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1 | |
Which statement best describes the appropriate valuation of accounts receivable and accounts payable on the balance sheet? (LO 1) |
| | A) | Accounts receivable and accounts payable are reported at face value. |
| | B) | Accounts receivable and accounts payable are reported at net realizable value. |
| | C) | Accounts receivable are reported at face value and accounts payable are reported at net realizable value. |
| | D) | Accounts receivable are reported at net realizable value and accounts payable are reported at face value. |
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2 | |
Use the following information to answer questions 2, 3, and 4: Hi-Tech Company borrowed $10,000 from the bank on March 1, 2005. The note carried a 9% annual interest rate and a one-year term to maturity. Which of the following is an effect of this transaction on Hi-Tech Corporation's financial statements for 2005? (LO 1) |
| | A) | Liabilities increased by $10,000. |
| | B) | Interest expense increased by $900. |
| | C) | Retained earnings decreased by $10,000. |
| | D) | All of the above statements are correct. |
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3 | |
What amount of interest expense will Hi-Tech Corporation show on its 2005 and 2006 income statements assuming the company repays the loan plus the interest at the end of the 1-year period?(LO 1)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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4 | |
Where will the Hi-Tech Corporation's cash payment for interest be shown on the 2006 statement of cash flows? (LO 1) |
| | A) | Cash flow from operating activities |
| | B) | Cash flow from investing activities |
| | C) | Cash flow from financing activities |
| | D) | The amount will not appear on the statement of cash flows. |
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5 | |
The Jigsaw Company recorded an adjusting entry to recognize accrued interest on a note payable. Which of the following choices accurately reflects how this event would affect the company's financial statements? (LO 1)
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c |
| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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6 | |
On March 22, Springtime Company sold merchandise to a customer for $800 cash in a state where the sales tax rate is 4%. Which of the following journal entries would Springtime Company record to recognize the revenue from this transaction? (LO 2)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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7 | |
When the Jubilee Company sold merchandise to its customers, Jubilee collected sales tax as required by the state. How does the remittance of this sales tax to the state taxing authority affect Jubilee's financial statements? (LO 2)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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8 | |
Which of the following defines a contingent liability? (LO 3) |
| | A) | A potential obligation arising from a past event |
| | B) | A potential obligation arising from a future event |
| | C) | A general uncertainty arising from a past event |
| | D) | A general uncertainty arising from a future event |
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9 | |
When is a contingent liability recognized as an actual liability in the financial statements? (LO 3) |
| | A) | When the future obligation is probable and the amount can be estimated |
| | B) | When the future obligation is reasonably possible |
| | C) | When the future obligation is probable but the amount cannot be estimated |
| | D) | When the future obligation is remote |
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10 | |
Use the following information to answer questions 10, 11, and 12
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| | A) | $ 800 debit |
| | B) | $ 800 credit |
| | C) | $1,200 debit |
| | D) | $1,200 credit |
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11 | |
What is Davis Company's net income for 2005? (LO 4) |
| | A) | $ 13,400 |
| | B) | $ 13,800 |
| | C) | $ 14,600 |
| | D) | $ 93,800 |
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12 | |
What is Davis Company's net cash flow from operating activities for 2005? (LO 4) |
| | A) | $ 13,400 |
| | B) | $ 13,800 |
| | C) | $ 14,600 |
| | D) | $ 93,800 |
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13 | |
Which of the following statements is TRUE? (LO 5) |
| | A) | A company must withhold payroll taxes when compensating an independent contractor for services performed. |
| | B) | Net pay is the amount of wages an employee earns before taking out any deductions. |
| | C) | Gross earnings is the sum of regular and overtime pay plus any bonus. |
| | D) | The compensation of an employee who is paid based on the number of hours worked is normally called a salary. |
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14 | |
Which of the following journal entries records the payment for salaries of $50,000 and the withholding of $7,500 for income tax on the salaries? (LO 6)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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15 | |
Which of the following forms is used to document the number of allowances claimed by an employee for federal income tax withholding purposes? (LO 6) |
| | A) | Form W-2 |
| | B) | Form W-4 |
| | C) | Form 940 |
| | D) | Form 941 |
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16 | |
Assume that the Social Security tax rate is 6% and the Medicare rate is 1.5%. If an employee earns $60,000 of wages for the year, what is the total FICA tax paid to the federal government? (LO 7) |
| | A) | $3,600 |
| | B) | $7,200 |
| | C) | $4,500 |
| | D) | $9,000 |
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17 | |
Which of the following is TRUE? (LO 7) |
| | A) | The FUTA tax is paid by both the employer and the employee. |
| | B) | The FUTA tax is only paid by the employee. |
| | C) | The FICA tax is paid by both the employer and the employee. |
| | D) | The FICA tax is only paid by the employer. |
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18 | |
Assume the following information for an employee of Seaworthy Company:
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| | A) | $9,434 |
| | B) | $8,068 |
| | C) | $7,634 |
| | D) | $7,184 |
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19 | |
Use the following selected financial statement information for Rocky Company to answer questions 19 and 20.
 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0072846003/310575/chap9_19.gif','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (6.0K)</a>]]>What is the amount of Rocky Company's total current assets? (LO 8) |
| | A) | $140,000 |
| | B) | $200,000 |
| | C) | $215,000 |
| | D) | $575,000 |
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20 | |
What is the amount of Rocky Company's total current liabilities? (LO 8) |
| | A) | $100,000 |
| | B) | $105,000 |
| | C) | $125,000 |
| | D) | $400,000 |
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21 | |
Using the following financial statement information, determine Madison Company's current ratio. (LO 10)
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| | A) | 1.00 |
| | B) | 1.20 |
| | C) | 1.44 |
| | D) | 4.40 |
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22 | |
Which of the following is TRUE?(LO 8, 9, 10) |
| | A) | Liquidity is the ability to repay liabilities in the long run. |
| | B) | A low current ratio suggests that the company may have difficulty paying its short-term obligations. |
| | C) | An operating cycle is defined as the average time it takes a business to convert cash to accounts receivable. |
| | D) | Solvency describes the ability to generate sufficient short-term cash flows to pay obligations as they become due. |
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23 | |
Which of the following about a classified balance sheet is TRUE? (LO 9) |
| | A) | Gross margin is identified on the statement. |
| | B) | Assets and liabilities are divided between current and noncurrent items. |
| | C) | The statement is only used for internal purposes. |
| | D) | Significant detail is presented on the face of the statement so that supporting notes are not necessary. |
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24 | |
Bailey Company issued a $30,000 face value discount note to Second Bank on October 1, 2005. The note had an 8 percent discount rate and a one-year term to maturity. Which of the following is the correct journal entry to (record the issuance of the note?)(LO 11)
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| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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25 | |
Bronson Company issued a $50,000 face value discount note to Second Bank on October 1, 2005. The note had a 10 percent discount rate and a one-year term to maturity. Which of the following is the correct journal entry to recognize the interest expense on December 31, 2005?
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(LO 11) |
| | A) | A |
| | B) | B |
| | C) | C |
| | D) | D |
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26 | |
Use the following information to answer questions 26 and 27: Windsor Company issued a $20,000 face value discount note to City Bank on August 1, 2005. The note had a 9 percent discount rate and a one-year term to maturity. What is the carrying value of the discount note liability on Windsor Company's balance sheet at December 31, 2005? (LO 11) |
| | A) | $18,200 |
| | B) | $18,950 |
| | C) | $20,000 |
| | D) | $20,750 |
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27 | |
Windsor Company repays the discount note on July 31, 2006. Which of the following reflects the effect of the note repayment on the statement of cash flows?(LO 11) |
| | A) | Financing activities ($20,000) |
| | B) | Financing activities ($21,800) |
| | C) | Financing activities ($18,200); operating activities ($1,800) |
| | D) | Financing activities ($20,000); operating activities ($1,800) |
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