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1) Which of the following assets is NOT classified as a short-term investment?
A) corporate stocks
B) corporate bonds
C) debt securities issued by governments
D) checking account balance
D) checking account balance
2) The net amount a company expects to collects on Accounts Receivable is equal to ________.
A) gross Accounts Receivable
B) Allowance for Doubtful Accounts
C) gross Accounts Receivable minus Allowance for Doubtful Accounts
D) gross Accounts Receivable plus Allowance for Doubtful Accounts
C) gross Accounts Receivable minus Allowance for Doubtful Accounts
3) Manufacturers have several inventory accounts that do NOT include ________.
A) Finished Goods Inventory
B) Raw Materials Inventory
C) Work in Process Inventory
D) Construction in Process Inventory
D) Construction in Process Inventory
4) A unit of ending inventory has a cost of $100 per unit. The selling price per unit is $200. The replacement cost per unit is $90. What value is reported for this inventory on the balance sheet?
A) $90
B) $100
C) $110
D) $200
A) $90
5) Details about Property, Plant and Equipment, such as the age of plant assets and the types of plant assets, are typically reported ________.
A) on the balance sheet
B) on the income statement
C) on the statement of cash flows
D) in a footnote
D) in a footnote
6) Leasehold Improvements do NOT include ________.
A) painting and decorating of leased property
B) security systems added to leased property
C) bookcases built into walls of leased property
D) furniture used at leased property
D) furniture used at leased property
8) Current assets are expected to be converted to cash or sold or consumed within ________.
A) one year or operating cycle if longer than one month
B) one year or operating cycle if longer than one year
C) one year or operating cycle if shorter than one year
D) one fiscal year
B) one year or operating cycle if longer than one year
9) Which of the following is NOT a current asset?
A) Inventories
B) Prepaid Insurance
C) Supplies
D) Land
D) Land
10) On a classified balance sheet, the Equipment account is reduced by ________.
A) Allowance for Bad Debts
B) Allowance for Doubtful Accounts
C) Accumulated Depreciation
D) Depreciation Expense
C) Accumulated Depreciation
13) Intangible assets are ________.
A) assets with a physical presence
B) assets that can be seen and touched
C) rights to expected future benefits
D) assets with definite lives only
C) rights to expected future benefits
1) Deferred tax liabilities are ________.
A) expected increases in future income taxes due to past transactions
B) expected decreases in future income taxes due to past transactions
C) expected increases in future income taxes due to future transactions
D) expected decreases in future income taxes due to future transactions
A) expected increases in future income taxes due to past transactions
2) How should Unearned Rent Revenue be classified on a balance sheet at December 31, 2013? The rental contract covers the period, January 1, 2013 through December 31, 2015.
A) current liability only
B) long-term liability only
C) current and long-term liability
D) current asset only
C) current and long-term liability
3) An example of secured bonds is ________.
A) debentures
B) zero coupon bonds
C) mortgage bonds
D) serial bonds
C) mortgage bonds
6) Unsecured debt holders are creditors who have ________.
A) a specific claim against particular assets
B) a specific claim against fixed assets only
C) a general claim against fixed assets only
D) a general claim against total assets
D) a general claim against total assets
8) Convertible bonds allow a bondholder to exchange ________.
A) unsecured bonds for secured bonds
B) unsubordinated bonds for subordinated bonds
C) common stock for bonds
D) bonds for mortgage bonds
C) common stock for bonds
2) Damon Company sold 10,000 shares of $1 par value common stock. The selling price was $9.00 per share. After the sale, what is the capital in excess of par value?
A) $80,000
B) $90,000
C) $100,000
D) $110,000
A) $80,000
3) What is Other Comprehensive Income?
A) unrealized gains and loss that are reported on the Statement of Retained Earnings
B) unrealized gains and losses that are reported on the traditional Income Statement
C) unrealized gains and losses that are reported on the Balance Sheet
D) unrealized gains and losses that are not reported on the financial statements
C) unrealized gains and losses that are reported on the Balance Sheet
6) Johnson Company's capital stock is currently trading for $22 per share. The following accounts appear on the balance sheet:
Common stock, $6.00 par value per share, 10,000 shares issued $60,000
Paid in capital in excess of par value $200,000
The only transaction affecting the accounts was one issue of the company's common stock. What was the original selling price of the common stock?
A) $6.00 per share
B) $20.00 per share
C) $22.00 per share
D) $26.00 per share
D) $26.00 per share
7) Joe Anthony Company recently issued 20,000 shares of $1.00 par value common stock for $40,000. This transaction will increase the ________.
A) Common stock account by $20,000
B) Common stock account by $40,000
C) Paid in capital in excess of par account by $40,000
D) Retained earnings account by $40,000
A) Common stock account by $20,000
9) The limited liability of stockholders in a corporation means that ________.
A) the company's creditors cannot seek payment from the stockholders as individuals if the corporation cannot pay its debt
B) the company's creditors cannot receive more than the face value of their debt
C) the short-term creditors have to be paid before the long-term creditors
D) the long-term creditors have to be paid before the short-term creditors
A) the company's creditors cannot seek payment from the stockholders as individuals if the corporation cannot pay its debt
3) When calculating diluted earnings per share, which of the following items is NOT considered?
A) number of common shares outstanding
B) additional common shares from conversion of convertible securities
C) additional common shares from exercise of stock options
D) number of common shares authorized to be issued
D) number of common shares authorized to be issued
4) A multiple step income statement has several measures of profit that do NOT include ________.
A) operating income
B) gross margin
C) income before taxes
D) cost of sales
D) cost of sales
5) ________ summarizes the results of the basic operating activities of a company.
A) Gross margin
B) Gross profit
C) Net profit
D) Operating income
D) Operating income
8) Sanders Company had the following data for the year ending December 31, 2014:
Cash $6,000
Depreciation expense 40,000
Prepaid rent 1,400
Cost of goods sold 69,000
Sales 200,000
Dividends paid 3,000
Rent expense 3,600
Wage expense 81,000
What is the net income for the year ending December 31, 2014?
A) $400
B) $3,400
C) $6,000
D) $6,400
D) $6,400
9) Selected items from the financial statements for Lorna Company are listed below:
Paid in capital, December 31, 2014 $100,000
Retained earnings, December 31, 2014 $75,000
Common stock dividends declared in 2014 $75,000
Net income for the year ended December 31, 2014 $100,000
Lorna Company has 5,000 common shares outstanding during the year. What are the earnings per share for the year ended December 31, 2014?
A) $12.00
B) $15.00
C) $20.00
D) $25.00
C) $20.00
2) Mary Company had the following data available:
Paid-in capital, December 31, 2014 $43,000
Retained earnings, December 31, 2014 $27,000
Net income for the year ended December 31, 2015 $35,400
Dividends declared in 2015 $20,000
What is the balance in Retained Earnings on December 31, 2015?
A) $23,400
B) $42,400
C) $52,400
D) $66,400
B) $42,400
3) Michael Company had the following data:
Retained earnings, January 1, 2015 $45,000
Depreciation expense for 2015 $7,000
Cost of goods sold for 2015 $102,000
Paid-in capital, January 1, 2015 $26,000
Rent expense for 2015 $12,000
Sales for 2015 $194,000
Dividends declared in 2015 $15,000
Wage expense for 2015 $40,000
Prepaid rent, January 1, 2015 $2,000
What is the balance in Retained Earnings on December 31, 2015?
A) $61,000
B) $63,000
C) $65,000
D) $74,000
B) $63,000
4) The ending retained earnings balance of Brothers Company is $700,000. During the current year, net income is $370,000 and dividends declared are $150,000. What is the beginning balance in retained earnings?
A) $480,000
B) $580,000
C) $800,000
D) $1,060,000
A) $480,000
1) Cash receipts of interest income are reported in the ________ section of the statement of cash flows. The direct method is used.
A) operating activities
B) investing activities
C) financing activities
D) noncash investing and financing activities
A) operating activities
2) Cash payments for interest expense are reported in the ________ section of the statement of cash flows. The direct method is used.
A) operating activities
B) investing activities
C) financing activities
D) noncash investing and financing activities
A) operating activities
3) A payment on bonds payable will be reported in the ________ section of the statement of cash flows.
A) operating activities only
B) investing activities
C) financing activities
D) noncash investing and financing activities
C) financing activities
4) Which of the following events do NOT affect cash flows from operating activities? Assume the direct method is used.
A) cash sale of merchandise inventory
B) cash purchase of equipment
C) cash purchase of inventory
D) cash paid for employees' wages
B) cash purchase of equipment
8) The cash paid to purchase equipment is included in the ________ section of the statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
B) investing
1) Georgia Company has the following data available:
December December
31, 2011 31, 2012
Fixed Assets $125 $125
Accumulated Depreciation $110 $117
Long-term debt $125 $5
Common stock $300 $400
Retained earnings $100 $120
No dividends were declared or paid for the year ending December 31, 2012. What is the net cash flow from financing activities for the year ended December 31, 2012?
A) $20 cash inflow
B) $20 cash outflow
C) $100 cash inflow
D) $120 cash outflow
B) $20 cash outflow
2) Michigan Company has the following data available:
December December
31, 2011 31, 2012
Fixed Assets $125 $125
Accumulated Depreciation $110 $117
Long-term debt $125 $5
Common stock $300 $400
Retained earnings $100 $120
Dividends of $20 were declared on December 1, 2012. What is the net income for the year ended December 31, 2012?
A) $10
B) $20
C) $30
D) $40
D) $40
3) Wisconsin Company reported selected accounts as follows:
December 31, 2014 December 31, 2015
Accounts payable $20,000 $30,000
Bonds payable $40,000 $28,000
Common stock $20,000 $24,000
Dividends of $8,800 were declared and paid by December 31, 2015. What was the net cash flow from financing activities for the year ended December 31, 2015?
A) $6,800 cash outflow
B) $16,800 cash outflow
C) $6,800 cash inflow
D) $16,800 cash inflow
B) $16,800 cash outflow
4) Old equipment having a book value of $12,000 was sold for $20,000 cash. New equipment was purchased for $25,000 cash. Additional equipment was acquired in exchange for a $17,000 long-term note payable. The net cash flow from investing activities was ________.
A) $5,000 cash outflow
B) $22,000 cash outflow
C) $25,000 cash outflow
D) $42,000 cash outflow
A) $5,000 cash outflow
5) California Company reports the following information:
12/31/14 12/31/15
Fixed Assets $330 $581
Less: Accumulated Depreciation (110) (127)
Net Fixed Assets $220 $454
Depreciation expense for the year ending December 31, 2015 is $17. No fixed assets were sold during 2015. What is the net cash flow from investing activities for the year ending December 31, 2015?
A) $17 cash inflow
B) $251 cash inflow
C) $251 cash outflow
D) $268 cash outflow
C) $251 cash outflow
7) Nebraska Company gave a long-term note payable in the amount of $285,000 to acquire a new piece of land. This transaction will be reported on the statement of cash flows as a ________.
A) investing activity
B) financing activity
C) investing and financing activity
D) noncash investing and financing transaction
D) noncash investing and financing transaction
depreciation expense of $7,000. The income tax expense for the year ending December 31, 2014 is $20,000. The following data is available:
December 31, 2013 December 31, 2014
Cash $25,000 $16,000
Accounts Receivable $25,000 $45,000
Inventories $60,000 $100,000
Fixed Assets $330,000 $581,000
Accumulated Depreciation $110,000 $101,000
Accounts Payable $6,000 $74,000
Wages Payable $4,000 $25,000
What is the net cash provided (used) by operating activities for the year ended December 31, 2014? Assume the indirect method is used.
A) $(20,000)
B) $23,000
C) $59,000
D) $69,000
C) $59,000
2) For the year ending December 31, 2014, Harkins Company reports net income of $35,000 and depreciation expense of $12,000. The income tax expense for the year ending December 31, 2014 is $20,000. The following data is available:
December 31, 2013 December 31, 2014
Cash $35,000 $16,000
Accounts Receivable $35,000 $45,000
Inventories $70,000 $100,000
Fixed Assets $440,000 $581,000
Accumulated Depreciation $120,000 $101,000
Accounts Payable $6,000 $74,000
Wages Payable $4,000 $25,000
What is the net cash provided by operating activities for the year ended December 31, 2014? Assume the indirect method is used.
A) $5,000
B) $26,000
C) $73,000
D) $96,000
D) $96,000
3) Listed below are selected accounts for Dentice Corporation:
December 31, 2013 December 31, 2014
Accounts Receivable $20,000 $40,000
Inventory $70,000 $30,000
Accounts Payable $20,000 $88,000
Wages payable $22,000 $1,000
For the year ended December 31, 2014, net income was $50,000 and depreciation expense was $0. The net cash provided by operating activities for the year ending December 31, 2014 was ________. Assume the indirect method is used.
A) $70,000
B) $90,000
C) $108,000
D) $117,000
D) $117,000
4) When calculating the net cash provided by operating activities, which procedure should NOT be carried out? Assume the indirect method is used.
A) add depreciation expense
B) subtract a decrease in accounts payable
C) subtract a decrease in prepaid expenses
D) add a decrease in inventories
C) subtract a decrease in prepaid expenses
6) Lantern Company reported sales of $200,000, an increase in accounts receivable of $5,000, and a decrease in cash of $20,000. How much cash was collected from customers?
A) $185,000
B) $195,000
C) $200,000
D) $220,000
B) $195,000
7) Beth Company reported sales on account of $250,000, an increase in inventory of $70,000, and a decrease in accounts receivable of $20,000. How much cash was collected from customers?
A) $180,000
B) $230,000
C) $270,000
D) $320,000
C) $270,000
9) Jerome Company reported cost of goods sold of $700,000, a decrease in inventory of $60,000, and an increase in accounts payable of $30,000. How much cash was paid to suppliers?
A) $605,000
B) $610,000
C) $725,000
D) $795,000
B) $610,000
10) The wages expense of Florida Corporation was $45,000 as per its income statement. Beginning wages payable was $6,000. Ending wages payable was $3,000. The cash paid to employees was ________.
A) $42,000
B) $45,000
C) $48,000
D) $50,000
C) $48,000
12) Benson Company's income statement showed rent expense of $16,000. The beginning balance in Prepaid Rent was $5,000. The ending balance in Prepaid Rent was $3,000. The cash paid for rent was ________.
A) $14,000
B) $16,000
C) $19,000
D) $24,000
A) $14,000
14) When reconciling net income to net cash provided by operating activities, a(n) ________ is an addition to net income.
A) increase in inventories
B) increase in accounts receivable
C) increase in wages payable
D) decrease in taxes payable
C) increase in wages payable
1) Why do accountants add Depreciation Expense to net income when determining net cash provided by operating activities? Assume the indirect method is used.
A) because depreciation expense is a source of cash
B) because depreciation expense requires the outflow of cash
C) because depreciation expense is an investing activity that should be reported in the investing section of the cash flow statement
D) because it cancels the earlier deduction when calculating net income
D) because it cancels the earlier deduction when calculating net income
2) Which of the following statements about depreciation is FALSE?
A) Depreciation does not generate cash.
B) Depreciation is an allocation of the original cost of an asset to the periods in which the asset is used.
C) Depreciation does not entail an outflow of cash.
D) Depreciation is a means of setting aside cash for the replacement of an asset.
D) Depreciation is a means of setting aside cash for the replacement of an asset.
1) On January 1, 2014, a company had 100 units of inventory. A company acquired 100 units of inventory on January 31, 2014 and 100 units on December 1, 2014. The company sold 100 units on December 31, 2014, which was the company's only sale. Under FIFO, the cost of goods sold would come from ________.
A) the purchase cost of beginning inventory
B) the purchase cost on January 31, 2014
C) the purchase cost on December 1, 2014
D) an average of the cost over the two purchase dates
A) the purchase cost of beginning inventory
2) LIFO uses the ________ costs to measure the ending inventory.
A) latest
B) earliest
C) average
D) weighted-average
B) earliest
3) LIFO uses the ________ costs to measure the cost of goods sold.
A) latest
B) earliest
C) average
D) weighted-average
A) latest