1. A corporation has which of the following sets of characteristics?
rubyCpaMba1. 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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