Question 1.1. (TCO A) A corporation has which of the following sets of characteristics? (Points : 5)
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
Question 2.2. (TCO A) The Dividends account _____. (Points : 5)
appears on the income statement along with the expenses of the business
must show transactions every accounting period
is increased with debits and decreased with credits
is considered a long-term asset of the firm
Question 3.3. (TCOs A, B) Below is a partial list of account balances for Denton Company:
Cash $7,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Common stock 1,400
Dividends 700
Revenues 21,000
Expenses 17,500
What did Denton Company show as total credits? (Points : 5)
$30,100
$29,400
$28,700
$30,800
Question 4.4. (TCOs B, E) Under the accrual basis of accounting, _____. (Points : 5)
cash must be received before revenue is recognized
net income is calculated by matching cash outflows against cash inflows
events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received
the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles
Question 5.5. (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 _____.(Points : 5)
LIFO will have the highest ending inventory
FIFO will have the highest cost of goods sold
All three companies will have the same value for ending inventory.
average cost will have an ending inventory value that falls between FIFO and LIFO
Question 6.6. (TCOs A, E) 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? (Points : 5)
$48,000
$52,500
$49,500
$43,500
Question 7.7. (TCOs D, G) Mendez Corporation issues 2,000 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 103. The journal entry to record the issuance will show a _____. (Points : 5)
debit to Cash of $2,000,000
debit to Premium on Bonds Payable for $60,000
credit to Bonds Payable for $2,000,000
credit to Cash for $2,060,000
Question 8.8. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)
$240,000
$250,000
$310,000
$230,000
Question 9.9. (TCO F) One variation of the horizontal analysis is known as _____.(Points : 5)
nonlinear analysis
vertical analysis
trend analysis
common-size analysis
Question 10.10. (TCO F) In a common-size balance sheet, the 100% figure is _____.(Points : 5)
total current assets
total property, plant, and equipment
total liabilities
total assets
Question 11.11. (TCO F) In vertical analysis, the base amount for studying salary and wages expense is generally _____. (Points : 5)
net sales
salary and wages expense in a previous year
gross profit
net income
Question 12.12. (TCO F) Short-term creditors are usually most interested in assessing _____. (Points : 5)
solvency
liquidity
marketability
profitability
Question 13.13. (TCO F) Return on common stockholder’s equity ratio is affected by _____. (Points : 5)
net income
dividend paid to preferred stock, if any
leverage (debt-to-assets ratio)
All of the above
Question 14.14. (TCO G) To calculate the market value of a bond, we need to use the time-value-of-money concept called _____. (Points : 5)
compounding
extrapolation
discounting
None of the above