Reference no: EM132379635

Question

1. One advantage of the LIFO method is that:

a. an equal cost is assigned to each unit, so net income does not fluctuate as much as with other methods

b. flow of goods and flow of costs are the same

c. it matches current selling prices and current costs

d. ending inventory is valued at very old costs

2. The principle of consistency states that:

a. changes in accounting methods should occur from one fiscal period to the next

b. a company cannot change from one inventory valuation method to another

c. a company should switch from LIFO to FIFO every other period

d. by using the same method, the financial statements are more meaningful

3. Goods that are consigned to another party:

a. belong to the other party because title has passed

b. belong to the company that has consigned them

c. belong to the consignor

d. b and c only

4. Chewy Candy has a beginning inventory of $1,000 with a retail value of $1,800. June purchases were $3,000, with a retail value of $4,700 and retail sales were $4,200. What is the June 30 estimated ending inventory at cost under the retail method?

a. $351

b. $949

c. $4,161

d. $1,416

5. The entry to record the disposal of a laptop computer with a cost of $2,500 and an accumulated depreciation of $1,500 would be:

a. debit Depreciation Expense, $2,500; credit Equipment $2,500

b. debit Accumulated Depreciation $1,500; debit Loss on Disposal of an Asset $1,000; credit Equipment $2,500

c. debit Equipment $2,500; credit Accumulated Depreciation $2,500

d. debit Cash $2,500; credit Equipment $2,500

6. If an asset is exchanged for a similar asset, a loss results:

a. when the book value of the old asset is greater than what is received for the trade-in allowance

b. when the book value of the old asset is less than what is received for the trade-in allowance

c. when the accumulated depreciation equals the cost of the old asset

d. None of the above.

7. If an asset is being sold or exchanged, the gain or loss is always computed by comparing the:

a. market value and cost

b. book value and salvage value

c. market value and salvage value

d. market value and book value

8. The process of writing off an intangible asset is:

a. depreciation

b. depletion

c. amortization

d. None of the above.

9. The exclusive right to produce and sell a manuscript is called a:

a. copyright

b. franchise

c. patent

d. goodwill

10. The allocation of the cost of a natural resource is:

a. depreciation

b. depletion

c. amortization

d. accrual

11. Salvage value was ignored when originally calculating the units-of-production depreciation. This error would cause:

a. the period's net income to be overstated

b. the period's net income to be understated

c. the period end assets to be overstated

d. None of the above.

12. The major parts of the Stockholders' Equity section of the balance sheet are:

a. Paid-in Capital and Retained Earnings

b. Stock and Retained Earnings

c. Stock, Paid-in Capital, and Retained Earnings

d. Authorized Stock and Preferred Stock

13. Stockholders' investment appears in:

a. Paid-in Capital

b. Owner's Equity

c. Retained Earnings

d. Cash

14. Authorized capital stock is shares:

a. listed in the charter

b. issued to the corporation's officers

c. sold and in stockholder possession

d. that pay dividends

15. One type of preferred stock that provides for the payment of preferred dividends that are in arrears is called:

a. non-participating

b. cumulative

c. non-cumulative

d. participating

16. Five hundred shares of $25 par common stock was exchanged for a piece of equipment with a fair market value of $13,500. The journal entry to record the transaction would include a credit to:

a. Equipment for $12,500

b. Debit to Common Stock for $12,500

c. Credit to Paid-In Capital in Excess of Par-Common for $1,000

d. Credit to Common Stock for $13,500

17. When stock is exchanged for non-cash assets:

a. debit the asset for prior book value; credit Common Stock for cash received

b. debit assets for market value; credit Common Stock for par value and, if needed, Paid-in Capital in Excess of Par

c. debit assets for market value; credit Common Stock for market value

d. debit assets for par value; credit Common Stock for par value

18. Organization costs are:

a. part of the company's start-up and are listed as expenses

b. listed as an intangible asset on the balance sheet

c. a current asset on the balance sheet

d. another expense on the income statement

19. Statements that are often used to compare similar businesses are called:

a. comparative analysis

b. vertical analysis

c. horizontal analysis

d. common-size statements

20. In a common-size income statement, selling expenses are 55%. This means that they are 55% of:

a. net income

b. net sales

c. gross profit

d. net profit

21. If Cara's Piano sales increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000, then vertical analysis based on sales would show the following for cost of goods sold (rounded to the nearest percent):

a. 40% and 20% b. 10% and 30% c. 50% and 67% d. 67% and 40%

22. The current ratio determines the ability of a company to:

a. pay off all payables

b. pay off current payables

c. manage its ability to earn profit

d. use its equity

23. If management wishes to evaluate the ability of a business to provide funding to cover the operating expenses, they could use the:

a. rate of return on total assets

b. rate of return on common stockholders' equity

c. gross profit rate

d. times interest earned

24. The debt in relation to the risk taken by stockholders is measured by:

a. debt to stockholders' equity

b. gross pro t ratio

c. rate of return to stockholders

d. None of the above.

25. The lower the times interest earned ratio, the more likely:

a. a default in payment will occur

b. a business needs to borrow money

c. a business will suffer a loss

d. interest payments can be made