(TCO A) A corporation has which of the following advantages? (Points : 5)

Reduced taxes

Simple to set up

Limited liability for stockholders

Owner maintains control

 

 

 

 

Question 2.2. (TCO A) Dividends flow through which one of the following statements? (Points : 5)

The Balance Sheet

The Statement of Retained Earnings

The Income Statement

None of the above

 

 

Question 3.3. (TCOs A and B) Below is a partial list of account balances for LBJ Company.

 

 

Cash

$12,000

Prepaid rent

1,300

Accounts receivable

7,000

Accounts payable

5,000

Notes payable

9,000

Common stock

22,000

Dividends

2,000

Revenues

45,000

Expenses

35,000

 

What did LBJ Company show as total debits? (Points : 5)

$57,300

$81,000

$55,300

$56,000

 

 

 

Question 4.4. (TCO B and E) Under cash-basis accounting, which of the following transactions would not be recorded? (Points : 5)

Cash sales to customers

Payments to vendors

Sales on account

Payroll payments to employees

 

 

Question 5.5. (TCO D) If ending inventory of the current year is understated (Points : 5)

Cost of goods sold for the current year will be understated

Gross profit for the current year will be unaffected

Gross profit for the current year will be understated

Net income for the current year will be overstated

 

 

Question 6.6. (TCO A and E) Equipment was purchased for $27,000. Freight charges amounted to $1,000 and there was a cost of $5,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $5,000 salvage value at the end of its 7-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

$4,714

$4,000

$3,857

$3,285

 

 

Question 7.7. (TCOs D and G) When the market rate of interest exceeds the stated rate of interest on the bond, the bond will require _____. (Points : 5)

a debit to Discount on Bonds Payable

a credit to Premium on Bonds Payable

a debit to Loss on Bonds Payable

a credit to Gain on Bonds Payable

 

 

Question 8.8. (TCO C) Which inventory accounting system does not require a physical count of the inventory at the year end? (Points : 5)

Periodic inventory system

Perpetual inventory system

Specific Identification

None of the above

 

 

Question 9.9. (TCO F) Horizontal analysis is also known as _____. (Points : 5)

ratio analysis

vertical analysis

common-size analysis

trend analysis

 

 

Question 10.10. (TCO F) When performing a common-size balance sheet, the 100% figure is _____. (Points : 5)

net sales

total liabilities

total assets

total equity

 

 

Question 11.11. (TCO F) Ratios are most useful in expressing _____. (Points : 5)

cause-and-effect relationships

the relationships between numbers

the delta between numbers

the root cause of the problem

 

 

Question 12.12. (TCO F) Creditors are usually most concerned with analyzing _____. (Points : 5)

the company stock price

turnover

liquidity

profitability

 

 

Question 13.13. (TCO F) Shareholders are usually most interested in evaluating _____. (Points : 5)

profitability

leverage

turnover

the ability to pay debts as they come due

 

 

Question 14.14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

multiply the stated rate times the bond’s face value

calculate the present value of the principal only

calculate the present value of both the principal and the interest

calculate the present value of the interest only