Description
The objectives of
financial reporting are to provide information
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• Question
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2.
Investors and creditors are interested in the probability that their
original investment or loan will eventually be returned, and that they will
receive a reasonable return while their funds are invested or borrowed. These
expectations are collectively referred to as:
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• Question
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3.
The basic purpose of generally accepted accounting principles is to:
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• Question
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4.
The concept of adequate disclosure means that:
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• Question
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5.
Which of the following is correct if a company purchases equipment for
$70,000 cash?
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• Question
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6.
If a transaction causes an asset account to decrease, which of the
following related effects may occur?
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• Question
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7.
If cash increases during a year, it must mean that:
A) There was positive net income on the income
statement
B) Retained earnings increased
C)
The net worth of a company increased.
D) None of the three statements above must
necessarily be true.
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• Question
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8.
On June 27, Healthy Life Services, Inc. performed extensive tests on lab
specimens submitted by several customers and sent invoices totaling $5,200, due
in 30 days:
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• Question
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9.
Master Equipment has a $17,400 liability to Arrow Paint Co. When Master
Equipment makes a partial payment of $7,600 on this liability, which of
following is true about the journal entry made by Master to record this
transaction?
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• Question
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10.
On June 18, Baltic Arena paid $6,600 to Marvin Maintenance, Inc. for
cleaning the arena following a monster truck show held on June 9th. This
transaction:
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• Question
11
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Use the following to answer
questions 11-13:
Montauk Oil Co. reports these account balances at December
31, 2010
Accounts
Payable………………………………………….. $
110,000
Accounts Receivable………………………………………. 100,000
Buildings………………………………………………………. 240,000
Capital
Stock…………………………………………………. 340,000
Cash……………………………………………………………. 80,000
Equipment…………………………………………………….. 160,000
Land……………………………………………………………. 200,000
Notes
Payable……………………………………………….. 260,000
Retained
Earnings………………………………………….. 70,000
On January 2, 2011, Montauk Oil collected $50,000 of its
accounts receivable and paid $20,000 on its accounts payable.
11. Refer to the above data. In a trial balance prepared at December
31,2010, the total of the debit column is:
A) $1,540,000.
B) $700,000.
C) $1020,000.
D) $780,000.
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• Question
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Use the following to answer
questions 11-13:
Montauk Oil Co. reports these account balances at December
31, 2010:
Accounts
Payable………………………………………….. $
110,000
Accounts
Receivable………………………………………. 100,000
Buildings………………………………………………………. 240,000
Capital
Stock…………………………………………………. 340,000
Cash……………………………………………………………. 80,000
Equipment…………………………………………………….. 160,000
Land……………………………………………………………. 200,000
Notes
Payable……………………………………………….. 260,000
Retained Earnings………………………………………….. 70,000
On January 2, 2011, Montauk Oil collected $50,000 of its
accounts receivable and paid $20,000 of its accounts payable.
12. Refer to the above data. In a trial balance prepared on January 3,
2011, the total of the debit column is:
A) $740,000.
B) $1,570,000.
C) $760,000.
D) $370,000.
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• Question
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Use the following to answer
questions 11-13:
Montauk Oil Co. reports these account balances at December
31, 2010:
Accounts
Payable………………………………………….. $
110,000
Accounts
Receivable………………………………………. 100,000
Buildings………………………………………………………. 240,000
Capital
Stock…………………………………………………. 340,000
Cash……………………………………………………………. 80,000
Equipment…………………………………………………….. 160,000
Land……………………………………………………………. 200,000
Notes
Payable……………………………………………….. 260,000
Retained Earnings………………………………………….. 70,000
On January 2, 2011, Montauk Oil collected $50,000 of its
accounts receivable and paid $20,000 of its accounts payable.
13. Refer to the above data. On January 3, 2011, total liabilities are:
A) $370,000.
B) $350,000.
C) $300,000.
D) $70,000.
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• Question
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14.
The concept of materiality:
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15.
As of January 31, Logan Company owes $600 to We-Rent-All for equipment
used during January. If no adjustment is
made for this item at January 31, how will Logan’s financial statements be
affected?
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16.
Rose Corp. has a note receivable from Jewel Co for $80,000. The note
matures in 5 years and bears interest of 6%. Rose is preparing financial
statements for the month of June. Rose should make an adjusting entry :
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• Question
17
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Use the following to answer
questions 17-19:
Rockville Company adjusts its accounts at the end of each
month. The following information has
been assembled in order to prepare the required adjusting entries at December
31:
(1) A one-year bank loan of $360,000 at an annual interest
rate of 12% had been obtained on December 1.
(2) The company’s pays all employees up-to-date each
Friday. Since December 31 fell on
Tuesday, there was a liability to employees at December 31 for two day’s pay
amounting to $5,900.
(3) On December 1 rent on the office building had been paid
for four months. Monthly rent is $3,000.
(4) Depreciation of office equipment is based on a lifetime
of six years. The balance in the Office
Equipment account is $7,200; no change has occurred in the account during the
year.
(5) Fees of $7,600 were earned during the month for clients
who had paid in advance.
17. What amount of interest expense has accrued
on the bank loan?
A) $2,400
B) $3,000.
C) $3,600.
D) $4,200.
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• Question
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Use the following to answer
questions 17-19:
Rockville Company adjusts its accounts at the end of each
month. The following information has been assembled in order to prepare the
required adjusting entries at December 31:
(1) A one-year bank loan of $360,000 at an annual interest
rate of 12% had been obtained on December 1.
(2) The company’s pays all employees up-to-date each Friday.
Since December 31 fell on Tuesday, there was a liability to employees at
December 31 for two day’s pay amounting to $5,900.
(3) On December 1 rent on the office building had been paid
for four months. Monthly rent is $3,000.
(4) Depreciation of office equipment is based on a lifetime
of six years. The balance in the Office Equipment account is $7,200; no change
has occurred in the account during the year.
(5) Fees of $7,600 were earned during the month for clients
who had paid in advance.
18. By what amount
will the book value of the office equipment decline after the appropriate
December adjustment is recorded?
A) $1,200.
B) $0.
C) $100.
D) Some other amount.
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• Question
19
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Use the following to answer
questions 17-19:
Rockville Company adjusts its accounts at the end of each
month. The following information has
been assembled in order to prepare the required adjusting entries at December
31:
(1) A one-year bank loan of $360,000 at an annual interest
rate of 12% had been obtained on December 1.
(2) The company’s pays all employees up-to-date each
Friday. Since December 31 fell on
Tuesday, there was a liability to employees at December 31 for two day’s pay
amounting to $5,900.
(3) On December 1 rent on the office building had been paid
for four months. Monthly rent is $3,000.
(4) Depreciation of office equipment is based on a lifetime
of six years. The balance in the Office
Equipment account is $7,200; no change has occurred in the account during the
year.
(5) Fees of $7,600 were earned during the month for clients
who had paid in advance.
19. Failure to make the appropriate adjustment
to the Salary Expense account will result in:
A) Understating net income for December by
$5,900.
B) Understating net income for January by
$5,900.
C) Overstating total liabilities at December
31.
D) Overstating the balance in Cash at December
31.
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• Question
20
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Use the following to answer questions 20-21:
Shown below is a trial balance for Dependable, Inc., on
December 31, after the first year of operations, after adjusting entries:
Trial Balance
Dependable, Inc.
December 31, 2005
Cash $ 6,200
Accounts receivable 5,100
Office equipment 9,000
Accumulated Depreciation
$ 2,400
Accounts payable
3,100
Capital Stock 9,000
Retained earnings
-0-
Dividends 3,000
Fees earned 18,200
Salaries expense 6,400
Advertising expense 1,300
Depreciation expense 1,700
$32,700 $32,700
20. Refer to the above data. Net income for the period equals:
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• Question
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21. Refer to the above data. Retained earnings at December 31 equals;
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22.
If current assets are $140,000 and current liabilities are $100,000, the
current ratio will be:
A) 71%.
B) $40,000.
C) 1:4:1.
D) $240,000
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• Question
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23.
If current assets are $90,000 and current liabilities are $30,000,
working capital will be:
A) 33.3%.
B) 3:1.
C) $60,000.
D) $120,000.
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• Question
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24.
The following information is available:
Sales…………………………………………………… $300,000
Net Income………………………………………….. $
15,000
Retained Earnings………………………………….. $
30,000
Avg. Stockholders’ Equity……………………….. $100,000
Dividends…………………………………………….. $
5,000
What is
the return on equity?
A) 5%.
B) 20%.
C) 25%.
D) 15%.
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• Question
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25.
The cost of delivering merchandise to the customer is:
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• Question
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26.
Emily Products uses a perpetual inventory system. At year-end the
Inventory account had a balance of $257,000, but a complete year-end physical
inventory indicated goods on hand costing only $251,000. Emily should:
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• Question
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27.
At the beginning of the year, California Coat Co. had an inventory of
$100,000. During the year, the company purchased merchandise costing $650,000.
Net sales for the year totaled $1,000,000, and the gross profit rate was 45%.
The cost of goods sold and the ending inventory, respectively, were:
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• Question
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28.
At the beginning of 2005, Hudson Hardware has an inventory of $200,000.
Because sales growth was strong during 2004, the owner wants to increase
inventory on hand to $250,000 at December 31, 2005. If net sales for 2005 are
expected to be $1,000,000, and the gross profit rate is expected to be 35%,
compute the cost of the merchandise the owner should expect to purchase during
2005.
A)
$600,000.
B) $700,000.
C) $900,000.
D) Some other amount.
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• Question
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29.
If cost of goods sold is $240,000 and the gross profit rate is 40%, what
is the gross profit?
A) $160,000
B) $560,000
C) $240,000
D) Some other amount.
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• Question
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30.
In order to achieve internal control over cash receipts:
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• Question
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Use the following to answer
questions 31-32:
The Cash account in the ledger of Novake, Inc. showed a
balance of $9,300 at June 30. The bank statement, however, showed a balance of
$11,700 at the same date. The only reconciling items consisted of a $2,100
deposit in transit, a bank service charge of $20, and a large number of
outstanding checks.
31. Refer to the above data. What is the “adjusted cash balance”
at June 30?
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• Question
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32.
Refer to the above data. Upon
completion of the bank reconciliation, a journal entry will be required to
update the depositor’s accounting records. This entry will include:
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• Question
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33.
Romeo Inc. had accounts receivable of $250,000 and an allowance for
doubtful accounts of $9,700 just before writing off as worthless an account
receivable from Juliet Company of $1,500. After writing off this receivable what
would be the balance in Romeo’s Allowance for Doubtful Accounts?
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• Question
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34.
On January 1, Pierce Farms established a petty cash fund of $450, which
it replenishes at the end of each month. When a surprise count of the petty
cash fund is made on March 5, the petty cash box contains $80 in cash and
receipts for the following items:
Delivery expense…………………………………… $28
Typewriter repairs…………………………………. 45
Office supplies……………………………………… 26
This
situation indicates:
A) Approximately $270 of petty cash has been
invested in cash equivalents.
B) There were approximately $270 in cash
disbursements made from the petty cash fund for the first two months of the
year.
C) The petty cash expense recognized for the
month of March is approximately $270.
D) There is approximately $270 of petty cash
that is missing and unaccounted for at March 5.
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• Question
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35.
Juliet Inc. had accounts receivable of $300,000 and an allowance for
doubtful accounts of $18,500 just before writing off as worthless an account
receivable from Arrow Company of $1,200. The net realizable values of the
accounts receivable before and after the write-off were:
A)
$281,500 before and $280,300 after.
B) $281,500 before and $281,500 after.
C) $300,000 before and $298,800 after.
D) $318,500 before and $317,300 after.
Answer
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