1. accompanying the bank statement was a credit memo for a short-term

1. Accompanying the bank statement was a credit memo for a short-term note collected by the bank for the customer. What entry is required in the company’s accounts? 

        debit Notes Receivable; credit Cash

        debit Cash; credit Miscellaneous Income

        debit Cash; credit Notes Receivable

        debit Accounts Receivable; credit Cash

 

2. A bank reconciliation should be prepared 

        whenever the bank refuses to lend the company money.

        to explain any difference between the company’s balance per books with the balance per bank.

        when an employee is suspected of fraud.

        by the person who is authorized to sign checks.

 

 

3. The debit recorded in the journal to reimburse the petty cash fund is to

        Petty Cash

        Accounts Receivable

        Cash

        various accounts for which the petty cash was disbursed

 

4. A check drawn by a company for $270 in payment of a liability was recorded in the journal as $720. This item would be included on the bank reconciliation as a(n) 

        addition to the balance per the company’s records

        addition to the balance per the bank statement

        deduction from the balance per the bank statement

        deduction from the balance per the company’s records

 

5. The term “receivables” includes all 

        money claims against other entities.

        merchandise to be collected from individuals or companies.

        cash to be paid to creditors.

        cash to be paid to debtors.

 

6. A 90-day, 12% note for $20,000, dated April 10, is received from a customer on account. If the note is discounted at 15% on May 20, the days in the discount period are 

        50    

        90

        120

        40

 

7. The amount of the promissory note plus the interest earned on the due date is called the 

        realizable value

        maturity value

        face value

        net realizable value

 

8. A 90-day, 12% note for $20,000, dated September 10, is received from a customer on account. If the note is discounted at 15% on October 10, the due date is 

        December 9  

        December 10

        December 11

        December 8

 

9. A new machine with a purchase price of $94,000, with transportation costs of $8,000, installation costs of $5,000, and special acquisition fees of $2,000, would have a cost basis of 

        $ 99,000

        $107,000

        $102,000

        $109,000    

 

10. An asset was purchased for $120,000 and originally estimated to have a useful life of 10 years with a residual value of $10,000. After two years of straight line depreciation, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate this year’s depreciation using the revised amounts and straight line method. 

        $25,000

        $11,000

        $24,000  

        $24,500

 

11. All leases are classified as either 

        capital leases or long-term leases

        capital leases or operating leases

        operating leases or current leases

        long-term leases or current leases

 

12. The most widely used depreciation method is

        straight-line

        sum-of-the-years-digits

        declining-balance

        units-of-production

 

13. Notes may be issued 

        when assets are purchased

        to creditor’s to temporarily satisfy an account payable created earlier

        when borrowing money

        all of the above

 

14. Most employers are required to withhold from employees for 

        both federal and state unemployment compensation

        only federal unemployment compensation tax

        only federal income tax

        only state unemployment compensation tax

 

15. Which statement below is not a determinate in calculating the amount of federal income taxes withheld from an individuals pay? 

        filing status

        types of earnings

        gross pay

        number of exemptions

 

16. Payroll taxes levied against employees become liabilities 

        the first of the following month

        at the time the payroll is paid

        when earned by the employee

        at the end of an accounting period

 

17. Which of the following is not a right possessed by common stockholders of a corporation?

        the right to vote in the election of the board of directors

        the right to receive a minimum amount of dividends

        the right to sell their stock to anyone they choose

        the right to share in assets upon liquidation

 

18. The term deficit is used to refer to a debit balance in which of the following accounts of a corporation?

        Retained Earnings

        Treasury Stock

        Organizational Expenses

        Common Stock

 

19. One of the main disadvantages of the corporate form is the

        professional management

        double taxation of dividends

        charter

        corporation must issue stock

 

20. The journal entry to issue 1,000,000 shares of $5 par common stock for $6.75 per share on January 2nd would be: 

        Jan 2 

Dr Cash 6,750,000

Cr Common Stock 5,000,000

Cr Paid-In Capital in Excess of Par – C/S 1,750,000

 

        Jan 2 

Dr Cash 5,000,000

Cr Common Stock 5,000,000

   

Jan 2 

Dr Cash 5,000,000

Dr Paid-In Capital in Excess of Par – C/S 1,750,000

Cr Common Stock 6,750,000

 

        Jan 2 

Dr Cash 1,000,000

Cr Common Stock 1,000,000

 

21. Which of the following statements is not true about a 2-for-1 split? 

        Par value per share is reduced to half of what it was before the split.

        Total contributed capital increases.

        The market price will probably decrease.

        A stockholder with ten shares before the split owns twenty shares after the split.

 

22. The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to 

        decrease total liabilities and stockholders’ equity.

        increase total expenses and total liabilities.

        increase total assets and stockholders’ equity.

        decrease total assets and stockholders’ equity.

 

23. Which of the following is not classified as paid-in capital on the balance sheet?

        common Stock

        common stock distributable

        donated capital

        treasury stock

 

24. The date on which a cash dividend becomes a binding legal obligation is on the

        declaration date

        date of record.

        payment date.

        last day of the fiscal year end.

 

25. Debenture bonds are 

        bonds secured by specific assets of the issuing corporation

        bonds that have a single maturity date

        issued only by the federal government

        issued on the general credit of the corporation and do not pledge specific assets as collateral

 

26. A corporation issues for cash $15,000,000 of 8%, 30-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true? 

        The amount of annual interest paid to bondholders remains the same over the life of the bonds.

        The amount of annual interest expense decreases as the bonds approach maturity.

        The amount of annual interest paid to bondholders increases over the 30-year life of the bonds.

        The carrying amount decreases from its amount at issuance date to $15,000,000 at maturity.

 

27. Bonds with a face amount $1,000,000, are sold at 106. The entry to record the issuance is 

        Dr Cash 1,000,000

Dr Premium on Bonds Payable 60,000

Cr Bonds Payable 1,060,000 

 

        Dr Cash 1,060,000

Cr Premium on Bonds Payable 60,000

Cr Bonds Payable 1,000,000 

 

        Dr Cash 1,060,000

Cr Discount on Bonds Payable 60,000

Cr Bonds Payable 1,000,000

 

        Dr Cash 1,060,000

Cr Bonds Payable 1,060,000 

 

28. One potential advantage of financing corporations through the use of bonds rather than common stock is 

        the interest on bonds must be paid when due

        the corporation must pay the bonds at maturity

        the interest expense is deductible for tax purposes by the corporation

        a higher earnings per share is guaranteed for existing common shareholders

 

29. Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows? 

        appropriation of retained earnings

        acquisition of treasury stock

        declaration of stock dividends

        issuance of long-term debt

 

30. Cash paid for equipment would be reported in the statement of cash flows in 

        the cash flows from operating activities section

        the cash flows from financing activities section

        the cash flows from investing activities section

        a separate schedule

 

31. The statement of cash flows may be used by management to 

        assess the liquidity of the business

        assess the major policy decisions involving investments and financing

        determine dividend policy

        do all of the above

 

32. 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 the cash flows from investing activities section of the statement of cash flows is (Points : 3)

        $46,000

        $9,000

        $55,000

        $64,000     

 

33. Which one of the following below would not be classified as an operating activity? 

        interest expense

        income taxes

        payment of dividends

        selling expenses

 

34. Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash? 

        purchase of noncurrent assets

        purchase of treasury stock

        discarding an asset that had been fully depreciated

        payment of cash dividends

 

35. On the statement of cash flows, the cash flows from financing activities section would include 

        receipts from the sale of investments

        payments for the acquisition of investments

        receipts from a note receivable

        receipts from the issuance of capital stock

 

 

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