1. Resources owned by a business are referred to as
profits.
dividends.
assets.
equity.
2. For 2014, EAB Corporation reported net income of $78,750; net sales of $1,378,125; and weighted average shares outstanding of 10,500. There were no preferred dividends. What was the 2014 earnings per share?
$17.50
$7.50
$75.00
$131.25
3. Selling a long-term asset is an example of a(n)
operating activity.
investing activity.
financing activity.
noncash investing and financing activity.
4. Dividends declared are reported on which of the following statements?
Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Financial Position
5. Which of the following describes the normal balance and classification of the Unearned Revenue account?
Credit, liability
Debit, liability
Debit, stockholders' equity
Credit, stockholders' equity
6. Which of the following items is handled as a deferral?
Accrued Expenses
Accrued Revenues
Prepaid Expenses
Depreciation
7. LBJ Company recorded the following events involving a recent purchase of merchandise.
- Received goods for $95,000, terms 2/10, n/30.
- Returned $4,500 of the shipment for credit due to damaged goods.
- Paid $1,000 for freight in.
- Paid the invoice within the discount period.
As a result of these events, the company's merchandise inventory
increased by 89,580.
increased by $89,690.
increased by $89,600.
increased by $91,500.
8. In a period of declining prices, which of the following inventory methods generally results in the highest gross profit figure?
Average cost method
LIFO
FIFO
Cannot be determined based on the information given
9. On a classified balance sheet, which is the least liquid asset listed below?
Inventories
Cash and cash equivalents
Accounts receivable, net
Short-term investments
10. Which of the following is an objective of internal control?
Risk assessment
Information technology
Adequate records
Comply with legal requirements
11. Your friend, Lisa, has hired you to evaluate the following internal control procedures.
Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which internal control procedure relates to each of the internal controls
For the weaknesses, you also need to state a recommendation for improvement.
(1) Paychecks are left on the desk for pick-up.
(2) Supervisors count cash receipts daily.
(3) Invoices are pre-numbered.
(4) Bonding of the cashiers is required.
(5) The accountant purchases and pays for supplies.
12. Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.
(1) Investors invest $500,000 in exchange for 50,000 shares of common stock.
(2) Company purchased equipment for $25,000 on account.
(3) Company paid Rent for $4,000.
(4) Company received $15,000 for services not yet performed.
(5) Employees work Monday through Friday and are paid on Friday. Salary expense is $10,000 per day and this year, December 31 falls on a Wednesday.
13. The following items are taken from the financial statements of Lacey Company for 2012:
|
Advertising Expense
|
$14,000
|
|
Accounts Receivable
|
12,000
|
|
Cost of Goods Sold
|
65,000
|
|
Accumulated Depreciation-Equipment
|
20,000
|
|
Accounts Payable
|
21,000
|
|
Cash
|
44,000
|
|
Depreciation Expense
|
17,000
|
|
Common Stock
|
100,000
|
|
Dividends
|
25,000
|
|
Insurance Expense
|
5,000
|
|
Note Payable (due 2014)
|
70,000
|
|
Rent Expense
|
4,000
|
|
Prepaid Insurance
|
17,000
|
|
Retained Earnings (beginning)
|
22,000
|
|
Salaries Expense
|
50,000
|
|
Salaries Payable
|
3,500
|
|
Net sales
|
175,000
|
|
Supplies
|
4,000
|
|
Supplies Expense
|
3,000
|
|
Equipment
|
210,000
|
Instructions
(a) Calculate the net income.
(b) Calculate the balance of Retained Earnings that would appear on a balance sheet at December 31, 2012.
(c) Calculate the gross profit percentage.
14. The following items are taken from the financial statements of SRW Company for 2012:
|
Cash
|
$375,000
|
|
Accounts Receivable
|
125,000
|
|
Prepaid Insurance
|
100,000
|
|
Accounts Payable
|
88,000
|
|
Unearned Service Revenue
|
15,000
|
|
Equipment, net of accumulated depreciation
|
177,000
|
|
Common Stock
|
125,000
|
|
Retained Earnings 12/31/2011
|
106,000
|
|
Long-term debt
|
336,500
|
|
Service revenue
|
225,000
|
|
Cost of Goods Sold
|
62,500
|
|
Rent expense
|
30,000
|
|
Supplies expense
|
8,000
|
|
Insurance expense
|
18,000
|
Instructions
(a) Please create a classified Balance Sheet in good form for the year ended 2012.
(b) Please calculate the current ratio.