3.Net income (loss) appears in which two financial statements?

·Income Statement and Statement of Stockholders equity

4.The financial statement that represents activity over the entire life of a company is

·Balance sheet

5.Adding a refrigeration unit to a delivery truck that previously did not have this capability is an example of:


6.Cowboy Development incurred the following costs associated with the purchase of a piece of land that it will use to re-build an office building:

·Sale price of land: $400,000

·Sale of salvaged parts on land: $20,000

·Demolition of the old building: $30,000

·Ground breaking ceremony: $1,500

·Land prep: $7,500

What amount should be recorded for the purchase of land


7.During the first two years, Supplies, Inc. drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of depreciation expense should Supplies, Inc. record in the second year using the activity based method.


8.Berry Co. purchases a patent on January 1, 2018, for $40,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight line method, what is the carrying value of the patent on December 31,2019?


9.The factors used to compute depreciation expense are an asset’s

·Cost, residual value, and service life

10.The current portion of long term debt is

·The amount that will be paid within the next year

11.Kansas Enterprises purchased equipment for $60,000 on January 1,2018. The equipment is expected to have a five-year life, with a residual value $5,000 at the end of five years.


12.Region Jet has a $50 million liability at December 31,2018, of which $10 million is payable in 2019. In its December 31, 2018 balance sheet, the company reports the $50 million debt as:

·$10 million current liability and a $40 million long term liability on the balance sheet

13.Which of the following measures of liquidity does not control for relative size of the company?

·They all control for the relative size of the company


15.·$5,000 interest payable

16·Debit Interest Expense, $2,000


18.On January 1,2018 Julee Enterprises borrows $30,000 to purchase a new Toyota Highlander by agreeing to a 6%, 4 year note with the bank. Payments of $704.55 are due at the end of month with first installment due on January 31, 2018. Record the issuance of the note payable and the first two monthly payments

·JAN 1

i.CASH – Debit 30,000


·JAN 31



iii.CASH – CREDIT 704.55

·FEB 28



iii.CASH – CREDIT 704.55

19.If a company issues 1,000 shares of $1 par value common stock for $20 per share, which of the following accounts would be credited?

·Additional Paid in Capital

20.Large stock dividends and stock splits are issues primarily to

·Lower the trading price of the stock per share

21.Treasury Stock is normally reported as

·A reduction of total stockholders’ equity

22.When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include

·A credit to Paid in Capital for $225,000

23.A company issues 1,00 shares of $1 par value preferred stock for $5 per share. What is true about the journal entry to record the issuance?

·Credit Additional Paid in Capital $4,000

24.Match by letter the following terms with their definitions

25.When treasury stock is acquired, what is the effect on assets and stockholders’ equity

·Assets and stockholder’s equity decrease

26.Financing activities include cash receipts and cash payments for transactions relating to revenue and expense activities


27.Angel investors are investors that focus on companies at or near bankruptcy


28.Preferred stock is called preferred because it usually has two preferences over commons stock. These preferences related to:

·Dividends and distribution of assets if the corporation is dissolved.

29.Using the indirect method, we begin with net income and the list adjustments to net income in order to arrive at operating cash flows


30.All classifications on the Balance Sheet have a general relationship with sections identified on the Statement of Cash Flows. Indicate which relationships are correctly identified in the table below.

·IV, V

31.Which of the following is not correct about the statement of cash flows?

·Cash dividends paid are classified as cash flows from operating activities.

32.Assuming Net income for the year is $115,000, what is the net operating cash flows given the following information:


33.Cash flows from investing activities do not include

·Proceeds from the issuance of common stock

34.Bad Brads BBQ had cash flows for the year as follows ($ in millions)


35.Under the indirect method, an increase in accounts payable is added to net income to arrive at net cash flows from operating activities.


36.Listed below are several transactions. For each transaction, indicate by letter whether the cash effect of each transaction is reported in a statement of cash flows as an operating (O), investing (I), financing (F), or noncash (NC) activity. Also, indicate whether the transaction is a cash inflow (CI), cash outflow (CO), or no effect on cash (NE).

37.We report the payment of cash dividends as cash outflow from investing activities


38.We can use ratios to help evaluate a firm’s performance and financial position


39.Other things being equal, the higher the debt to equity ratio, the higher the risk of bankruptcy


40.External transactions are transactions the firm conducts with a separate economic entity, such as selling products to a customer, purchasing supplies from a vendor, paying salaries to an employee, and borrowing money from a bank


41.Providing service to customers for cash causes stockholders’ equity to increase


42. A company sells common stock for $20,000 cash. Record the transaction.

·CASH – DEBIT 20,000


43.Which one of the following accounts would NOT have a balance after closing entries?


44.Below is the company’s cash T-account

·Beg. 1,200



End 3,300

·Payment for salaries

45. An adjusted trial balance

·Is a list of all accounts and their balances after adjusting entries?

46.Given the information in the table below what is the company’s gross profit.

·Sale revenue $350,000

·Accounts receivable $280,000

·Ending inventory $230,000

·Cost of goods sold $180,000

·Sales returns $50,000

·Sales discount $20,000


47.In response to corporate accounting scandals and to public outrage over seemingly widespread unethical behavior of top executives, Congress passed the Sarbanes-Oxley Act


48.Common examples of cash equivalents include all of the following except:

·Accounts receivable

49.Which of the following items may be classified as nonoperating revenues and expenses?

·All of the other answers are classified as nonoperating revenues and expenses

50.Inventory is usually reported as a long term asset in the balance sheet