1. (TCO A) Which one of the following is an advantage of corporations relative to partnerships and sole proprietorships? (Points : 5)
       Reduced legal liability for investors
Harder to transfer ownership
Lower taxes
Most common form of organization

2. (TCO A) When a corporation distributes a dividend, _____. (Points : 5)
       the most common form of distribution is a cash dividend
the Dividends account will be increased with a credit
the Retained Earnings account will be directly increased with a debit
the Dividends account will be decreased with a debit

3. (TCOs A, B) Below is a partial list of account balances for Cerner Company:

What did Cerner Company show as total credits? (Points : 5)
       $21,500
$21,000
$20,500
$22,000

4. (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)
       sales under $1,000,000
no accountants on staff
insignificant receivables and payables
all sales and purchases on account

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

6. (TCOs A, E) Equipment was purchased for $60,000. Freight charges amounted to $2,800 and there was a cost of $8,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $12,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)
       $14,160
$11,760
$9,840
$9,600

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

8. (TCO C) Accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $120,000. 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)
       $120,000
$125,000
$155,000
$115,000

9. (TCO F) One variation of the horizontal analysis is known as _____. (Points : 5)
       nonlinear analysis
vertical analysis
trend analysis
common-size analysis

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

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

12. (TCO F) A common measure of profitability is the _____. (Points : 5)
       current ratio
current cash debt coverage ratio
return on common stockholder’s equity ratio
debt to total assets

13. (TCO F) Return-on-assets ratio is most closely related to _____. (Points : 5)
       profit margin and debt-to-total-assets ratio
profit margin and asset-turnover ratio
times interest earned and debt-to-stockholders equity ratio
profit margin and free cash flow

14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)
       find out the present value of all of the future cash payments promised by the bond
calculate the present value of the principal only
calculate the present value of the interest only
multiply the bond price by the interest rate