1. A corporation has which of the following sets of characteristics?

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1.  A corporation has which of the following sets of characteristics? 

 

Shared control, tax advantages, increased skills, and resources

Simple to set up and maintains control with the founder

Easier to transfer ownership and raise funds, no personal liability for stockholders

Harder to raise funds and gives owner control

 

2.  The Dividends account _____. 

 

is increased with a debit

is decreased with a credit

is not an expense account

All of the above

 

3. Denton Company showed the following balances at the end of its first year:

 

Cash       $7,000

Prepaid insurance    700

Accounts receivable    3,500

Accounts payable    2,800

Notes payable     4,200

Common stock    1,400

Dividends     700

Revenues    21,000

Expenses    17,500

 

What did Denton Company show as total credits on its trial balance? 

 

$30,100

$29,400   

$28,700

$30,800

 

4. Under the accrual basis of accounting, _____. 

 

cash must be received before revenue is recognized

net income is calculated by matching cash outflows against cash inflows

events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received

the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles

 

5.  In a period of increasing prices, which inventory cost flow assumption will result in the lowest amount of income tax expense? 

 

FIFO

LIFO

The average cost method

Income tax expense for the period will be the same under all assumptions.

 

6.  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 _____. 

 

$14,160

$11,760   

$9,840

$9,600

 

7.  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 _____. 

 

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.  Accounts receivable arising from sales to customers amounted to $40,000 and $35,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. 

 

$110,000

$105,000

$115,000   

$150,000

 

9.  One variation of the horizontal analysis is known as _____. 

 

nonlinear analysis

vertical analysis

trend analysis

common-size analysis

 

10.  Comparisons of data within a company are an example of the following comparative basis. 

 

Industry averages

Intercompany

Intracompany

Interregional

 

11.  Which one of the following is not a characteristic generally evaluated in ratio analysis? 

 

Liquidity

Profitability

Marketability of the product

Solvency

 

12. A common measure of liquidity is _____. 

 

return on assets

current ratio

profit margin

debt to equity

 

13. Long-term creditors are usually most interested in evaluating _____. 

 

liquidity

marketability

profitability

solvency

 

14.  To calculate the market value of a bond, we need to _____. 

 

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

 

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