1.

Procedures designed to protect cash from theft and misuse from the time it is received
until it can be deposited in a bank are called ________.
accounting controls
cash controls
preventive controls
detective controls

2. There are three parties to a check. The drawer is ________.

a written document signed by the depositor
is the one who signs the check ordering payment by the bank
the bank on which the check is drawn
the party to whom payment is to be made
none of the above ;

3. A check drawn by a depositor for $180 in payment of a liability was recorded in the
journal as $810. This item would be included on the bank reconciliation as a(n)
________. (
addition to the balance per the depositor's records
addition to the balance per the bank statement
deduction from the balance per the bank statement
deduction from the balance per the depositor's records

4. The bank reconciliation ________. (

should be prepared by an employee who records cash transactions
is part of the internal control system
is for information purposes only
is sent to the bank for verification

5. Receipts from cash sales of $9,500 were recorded incorrectly in the cash receipts
journal as $5,900. What entry is required in the depositor's accounts? (
debit Sales; credit Cash
debit Cash; credit Accounts Receivable
debit Cash; credit Sales
debit Accounts Receivable; credit Cash

6. Jones Company had checks outstanding totaling $5,400 on its June bank reconciliation.
In July, Jones Company issued checks totaling $38,900. The July bank statement shows
that $26,300 in checks cleared the bank in July. A check from one of Jones Company's
customers in the amount of $300 was also returned marked "NSF." The amount of
outstanding checks on Jones Company's July bank reconciliation should be ________. (
$7,200
$12,600
 $17,700
$18,000

7. Santos Company gathered the following reconciling information in preparing its

August bank reconciliation:

Cash balance per books, 8/31

$3,500

Deposits in transit
150

Notes receivable and interest collected by bank

850

Bank charge for check printing

20

Outstanding checks
2,000

NSF check
170

The adjusted cash balance per books on August 31 is _______. (

$4,160
$4,010
$2,310
$2,460
8. The term "receivables" includes all ________. (
money claims against other entities
merchandise to be collected from individuals or companies
cash to be paid to creditors
cash to be paid to debtors.

9. An estimate based on an analysis of receivables shows that $780 of accounts

receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance
of $110. After preparing the adjusting entry at the end of the year, the balance in the
Allowance for Doubtful Accounts is _______. (
$110
$780
$670
$890

10. Allowance for Doubtful Accounts has a credit balance of $1,500 at the end of the year
(before adjustment), and an analysis of customers' accounts indicates doubtful accounts
of $17,900. Which of the following entries records the proper provision for doubtful
accounts? (Points: 4)
debit Allowance for Doubtful Accounts, $16,400; credit Uncollectible Accounts
Expense, $16,400
debit Allowance for Doubtful Accounts, $19,400; credit Uncollectible Accounts
Expense, $19,400
debit Uncollectible Accounts Expense, $19,400; credit Allowance for Doubtful
Accounts, $19,400
debit Uncollectible Accounts Expense, $16,400; credit Allowance for Doubtful
Accounts, $16,400

11. Tanning Company uses the percentage of receivables method for recording bad debts
expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. An
aging of accounts receivable shows that 5% will be uncollectible. What adjusting entry
will Manning Company make if the Allowance for Doubtful Accounts has a credit
balance of $2,000 before adjustment? (
Bad Debts Expense 8,000
Allowance for Doubtful Accounts 8,000

Bad Debts Expense 10,000

Allowance for Doubtful Accounts 10,000

Bad Debts Expense 8,000

Accounts Receivable 8,000

Bad Debts Expense 10,000

Accounts Receivable 10,000

12. A $6,000, 30-day, 12% note recorded on November 21 is not paid by the maker at
maturity. The journal entry to recognize this event is ________. (
debit Cash, $6,060; credit Notes Receivable, $6,060
debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit Interest
Receivable, $60
debit Notes Receivable, $6,060; credit Accounts Receivable, $6,060
debit Accounts Receivable, $6,060; credit Notes Receivable, $6,000; Credit
Interest Revenue, $60

13. A used machine with a purchase price of $77,000, requiring an overhaul costing
$8,000, installation costs of $5,000, and special acquisition fees of $2,000, would have a
cost basis of _______. (

$92,000
$91,000
$87,000
$86,000

14. Equipment with a cost of $160,000 has an estimated residual value of $10,000 and an
estimated life of 5 years or 12,000 hours. It is to be depreciated by the straight-line
method. What is the amount of depreciation for the first full year, during which the
equipment was used 3,300 hours? (

$30,000
$32,500
$34,000
$40,000

15. A machine with a cost of $65,000 has an estimated residual value of $5,000 and an
estimated life of 4 years or 18,000 hours. What is the amount of depreciation for the
second full year, using the double declining-balance method? (

$15,000
$30,000
$16,250
$32,500
16. Equipment with a cost of $80,000, an estimated residual value of $5,000, and an
estimated life of 15 years was depreciated by the straight-line method for 5 years. Due to
obsolescence, it was determined that the useful life should be shortened by 5 years and
the residual value changed to zero. The depreciation expense for the current and future
years is _______. (

$5,500
$11,000
$10,000
$5,000

17. Computer equipment was acquired at the beginning of the year at a cost of $56,000
that has an estimated residual value of $3,000 and an estimated useful life of 5 years.
Determine the 2nd year’s depreciation using straight-line depreciation. (

$11,200
$22,400
$10,600
$13,600

18. An asset was purchased for $60,000 and originally estimated to have a useful life of
10 years with a residual value of $3,000. After two years of straight line depreciation, it
was determined that the remaining useful life of the asset was only 2 years with a residual
value of $2,000. Calculate this year’s depreciation using the revised amounts and straight
line method. (

$22,800
$11,400
$23,300
$24,000

19. A fixed asset with a cost of $40,000 and accumulated depreciation of $36,500 is
traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $3,000, the
recognized loss on the trade is _______. (

$1,000
$3,500
$ 500
$1,500

20. A fixed asset with a cost of $30,000 and accumulated depreciation of $27,500 is sold
for $3,500. What is the amount of the gain or loss on disposal of the fixed asset? (
 $2,500 loss
$1,000 loss
$2,500 gain
$1,000 gain

21. On June 8, Acme Co. issued an $80,000, 6%, 120-day note payable to Still Co.
Assume that the fiscal year of Still Co. ends June 30. What is the amount of interest
revenue recognized by Still in the following year? (

$1,200.00
$1,208.89
$1,306.67
$1,600.00

22. Miller Co. issued a $35,000, 60-day, discounted note to River City Bank. The
discount rate is 6%. What is the maturity value of the note? (

$35,350
$37,100
$35,000
$34,650

23. Gray County Bank agrees to lend the Starkwood Building Company $100,000 on
January 1. Starkwood Building Company signs a $100,000, 9%, 9-month note. The entry
made by Starkwood Building Company on January 1 to record the proceeds and issuance
of the note is: _________. (

Interest Expense 9,000

Cash 91,000
Notes Payable 100,000

Cash 100,000
Notes Payable 100,000

Cash 100,000
Interest Expense 9,000
Notes Payable 109,000

Cash 100,000
Interest Expense 9,000
Notes Payable 109,000
Interest Payable 4,500
24. Gray County Bank agrees to lend the Starkwood Building Company $100,000 on
January 1. Starkwood Building Company signs a $100,000, 9%, 9-month note. What is
the adjusting entry required if Starkwood Building Company prepares financial
statements on June 30? (

Interest Expense 9,000

Interest Payable 9,000

Interest Expense 4,500

Interest Payable 4,500

Interest Expense 6,750

Interest Payable 6,750

Interest Payable 4,500

Interest Expense 4,500

25. The journal entry to record the conversion of a $250 accounts payable to a notes
payable would be: (

Jan 31 Cash 250

Notes Payable 250

Jan 31 Notes Receivable 250

Notes Payable 250

Jan 31 Notes Payable 250

Cash 250

Jan 31 Accounts Payable 250

Notes Payable 250

26. The maturity value of a $15,000, 60-day, 5% note payable is _______. ( $15,750
$750
$15,125
$125

27. On October 30, Santos Salon, Inc. issued a 90-day note with a face amount of
$60,000 to Charah Hair Products, Inc. for merchandise inventory. Determine the proceeds
of the note assuming the note is discounted at 8%. ( $55,200
$64,800
$58,800
$61,200

28. An employee receives an hourly rate of $15, with time and a half for all hours worked
in excess of 40 during the week. Payroll data for the current week are as follows: hours
worked, 48; federal income tax withheld, $120; cumulative earnings for the year prior to
this week, $24,500; Social security tax rate, 6% on maximum of $100,000; and Medicare
tax rate, 1.5% on all earnings; state unemployment compensation tax, 3.4% on the first
$7,000; federal unemployment compensation tax, .8% on the first $7,000. What is the
employer's payroll tax expense? (
$152.76
$91.26
$58.50
$178.50

29. An employee receives an hourly rate of $15, with time and a half for all hours worked
in excess of 40 during the week. Payroll data for the current week are as follows: hours
worked, 46; federal income tax withheld, $120; cumulative earnings for the year prior to
this week, $5,500; Social security tax rate, 6% on maximum of $100,000; and Medicare
tax rate, 1.5% on all earnings; state unemployment compensation tax, 3.4% on the first
$7,000; federal unemployment compensation tax, .8% on the first $7,000. What is the
employer's payroll tax expense? (
$55.13
$61.01
$86.00
$141.13

30. The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently
reacquired. What is the number of shares outstanding? (
5,000
35,000
45,000
55,000

31. Hurd Company acquired a building valued at $160,000 for property tax purposes in
exchange for 10,000 shares of its $5 par common stock. The stock is widely traded and
selling for $15 per share. At what amount should the building be recorded by Hurd
Company? (
 $50,000
$150,000
$160,000
$200,000

32. The charter of a corporation provides for the issuance of 100,000 shares of common
stock. Assume that 50,000 shares were originally issued and 10,000 were subsequently
reacquired. What is the number of shares outstanding? (
10,000
40,000
50,000
60,000

33. The journal entry to issue 1,000,000 shares of $5 par common stock for $7.00 per
share on January 2nd would be: _______. (
Jan 2 Cash 7,000,000
Common Stock 5,000,000
Paid-In Capital in Excess
of Par - C/S 2,000,000

Jan 2 Cash 5,000,000

Common Stock 5,000,000

Jan 2 Cash 5,000,000

Paid-In Capital in Excess
of Par - C/S 2,000,000
Common Stock 5,000,000

Jan 2 Cash 1,000,000

Common Stock 1,000,000

34. On January 1, 20xx, Sunshine Corporation had 40,000 shares of $10 par value
common stock issued and outstanding. All 40,000 shares had been issued in a prior period
at $20.00 per share. On February 1, 20xx, Sunshine purchased 2,000 shares of treasury
stock for $23 per share and later sold the treasury shares for $21 per share on March 1,
20xx.
The journal entry to record the purchase of the treasury shares on February 1, 20xx,
would include a ________.

(
credit to Treasury Stock for $46,000
debit to Treasury Stock for $46,000
 debit to a loss account for $6,000
credit to a gain account for $6,000

35. The journal entry to issue 1,000,000 shares of $5 par common stock for $6.25 per
share on January 2nd would be: _______. (
Jan 2 Cash 6,250,000
Common Stock 5,000,000
Paid-In Capital in Excess
of Par - C/S 1,250,000

Jan 2 Cash 5,000,000

Common Stock 5,000,000

Jan 2 Cash 5,000,000

Paid-In Capital in Excess of Par - C/S 1,250,000
Common Stock 6,250,000

Jan 2 Cash 1,000,000

Common Stock 1,000,000

36. Day Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2006. What is
the annual dividend on the preferred stock? (
$50 per share
$25,000 in total
$600 in total
$0.50 per share

37. Based on the following information, calculate the dividend yield on common stock

Market price per share $40.00

Earnings per share

4.00

Dividends per share

1.00

Investor's cost per share

30.00

(
 0.075
0.025
0.133
0.033

38. What is the total stockholders' equity based on the following data?

Common Stock $500,000

Excess of Issue Price Over Par

375,000

Retained Earnings (deficit)

40,000

(
$915,000
$875,000
$835,000
$540,000

39. A corporation has 40,000 shares of $25 par value stock outstanding. If the corporation
issues a 4-for-1 stock split, the number of shares outstanding after the split will be
________. (
160,000 shares
40,000 shares
120,000 shares
10,000 shares

40. A corporation has 50,000 shares of $25 par value stock outstanding that has a current
market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the
stock will be _______. (
$5
$60
unchanged
$24

41. The present value of $30,000 to be received in two years, at 12% compounded
annually, is (rounded to nearest dollar) ________. (
$23,916
$37,632
$23,700
 $30,000

42. The Mansur Company issued $100,000 of 12% bonds on May 1, 2007 at face value.
The bonds pay interest semiannually on January 1 and July 1. The bonds are dated
January 1, 2007, and mature on January 1, 2011. The total interest expense related to
these bonds for the year ended December 31, 2007 is ______. (
$2,000
$4,000
$8,000
$12,000

43. On January 1, 2007, the Queen Corporation issued 10% bonds with a face value of
$100,000. The bonds are sold for $98,000. The bonds pay interest semiannually on June
30 and December 31 and the maturity date is December 31, 2011. Queen records straight-
line amortization of the bond discount. The bond interest expense for the year ended
December 31, 2007, is ________. (
$9,600
$9,800
$10,400
$10,200

44. If $1,000,000 of 8% bonds are issued at 102 1/2, the amount of cash received from
the sale is _______. (
$1,080,000
$975,000
$1,000,000
$1,025,000

45. On January 1, 2007, the Kings Corporation issued 10% bonds with a face value of
$100,000. The bonds are sold for $96,000. The bonds pay interest semiannually on June
30 and December 31 and the maturity date is December 31, 2011. Kings records straight-
line amortization of the bond discount. The bond interest expense for the year ended
December 31, 2007, is _______. (
$9,200
$9,800
$10,400
$10,800

46. A corporation issues $100,000, 8%, 5-year bonds on January 1, 2007, for $104,200.
Interest is paid semiannually on January 1 and July 1. If the corporation uses the straight-
line method of amortization of bond discount, the amount of bond interest expense to be
recognized on July 1, 2007, is _______. (
$8,420
$4,420
$4,000
$3,580

47. Bonds with a face amount $1,000,000, are sold at 97. The entry to record the issuance
is _______. (
Cash 1,000,000
Premium on Bonds Payable 30,000
Bonds Payable 970,000

Cash 970,000
Premium on Bonds Payable 30,000
Bonds Payable 1,000,000

Cash 970,000
Discount on Bonds Payable 30,000
Bonds Payable 1,000,000

Cash 970,000
Bonds Payable 970,000

48. A $300,000 bond was redeemed at 98 when the carrying value of the bond was
$296,000. The entry to record the redemption would include a _______. (
loss on bond redemption of $4,000
gain on bond redemption of $4,000
gain on bond redemption of $2,000
loss on bond redemption of $2,000

49. On the statement of cash flows prepared by the indirect method, the cash flows from
operating activities section would include ________. (
receipts from the sale of investments
amortization of premium on bonds payable
payments for cash dividends
receipts from the issuance of capital stock

50. Financing activities involve ________. (

lending money
acquiring investments
issuing debt
 acquiring long-lived assets

51. The net income reported on the income statement for the current year was $275,000.
Depreciation recorded on fixed assets and amortization of patents for the year were
$40,000 and $9,000, respectively. Balances of current asset and current liability accounts
at the end and at the beginning of the year are as follows:

End
Beginning

Cash
$ 50,000
$ 60,000

Accounts receivable
112,000
108,000

Inventories
105,000
93,000

Prepaid expenses
4,500
6,500

Accounts payable (merchandise creditors)

75,000
89,000

What is the amount of cash flows from operating activities reported on the statement of
cash flows prepared by the indirect method? (
$198,000
$324,000
$352,000
$296,000

52. Land costing $47,000 was sold for $78,000 cash. The gain on the sale was reported
on the income statement as other income. On the statement of cash flows, what amount
should be reported as an investing activity from the sale of land? (
$78,000
 $47,000
$109,000
$31,000

53. Land costing $68,000 was sold for $50,000 cash. The loss on the sale was reported on
the income statement as other expense. On the statement of cash flows, what amount
should be reported as an investing activity from the sale of land? (
$50,000
$78,000
$118,000
$68,000

54. Concerning the Indirect Statement of Cash Flows, select the correct statement.
The management of a company would mostly utilize the Indirect Statement of Cash
Flows as a management tool since it starts with Net Income from the Income
Statement.
The management of a company would not normally distribute the Indirect Statement
of Cash Flows as a statement within its annual reports because it would most likely
confuse the average reader.
The management of a company would most likely distribute the Indirect Statement
of Cash Flows as a statement within its annual reports because it starts with Net Income
and ends in the current cash balance which increases reader confidence in the report.
The management of a company would most likely distribute the Indirect Statement
of Cash Flows as a statement within its annual reports because it does not present any
relation to the other statements of the report, therefore it is least likely to confuse the
reader.

55. If accounts payable have increased during a period _______.

revenues on an accrual basis are less than revenues on a cash basis
expenses on an accrual basis are less than expenses on a cash basis
expenses on an accrual basis are the same as expenses on a cash basis
expenses on an accrual basis are greater than expenses on a cash basis