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1.) 1.) Current Liabilities are
a.) Due, but not payable for more than one year
b.) Due and receivable within one year
c.) Due, but not receivable for more than one year
d.) Due and payable within one year
2.) 2.) Notes may be issued
a.) To creditors to temporarily satisfy an account payable created earlier
b.) When borrowing money
c.) When assets are purchased
d.) All of the above
3.) 3.) On June 8, Acme Co. issued an $80,000 6% 120-day note payable to still Co.
What is the maturity value of the note?
a.) $81,200
b.) $81,600
c.) $80,100
d.) $84,800
4.) 4.) A Business borrowed $40,000 on March 1 of the current year by signing a 30
day 6% Interest bearing note. When the note is paid on March 31, the entry to record
the payment should include a
a.) Credit to Cash for $42,400
b.) Credit to Cash for $40,000
c.) Debit to Interest Payable $200
d.) Debit to Interest Expense $200
5.) 5.) Chu Co. issued a $50,000 60-day, discounted note to River City Bank. The
discount rate is 6%. The cash proceeds to Chu Co. are
a.) $ 50,500
b.) $ 50,250
c.) $ 49,500
d.) $ 50,250
6.) 6.) Pilgrim Company sells merchandise with a one year warranty. In 2005, Sales
consisted of 1,500 units. It is estimated that warranty repairs will average $10 per unit
sold, and 30% of the repairs will be made in 2005 and 70% in 2006. In the 2005
income statement, Pilgrim should show warranty expense of
a.) $4,500
b.) $10,500
c.) 15,000
d.) $0
7.) 7.) For which of the following taxes is there no ceiling on the amount of employee
annual earnings subject to the tax?
a.) Only unemployment compensation tax
b.) Only Medicare tax
c.) Only Social Security Tax
d.) None of the
8.) 8.) Payroll taxes levied against employee’s become liabilities
a.) When earned by the employee
b.) At the time the payroll is paid
c.) The first of the following month
d.) At the end of an accounting period
9.) 9.) Which of the following are included in the employer’s taxes?
a.) All of the above
b.) FICA taxes
c.) SUTA taxes
d.) FUTA taxes
10.) 10.) The detailed record indicating the data for each employee for each payroll
period and the cumulative total earnings for each employee is called the
a.) Employer’s earnings record
b.) Employee’s earning’s record
c.) Payroll register
d.) Payroll check
11.) 11.) One of the main disadvantages of the corporate form is the
a.) Double taxation of dividends
b.) Charter
c.) Professional management
d.) Corporation must issue stock
12.) 12.) Stockholders’ equity
a.) Includes paid-in-capitol and liabilities
b.) Includes retained earnings and paid-in capitol
c.) Is usually equal to cash on hand
d.) Is shown on the income statement
13.) 13.) If preferred stock has dividends in arrears, the preferred stock must be
a.) Cumulative
b.) Callable
c.) Convertible
d.) Participating
14.) 14.) The par value per share of common represents
a.) An arbitrary amount established in the articles of incorporation
b.) The minimum amount the stockholder will receive when the corporation is
liquidated
c.) The amount of dividends per share to be received each year
d.) The minimum selling price of the stock established by the articles of incorporation
15.) 15.) The entry to record the issuance of 150 shares of $5 par common stock at
par to an attorney in payment of legal fees for organizing the corporation includes a
credit to
a.) Goodwill
b.) Common stock
c.) Organizational Expenses
d.) Cash
16.) 16.) Treasury stock shares are
a.) Part of the total outstanding shares but not part of the total issued shares of a
corporation
b.) Unissued shares that are held by the treasurer of the corporation
c.) Shares held by the U.S Treasury Department
d.) Issued shares that are held by the treasurer of a corporation
17.) 17.) A corporation has 40,000 shares of $25 par value stock outstanding. If the
corporation issues a 4-for1 stock split, the number of shares outstanding after the split
will be
a.) 120,000 shares
b.) 40,000 shares
c.) 10,000 shares
d.) 160,000 shares
18.) 18.) Which of the following is not a prerequisite to paying a cash dividend?
a.) Sufficient cash
b.) Market value in excess of par value per share
c.) Sufficient retained earnings
d.) Formal action by the board of directors
19.) 19.) The liability for a dividend is recorded on which of the following dates?
a.) The date of record
b.) The date of repayment
c.) The date of declaration
d.) The date of announcement
20.) 20.) The Rand Corporation began the current year with a retained earnings
balance of $25,000. During the years, the company corrected an error made in the
prior year, which was a failure to record depreciation expense of $3,000 on
equipment. Also, during the current year, the company earned net income of $12,000
and declared cash dividends of $5,000. Compute the year end retained earnings
balance.
a.) $29,000
b.) $35,000
c.) $39,000
d.) $45,000
21.) 21.) The income before income tax for the first year of operations is $750,000.
Because of timing differences in accounting and tax methods, the taxable income for
the same year is $550,000. Assuming an income tax rate of 50%, the amount of the
deferred income tax would be
a.) $100,000
b.) $50,000
c.) $200,000
d.) $375,000
22.) 22.) An extraordinary item results from
a.) Corporate income tax being paid
b.) A transaction or event that is unusual occurs infrequently
c.) A change from one accounting method to another acceptable accounting method
d.) A segment of business being sold
23.) 23.) For the year that just ended, a company reports net income of $3,200,000.
There are 750,000 shares authorized, 600,000 shares issued, and 500,000 shares of
common stock outstanding. What is the earnings per share?
a.) $3.33
b.) $5.33
c.) $6.40
d.) $3.20
24.) 24.) The equity method of accounting for investments
a.) requires the investment be decreased by the reported net income of the investee
b.) requires the investment be increased by the reported net income of the
investee
c.) requires a year-end adjustment to revalue the stock to lower of cost or market
d.) requires the investment to be reported at its original cost
25.) 25.) Temporary investments are
a.) recorded at cost but reported at fair market value
b.) recorded at cost and reported at cost
c.) recorded at cost but reported at lower of cost of fair market value
d.) recorded at fair market value and reported at fair market value
26.) 26.)When one corporation acquires the properties of another corporation and
latter then dissolves, the joining of the two corporations is called a
a.) consolidation
b.) pooling of interest
c.) merger
d.) purchase
27.) 27.) When two or more corporations transfer their assets and liabilities to a
corporation which has been created for purposes of the takeover, the combination is
called a
a.) consolidation
b.) limited partnership
c.) shell corporation
d.) Merger
28.) 28.) two or more corporations closely related through stock ownership may be
said to be associated or
a.) pooled
b.) subsidiaries
c.) affiliated
d.) purchased
29.) 29.) Patterson Company owns 83% of the outstanding stock of Taylor Company.
Patterson Company is referred to as the
a.) subsidiary
b.) parent
c.) minority interest
d.) Affiliate
30.) 30.) Greg owns 87% of the outstanding stock of Kay Company. Key Company is
referred to as the
a.) Subsidiary
b.) Parent
c.) minority interest
d.) affiliate
31.) 31.) Financial statements in which financial data for two or more companies are
combined as a single entity are called
a.) consolidated statements
b.) audited statements
c.) conventional statements
d.) constitutional statements
32.) 32.) Chi Company owns 90% of the outstanding stock of Kay Company. The
equity of the remaining 10% of Kay Company stock is called the
a.) minority interest
b.) majority interest
c.) parent
d.) subsidiary
33.) 33.) One potential advantage of financing corporations through the use of bonds
rather than common stock is
a.) the interest expense is deductible for tax purposes by the corporation
b.) the corporation must pay the bonds at maturity
c.) a higher earnings per share is guaranteed for existing common shareholders
d.) the interest on bonds must be paid when due
34.) 34.) a bond denture is
a.) A contract between the corporation issuing the bonds and the bond trustee,
who is acting on behalf of the bondholders.
b.) the amount due at the maturity date of the bonds
c.) the amount for which the corporation can buy back the bonds prior to the maturity
date
d.) a contract between the corporations issuing the bonds and the underwriters selling
the bonds
35.) 35.) When the corporation issuing the bonds has the right to repurchase the bonds
prior to the maturity date for a specific price, the bonds are
a.) convertible bonds
b.) unsecured bonds
c.) debenture bonds
d.) callable bonds
36.) 36.) If the market rate of interest is 8% the price of 6% bonds paying
semiannually with a face value of $100,000 will be
a.) Equal to $100,000
b.) greater than $100,000
c.) less than $100,000
d.) greater than $100,000 depending on the maturity date of the bonds
37.) 37.) The interest rate specified in the bond indenture is called the
a.) contract rate
b.) effective rate
c.) market rate
d.) discount rate
38.) 38.) The entry to record the amortization of a premium on bonds payable is a
a.) debit interest expense, credit premium on bonds payable
b.) debit bonds payable, credit interest expense
c.) debit interest expense, debit premium on bonds payable, credit cash
d.) debit premium on bonds payable, credit interest expense
39.) 39.) When the market rate of interest was 11% Welch Corporation issued
$100,000 8%, 10-year bonds that pay interest semiannually. Using the straight-line
method, the amount of discount or premium to be amortized each interest period
would be
a.) $896
b.) $17,926
c.) $4,000
d.) $1,793
40.) 40.) Sinking Fund Cash would be classified on the balance sheet as
a.) a fixed asset
b.) an intangible asset
c.) a current asset
d.) an investment
41.) 41.) Sinking Fund Income is reported in the income statement as
a.) A gain on sinking fund transaction
b.) Extraordinary
c.) income from operations
d.) other income
42.) 42.) If bonds payable are not callable, the issuing corporation
a.) must get special permission from SEC to repurchase them
b.) can repurchase them in the open market
c.) is more likely to repurchase them if the interest increase
d.) cannot repurchase them before maturity
43.) 43.) When callable bonds are redeemed below carrying value
a.) gain on redemption of bonds is credited
b.) loss of redemption of bonds is debited
c.) retained earnings is debited
d.) retained earnings is credited
44.) 44.) On the statement of cash flows, the cash flows from operating activates
section would include
a.) receipts from the issuance of capitol stock
b.) receipts from the sale of investments
c.) cash from sales activates
d.) payments for the acquisition of investments
45.) 45.) A ten-year bond was issued at par for $150,000 cash. This transaction should
be shown on a statement of cash flows under
a.) financing activities
b.) noncash investing and financing activities
c.) investing actives
d.) operating activities
46.) 46.) Which of the following is a noncash investing and financing activity?
a.) payment of a six-month note payable
b.) purchase of merchandise inventory on account
c.) payment of cash dividend
d.) issuance of common stock to acquire land
47.) 47.)Which of the following below increases cash?
a.) the declaration of cash dividend
b.) borrowing money by issuing a six-month note
c.) depreciation expense
d.) acquisition of treasury stock
48.) 48.)The following information is available from the current period financial
statements:
NET INCOME $140,000
DEPRECIATION EXPENSE 28,000
INCREASE ACCOUNTS RECIVABLE 16,000
DECREASE IN ACCOUNTS PAYABLE 21,000
THE NET CASH FLOW FROM OPERATING ACTIVITES USING THE
INDIRECT METHOD IS
a.) $205,000
b.) $107,000
c.) $131,000
d.) $163,000
49.) 49.)If a gain of $9,000 is incurred in selling ( for cash) office equipment having a
book value of $55,000 the total amount reported in cash flows from investing
activities section of the statement of cash flows is
a.) $46,000
b.) $9,000
c.) $64,000
d.) $55,000
50.) 50.)On the statement of cash flows, the cash flows from operating activates
section would include
a.) receipts from the issuance of capitol stock
b.) payment for interest on short term-term notes payable
c.) payments for the acquisition of investments
d.) payments for cash dividends