1. Which financial statement would you utilize to determine whether a company will be able to pay liabilities which are due in 30 days?
A. Income statement
B. Balance sheet
C. Statement of retained earnings
D. Statement of cash flows
2. Which of the following is an objective of the external audit of a company's financial statements?
A. To provide a forecast of the company's future earnings.
B. To assure no fraud has been committed by the company's management.
C. To provide credibility and assurance that the financial statement information conforms with generally accepted accounting principles in all material respects.
D. To detect all accounting errors made by the accounting system and employees.
3. Huron has provided the following year-end balances:
• Cash, $25,000
• Patents, $7,900
• Accounts receivable, $9,300
• Property, plant, and equipment, $98,700
• Prepaid insurance, $3,600
• Accumulated depreciation, $10,000
• Inventory, $37,000
• Trademarks, $12,600
How much are Huron's current assets?
A. $85,900.
B. $71,300.
C. $74,900.
D. $102,100.
4. Which group requires CPAs to follow a professional code of ethics and standards?
A. American Institute of Certified Public Accountants
B. Internal Revenue Service
C. Securities & Exchange Commission
D. Local taxing agency
5. Match each career with the related definition by entering the appropriate letter in the space provided.
Careers
(1) financial analyst
(2) Independent auditor
(3) CEO
(4) Tax practitioner
Definitions
a. Chief executive officer who has primary responsibility for the financial information presented in the financial statements.
b. Advisor who analyzes financial and other economic information to form forecasts and stock recommendations.
c. CPA who examines financial statements and attests to their fairness.
d. Individual who provides tax planning and tax services.
6. Phipps Company borrowed $25,000 cash on October 1, 2010, and signed a six-month, 8% interest-bearing note payable with interest payable at maturity. Assuming that no adjusting entries have been made during the year, what is the amount of accrued interest payable to be reported on the December 31, 2010 balance sheet?
7. On January 1, 2011 Miller Corporation had retained earnings of $18,000. During 2010, Miller reported net income of $25,000, declared and paid dividends of $20,000, and issued stock for $10,000. What were Miller's retained earnings on December 31, 2011?
8. A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $10,000 credit balance in retained earnings. What is the balance in the contributed capital account?
9. During 2010, Sigma Company earned service revenues amounting to $900,000, of which $700,000 was collected in cash; the balance will be collected in January 2011. What amount should the 2010 income statement report for service revenues?
10. A company receives a $55,000 cash deposit from a customer on December 15 but will not deliver the goods until January 20. What month will revenue be recorded?
11. On January 1, 2011, the general ledger of Global Corporation included supplies inventory of $2,000. During 2011, supplies purchases amounted to $6,000. A physical count of inventory on hand at December 31, 2011 determined that the supplies inventory was $1,300. How much is the 2011 supplies expense?
12. A company reported the following information for its most recent year of operation: purchases, $300,000; beginning inventory, $20,000; and cost of goods sold, $10,000. How much was the company's ending inventory?
13. Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:
Date Transaction Number of Units Cost per Unit
1/1 Beginning inventory 100 $800
5/5 Purchase 200 $900
8/10 Purchase 300 $1,000
10/15 Purchase 200 $1,050
During the year, 150 laptop computers were sold.
What was cost of goods sold using the FIFO cost flow assumption?
14. Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:
Date Transaction Number of Units Cost per Unit
1/1 Beginning inventory 100 $800
5/5 Purchase 200 $900
8/10 Purchase 300 $1,000
10/15 Purchase 200 $1,050
During the year, 150 laptop computers were sold.
What was cost of goods sold using the LIFO cost flow assumption?
15. On January 1, 2010, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $2,000 for transportation and installation. The expected useful life of the machine is 9 years and the residual value is $6,000. How much is the annual depreciation expense assuming use of the straight-line depreciation method?
16. A company purchased an oil well for $50,000. It is estimated that 100,000 barrels can be extracted from the well. What is the depletion expense assuming 30,000 barrels are extracted and sold?
17. The following data were provided by the detailed payroll records of Mountain Corporation for the month of March 2011:
Wages $35,000
Income Taxes Withheld 7,350
Union dues 175
FICA taxes at a 7.65% rate (no employee has reached the maximum)
Requirements:
a) Prepare the journal entry to record the payroll and the related employee deductions.
b) Prepare the journal entry to record the employers FICA payroll tax expense.
18. For each of the transactions listed below, indicate whether it is an operating (O), investing (I) or financing (F) activity on the statement of cash flows. Also, indicate if the transaction increases (+) or decreases (-) cash.
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Transaction
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Type of Activity
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Effect on Cash
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A)
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Sold stock for cash
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B)
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Collected cash from customers on account
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C)
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Purchased equipment
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D)
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Paid operating expenses
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E)
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Repaid the bank loan
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F)
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Paid dividends to stockholders
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19. Record the following transactions indicating the account affected and whether the account increased (+) or decreased (-) 3 points each, 42 points total
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Transaction
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Assets
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Liabilities
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Stockholders' Equity
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A)
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Paid accounts payable of $15,000
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-15,000
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-15,000
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B)
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Purchased $1,000 of supplies on account
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C)
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Borrowed $20,000 cash from the bank
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D)
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Purchased equipment for $18,000 and paid cash
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E)
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Sold stock and received $50,000 cash
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F)
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Earned $90,000 of revenue on account
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G)
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Collected $70,000 accounts receivable
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H)
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Paid dividends of $13,000
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I)
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Paid operating expenses of $12,000
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J)
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Depreciation expense for the year, $23,000
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K)
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Accrued year end wages of $4,000
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L)
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Received cash for services provided, $75,000
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M)
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Paid $12,000 for a 2 year insurance policy
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N)
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Insurance expired for the year $6,000
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O)
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Accrued interest expense on note, $1,000
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20.
Letter Account Title Letter Account Title
A Cash G Notes payable
B Accounts receivable H Contributed capital
C Supplies I Retained earning
D Prepaid Insurance J Revenue
E Equipment K Operating expenses
F Accounts payable
During 2010, the company completed the transactions given below. Indicate the appropriate journal entry for each transaction by giving the account letter and amount. 2 point each, 44 points total
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Transaction
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Letter
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Debit
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Letter
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Credit
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1)
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Paid $500 in operating expenses
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2)
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Paid $12,000 for a two year insurance policy
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3)
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Purchased equipment for $40,000. Paid $10,000 cash and signed a $30,000 note
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4)
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Issued capital stock and received $8,000 cash
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5)
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Received cash for services provided $7,500
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6)
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Received $2,100 on accounts receivable
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7)
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Insurance expired for the year, $23,000
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8)
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Accrued year end expenses of $4,000
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9)
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Paid accounts payable of $1,2,00
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10)
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Earned $9,000 of revenue on account
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11)
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Paid dividends to stockholders, $3,000
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21. National Shops, Inc. reported the following amounts on its balance sheet as of December 31, 2010:
Inventory $325,000
Notes payable 100,000
Cash 150,000
Contributed capital 250,000
Equipment 700,000
Accumulated depreciation 600,000
Accounts receivable 30,000
Accounts payable 45,000
Retained earnings 210,000
Requirements:
1. What is the amount of National's total assets? _______________
2. What is the amount of National's total liabilities? _______________
3. What is the amount of National's stockholders' equity _______________
22. For each of the accounts listed below, indicate whether the normal balance is a debit (DR) or credit (CR)
______ Inventory _____ Prepaid insurance
______ Notes payable ______Accounts payable
______ Retained earnings ______Cost of Goods Sold
______ Equipment ______Cash
______ Accounts receivable ______ Wage Expense
______Revenue ______Contributed capital
23. Indicate whether the following items would be added (+) or subtracted (-) from the company's books or the bank statement during the preparation of a bank reconciliation.
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Reconciling item
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Company's Books
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Bank Statement
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Outstanding checks
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Bank service charge
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Interest earned on the account
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Deposits in transit
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A check written for $59 but was incorrectly recorded in the check register for $95
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24. The following data were taken from the records of Lilo Corporation for the year ended December 31, 2010:
Sales 900,000
Sales returns and allowances 10,000
Selling and administrative expenses 170,000
Cost of goods sold 510,000
The income tax rate is 35%.
Based on the above data, prepare a multiple-step income statement using good form. Include gross profit and pretax income. Use the form below.
25. For each of the accounts listed below, indicate whether they would be classified as an
ASSET (A) , LIABILITY (L), STOCKHOLDERS EQUITY (SE), REVENUE (R), EXPENSE (E)
______ Inventory ______ Prepaid insurance
______ Notes payable ______Accounts payable
______ Retained earnings ______Cost of Goods Sold
______ Equipment ______Cash
______ Accounts receivable ______ Wage Expense
______Revenue ______Contributed capital
26. For each of the accounts listed below, indicate which financial statement they would be included on Balance Sheet (BS) or Income Statement (IS)
______ Inventory ______ Prepaid insurance
______ Notes payable ______Accounts payable
______ Retained earnings ______Cost of Goods Sold
______ Equipment ______Cash
______ Accounts receivable ______ Wage Expense
______Revenue ______Contributed capital
27. Compute the missing amounts for each independent case.
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Total
Revenues
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Total
Expenses
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Net Income
(Loss)
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Total
Assets
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Total
Liabilities
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Stockholders'
Equity
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A)
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231,820
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196,700
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294,300
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75,000
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B)
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175,780
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29,920
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590,000
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348,400
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C)
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36,590
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9,840
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189,675
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97,525
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28. Compute the missing amounts for each independent case.
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Sales
Revenue
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Beginning
Inventory
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Purchases
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Total
Available
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Ending
Inventory
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Cost of
Goods Sold
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Gross
Profit
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A)
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650
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100
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700
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500
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350
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B)
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1,000
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900
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1,100
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500
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500
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