Reference no: EM131296078

QUESTION 1

A cash equivalent must be readily convertible to a known amount of cash, and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.
True
False

QUESTION 2
1. A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.
True
False

QUESTION 3
1. A company borrowed $40,000 cash from the bank and signed a 6-year note at 7% annual interest. The present value of an annuity factor for 6 years at 7% is 4.7665. The annual annuity payments equal:
2. $40,000.00.
$190,660.00.
$52,450.00.
$8,391.91.
$10,489.88.

QUESTION 4
1. A company factored $30,000 of its accounts receivable and was charged a 2% factoring fee. The journal entry to record this transaction would include a debit to Cash of $30,000, a debit to Factoring Fee Expense of $600, and credit to Accounts Receivable of $30,600.
True
False

QUESTION 5
1. A company had average total assets of $887,000. Its gross sales were $1,090,000 and its net sales were $1,000,000. The company's total asset turnover equals:
2. 0.81.
1.13.
1.09.
0.89.
1.23.

QUESTION 6
1. A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?
2. $276
$280
$288
$296
$304

QUESTION 7
1. A company has net sales of $1,200,000 and average accounts receivable of $400,000. What is its accounts receivable turnover for the period?
2. 5.00
73.0
20.0
0.20
3.0

QUESTION 8
1. A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into. The loan is at 8% interest compounded annually. The present value factor for 3 years at 8% is 0.7938. The present value of the loan (rounded) is:
2. $47,630.
$5,592.
$12,400.
$15,877.
$9,200.

QUESTION 9
1. A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire transaction is disclosed to users in the financing section of the statement of cash flows.
True
False

QUESTION 10
1. A company received a $15,000, 90-day, 10% note receivable. The journal entry to record receipt of the note includes a debit to Notes Receivable.
True
False

QUESTION 11
1. A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.
True
False

QUESTION 12
1. A company's ability to issue unsecured debt depends on its credit standing.
True
False

QUESTION 13
1. A corporation is a legal entity separate from its owners.
True
False

QUESTION 14
1. A corporation may be authorized to issue both common and preferred stock.
True
False

QUESTION 15
1. A disadvantage of bond financing over equity financing is the burden on the cash flows of the company.
True
False

QUESTION 16
1. A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events.
True
False

QUESTION 17
1. A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.
True
False

QUESTION 18
1. A plant asset's useful life is the length of time it is productively used in a company's operations.
True
False

QUESTION 19
1. A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows.
True
False

QUESTION 20
1. A purchase of land in exchange for shares of stock is disclosed at the bottom of the statement of cash flows or in a note to the statement.
True
False

QUESTION 21
1. A short-term note payable is a written promise to pay a specified amount on a definite future date within one year or the operating cycle, whichever is shorter.
True
False

QUESTION 22
1. A voucher is an internal document or file:
2. Prepared after an invoice is received.
Takes the place of a bank check.
Used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded.
Used as a substitute for an invoice if the supplier fails to send one.
Prepared before the company orders goods to make sure that all goods are being ordered from an approved vendor list.

QUESTION 23
1. Additions to land that increase the usefulness of the land such as parking lots, fences, and lighting are not depreciated.
True
False

QUESTION 24
1. All expected future payments are liabilities.
True
False

QUESTION 25
1. Amortizing a bond discount:
2. Increases cash flows from the bond.
Increases the market value of the Bonds Payable.
Decreases interest expense each period.
Allocates a portion of the total discount to interest expense each interest period.
Decreases the Bonds Payable account.

QUESTION 26
1. An analysis that explains differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):
2. Bank audit.
Bank reconciliation.
Trial reconciliation.
Internal audit.
Analysis of debits and credits.

QUESTION 27
1. An annuity is a series of equal payments at equal time intervals.
True
False

QUESTION 28
1. An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled:
2. Cash Over and Short.
Cash Receivable.
Bank Reconciliation.
Petty Cash.
Cash Lost.

QUESTION 29
1. An understatement of ending inventory will cause
2. An understatement of assets and equity on the balance sheet.
No effect on the balance sheet.
An understatement of assets and an overstatement of equity on the balance sheet.
An overstatement of assets and equity on the balance sheet.
An overstatement of assets and an understatement of equity on the balance sheet.

QUESTION 30
1. Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash fund will include:
2. A debit to Cash Over and Short for $5.00.
A debit to Petty Cash for $382.50.
A debit to Cash for $377.50.
A credit to Cash for $382.50.
A debit to Cash for $387.50.

QUESTION 31
1. Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.
True
False

QUESTION 32
1. Common shareholders always share equally with all other shareholders in dividends.
True
False

QUESTION 33
1. Companies use two methods to account for uncollectible accounts, the direct write-off method and the allowance method.
True
False

QUESTION 34
1. Days' sales in inventory is calculated as:
2. Ending inventory times cost of goods sold.
Cost of goods sold divided by ending inventory times 365.
Ending inventory divided by cost of goods sold times 365.
Ending inventory divided by cost of goods sold.
Cost of goods sold divided by ending inventory.

QUESTION 35
1. Debentures always have specific assets of the issuing company pledged as collateral.
True
False

QUESTION 36
1. During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should:

rev: 10_27_2015_QC_CS-31195
2. Deduct the check amount from the bank balance.
Add the check amount to the book balance of cash.
Deduct the check amount from the book balance of cash .
Make a journal entry in the company records for an error.
Add the check amount to the bank balance.

QUESTION 37
1. Experience shows that the default rate on liabilities increases sharply when times interest earned falls below 1.5 to 2.0 and remains at that level or lower for several time periods.
True
False

QUESTION 38
1. FICA taxes include:
2. Employee federal income tax.
Employee state income tax.
Charitable giving.
Federal and state unemployment taxes.
Social Security and Medicare taxes.

QUESTION 39
1. Factoring receivables is beneficial to a seller for all of the following reasons except:
2. There are no fees for factoring.
Allows firms to receive cash earlier.
May transfer the risk of bad debts to the factor.
Seller avoids the cost of billing and accounting for receivables.
Passes ownership of the receivables to the factor.

QUESTION 40
1. Grays Company has inventory of 10 units at a cost of $10 each on August 1. On August 3, it purchased 20 units at $12 each. 12 units are sold on August 6. Using the FIFO perpetual inventory method, what amount will be reported in cost of goods sold for the 12 units that were sold?
2. $120.
$140.
$130.
$128.
$124.

QUESTION 41
1. Honoring a note receivable indicates that the maker has:
2. Guaranteed.
Notarized.
Signed.
Paid in full.
Cosigned.

QUESTION 42
1. If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227, how should this error be treated on the bank reconciliation?
2. Subtract $45 from the bank's balance and add $45 to the book's balance.
Subtract $45 from the bank's balance.
Subtract $45 from the book balance.
Add $45 to the book balance.
Add $45 to the bank's balance.

QUESTION 43
1. If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:
2. Net sales.
Gross profit.
Cost of goods sold.
Current assets.
Net income.

QUESTION 44
1. In preparing a company's statement of cash flows for the most recent year, the following information is available:

Loss on the sale of equipment	$14,000
Purchase of equipment	$225,000
Proceeds from the sale of equipment	$106,000
Repayment of outstanding bonds	$87,000
Purchase of treasury stock	$25,000
Issuance of common stock	$96,000
Purchase of land	$115,000
Increase in accounts receivable during the year	$33,000
Decrease in accounts payable during the year	$75,000
Payment of cash dividends	$35,000

2. Net cash flows from investing activities for the year were:
3. $234,000 of net cash used.
$280,000 of net cash provided.
$259,000 of net cash used.
$340,000 of net cash used.
$120,000 of net cash provided.

QUESTION 45
1. Internal users of the statement of cash flows often use cash flow information to plan day-to-day operating activities and make long-term investment and financing decisions.
True
False

QUESTION 46
1. It is necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements.
True
False

QUESTION 47
1. Merchant Company purchased property for a building site. The costs associated with the property were:

Purchase price	$185,000
Real estate commissions	15,000
Legal fees	700
Expenses of clearing the land	2,000
Expenses to remove old building	4,000

2. What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?
3. $206,700 to Land; $0 to Building.
$185,000 to Land; $21,700 to Building.
$200,000 to Land; $6,700 to Building.
$200,700 to Land; $6,000 to Building.
$187,700 to Land; $19,000 to Building.

QUESTION 48
1. Minimum legal capital requirements are intended to protect creditors.
True
False

QUESTION 49
1. Mortgage bonds are backed only by the good faith and credit of the issuing company.
True
False

QUESTION 50
1. Most managers stress the importance of understanding and predicting cash flows for business decisions.
True
False

QUESTION 51
1. Obligations to be paid within one year or the company's operating cycle, whichever is longer, are:
2. Bills.
Operating cycle liabilities.
Earned revenues.
Current assets.
Current liabilities.

QUESTION 52
1. Outstanding checks refer to checks that have been:
2. Held as blank checks.
Written, recorded on the company books, sent to the payee, but not yet paid by the bank.
Written and not yet recorded in the company books.
Issued by the bank.
Written, recorded, sent to payees, and received and paid by the bank.

QUESTION 53
1. Peavey Enterprises purchased a depreciable asset for $22,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?
2. $15,000
$5,000
$15,125
$20,000
$13,750

QUESTION 54
1. Plant assets are used in operations and have useful lives that extend over more than one accounting period.
True
False

QUESTION 55
1. Saffron Industries most recent balance sheet reports total assets of $42,000,000, total liabilities of $16,000,000 and stockholders' equity of $26,000,000. Management is considering using $3,000,000 of excess cash to prepay $3,000,000 of outstanding bonds. What effect, if any, would prepaying the bonds have on the company's debt-to-equity ratio?
2. Prepaying the debt would cause the firm's debt-to-equity ratio to worsen from .62 to .57.
Prepaying the debt would cause the firm's debt-to-equity ratio to worsen from .62 to .50.
Prepaying the debt would cause the firm's debt-to-equity ratio to remain unchanged.
Prepaying the debt would cause the firm's debt-to-equity ratio to improve from .62 to .57.
Prepaying the debt would cause the firm's debt-to-equity ratio to improve from .62 to .50.

QUESTION 56
1. Shareholders in a corporation have the power to bind the corporation to contracts.
True
False

QUESTION 57
1. Since an error in the period-end inventory causes an offsetting error in the next period:
2. It is said to be self-correcting.
If affects only balance sheet accounts.
It affects only income statement accounts.
Managers can ignore the error.
Is immaterial for managerial decision making.

QUESTION 58
1. Special rights often granted to preferred stock include a preference for receiving dividends and additional voting privileges.
True
False

QUESTION 59
1. Stock is attractive to investors because stockholders are not liable for the corporation's actions and debts and because stock is easily transferred.
True
False

QUESTION 60
1. The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

Retained earnings balance at the beginning of the year	$126,000
Cash dividends declared for the year	$46,000
Proceeds from the sale of equipment	$81,000
Gain on the sale of equipment	$7,000
Cash dividends payable at the beginning of the year	$18,000
Cash dividends payable at the end of the year	$20,000
Net income for the year	$92,000

2. What is the ending balance for retained earnings?
3. $179,000.
$352,000.
$218,000.
$170,000.
$172,000.

QUESTION 61
1. The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

Retained earnings balance at the beginning of the year	$126,000
Cash dividends declared for the year	$46,000
Proceeds from the sale of equipment	$81,000
Gain on the sale of equipment	$7,000
Cash dividends payable at the beginning of the year	$18,000
Cash dividends payable at the end of the year	$20,000
Net income for the year	$92,000

2. The amount of cash dividends paid during the year would be:
3. $44,000.
$48,000.
$64,000.
$46,000.
$8,000.

QUESTION 62
1. The accountant for Huckleberry Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

Retained earnings balance at the beginning of the year	$151,000
Cash dividends declared for the year	$46,000
Net income for the year	$92,000

2. What is the ending balance for retained earnings?
3. $264,000.
$13,000.
$105,000.
$243,000.
$197,000.

QUESTION 63
1. The accountant for Mandarin Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

Retained earnings balance at the beginning of the year	$819,000
Net income for the year	$230,000
Cash dividends declared for the year	$42,000
Retained earnings balance at the end of the year	$1,007,000
Cash dividends payable at the beginning of the year	$10,000
Cash dividends payable at the end of the year	$11,000

2. What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?
3. $1,000.
$41,000.
$63,000.
$42,000.
$43,000.

QUESTION 64
1. The accounts receivable turnover indicates how often accounts receivable are received and collected during the period.
True
False

QUESTION 65
1. The accounts receivable turnover is calculated by:
2. Dividing net sales by average accounts receivable and multiplying by 365.
Dividing average accounts receivable by net sales.
Dividing net sales by average accounts receivable.
Dividing net income by average accounts receivable.
Dividing average accounts receivable by net sales and multiplying by 365.

QUESTION 66
1. The annual Federal Unemployment Tax Return is:
2. Form 104.
Form 940.
Form 1099.
Form W-2.
Form W-4.

QUESTION 67
1. The carrying value of a long-term note is computed as the present value of all remaining future payments, discounted using the market rate at the time of issuance.
True
False

QUESTION 68
1. The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.
True
False

QUESTION 69
1. The cash flow on total assets ratio reflects actual cash flows and is therefore affected by income recognition and measurement.
True
False

QUESTION 70
1. The days' sales uncollected ratio is used to:
2. Measure how many days of sales remain until the end of the year.
Identify the likelihood of collecting sales on account.
Determine the number of days that have passed without collecting on accounts receivable.
Measure the amount of cash sales during a period.
Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.

QUESTION 71
1. The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:
2. Principle.
Cash.
Interest.
Face Value.
Accounts Payable.

QUESTION 72
1. The employer should record deductions from employee pay as:
2. Wages payable.
Payroll taxes.
Employee receivables.
Current liabilities.
Employee payables.

QUESTION 73
1. The factor for the present value of an annuity at 8% for 10 years is 6.7101. This implies that an annuity of ten $15,000 payments at 8% yields a present value of $2,235.
True
False

QUESTION 74
1. The inventory turnover ratio is calculated as:
2. Cost of goods sold divided by average merchandise inventory.
Cost of goods sold divided by ending inventory times 365.
Ending inventory divided by cost of goods sold.
Sales divided by cost of goods sold.
Cost of goods sold divided by ending inventory.

QUESTION 75
1. The inventory turnover ratio:
2. Reveals how many times a company sells its merchandise inventory during a period.
Calculation depends on the company's inventory valuation method.
Reveals how many days a company can sell inventory if no new merchandise is purchased.
Is used to measure solvency.
Is used to analyze profitability.

QUESTION 76
1. The matching principle permits the use of the direct write-off method of accounting for uncollectible accounts when bad debts are very large in relation to a company's other financial statement items such as sales and net income.
True
False

QUESTION 77
1. The number of days' sales uncollected is calculated by:
2. Dividing net sales by accounts receivable and multiplying by 365.
Dividing accounts receivable by net sales and multiplying by 365.
Dividing accounts receivable by net sales.
Multiplying net sales by accounts receivable and dividing by 365.
Dividing net sales by accounts receivable.

QUESTION 78
1. The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.
True
False

QUESTION 79
1. The process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use is called depletion.
True
False

QUESTION 80
1. The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.
True
False

QUESTION 81
1. The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.
True
False

QUESTION 82
1. The total number of shares outstanding is the authorized stock.
True
False

QUESTION 83
1. The understatement of the beginning inventory balance causes:
2. Cost of goods sold to be understated and net income to be understated.
Cost of goods sold to be overstated and net income to be correct.
Cost of goods sold to be understated and net income to be overstated.
Cost of goods sold to be overstated and net income to be overstated.
Cost of goods sold to be overstated and net income to be understated.

QUESTION 84
1. The understatement of the ending inventory balance causes:
2. Cost of goods sold to be understated and net income to be understated.
Cost of goods sold to be overstated and net income to be overstated.
Cost of goods sold to be understated and net income to be overstated.
Cost of goods sold to be overstated and net income to be correct.
Cost of goods sold to be overstated and net income to be understated.

QUESTION 85

1. Which of the following procedures would weaken control over cash receipts that arrive through the mail?
2. The cashier deposits the money in the bank and the recordkeeper records the amounts received in the accounting records.
The employees handling the cash receipts are bonded.
The bank reconciliation is prepared by a person who does not handle cash or record cash receipts.
For safety, only one person should open the mail, and that person should immediately deposit the cash received in the bank.
After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender's name, the amount, and an explanation of why the money is sent.
Name: _______________________

1. A company sells the following items:

1-Sep	beginning balance 18 units @	13
12-Sep	Purchase 30 Units @	14
19-Sep	Sold 24 units @	30
20-Sep	Purchased 24 units @	17
27-Sep	Sold 27 units @	30

What is the ending balance of inventory and the cost of goods sold using FIFO and LIFO.

2. The company has the following data:

Cash balance per company books	6500
Deposits in transit	1400
Outstanding Checks	750
Bank Charges	75
Collected items directly to bank	1425
NSF Checks	625

Prepare a bank reconciliation and determine what the actual bank balance is (not the adjusted).

3. A company reported the following balances

Accounts Receivable	$        375,000
Allowance for Uncollectible Accounts	$            4,500
Net Sales	$        850,000
Estimated sales uncollected are	0.4%
Estimated AR uncollectable	2%

 

 

Prepare the journal entry for the bad debt expense using the sales uncollected method and the estimated AR uncollected method.

4. A company purchased a building and land for $1.5M. The state tax assessed value when purchased was $877,500 land and $472,500 building with a 40-year useful life. Also, the following long-term items were purchased.

Assets	cost	Useful Life	Method
Truck	35000	5	units of production
Trailer	15000	5	Double Declining
Office furniture	3500	10	Straight-line
Office equipment	5000	10	Straight-line

Prepare the journal entries for the 5th year of depreciation.

5. The following data has been provided for the weekly payroll. The hourly workers worked 40 hours. Prepare the payroll entries for this pay period.

Employee	Salary	Hourly	401(k)	Medical	Child support	Federal	State
Mike	45000		15%	250	250	225	135
Bob		37.5	5%	500		150	75
Mary	52000		10%	300		200	100
Lauran		25.5	7.50%	400		100	50
FUTA	6%
SUTA	3%
401(k) match	5%

6. Prepare the issuance journal entry and the first annual payment using straight-line. All bonds were dated January 1, 2015 and pay annually.

Bond Amount	Sold	Rate	years
1,500,000	103	6%	5
750000	100	5%	5
250000	97	4%	5

7. Prepare the journal entry to issue the stock below.

	Authorized	Issued	Outstanding
Preferred Stock 8%, $100	1000	1000	1000
Common Stock, $1 Par	100000	75000	75000

April 2015

The company purchased 5000 shares of its own shares for 10 on the open market. Prepare this journal entry.

July 2015

The company declared a 10% stock dividend and the market price was $15.

September 2015

The company sells all its treasury stock for 12.50. Prepare this journal entry.

December 2015

Company declared a 50,000 dividend. Prepare the journal entry. How much per share?