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1. A company has gross profit of $58,300 and a gross profit percent of 25%. What are the company’s gross sales?

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1. A company has gross profit of $58,300 and a gross profit percent of 25%. What are the company’s gross sales?
$233,200
$14,575
$72,825
None of the above.

2. The allowance for doubtful accounts represents
the amount of actual uncollectible accounts to date.
the portion of receivables that are estimated to be uncollectible.
a process of classifying account receivable.
None of the above.

3. The depreciation method in which the depreciable cost of an asset is apportioned equally over its estimated useful life in terms of months or years is called
declining-balance method.
sum-of-the-years digits method.
straight-line method.
functional method.

4. The daily cash count of cash register receipts made by department supervisors is an example of
other controls.
independent internal verification.
establishment of responsibility.
segregation of duties.

5. The date of record for a dividend is the date on which the company:
debits Dividends Declared and credits Dividends Payable for the amount of the dividend.
debits Dividend Expense and credits Cash for the dividend amount
debits Dividends Payable and credits Cash for the dividend amount.
establishes who will receive the dividend payment.

6. Two individuals at a retail store work the same cash register. You evaluate this situation as
a violation of establishment of responsibility.
a violation of separation of duties.
supporting the establishment of responsibility.
supporting internal independent verification.

7. Which one of the following is not an objective of a system of internal controls?
Safeguard company assets.
Overstate liabilities to be conservative.
Enhance the accuracy and reliability of accounting records.
Reduce the risks of errors.


8. What is the detailed report that companies file annually with the Securities and Exchange Commission?
Form 8-K
Form 10-Q
Form 10-K
Form 5-K

9. In the normal formula for interest calculation, the interest rate is on a(n) _____________basis and therefore the time variable must reflect how many _________ out of _____ are in the interest period.
biannual, months, 6
annual, years, 1
biannual, half-years, 2
annual, months, 12

10. During one pay period, your company distributes $130,500 to employees as net pay. The income tax withholdings were $19,000 and the FICA withholdings were $5,000. The total compensation expense to the company for this pay period, excluding any unemployment taxes, was:
$149,500.
$130,500.
$154,500.
$159,500.

11. Sales revenue less cost of goods sold is called
gross profit.
net profit.
net income.
marginal income.

12. Which of the following is not a right or preference associated with preferred stock?
The right to vote.
First claim to dividends.
Preference to corporate assets in case of liquidation.
To receive dividends in arrears before common stockholders receive dividends.

13. Green Company sees its receivables turnover ratio rise from 12.1 to 14.0.
This indicates that the company is taking longer to collect from its customers.
This is an indication that the company is experiencing falling credit costs.
This is an indication that the company is using more efficient collection methods.
This is an indication that the company is buying and selling financial assets less rapidly.

14. A company extends credit to customers because it expects the:
rise in sales to be greater than the rise in cost of extending credit.
interest charged to be greater than the cost of extending credit.
tax savings from a lower net income to be greater than the cost of extending credit.
All of these.

15. If a publicly traded company is trying to maximize its perceived performance, as reported to decisions makers external to the corporation, the company is most likely to understate which of the following on its balance sheet?
Assets
Liabilities
Retained earnings
Contributed capital

16. Holders of common stock receive certain benefits such as a residual claim which is the:
right of stockholders to be paid back their investment before anyone else if the company ceases operation.
right to oversee management of the company.
right to share in any remaining assets after creditors have been paid off, if the company ceases operations.
continuing right to receive a share of profits as dividends.

17. The book value of a tangible asset is the difference between the
replacement cost of the asset and its historical cost.
cost of the asset and the amount of depreciation expense for the year.
cost of the asset and the accumulated depreciation to date.
proceeds received from the sale of the asset and its original cost.

18. If a check correctly written and paid by the bank for $450 is incorrectly recorded on the company’s books for $405, the appropriate treatment on the bank reconciliation would be to
add $45 to the bank’s balance.
add $45 to the book’s balance.
deduct $45 from the book’s balance.
deduct $45 from the bank’s balance.

19. 1-year, $15,000, 12 percent note is signed on April 1. If the note is repaid on September 1 of the same year, how much interest expense is incurred?
Answer
$1,800
$900
$750
$600

20. A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The current number of outstanding shares after these transactions have been accounted for is:
8 million shares.
20 million shares.
10 million shares.
9 million shares.

21. A truck costing $12,000, on which $9,000 of accumulated depreciation has been recorded was sold for $2,000 cash. The entry to record this event would include a:
gain of $1,000.
loss of $1,000.
credit to the Truck account for $3,000.
credit to Accumulated Depreciation for $9,000.

22. On December 31, 2009, Beacon Company had an outstanding note payable totaling $125,000. The note is due in equal annual installments of $25,000 on January 1 of each of the next 5 years. The current portion of long-term debt that should be reported on the December 31, 2009 balance sheet is
$0
$25,000
$50,000
$125,000

23. Which of the following statements is NOT true of a corporation?
A corporation is taxed as a separate legal entity.
A corporation has easy transferability of ownership.
A corporation may have the ability to raise large amounts of capital.
A corporation's owners have unlimited liability.

24. The right to exclude others from making or using an invention is a
patent.
copyright.
franchise.
licensing right.

25. Borrowing a textbook and photocopying it is a violation of the publisher’s:

patent.
trademark.
franchise agreement.
copyright.

26. When auditors conclude that a company’s financial statements conform to GAAP, the audit report is said to be:
validated.
qualified.
unqualified.
adverse.

27. A company reported net income of $6 million. During the year the average number of common shares outstanding was 3 million. The price of a share of common stock at the end of the year was $5. There were 400,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative.
The EPS is approximately:
Answer
$0.40
$1.76
$1.86
$2.00


28. Under the cost principle:
only reasonable and necessary costs of acquiring an asset should be recorded as a cost of the asset.
costs of preparing an asset for use should never be recorded as part of the cost of the asset.
all reasonable and necessary costs of acquiring an asset and preparing it for use should be recorded as a cost of the asset.
only the actual purchase price of the asset is recorded as the asset’s cost.

29. Journal entries are required by the depositor for all of the following except
collection of a note receivable.
bank errors.
bank service charges.
an NSF check.

30. Goodwill:
should be treated like most other intangible assets and amortized over a useful life of not more than 40 years.
is an accounting measurement of how well a company's employees behave towards the company's customers.
should be recorded as a negative value if a company is purchased for less than the net carrying value of its assets.
is recorded when the purchasers of a business pay more than the fair market value of the assets purchased.

31. The declaration date for a dividend is the date on which the company:
debits Dividends Declared and credits Dividends Payable for the amount of the dividend.
debits Dividend Expense and credits Cash for the dividend amount.
debits Dividends Payable and credits Cash for the dividend amount.
establishes who will receive the dividend payment.

32. Further information about financial data, accounting methods, and financial statements is included in what part of the annual report?
The balance sheet.
The unaudited condensed quarterly data.
The notes to the financial statements.
The summarized financial data.

33. What would a financial statement user learn from reading the auditors' report?
Whether the financial statements present a fair picture of the company's financial results and are prepared in accordance with GAAP.
Whether or not it is a good time to purchase the stock.
What the company plans to distribute as dividends.
Whether or not the company has plans for future expansion.


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