Assignment
Part 1
1. External users want answers to all of the following questions except:
Is the company earning satisfactory income?
Will the company be able to pay its debts as they come due?
Did the company use a budget to plan its expenses?
How does the company compare in profitability with competitors?
2. Debt securities sold to investors that must be repaid at a particular date some years in the future are called:
accounts payable.
notes receivable.
taxes payable.
bonds payable.
3. The statement of cash flows would disclose the payment of a dividend:
nowhere on the statement.
in the operating activities section.
in the investing activities section.
in the financing activities section.
4. The cost of assets consumed or services used is also known as:
a revenue.
an expense.
a liability.
an asset.
5. Edwards Company recorded the following cash transactions for the year:
Paid $45,000 for salaries.
Paid $20,000 to purchase office equipment.
Paid $5,000 for utilities.
Paid $2,000 in dividends.
Collected $75,000 from customers.
What was Edwards' net cash provided by operating activities?
$25,000
$5,000
$30,000
$23,000
6. On a classified balance sheet, prepaid insurance is classified as:
an intangible asset.
property, plant, and equipment.
a current asset.
a long-term investment.
7. Which of the following should not be classified as a current asset?
Supplies
Short-term Marketable securities
Prepaid insurance that will expire next year.
A Note Receivable that will mature after 21 months.
8. These are selected account balances on December 31, 2010.
-Land (location of the corporation's office building) $100,000
-Land (held for future use) 150,000
-Corporate Office Building 600,000
-Inventory 200,000
-Equipment 450,000
-Office Furniture 100,000
-Accumulated Depreciation 300,000
What is the total NET amount of property, plant, and equipment that will appear on the balance sheet?
$1,300,000
$1,100,000
$1,600,000
$950,000
9. For 2010, Landford Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 6,000. There were no preferred stock dividends. What was the 2010 earnings per share?
$4.66
$0.20
$66.67
$5.00
10. Morten Corporation had beginning retained earnings of $764,000 and ending retained earnings of $833,000. During the year they issued common stock totaling $47,000. There were no dividends issued. What was their net income for the year?
$69,000
$22,000
$116,000
$91,000
11. On March 1, 2010, Dillon Company hires a new employee who will start the work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not?
Yes, the company is now obligated to pay the employee, thus that event must be recorded on March 6.
No, hiring an employee is an important event; however, it is not an economic event that should be recorded on March 6.
Yes, failure to record the event on March 6 would cause the financial statements to be misleading.
No, the journal entry should be made on March 1 which is the date of hiring.
12. Which one of the following is not a part of an account?
Credit side
Trial balance
Debit side
Title
13. Which of the following describes the classification and normal balance of the retained earnings account?
Asset, debit
Stockholders' equity, credit
Revenues, credit
Expense, debit
14. In recording an accounting transaction in a double-entry system:
the number of debit accounts must equal the number of credit accounts.
there must always be entries made on both sides of the accounting equation.
the amount of the debits must equal the amount of the credits.
there must only be two accounts affected by any transaction.
15. Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner?
Prepaid insurance and dividends
Dividends and medical fees earned
Interest payable and common stock
Advertising expense and land
Part 2
1. The time period assumption states that:
a transaction can only affect one period of time.
estimates should not be made if a transaction affects more than one time period.
adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations.
the economic life of a business can be divided into artificial time periods.
2. In a merchandising business, revenue may be considered earned when:
cash is received from the customers
a product is delivered to a customer.
an order is received from a customer
a customer shows interest in a product
3. Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the first period?
Due from Employees
Due to Employer
Wages Payable
Wages Expense
4. The following is selected information from J Corporation for the fiscal year ending October 31, 2010.
Cash received from customers $75,000
Revenue earned 87,500
Cash paid for expenses 42,500
Expenses incurred 50,000
Based on the accrual basis of accounting, what is J Corporation's net income for the year ending October 31, 2007?
$28,500
$33,500
$20,500
$37,500
5. The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is:
contra asset.
prepayment.
asset.
accrual.
6. Which of the following expressions is incorrect?
Gross profit - operating expenses = net income
Sales - cost of goods sold - operating expenses = net income
Net income + operating expenses = gross profit
Operating expenses - cost of goods sold = gross profit
7. Hunter Company purchased merchandise inventory with an invoice price of $12,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period?
$11,040
$10,800
$11,760
$12,000
8. Zach's Market recorded the following events involving a recent purchase of merchandise:
Received goods for $50,000, terms 2/10, n/30.
Returned $1,000 of the shipment for credit.
Paid $250 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company's merchandise inventory:
increased by $48,020.
increased by $49,250.
increased by $48,265.
increased by $48,270.
9. If goods in transit are shipped FOB destination
the seller has legal title to the goods until they are delivered.
the buyer has legal title to the goods until they are delivered.
the transportation company has legal title to the goods while the goods are in transit.
no one has legal title to the goods until they are delivered.
10. When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?
To check the accuracy of the perpetual inventory records
To determine cost of goods sold for the accounting period
To compute inventory ratios
All are a purpose of taking a physical inventory when a perpetual inventory system is used.
11. A problem with the specific identification method is that:
inventories can be reported at actual costs.
management can manipulate income.
matching is not achieved.
the lower of cost or market basis cannot be applied
12. Which of the following statements is true regarding inventory cost flow assumptions?
A company may use more than one cost-flow assumption concurrently for different product lines.
A company must comply with the method specified by industry standards.
A company must use the same method for domestic and foreign operations.
A company may never change its inventory costing method once it has chosen a method.
13. In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure?
Average Cost Method
LIFO method
FIFO method
Need more information to answer
14. Which of the following is a true statement about inventory systems?
Periodic inventory systems require more detailed inventory records.
Perpetual inventory systems require more detailed inventory records.
A periodic system requires cost of goods sold be determined after each sale.
A perpetual system determines cost of goods sold only at the end of the accounting period.
15. The primary source of revenue for a retailer is:
investment income.
service revenue.
the sale of merchandise.
the sale of plant assets the company owns.