010; credit Sales $1,010 c. Debit Cash $1,010; credit Sales $1,000; credit Cash Over & Short $10 d. Debit Cash $1,000; debit Cash Over & Short $10; credit Sales $1,010 e. Debit Cash Over & Short $10, credit Cash $10

c. Debit Cash $1,010; credit Sales $1,000; credit Cash Over & Short $10

Willow Rentals purchased $800 of office supplies on credit. Which of the following general journal entries will Willow Rentals make to record this transaction? a. Debit Accounts Payable $800, Credit Office Supplies $800. b. Debit Office Supplies $800, Credit Cash $800. c. Debit Office Supplies $800, Credit Accounts Payable $800. d. Debit Office Supplies $800, Credit Account Receivable $800. e. Debit Cash $800, Credit Office Supplies $800.

c. Debit Office Supplies $800, Credit Accounts Payable $800.

The purchase of long term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the: a. Operating activities b. Financing activities c. Investing activities d. Schedule of noncash financing and investing activities e. Reconciliation of cash balance

c. Investing activities

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is: a. Operating activities. b. Financing activities. c. Investing activities. d. Schedule of noncash investing or financing activity. e. None of these as this is not reported on the statement of cash flows.

c. Investing activities.

The carrying value of a long-term note payable: a. Is computed as the future value of all remaining future payments, using the market rate as interest. b. Is the face value of the long-term note less the total of all future interest payments. c. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance. d. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest. e. Decreases each time period the discount on the note is amortized.

c. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers including expenditures related to administering the business are classified as: a. Financing activities b. Investing activities c. Operating activities d. Direct activities e. Indirect activities

c. Operating activities

The ability to provide financial rewards sufficient to attract and retain financing is called: a. Liquidity and efficiency b. Solvency c. Profitability d. Market prospects e. Creditworthiness

c. Profitability

A company sold $12,000 worth of bicycles with an extended warranty. The company's experience is that warranty expense averages 2% of sales. The company should: a. Consider warranty expense a remote liability since the rate is only 2% b. Recognize warranty expense at the time the warranty work is performed c. Recognize warranty expense and liability in the year of the sale d. Consider the warranty expense a contingent liability e. Recognize warranty liability when the company purchases the bicycles

c. Recognize warranty expense and liability in the year of the sale

Prior period adjustments are reported in the: a. Income statement. b. Balance sheet. c. Statement of retained earnings. d. Statement of cash flows.

c. Statement of retained earnings.

The purchase of Prior period adjustments are reported in the: a. Income statement. b. Balance sheet. c. Statement of retained earnings​. d. Statement of cash flows. e. Notes to the financial statements.

c. Statement of retained earnings​.

The carrying value of a long-term note payable is computed as: a. The future value of all remaining payments using the market rate of interest b. The face value of the long-term note less the total of all future interest payments c. The present value of all remaining payments discounted using the market rate of interest at the time of issuance d. The present value of all remaining interest payments discounted using the current market rate of interest e. The face value of the long-term note plus the total of all future interest payments

c. The present value of all remaining payments discounted using the market

On November 1, Amna Company signed a 90-day 6% note payable with a face value of $10,000. What is the maturity date of the note on March 1? (Use 360 days a year) a. $150 b. $600 c. $10,000 d. $10,150 e. $10,600

d. $10,150

A company has 5,000 shares of $100 par preferred stock and 50,000 shares of $10 par common stock outstanding. Its total stockholders' equity is $2,000,000. Its book value per common share is a. $100 b. $10 c. $40 d. $30 e. $36.36

d. $30

A company settles a long term note payable plus interest by paying $68,000 cash toward the principal amount and $5,440 cash for interest. The amount reported as a use of cash under cash flows from financing activities is a. Zero; this is an investing activity b. Zero; this is an operating activity c. $73,440 d. $68,000 e. $5,440

d. $68,000

A company settles a long-term note payable plus interest by paying $68,000 cash toward the principal amount and $5,440 cash for interest. The amount reported as a use of cash under cash flows from financing activities is a. Zero; this is an investing activity. b. Zero; this is an operating activity. c. $73,440. d. $68,000. e. $5,440.

d. $68,000.

A company's sales in 2017 were $300,000 and in 2018 were $351,000. Using 2017 as the base year, the sales trend percent for 2018 is a. 17% b. 85% c. 100% d. 117% e. 48%

d. 117%

A company purchased $4,500 of merchandise on May 1 with terms of 2/10, n/30. On May 6, it returned $250 of merchandise. On May 8, it paid the balance owed, taking the discount entitled. The cash paid on May 8 is: a. 4,500 b. 4,250 c. 4,160 d. 4,165 e. 4,410

d. 4,165

A company's Accounts Receivable balance at 12/31 is $125,650, and its Allowance for Doubtful Accounts has a credit balance of $328 before year-end adjustment. Net sales are $572,300. It estimates that 4% of outstanding accounts receivable are uncollectible. What amount of bad debt expense is recorded at 12/31? a. 5,354 b. 328 c. 5,026 d. 4,698 e. 34,338

d. 4,698

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n): a. Short-term marketable equity security. b. Operating activity. c. Common stock. d. Cash equivalent. e. Financing activity

d. Cash equivalent.

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n): a. Short-term marketable equity security. b. Operating activity. c. Common stock. d. Cash equivalent. e. Financing activity.

d. Cash equivalent.

On January 1st Ivan Incorporated issues 6% 10 year bonds with a par value of $1000000. the bonds pay interest semi-annually. The market rate of interest is 8% and the bond selling price was. the bond issuance should be recorded as: a. Debit Cash $1,000,000; credit Bonds Payable $1,000,000 b. Debit Cash $864,097; credit Bonds Payable $864,097 c. Debit Cash $1,000,000; credit Bonds Payable $864,097; credit Discount on Bonds Payable $135,903 d. Debit Cash $864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $1,000,000 e. Debit Cash $864,097; debit Interest Expense $135,903; credit Bonds Payable $1,000,000

d. Debit Cash $864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $1,000,000

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows as a(n): a. Operating activity b. Financing activity c. Investing activity d. Noncash financing and investing activity e. Reconciliation of cash balance

d. Noncash financing and investing activity

Which one of the following is representative of typical cash flows from operating activities? a. Process from collecting the principle amount of loans b. Repayment of principal on loans c. Proceeds from the issuance of bonds and notes payable d. Receipt of cash sales e. Payments by a merchandiser to acquire equity securities of other companies

d. Receipt of cash sales

Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a 90-day, 10% promissory note for the $5,000. TechCom's journal entry to record the sales portion of the transaction is:

debit Notes receivable 5000 credit sales 5000

Awn Services paid a dividend of $8,700 during the current year. The entry to close the dividend account at the end of the year is:

debit retained earnings 8,700 credit dividends 8,700

A company issued eight year, 5% bonds with a par value of $350,000. The company received proceeds of $373,745. Interest is payable semiannually. The amount of premium amortized for the first semiannual interest period, assuming straight line bond amortization a. $2,698 b. $23,745 c. $8,750 d. $9,344 e. $1,484

e. $1,484

A company has 25,000 shares of common stock outstanding. The stockholders' equity applicable to common shares is $420,000 and the par value per common share is $10. The book value per share is: a. $0.09 b. $47.50 c. $10.00 d. $11.75 e. $16.80

e. $16.80

A company purchased equipment and signed a seven-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value factor for an annuity for seven years at 9% is 5.0330. What value for this equipment should be recorded on the company's books on the day the contract is signed? a. $9,000 b. $5,033 c. $63,000 d. $57,330 e. $45,297

e. $45,297

A company purchased equipment and signed a seven-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value factor for an annuity for seven years at 9% is 5.0330. What value for this equipment should be recorded on the company's books on the day the contract is signed? a. $9,000 b. $5,033 c. $63,000 d. $57,330 e. $45,297

e. $45,297

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital is: a. $100 b. $600 c. $1,000 d. $6,000 e. $7,000

e. $7,000

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of contributed capital is: a. $100 b. $600 c. $1,000 d. $6,000 e. $7,000

e. $7,000

A corporation issues 6,000 shares of $5 par value common stock for $8 cash per share. The entry to record this transaction includes a. A debit to Paid-In Capital in Excess of Par Value for $18,000 b. A credit to Common Stock for $48,000 c. A credit to Paid-In Capital in Excess of Par Value for $30,000 d. A credit to Cash for $48,000 e. A credit to Common Stock for $30,000

e. A credit to Common Stock for $30,000

Changes in accounting estimates are: a. Considered accounting errors b. Reported as prior period adjustments c. Accounted for with a cumulative "catch-up" adjustment start d. Extraordinary items e. Accounted for in current and future periods

e. Accounted for in current and future periods

A company needs to replenish its $500 petty cash fund. The petty cashbox has $75 cash and petty cash receipts of $420. The journal entry to replenish the fund includes: a. Debit cash for $75 b. Credit cash for $75 c. Credit petty cash for $420 d. Credit cash over and short for $5 e. Debit cash over and short for $5

e. Debit cash over and short for $5

The appropriate section to report a company reissuing treasury stock is: a. Short-term marketable equity security. b. Operating activity. c. Common stock. d. Cash equivalent. e. Financing activity.

e. Financing activity.

A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is equal to the: a. Acid-test ratio. b. Merchandise turnover. c. Price earnings ratio. d. Accounts receivable turnover. e. Profit margin ratio.

e. Profit margin ratio.

Which one of the following is representative of typical cash flows from operating activities? a. Proceeds from collecting the principal amount of loans. b. Repayment of principal on loans. c. Proceeds from the issuance of bonds and notes payable. d. Payments by a merchandiser to acquire equity securities of other companies. e. Receipts of cash sales.

e. Receipts of cash sales.

On December 15 of the current year, Balderrama Accounting Services signed a $40,000 contract with a client to provide bookkeeping services to the client in the following year. The client paid the entire $40,000 on the date the contract was signed. Which accounting principle would require Balderrama Accounting Services to record the bookkeeping revenue in the following year and not the year the cash was received? a. Monetary unit assumption b. Going concern assumption c. Measurement (cost) principal d. Business entity assumption e. Revenue recognition principle

e. Revenue recognition principle

The evaluation of individual financial statement items or a group of items showing changes in relative importance of each financial statement item is: a. Acid-Financial reporting. b. Horizontal analysis. c. Investment analysis d. Risk analysis. e. Vertical analysis

e. Vertical analysis

What is the acid test ratio equation?

quick assets/current liabilities

A company made no adjusting entry for accrued and unpaid employee wages of $48,000 in December. This would cause: a. Net income to be understated by $48,000 ​b. Net income to be overstated by $48,000 c. No effect on net income d. Assets to be overstated by $48,000 e. Assets to be understated by $48,000

​b. Net income to be overstated by $48,000