财会2010期末考试题.doc

FE - 21 Test Bank for Financial Accounting, Sixth EditionFinal Exam: Chapters 1-15Name Financial Accounting, Sixth EditionInstructor Section # Date PartIIIIIIIVVVIVIIVIIITotalPoints9025141512151415200ScorePART I MULTIPLE CHOICE (90 points)InstructionsDesignate the best answer for each of the following questions.Questions 1 and 2 are based on the following information:Bono Company recently incurred the following costs:(1)Purchase price of land and dilapidated building$350,000(2)Real estate brokers commission14,000(3)Net demolition costs of dilapidated building39,000(4)Excavation costs for new building44,000(5)Architects fees and building permits30,000(6)Costs associated with new building construction950,000(7)Costs associated with new furniture and equipment250,000(8)Actual interest costs during building construction168,000(9)Actual interest cost after completion of building construction120,000(10)Costs of walks, driveways, and parking lot55,000_1.The building should be recorded on Bonos books ata.$880,000.b.$924,000.c.$963,000.d.$1,192,000._2.Land should be recorded on Bonos books ata.$350,000.b.$364,000.c.$403,000.d.$433,000._3.Carson Supply bought equipment at a cost of $72,000 on January 2, 2005. It originally had an estimated life of ten years and a salvage value of $12,000. Carson uses the straight-line depreciation method. On December 31, 2008, Carson decided the useful life likely would end on December 31, 2012, with a salvage value of $6,000. The depreciation expense recorded on December 31, 2008, should bea.$6,000.b.$6,600.c.$9,600.d.$13,200._4.In order to be relevant, accounting information musta.be neutral.b.be verifiable.c.help predict future events.d.be a faithful representation._5.Riodan Company sold old equipment for $35,000. The equipment had a cost of $70,000 and accumulated depreciation of $42,000. The entry to record the sale of the equipment would include aa.loss on disposal of $35,000.b.gain on disposal of $35,000.c.loss on disposal of $7,000.d.gain on disposal of $7,000._6.The cost of intangible assets should bea.amortized over the assets estimated useful life, or legal life, whichever is shorter.b.amortized over a period not exceeding 5 years.c.amortized over the assets estimated useful life.d.charged to an expense account at acquisition._7.In a period of rising prices, the inventory method that results in the lowest income tax payment isa.LIFO.b.FIFO.c.average cost.d.specific identification._8.On November 30, Thatcher Company issued a $6,000, 6%, 4-month note to the National Bank. The entry on Thatchers books to record the payment of the note at maturity will include a credit to Cash fora.$6,000.b.$6,360.c.$6,120.d.$6,240._9.The inventory methods that result in the most current costs in the income statement and balance sheet areIncome StatementBalance Sheeta.FIFOFIFO b.LIFOFIFOc.LIFOLIFOd.FIFOLIFO_10.The following information is available for Lighten Company:Sales$130,000Freight-in$10,000Ending Merchandise Inventory12,000Purchase Returns and Allowances5,000Purchases100,000Beginning Merchandise Inventory15,000Lightens cost of goods sold isa.$125,000.b.$120,000.c.$108,000.d.$105,000._11.If ending inventory is understated, net income and assets will beNet Income Assetsa.UnderstatedUnderstatedb.OverstatedOverstatedc.UnderstatedUnaffectedd.None of the above._12.One of the two constraints in accounting parability.b.materiality.c.reliability.d.relevance._13.The assumption that assumes a company will continue in operation long enough to carry out its existing objectives is thea.economic entity assumption.b.going concern assumption.c.monetary unit assumption.d.time period assumption._14.All of the following are intangible assets excepta.patents.b.land improvements.c.goodwill.d.franchises._15.A daily cash count of register receipts made by a cashier department supervisor demonstrates an application of which of the following internal control principles?a.Documentation proceduresb.Segregation of dutiesc.Establishment of responsibilityd.Independent internal verification_16.When the allowance method is used for bad debts, the entry to write off an individual account known to be uncollectible involves aa.debit to an expense account.b.credit to an expense account.c.credit to the Allowance account.d.debit to the Allowance account._17.Shipping terms of FOB destination mean that thea.purchaser is responsible for the shipping charges.b.shipping charges are debited to Freight-Out.c.items should be in the purchasers inventory account at year-end if the items are in transit.d.both (a) and (c) above._18.Bates Company has a $300,000 balance in Accounts Receivable and a $2,000 debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled $1,800,000. What is the amount of the bad debt adjusting entry if Bates uses a percentage of receivables basis (at 10%)?a.$30,000b.$28,000c.$32,000d.$30,400_19.The constraint of conservatism is best expressed asa.the cost of applying an accounting principle should not exceed its benefit.b.only material items should be recorded and reported.c.when in doubt, choose the method that will least likely overstate assets and net income.d.the lower of cost or market method should be used for inventories._20.If merchandise is sold for $2,000 subject to credit terms of 2/10, n/30, the entry to record collection in full within the discount period would include aa.credit to Sales Discounts for $40.b.credit to Cash for $1,960.c.credit to Accounts Receivable for $40.d.none of the above._21.Barker Companys records show the following for the month of January:Total Retained Earnings at January 1 $600,000Total Retained Earnings at January 31 900,000Total Revenues 1,005,000Total Dividends Declared 45,000Total expenses for January werea.$960,000.b.$1,005,000.c.$705,000.d.$660,000.22.Jetson Companys financial information is presented below.Sales$ ?Purchase Returns and Allowances$ 30,000Sales Returns and Allowances60,000 Ending Merchandise Inventory70,000Net Sales700,000Cost of Goods Sold360,000Beginning Merchandise Inventory?Gross Profit?Purchases340,000 The missing amounts above are: SalesBeginning InventoryGross Profita.$760,000$90,000$340,000b.$640,000$90,000$400,000c.$760,000$120,000$340,000d.$640,000$120,000$400,000_23.The necessity of making adjusting entries relates mostly to thea.economic entity assumption.b.time period assumption.c.going concern assumption.d.monetary unit assumption._24.The preparation of closing entriesa.is an optional step in the accounting cycle.b.results in zero balances in all accounts at the end of the period so that they are ready for the following periods transactions.c.is necessary before financial statements can be prepared.d.results in transferring the balances in all temporary accounts to Retained Earnings._25.Allowance for Doubtful Accounts is reported in thea.balance sheet as a contra asset.b.balance sheet as a contra liability account.c.income statement under other expenses and losses.d.income statement under other revenues and gains._26.Current liabilities are obligations that are reasonably expected to be paid from ExistingCreation of OtherCurrent AssetsCurrent Liabilitiesa.NoNob.YesYesc.YesNod.NoYes_27.Which of the following errors will cause a trial balance to be out of balance? The entry to record a payment on account wasa.not posted at all.b.posted as a debit to Cash and a credit to Accounts Payable.c.posted as a debit to Cash and a debit to Accounts Payable.d.posted as a debit to Accounts Receivable and a credit to Cash._28.The primary accounting standard-setting body in the United States is thea.Securities and Exchange Commission.b.Accounting Principles Board.c.Financial Accounting Standards Board.d.Internal Revenue Service._29.Lawford Companys equipment account increased $600,000 during the period; the related accumulated depreciation increased $45,000. New equipment was purchased at a cost of $1,050,000 and used equipment was sold at a loss of $30,000. Depreciation expense was $150,000. Proceeds from the sale of the used equipment werea.$315,000.b.$375,000.c.$420,000.d.$480,000._30.Which of the following would not be included in the operating activities section of a statement of cash flows?a.Cash inflows from returns on loans (i.e., interest)b.Cash inflows from returns on equity securities (i.e., dividends)c.Cash outflows to governments for taxesd.Cash outflows to reacquire treasury stock_31.Which of the following combinations presents correct examples of liquidity, profitability, and solvency ratios, respectively?LiquidityProfitabilitySolvencya.Inventory turnoverInventory turnoverTimes interest earnedb.Current ratioInventory turnoverDebt to total assetsc.Receivable turnoverReturn on assetsTimes interest earnedd.Average days collectionPayout ratioReturn on assets_32.Nadine Manufacturing declared a 10% stock dividend when it had 200,000 shares of $5 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit toa.Retained Earnings of $100,000.b.Paid-in Capital in Excess of Par for $140,000.c.Common Stock for $100,000.d. Retained Earnings for $240,000._33.Which of the following pairs of terms in the area of financial statement analysis are synonymous?a.Ratio Trendb.Horizontal Trendc.Vertical Ratiod.Horizontal Ratio_34.Which of the following statements is true?a.Trading securities are debt securities that the investor has the intent to hold to maturity.b.Trading securities are securities bought and held primarily for sale in the near term.c.Trading securities are securities that may be sold in the future.d.Trading securities are reported at cost in the balance sheet._35.Dividends received are credited to what account under the equity method and cost method, respectively?Equity MethodCost Methoda.Stock InvestmentsDividend Revenueb.Dividend RevenueDividend Revenuec.Stock InvestmentsStock Investmentsd.Dividend RevenueStock Investments_36.In accounting for available-for-sale securities, the Unrealized LossEquity account should be classified as aa.liability on the balance sheet.b.loss on the income statement.c.deduction in the stockholders equity section of the balance sheet.d.contra asset on the balance sheet._37.Carr Corporation has the following stock outstanding:6% Preferred, $100 Par$500,000Common Stock, $50 Par2,000,000No dividends were paid the previous 2 years. If Carr declares $400,000 of dividends in the current year, how much will preferred stockholders receive if the preferred stock is cumulative?a.$310,000b.$60,000c.$30,000d.$90,000_38.The statement of cash flows is a(n)a.required supplemental financial statement.b.required basic financial statement.c.optional basic financial statement.d.optional supplementary statement._39.The directors of Chandler Corp. are trying to decide whether they should issue par or no par stock. They are considering two alternatives for their new stock, which they are assuming will be issued at $8 per share. The alternatives are: (A) $5 par value and (B) no par, no stated value. If 100,000 shares are issued, what amount will be credited to the common stock account in each of these cases? (A) (B)a.$100,000$800,000b.$100,000$800,000c.$800,000$800,000d.$500,000$800,000_40.Fison Corp. purchased 20,000 shares of its $2 par common stock at a cost of $13 per share on April 30, 2008. The stock was originally issued at $11 per share. The entry to record the purchase of the stock should include a debit toa.Common Stock for $40,000.b.Treasury Stock for $40,000.c.Common Stock for $260,000.d.Treasury Stock for $260,000._41.What is the effect on total paid-in capital of a stock dividend and a stock split, respectively?Stock DividendStock Splita.IncreaseNo effectb.No effectNo effectc.DecreaseNo effectd.DecreaseDecrease_42.Which of the following should be classified as an extraordinary item?a.Effects of major casualties not infrequent in the areab.Write-off of a significant amount of receivablesc.Loss from the expropriation of facilities by a foreign governmentd.Losses due to a bitter, lengthy labor strike_43.A Discount on Bonds Payable accounta.is a contra account to Bonds Payable.b.will cause interest expense to be less than cash interest payable.c.is increased over the life of the bond until it equals the bonds face value.d.is an adjunct account to Bonds Payable._44.In order to be considered extraordinary, an item must bea.frequent and uninsured.b.unusual and uninsured.c.uninsured and infrequent.d.infrequent and unusual._45.If the market rate of interest is lower than the stated rate, bonds will sell at an amounta.equal to face value.b.not determinable from the given information.c.lower than face value.d.higher than face value.PART II MATCHING (25 points)InstructionsDesignate the terminology that best represents the definition or statement given below by placing the identifying letter(s) in the space provided. No letter should be used more than once.A.Additions and improvements X.Full disclosure principleB.Allowance methodY.Going-concern assumptionC.AmortizationZ.Held-to-maturity securitiesD.Available-for-sale securitiesAA.Internal controlE.Average cost methodAB.Last-in, first-out methodF.Book valueAC.LIFO reserveG.Capital expenditureAD.Matching principleH.Cash debt coverage ratioAE.MaterialityI.ConsistencyAF.Monetary unit assumptionJ.Contra asset accountAG.Net purchasesK.Cost methodAH.Periodic inventory systemL.Credit memorandumAI.Permanent accountsM.Debit memorandumAJ.Perpetual inventory systemN.Declining-balance methodAK.Ratio analysisO.Depreciable CostAL.RelevanceP.DepreciationAM.ReliabilityQ.Direct write-off methodAN.Revenue expenditureR.Discontinued operationsAO.Revenue recognition principleS.Earnings per shareAP.Stock dividendT.Economic entity assumptionAQ.Stock splitU.Equity methodAR.Temporary accountsV.Extraordinary itemsAS.Time period assumptionW.First-in, first-out methodAT.Units-of-activity method_1.The periodic write-off of an intangible asset._2.The total amount subject to depreciation._3.The principle that efforts be matched with accomplishments._4.An expenditure charged against revenues as an expense when incurred._5.The inventory costing method that assumes that the costs of the earliest goods purchased are the first to be recognized as cost of goods sold._6.Use of the same accounting principles and methods from period to period by the same business enterprise._7.A measure of solvency calculated as cash provided by operating activities divided by average total liabilities._8.An inventory costing method that assumes that the latest units purchased are the first to be allocated to cost of goods sold._9.An assumption that economic events can be identified with a particular unit of accountability.PART II MATCHING (cont.)_10.A characteristic of information that means it is capable of making a difference in a decision._11.An assumption that the economic life of a business can be divided into artificial time periods._12.This method of accounting for uncollectible accounts is required when bad debts are significant in size._13.An accounting method in which cash dividends received are credited to Dividend Revenue._14.Used by a bank when a previously deposited customers check “bounces” because of insufficient funds._15.The assumption that the enterprise will continue in operation long enough to carry out its existing objectives and commitments._16.A system in which detailed records are not maintained and cost of goods sold is determined only at the end of an accounting period._17.The difference between inventory reported using LIFO and inventory reported using FIFO._18.The methods and measures adopted within a business to safeguard its assets and enhance the accuracy and reliability of its accounting records._19.Revenue, expense, and dividends accounts whose balances are transferred to retained earnings at the en