1. A corporation has which of the following sets of characteristics?
Shared control, tax advantages, increased skills, and resources
Simple to set up and maintains control with the founder
Easier to transfer ownership and raise funds, no personal liability for stockholders
Harder to raise funds and gives owner control
2. When a corporation distributes a dividend, _____.
the most common form of distribution is a cash dividend
the Dividends account will be increased with a credit
the Retained Earnings account will be directly increased with a debit
the Dividends account will be decreased with a debit
3. Below is a partial list of account balances for Kerner Company:
Cash $10,000
Prepaid insurance 1,000
Accounts receivable 5,000
Accounts payable 4,000
Notes payable 6,000
Common stock 2,000
Dividends 1,000
Revenues 30,000
Expenses 25,000
What did Kerner Company show as total credits?
$43,000
$41,000
$42,000
$44,000
4. Using accrual accounting, expenses are recorded and reported only _____.
when they are incurred, whether or not cash is paid
when they are incurred and paid at the same time
if they are paid before they are incurred
if they are paid after they are incurred
5. In a period of increasing prices, which inventory cost flow assumption will result in the lowest amount of income tax expense?
FIFO
LIFO
The average cost method
Income tax expense for the period will be the same under all assumptions.
6. Equipment with a cost of $192,000 has an estimated salvage value of $18,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?
$48,000
$52,500
$49,500
$43,500
7. Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____.
debit to Cash of $500,000
credit to Discount on Bonds Payable for $20,000
credit to Bonds Payable for $480,000
debit to Cash for $480,000
8. Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____.
$120,000
$125,000
$155,000
$115,000
9. One variation of the horizontal analysis is known as _____.
nonlinear analysis
vertical analysis
trend analysis
common-size analysis
10. Comparisons of data within a company are an example of the following comparative basis.
Industry averages
Intercompany
Intracompany
Interregional
11. In vertical analysis, the base amount for studying salary and wages expense is generally _____.
net sales
salary and wages expense in a previous year
gross profit
net income
12. Short-term creditors are usually most interested in assessing _____.
solvency
liquidity
marketability
profitability
13. Return on common stockholder's equity ratio is affected by _____.
net income
dividend paid to preferred stock, if any
leverage (debt-to-assets ratio)
All of the above
14. To calculate the market value of a bond, we need to use the time-value-of-money concept called _____.
compounding
extrapolation
discounting
None of the above.