1. Corresponds to CLO 1(a) Which of the following interrelationships is important to understand when preparing financial statements:
The net income from the income statement is used in the retained earnings statement.
The ending retained earnings from the retained earnings statement is used in the stockholders' equity section of the balance sheet.
The cash on the balance sheet should be equal to the cash at the end of the period on the statement of cash flows.
All of the above.
2. Corresponds to CLO 1(b) Which of the following best describes the balance sheet?
The balance sheet reports the revenue and expenses for a specific period of time.
The balance sheet reports the assets, liabilities, and stockholders' equity at a specific date.
The balance sheet reports the changes in retained earnings for a specific period of time.
The balance sheet reports the changes in assets, liabilities, and stockholders' equity over a period of time.
3. Corresponds to CLO 1(c) In 2014, Tulsa Corporation recorded revenues of $200,000, expenses of $125,000, and paid dividends of $20,000. What was Tulsa's net income for the year?
$75,000
$105,000
$55,000
$200,000
4. Corresponds to CLO 1(d) What is the primary purpose of the statement of cash flows?
To disclose a company's financing activities.
To report information about cash receipts and cash payments of a company.
To determine the cash balance to be used on the balance sheet.
To determine a company's working capital.
5. Corresponds to CLO 2(a) The double-entry system requires that each transaction must be recorded
in at least two different accounts.
in two sets of books.
in a journal and in a ledger.
first as a revenue and then as an expense.
6. Corresponds to CLO 2(b) Shamrock Industries purchased supplies of $1,000 on account. The entry to record this purchase will include:
a debit to Supplies expense and a credit to Accounts Receivable.
a debit to Supplies and a credit to Accounts Payable.
a debit to Accounts Payable and a credit to Supplies.
a debit to Supplies and a credit to Cash
7. Corresponds to CLO 2(c) Hemmingway Corporation paid salaries of $8,000 and advertising expense of $3,000. Which of the following journal entries correctly records theses expenses?
Debit: Cash $11,000
Credit: Salaries and Wages Expense $8,000
Credit: Advertising Expense $3,000
Debit: Salaries and Wages Expense $8,000
Debit: Advertising Expense $3,000
Credit: Cash $10,000
Debit: Salaries and Wages Expense $8,000
Debit: Advertising Expense $3,000
Credit: Salaries and Wages Payable $8,000
Credit: Accounts Payable $3,000
Debit: Salaries and Wages Expense $8,000
Debit: Advertising Expense $3,000
Credit: Cash $11,000
8. Corresponds to CLO 2(d) Which of the following accounts is increased with a debit?
Dividends
Service Revenue
Interest Payable
Common Stock
9. Corresponds to CLO 3(a) Marshall Machinery made a sale for $80,000 on January 6. The customer is sent a statement on January 25 and payment is received on February 20. Marshall prepares January's monthly internal financial statements on February 15. Marshall follows GAAP and applies the revenue recognition principle. When is the $80,000 considered to be earned?
February 20
February 15
January 25
January 6
10. Corresponds to CLO 3(b) The expense recognition principle matches:
customers with businesses.
expenses with revenues.
assets with liabilities.
creditors with businesses.
11. Corresponds to CLO 3(c) Why are adjusting entries necessary?
To allow management to change the balance in an account to show better results on the financial statements.
To correct errors due to erroneous recording of journal entries.
To update accounts due to resources used, amounts expired due to the passage of time, or amounts that may need to be recorded.
To remove the balances of temporary accounts so that financial statements can be prepared.
12. Corresponds to CLO 3(d) Ace Corporation purchased office supplies costing $13,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,700 still on hand. The appropriate adjusting journal entry to be made at the end of the period is
debit Office Supplies Expense, $10,300; credit Office Supplies, $10,300.
debit Office Supplies, $10,300; credit Office Supplies Expense, $10,300.
debit Office Supplies Expense, $2,700; credit Office Supplies, $2,700.
debit Office Supplies, $2,700; credit Office Supplies Expense, $2,700.
13. Corresponds to CLO 4(a) Which of the following is not true about a company's system of internal controls?
Internal control procedures are designed to safeguard assets from employee theft.
Internal control measures can eliminate all irregularities in the accounting process.
Internal controls can be rendered ineffective by employee collusion.
Large companies often assign internal auditors to continuously evaluate the effectiveness of the company's internal control systems.
14. Corresponds to CLO 4(b) At Huntington Health Corporation, only the treasurer is authorized to sign checks. This is an example of which of the following internal control procedures?
Establishment of responsibility
Physical controls
Human resource controls
Documentation controls
15. Corresponds to CLO 4(c) At Delicious Desserts Corporation, the bookkeeper records cash receipts which are held by the treasurer. This is an example of which of the following internal control procedures?
Human resource controls
Physical controls
Segregation of duties
Documentation controls
16. Corresponds to CLO 4(d) At Pocket Protector Products, the treasurer of the company has not taken vacation for the past 4 years. Which of the following internal control principles does this violate?
Human resource controls
Physical controls
Segregation of duties
Establishment of responsibility
17. Corresponds to CLO 5(a) Under the allowance method, Bad Debt Expense is recorded
When an individual account is written off.
When the loss amount is known.
For an amount that the company estimates it will not collect.
Several times during the accounting period.
18. Corresponds to CLO 5(b) Under the allowance method, writing off an uncollectible account
affects only balance sheet accounts.
affects both balance sheet and income statement accounts.
affects only income statement accounts.
is not an acceptable practice.
19. Corresponds to CLO 5(c) Under the direct write-off method, writing off an uncollectible account
affects only balance sheet accounts.
affects both balance sheet and income statement accounts.
affects only income statement accounts.
does not affect balance sheet or income statement accounts.
20. Corresponds to CLO 5(d) Wallace Company uses the accounts receivable aging method for recording bad debts expense. The accounts receivable balance is $150,000 and credit sales are $1,250,000. Management estimates that 5% of all accounts receivable will be uncollectible. What adjusting entry will Wallace make if the Allowance for Doubtful Accounts has a credit balance of $1,000 before adjustment?
debit: Bad debts expense, $6,500; credit: Allowance for doubtful accounts, $6,500
debit: Bad debts expense, $62,500; credit: Allowance for doubtful accounts, $62,500
debit: Allowance for doubtful accounts, $6,500; credit: Bad debts expense, $6,500
debit: Allowance for doubtful accounts, $62,500; credit: Bad debts expense, $62,500
21. Corresponds to CLO 6(a) 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 to be determined after each sale.
A perpetual system determines cost of goods sold only at the end of the accounting period.
22. Corresponds to CLO 6(b) What is the term applied to the excess of net sales over the cost of goods sold?
Income before income taxes.
Income from operations.
Net income.
Gross profit.
23. Corresponds to CLO 6(c) The LIFO inventory method assumes that the cost of the latest units purchased are
the last to be allocated to cost of goods sold.
the first to be allocated to ending inventory.
the first to be allocated to cost of goods sold.
not allocated to cost of goods sold or ending inventory.
24. Corresponds to CLO 6(d) In a period of increasing prices, which of the following inventory methods generally results in the lowest net income figure?
Average cost method.
LIFO method.
FIFO method.
More information is necessary to answer this question.
25. Corresponds to CLO 7(a) Lennox Corporation purchased a new delivery truck for 35,000. The sales taxes are $2,700. Before the truck is placed into service, the logo is painted on the side of the truck for $800. The truck's annual license is $200. Annual insurance on the truck is $1,300. What should Lennox record as the cost of the new truck?
$40,000
$38,500
$37,700
$35,000
Question 26. 26. Corresponds to CLO 7(b) On April 1, 2013, Ballard Corporation purchased equipment for $65,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 5 year useful life. If Ballard uses the straight-line method of depreciation, what is the accumulated depreciation at December 31, 2013?
$13,000
$12,000
$9,750
$9,000
27. Corresponds to CLO 7(c) Tyree Company purchased equipment with a cost of $90,000 and an estimated salvage value of $18,000. The equipment is expected to produce 150,000 units over its estimated useful life of 10 years. If Tyree uses the units-of-activity method, what is the depreciation cost per unit to be used in calculating depreciation?
$1.67
$0.48
$2.08
$0.60
28. Corresponds to CLO 7(d) Kerns Company purchased equipment with a cost of $200,000 and an estimated salvage value of $10,000. The equipment has an estimated useful life of 5 years. If Kerns uses the double-declining balance method, what is the annual depreciation rate to be used in calculating depreciation?
5%
10%
20%
40%
29. Corresponds to CLO 8(a) A current liability is a debt that can reasonably be expected to be paid
within one year, or the operating cycle, whichever is longer.
between 6 months and 18 months.
out of currently recognized revenues.
out of cash currently on hand.
30. Corresponds to CLO 8(b) Which of the following is not a currently liability on December 31, 2014?
A Note Payable due December 31, 2015.
An Accounts Payable due January 31, 2015.
A Note Payable due December 31, 2016.
Accrued salaries payable from 2014.
31. Corresponds to CLO 8(c) Sales taxes collected by a retailer are reported as
revenues.
long-term liabilities.
current liabilities.
None of the above.
32. Corresponds to CLO 8(d) Interest expense on an interest-bearing note is
always equal to zero.
accrued over the life of the note.
only recorded at the time the note is issued.
only recorded at maturity when the note is paid.
33. Corresponds to CLO 9(a) The authorized stock of a corporation
only reflects the initial capital needs of the company.
is indicated in its by-laws.
is indicated in its charter.
must be recorded in a formal accounting entry.
34. Corresponds to CLO 9(b) If Lantz Company issues 5,000 shares of $5 par value common stock for $210,000, the account
Common stock will be credited for $25,000.
Paid-in Capital in Excess of Par will be credited for $25,000.
Paid-in Capital in Excess of Par will be credited for $210,000.
Cash will be debited for $185,000.
35. Corresponds to CLO 9(c) Treasury Stock is a(n)
contra asset account.
contra stockholders' equity account.
asset account.
retained earnings account.
36. Corresponds to CLO 9(d) The board of directors of Yancey Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2014. The dividend is to be paid on August 15, 2014, to stockholders of record on July 31, 2014. The correct entry to be recorded on July 15, 2014, will include a
debit to Dividends Payable.
debit to Cash Dividends.
credit to Cash.
credit to Cash Dividends.
37. Corresponds to CLO 10(a) Ratios are used as tools in financial analysis (Points : 3)
instead of horizontal and vertical analyses.
because they can provide information that may not e apparent from inspection of the individual components of the financial statements.
because they are prescribed by GAAP.
ratios are not used for financial statement analysis.
38. Corresponds to CLO 10(b) A common measure of liquidity is
earnings per share.
current ratio.
return on sales.
debt to equity ratio.
39. Corresponds to CLO 10(c) The following balance sheet and income statement data is available for Gold River Corporation: Current assets...$125,000; Total assets...$520,000; Net income...$345,000; Current liabilities...$80,000; Total liabilities...$150,000; Stockholders' equity...$370,000; Average common shares outstanding... 10,000. What is Gold River's current ratio?
3.47
1.64
1.56
0.83
40. Corresponds to CLO 10(d) The following financial information is available for Maroon Corporation: Sales revenue...$200,000; Cost of goods sold...$140,000; Operating expenses...$20,000. What is Maroon's gross profit percentage
30%
20%
60%
40%