Question 1. Shareholders want answers to all of the following questions except for?
- How does the company compare in profitability with competitors?
- Did the company meet its operating expense budget?
- Will the company be able to pay its liabilities as they come due?
- Is the company earning a satisfactory return?
Question 2. Paying back long-term debt is an example of a(n)
- non-cash investing activity.
- investing activity.
- financing activity.
- operating activity.
Question 3. Resources owned by a business are referred to as
- revenues.
- dividends.
- liabilities.
- assets.
Question 4. In a classified balance sheet, assets are usually classified as
- current assets, long-term assets, property, plant, and equipment, and tangible assets.
- current assets, long-term investments, property, plant, and equipment, and intangible assets.
- current assets, long-term investments, and tangible assets.
- current assets, long-term investments, property, plant, and equipment, and common stocks.
Question 5. For 2012, LBJ Corporation reported net income of $75,000; net sales $750,000; and weighted average shares outstanding of 7,500. There were no preferred stock dividends. What was the 2012 earnings per share?
- $100.00
- $50.00
- $10.00
- $110.00
Question 6. Which of the following describes the normal balance and classification of the unearned revenue account?
- Debit, Expense
- Credit, Liability
- Credit, Stockholders' equity
- Debit, Liability
Question 7. Which of the following statements is correct?
- Cash-basis accounting records revenue when earned.
- Cash-basis accounting records expenses when incurred.
- Accrual accounting records expenses when incurred.
- Accrual accounting records revenue when the payment is received in cash.
Question 8. A periodic inventory system would most likely be used by a(n) _____
- automobile dealership.
- jewelry store.
- furniture store.
- local neighborhood restaurant.
Question 9. LBJ Company recorded the following events involving a recent purchase of merchandise.
- Received goods for $100,000, terms 2/10, n/30
- Returned $5,000 of the shipment for a credit due to damaged goods
- Paid $1,500 for freight in
- Paid the invoice within the discount period
As a result of these events, the company's merchandise inventory
increased by $96,500.
increased by $95,000.
increased by $94,500.
increased by $94,600.
Question 10. In a period of declining prices, which of the following inventory methods generally results in the lowest gross profit figure?
- FIFO method
- LIFO method
- Average cost method
- None of the above
Question 11. Describe the process of preparing a trial balance. What is the purpose of preparing a trial balance? If a trial balance does not balance, identify what might be the reasons why it does not balance. If the trial balance does balance, does that ensure that the ledger accounts are correct? Explain.
Question 12. The adjusted trial balance of Gertz Company included the following selected accounts.
Debit Credit
Sales $575,000
Sales returns and allowances $ 50,000
Sales discounts 9,500
Cost of goods sold 347,000
Freight-out 2,000
Advertising expense 15,000
Interest expense 19,000
Store salaries expense 74,000
Utilities expense 18,000
Depreciation expense 3,500
Interest revenue 25,000
Instructions:
•Use the above information to prepare a multiple-step income statement for the year ended December 31, 2010.
•Calculate the profit margin ratio and gross profit rate. To qualify for full credit, you must state the formula you are using, show your computations, and explain your findings.
Question 13. Please prepare the following journal entries. Indicate which account should be debited and which account should be credited, along with the dollar amount of the debit and credit.
Investors invest $50,000 in exchange for 1,000 shares of common stock.
Company purchased equipment for $10,000 on credit.
Company received $5,000 for services performed.
Company made payment on account for $2,000.
Company received $7,000 for services not yet performed.
Question 14. Your friend Sally has hired you to evaluate the following internal control procedures.
Explain to your friend whether each of the numbered items below is an internal control strength or weakness. You must also state which principle relates to each of the internal controls.
For the weaknesses, you also need to state a recommendation for improvement.
Invoices are pre-numbered.
The controller approves of the purchases and makes the payment since he or she is familiar with the purchases.
The office manager is in charge of the petty cash fund.
Blank checks are stored in the safe.
At the end of the day, the total receipts are counted by the cashier on duty and reconciled to the cash register total.