1. (TCO A) Which of the following is an advantage of the sole proprietorship relative to the corporate form of business organization
Limited liability of investor
Transferability of ownership
Simple to establish
2. (TCO A) The payment of cash dividends is recorded in the _____.
operating section of the statement of cash flows
investing section of the statement of cash flows
financing section of the statement of cash flows
noncash investing and financing section of the statement of cash flows
3. (TCOs A, B) Below is a partial list of account balances for Landon Company::
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Common stock 1,400
What did Landon Company show as total debits
4. (TCOs B, E) Under the accrual basis of accounting, revenues are recorded and reported _____.
when companies receive payments for jobs performed or products provided
when companies have provided products or performed services
when companies receive payments prior to providing products or performing services
when companies receive payments after providing products or performing services
5. (TCO D) Three companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____.
FIFO will have the highest income tax expense
average cost will have the income tax expense
LIFO will have the highest income tax expense
All three methods will result in the same income tax expense.
6. (TCOs A, E) Equipment with a cost of $212,000 has an estimated salvage value of $12,000 and an estimated life of 5 years or 15,000 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 6,000 hours?
7. (TCO D, G) Payne Corporation issues 100 twenty-year, 6%, $1,000 bonds dated July 1, 2010, at 105. The journal entry to record the issuance will show a _____.
debit to Discount on Bonds Payable of $5,000
debit to Premium on Bonds Payable of $5,000
credit to Discount on Bonds Payable of $5,000
credit to Premium on Bonds Payable of $5,000
8. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $120,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $2,000,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____.
9. (TCO F) If you are making comparisons with other companies to provide insight into a company’s competitive position, you are performing what type of analysis
Industry average analysis
10. (TCO F) In a common size income statement, the 100% figure is _____.
Total Stockholders’ Equity
11. (TCO F) Horizontal analysis of comparative financial statements includes the _____.
development of common-size statements
calculation of liquidity ratios
calculation of dollar amount changes and percentage changes from the previous year to the current year
evaluation of financial statement data that expresses each item in a financial statement as a percentage of a base amount
12. (TCO F) A common measure of solvency is the _____.
current cash debt coverage ratio
cash debt coverage ratio
13. (TCO F) Short-term creditors would be most interested in which of the following ratios?
Average collection period
Times interest earned
Cash debt coverage
Free cash flow
14. (TCO G) To calculate the market value of a bond, we need to _____.
multiply the bond price times the interest rate
calculate the present value of the principal only
calculate the present value of the interest only
calculate the present value of both the principal and interest payments