Accounting Final Exam Chps 1-12

Flashcard maker : Lily Taylor
Which of the following is an asset?
A) Mortgage payable
B) Investments
C) Common stock
D) Retained earnings
Investments
The proprietorship form of business organization…
A) must have at least two owners in most states.
B) generally receives favorable tax treatment relative to a corporation.
C) combines the records of the business with the personal records of the owner.
D) is classified as a separate legal entity.
Generally receives favorable tax treatment relative to a corporation
The best definition of assets is the…
A) cash owned by the company.
B) collections of resources belonging to the company and the claims on these resources.
C) owners’ investment in the business.
D) resources belonging to a company that have future benefit to the company.
resources belonging to a company that have future benefit to the company
Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?
A) Only Jack is personally liable for the debt, since he has been the managing partner during that time.
B) Only Jill is personally liable for the debt of the business, since Jack has been working and she has not.
C) Both Jack and Jill are personally liable for the business debt.
D) Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity.
Both Jack and Jill are personally liable for the business debt
Which of the following is not a step for solving an ethical dilemma?
A) Identifying the alternatives and weighing the impact of each alternative on various stakeholders.
B) Certifying the ethical accuracy of the financial information.
C) Identifying and analyzing the principal elements in the situation.
D) Recognizing the ethical situation and issues involved.
certifying the ethical accuracy of the financial information
Issuing shares of stock in exchange for cash is an example of a(n)
A) delivering activity.
B) investing activity.
C) financing activity.
D) operating activity.
financing activity
External users want answers to all of the following questions except
A) Is the company earning satisfactory income?
B) Will the company be able to pay its debts as they come due?
C) Will the company be able to afford employee pay raises this year?
D) How does the company compare in profitability with competitors?
will the company be able to afford employee pay raises this year?
The balance sheet
A) summarizes the changes in retained earnings for a specific period of time.
B) reports the changes in assets, liabilities, and stockholders’ equity over a period of time.
C) reports the assets, liabilities, and stockholders’ equity at a specific date.
D) presents the revenues and expenses for a specific period of time.
reports the assets, liabilities, and stockholders’ equity at a specific date
Borrowing money is an example of a(n)
A) delivering activity.
B) financing activity.
C) investing activity.
D) operating activity.
financing activity
Elston Company compiled the following financial information as of December 31, 2014:
Service revenue $700,000
Common stock 150,000
Equipment 200,000
Operating expenses 625,000
Cash 175,000
Dividends 50,000
Supplies 25,000
Accounts payable 100,000
Accounts receivable 75,000
Retained earnings, 1/1/14 375,000

Elston’s assets on December 31, 2014 are
A) $1,175,000.
B) $850,000.
C) $400,000.
D) $475,000.

475000
Elston Company compiled the following financial information as of December 31, 2014:
Service revenue $700,000
Common stock 150,000
Equipment 200,000
Operating expenses 625,000
Cash 175,000
Dividends 50,000
Supplies 25,000
Accounts payable 100,000
Accounts receivable 75,000
Retained earnings, 1/1/14 375,000

Elston’s stockholders’ equity on December 31, 2014 is
A) $525,000.
B) $550,000.
C) $400,000.
D) $600,000.

550,000
Elston Company compiled the following financial information as of December 31, 2014:
Service revenue $700,000
Common stock 150,000
Equipment 200,000
Operating expenses 625,000
Cash 175,000
Dividends 50,000
Supplies 25,000
Accounts payable 100,000
Accounts receivable 75,000
Retained earnings, 1/1/14 375,000

Elston’s retained earnings on December 31, 2014 are
A) $375,000.
B) $450,000.
C) $400,000.
D) $ 25,000.

400,000
Payments to stockholders are called
A) expenses.
B) liabilities.
C) dividends.
D) distributions.
dividends
Dividends are reported on the
A) income statement.
B) retained earnings statement.
C) balance sheet.
D) income statement and balance sheet.
retained earnings statement
The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)
A) account payable.
B) account receivable.
C) revenue.
D) expense.
account payable
In a classified balance sheet, assets are usually classified as
A) current assets; long-term assets; property, plant, and equipment; and intangible assets.
B) current assets; long-term investments; property, plant, and equipment; and common stocks.
C) current assets; long-term investments; tangible assets; and intangible assets.
D) current assets; long-term investments; property, plant, and equipment; and intangible assets.
current assets; long-term investments; PPE and intangible assets
On a classified balance sheet, short-term investments are classified as
A) an intangible asset.
B) property, plant, and equipment.
C) a current asset.
D) a long-term investment.
current asset
An intangible asset
A) derives its value from the rights and privileges it provides the owner.
B) is worthless because it has no physical substance.
C) is converted into a tangible asset during the operating cycle.
D) cannot be classified on the balance sheet because it lacks physical substance.
derives its value from the rights and privileges it provides the owner
Which of the following is not considered an asset?
A) Equipment
B) Dividends
C) Accounts receivable
D) Inventory
dividends
Trademarks would appear in which balance sheet section?
A) Intangible assets
B) Investments
C) Property, plant, and equipment
D) Current assets
intangible assets
Liabilities are generally classified on a balance sheet as
A) small liabilities and large liabilities.
B) present liabilities and future liabilities.
C) tangible liabilities and intangible liabilities.
D) current liabilities and long-term liabilities.
current and long-term liabilities
22. Which of the following would not be classified as a long-term liability?
A) Current maturities of long-term debt
B) Bonds payable
C) Mortgage payable
D) Lease liabilities
current maturities of long-term debt
23. Which of the following is not a current liability?
A) Salaries and Wages Payable
B) Accounts Payable
C) Taxes Payable
D) Bonds Payable
Bonds Payable
24. These are selected account balances on December 31, 2014.
Land $100,000
Land (held for future use) 150,000
Buildings 800,000
Inventory 200,000
Equipment 450,000
Furniture 100,000
Accumulated Depreciation 300,000

What is the total amount of property, plant, and equipment that will appear on the balance sheet?
A) $1,500,000
B) $1,300,000
C) $1,800,000
D) $1,150,000

1,150,000
25. Use the following data to determine the total dollar amount of assets to be classified as current assets. from Koonce Office supplies
Cash 130,000
A/R 100,000
Inven 110,000
Prepaid invst 60,000
400,000
26. Use the following data to determine the total amount of working capital.
Koonce Office Supplies
Balance Sheet
December 31, 2014

Cash $ 130,000 Accounts payable $ 140,000
Accounts receivable 100,000 Salaries and wages payable 20,000
Inventory 110,000 Mortgage payable 160,000
Prepaid insurance 60,000 Total liabilities $320,000
Stock investments 170,000
Land 180,000
Buildings $210,000 Common stock $240,000
Less: Accumulated Retained earnings 500,000
depreciation (40,000) 170,000 Total stockholders’ equity $740,000
Trademarks 140,000 Total liabilities and
Total assets $1,060,000 stockholders’ equity $1,060,000

A) $240,000
B) $390,000
C) $130,000
D) $180,000

working capital = CA-CL
240,000
27. Use the following data to calculate the current ratio.
Koonce Office Supplies
Balance Sheet
December 31, 2014

Cash $ 130,000 Accounts payable $ 140,000
Accounts receivable 100,000 Salaries and wages payable 20,000
Inventory 110,000 Mortgage payable 160,000
Prepaid insurance 60,000 Total liabilities $320,000
Stock investments 170,000
Land 180,000
Buildings $210,000 Common stock $240,000
Less: Accumulated Retained earnings 500,000
depreciation (40,000) 170,000 Total stockholders’ equity $740,000
Trademarks 140,000 Total liabilities and
Total assets $1,060,000 stockholders’ equity $1,060,000

A) 2.13 : 1
B) 1.44 : 1
C) 2.86 : 1
D) 2.50 : 1

current ratio = CA/CL
2.50:1
28. N3 Corporation has assets of $3,000,000, common stock of $780,000, and retained earnings of $475,000. What are the creditors’ claims on their assets?
A) $2,695,000
B) $1,255,000
C) $1,745,000
D) $3,305,000
$1,745,000
(assets – common stock – retained earnings)
29. The following information is available for Bradshaw Corporation and Newell Corporation:
Bradshaw Corporation Newell Corporation
(in millions) 2014 2013 2014 2013
Preferred dividends 25 10 0 30
Net income 500 480 490 520
Shares outstanding at the end of the year 200 180 150 200
Shares outstanding at the beginning of the year 180 150 200 220

Based on this information, what is the amount of Bradshaw’s earnings per share (rounded to two decimals) for 2014?
A) $2.76
B) $2.50
C) $1.25
D) $1.32

$2.50
30. McKinney Corporation had beginning retained earnings of $2,242,000 and ending retained earnings of $2,499,000. During the year they issued common stock totaling $141,000. No dividends were paid. What was their net income for the year?
A) $257,000
B) $116,000
C) $398,000
D) $323,000
$257,000
31. Collection of a $600 Accounts Receivable
A) increases an asset $600; decreases an asset $600.
B) increases an asset $600; decreases a liability $600.
C) decreases a liability $600; increases stockholders’ equity $600.
D) decreases an asset $600; decreases a liability $600.
increases an asset (cash) $600 and decreases an asset (AR) $600
32. If services are rendered on account, then
A) assets will decrease.
B) liabilities will increase.
C) stockholders’ equity will increase.
D) liabilities will decrease.
stockholders’ equity will increase??
33. An investment by the stockholders in a business increases
A) assets and stockholders’ equity.
B) assets and liabilities.
C) liabilities and stockholders’ equity.
D) assets only.
assets and stockholders’ equity
34. The purchase of an asset for cash
A) increases assets and stockholders’ equity.
B) increases assets and liabilities.
C) decreases assets and increases liabilities.
D) leaves total assets unchanged.
leaves total assets unchanged
35. The purchase of an asset on credit
A) increases assets and stockholders’ equity.
B) increases assets and liabilities.
C) decreases assets and increases liabilities.
D) leaves total assets unchanged.
increases assets and liabilities
36. The payment of a liability
A) decreases assets and stockholders’ equity.
B) increases assets and decreases liabilities.
C) decreases assets and increases liabilities.
D) decreases assets and liabilities.
decreases assets and liabilities
37. Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?
A) Yes, they are treated as revenue at the time of receipt because the company has access to the cash.
B) No, the amount of revenue cannot be adequately determined until the company completes the work.
C) Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed.
D) No, revenue cannot be recognized until the work is performed.
No, revenue cannot be recognized until the work is performed
38. Jamal Company began the year with $84,000 in its Common Stock account and a debit balance in Retained Earnings of $36,000. During the year, the company earned net income of $18,000 and declared and paid $6,000 of dividends. In addition, the company sold additional common stock amounting to $22,000. Based on this information, what should the transaction analysis show for the ending total of all stockholders’ equity accounts?
A) $154,000
B) $166,000
C) $82,000
D) $110,000
$82,000
39. Crawford Company started the year with $30,000 in its Common Stock account and a credit balance in Retained Earnings of $22,000. During the year, the company earned net income of $24,000 and declared and paid $10,000 of dividends. In addition, the company sold additional common stock amounting to $14,000. As a result, the amount of its retained earnings at the end of the year would be
A) $80,000.
B) $36,000.
C) $66,000.
D) $50,000.
36000
40. The left side of an account is
A) blank.
B) a description of the account.
C) the debit side.
D) the balance of the account.
the debit side
41. A debit to an asset account indicates a(n)
A) error.
B) credit was made to a liability account.
C) decrease in the asset.
D) increase in the asset.
increase in the asset
42. The double-entry system requires that each transaction must be recorded
A) in at least two different accounts.
B) in two sets of books.
C) in a journal and in a ledger.
D) first as a revenue and then as an expense.
in at least two different accounts
43. Which of the following describes the classification and normal balance of the Unearned Rent Revenue account?
A) Asset, debit
B) Liability, credit
C) Revenues, credit
D) Expense, debit
liability, credit
44. Which of the following correctly identifies normal balances of accounts?
A) Assets Debit
Liabilities Credit
Common Stock Credit
Revenues Debit
Expenses Credit

B) Assets Debit
Liabilities Credit
Common Stock Credit
Revenues Credit
Expenses Credit

C) Assets Credit
Liabilities Debit
Common Stock Debit
Revenues Credit
Expenses Debit

D) Assets Debit
Liabilities Credit
Common Stock Credit
Revenues Credit
Expenses Debit

D
Assets —- Debit
Liabilities —- Credit
Common Stock —- Credit
Revenues —– Credit
Expenses —– Debit
45. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,400 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a
A) $800 credit balance.
B) $1,400 debit balance.
C) $600 debit balance.
D) $600 credit balance.
$600 debit balance
46. The periodicity assumption states that:
A) a transaction can only affect one period of time.
B) estimates should not be made if a transaction affects more than one time period.
C) adjustments to the enterprise’s accounts can only be made in the time period when the business terminates its operations.
D) the economic life of a business can be divided into artificial time periods.
the economic life of a business can be divided into artificial time periods
47. One of the accounting concepts upon which adjustments for prepayments and accruals are based is:
A) expense recognition.
B) cost.
C) monetary unit.
D) economic entity.
expense recognition
48. An accounting time period that is one year in length is called:
A) a fiscal year.
B) an interim period.
C) the time period assumption.
D) a reporting period.
fiscal year
49. Management usually wants ________ financial statements and the IRS requires all businesses to file _________ tax returns.
A) annual, annual
B) monthly, annual
C) quarterly, monthly
D) monthly, monthly
monthly, annual
50. On January 1, 2013, M. Johanson Company purchased equipment for $36,000. The company is depreciating the equipment at the rate of $500 per month. The book value of the equipment at December 31, 2013 is:
A) $0.
B) $6,000.
C) $30,000.
D) $36,000.
$30,000
126. Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets?
A) Salvage value.
B) Estimated useful life.
C) Cash needed to replace the plant asset.
D) Cost.
Cash needed to replace the plant asset
127. The book value of an asset is equal to the
A) asset’s fair value less its historical cost.
B) blue book value relied on by secondary markets.
C) replacement cost of the asset.
D) asset’s cost less accumulated depreciation.
asset’s cost less accumulated depreciation
128. Depreciation is a process of
A) asset devaluation.
B) cost accumulation.
C) cost allocation.
D) asset valuation.
cost allocation
129. Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 10,000 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 2,700 hours?
A) $56,250.
B) $52,500.
C) $56,700.
D) $54,375.
52,500
130. The declining-balance method of depreciation produces a(n)
A) decreasing depreciation expense each period.
B) increasing depreciation expense each period.
C) declining percentage rate each period.
D) constant amount of depreciation expense each period.
decreasing depreciation expense each period
131. Mitchell Corporation bought equipment on January 1, 2014 .The equipment cost $180,000 and had an expected salvage value of $30,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is
A) $180,000.
B) $150,000.
C) $30,000.
D) $25,000.
150,000 (cost – salvage value = depreciable cost)
132. Jack’s Copy Shop bought equipment for $150,000 on January 1, 2013. Jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Jack decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2014?
A) $50,000.
B) $20,000.
C) $25,000.
D) $37,500.
25,000
133. Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 6 years and no change in the salvage value, the depreciation expense for Year 3 would be
A) $10,500.
B) $9,333.
C) $14,000.
D) $7,000.
10,500
134. A company sells a plant asset that originally cost $240,000 for $80,000 on December 31, 2014. The accumulated depreciation account had a balance of $120,000 after the current year’s depreciation of $20,000 had been recorded. The company should recognize a
A) $40,000 loss on disposal.
B) $40,000 gain on disposal.
C) $80,000 loss on disposal.
D) $80,000 gain on disposal.
$40,000 loss on disposal
135. A machine costing $132,000 was destroyed when it caught fire. At the date of the fire, the accumulated depreciation on the machine was $60,000. An insurance check for $150,000 was received based on the replacement cost of the machine. The entry to record the insurance proceeds and the disposition of the machine will include a
A) gain on disposal of $18,000.
B) credit to the Equipment account for $72,000.
C) credit to the Accumulated Depreciation account for $60,000.
D) gain on disposal of $78,000.
gain on disposal of $78,000
136. Liabilities are classified on the balance sheet as current or
A) deferred.
B) unearned.
C) long-term.
D) accrued.
long-term
137. A current liability is a debt that can reasonably be expected to be paid
A) within one year, or the operating cycle, whichever is longer.
B) between 6 months and 18 months.
C) out of currently recognized revenues.
D) out of cash currently on hand.
within one year, or the operating cycle, whichever is longer
138. Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30?
A) Interest Expense 9,000
Interest Payable 9,000

B) Interest Expense 9,000
Cash 9,000

C) Interest Payable 9,000
Cash 9,000

D) Interest Payable 9,000
Interest Expense 9,000

Interest Expense — 9000
Interest Payable — 9000
139. As interest is recorded on an interest-bearing note, the Interest Expense account is
A) increased; the Notes Payable account is increased.
B) increased; the Notes Payable account is decreased.
C) increased; the Interest Payable account is increased.
D) decreased; the Interest Payable account is increased.
Increased; the interest payable account is increased
140. Interest expense on an interest-bearing note is
A) always equal to zero.
B) accrued over the life of the note.
C) only recorded at the time the note is issued.
D) only recorded at maturity when the note is paid.
accrued over the life of the note
141. On January 1, 2014, Keisler Company, a calendar-year company, issued $700,000 of notes payable, of which $175,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is
A) Current liabilities, $700,000.
B) Long-term debt, $700,000.
C) Current liabilities, $175,000; Long-term Debt, $525,000.
D) Current liabilities, $525,000; Long-term Debt, $175,000.
Current liabilities, $175,000
Long-term debt, $525,000
142. Morgan Company does not ring up sales taxes separately on the cash register. Total receipts for February amounted to $25,440. If the sales tax rate is 6%, what amount must be remitted to the state for February’s sales taxes?
A) $1,527
B) $1,440
C) $1,435
D) It cannot be determined.
$1,440
143. Bonds that may be exchanged for common stock at the option of the bondholders are called
A) options.
B) stock bonds.
C) convertible bonds.
D) callable bonds.
convertible bonds
144. Bonds with a face value of $300,000 and a quoted price of 97 have a selling price of

A) $291,750.
B) $291,075.
C) $291,006.
D) $292,500.

$291,750
145.
On January 1, 2014, $2,000,000, 10-year, 10% bonds, were issued for $1,940,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is
A) $19,400.
B) $6,000.
C) $1,616.
D) $500.
$500
146. Gomez Corporation issues 600, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 96. The journal entry to record the issuance will show a
A) debit to Cash of $600,000.
B) credit to Discount on Bonds Payable for $24,000.
C) credit to Bonds Payable for $576,000.
D) debit to Cash for $576,000.
debit to Cash for $576,000
147. Four thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is
A) Cash 4,080,000
Bonds Payable 4,080,000

B) Cash 4,000,000
Premium on Bonds Payable 80,000
Bonds Payable 4,080,000

C) Cash 4,080,000
Premium on Bonds Payable 80,000
Bonds Payable 4,000,000

D) Cash 4,080,000
Discount on Bonds Payable 80,000
Bonds Payable 4,000,000

C
148. Winrow Company received proceeds of $565,500 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $600,000, pay interest annually on December 31st, and have a call price of 101. Winrow uses the straight-line method of amortization. What is the amount of interest Winrow must pay the bondholders in 2013?
A) $45,240
B) $48,000
C) $51,450
D) $44,550
B
149. Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of $23,100. The mortgage carries an interest rate of 10 percent. The entry to record the first monthly payment will include a
A) debit to the Cash account for $23,100.
B) credit to the Cash account for $21,000.
C) debit to the Interest Expense account for $21,000.
D) credit to the Mortgage Payable account for $23,100.
C
150. Sielert Corporation borrowed $900,000 from National Bank on May 31, 2013. The three-year, 7% note required annual payments of $342,945 beginning May 31, 2014. The total amount of interest to be paid over the life of the loan is
A) $63,000.
B) $128,835.
C) $251,403.
D) $189,000.
B

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