1. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? Reduced legal liability for investors. Harder to transfer ownership. Lower taxes. Most common form of organization. 2. Which of these activities involves purchasing buildings? Delivering Operating Financing Investing 3. Johnson Company reported Net Income of $60,000 for 2010. Net Sales were $450,000. The average common shares outstanding were 10,000. Preferred dividends paid were $10,000. What was the 2010 Earnings per Share (EPS)? $6.00 $44.00 $45.00 $5.00 4. Free cash flow can be utilized to retire stock or debt. acquire new assets. pay additional dividends. All of the above are correct. 5. The payment of cash dividends is recorded in the Operating section of the statement of cash flows. Investing section of the statement of cash flows. Financing section of the statement of cash flows. Non-cash investing and financing section of the statement of cash flows. 6. Landon Company showed the following balances at the end of its first year: Cash $10,000 Prepaid insurance 700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Common stock 1,400 Dividends 700 Revenues 21,000 Expenses 17,500 What did Landon Company show as total debits on its trial balance? $32,400 $29,400 $34,500 $35,200 7. (TCO B, E) Why is the accrual basis of accounting preferred by GAAP? The Accrual basis is easier to use. The Accrual basis is also preferred by the Internal Revenue Service. The Accrual basis complies with the revenue recognition and matching principles. The Accrual basis requires less accounting resources. 8. (TCO A, B) The KPMM Accounting firm purchased 10 laser toner cartridges for $60 each for a total of $600 on May 1 and recorded the purchase as an asset. On May 31, an inventory of the toner cartridges indicated only 8 on hand. The adjusting entry that should be made by the firm on May 31 is Debit Office Supplies Expense, $600; Credit Office Supplies, $600. Debit Office Supplies Expense, $480; Credit Office Supplies, $480. Debit Office Supplies Expense, $120; Credit Office Supplies, $120. Debit Office Supplies, $480; Credit Office Supplies Expense, $480. 9. (TCO E) A credit purchase of $2,000 is made on May 25, terms 2/10, net/30, on which a return of $250 is made on May 28. What amount is paid as payment in full on June 2? $2,000 $1,750 $1,715 $1,700 10. (TCO B) At the beginning of the year, Westside Software had an inventory of $1,000,000. During the year, the company purchased goods costing $500,000. If Westside Software reported ending inventory of $600,000 and sales of $3,000,000, their cost of goods sold and gross profit rate must be $900,000 and 70% $2,100,000 and 70% $900,000 and 30% $2,100,000 and 30% 11. (TCO D) If Alpha Company has a higher inventory turnover ratio than Beta Company, Alpha Company's days in inventory ratio will be ____________ compared to Beta Company. Lower Higher The same. Cannot determine from the information given 12. (TCO D) Days in inventory helps managers evaluate How quickly the firm turns its inventory. How many days are left before the firm needs to order inventory. The average number of days inventory is held. How much profit the firm makes on its inventory. 13. The internal audit function can best be classified as an example of which control principle Establishment of responsibility. Independent internal verification. Documentation procedures. Separation of duties is violated. 14. If two employees are working out of the same cash register, this is a violation of which internal control principle? Physical controls. Segregation of duties. Establishment of responsibilities. Documentation procedures. 15. An aging of a company's accounts receivable indicates that $27,000 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a? Credit to Bad Debts Expense for $25,800. Debit to Bad Debts Expense for $25,800. Credit to Allowance for Doubtful Accounts of $25,800. Debit to Bad Debts Expense for $28,200.

1.(TCO A, B, D) Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $33,000 at the end of the year. If the balance of the Allowance for Doubtful Accounts is $10,000 debit before adjustment; what is the balance after adjustment? (Points: 5) $33,000 $23,000 $43,000 $10,000 2.(TCO A, E) Julien Company purchases land for $35,000 cash. Julien assumes $1,500 in property taxes due on the land. The title and attorney fees totaled $1,000. Julien has the land graded for $3,200. They paid $10,000 for paving of a parking lot. What amount does Julien record as the cost for the land? (Points: 5) $40,700 $35,000 $37,500 $45,000 3.(TCO A, E) Equipment with a cost of $212,000 has an estimated salvage value of $12,000 and an estimated life of 5 years or 15,000 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 6,000 hours? (Points: 5) $80,000 $84,800 $42,400 $40,000 4.(TCO D) A cash register tape shows cash sales of $7,500 and sales taxes of $500. The journal entry to record this information is (Points: 5) Debit Cash $8,000; Credit Sales $7,500; Credit Sales Taxes Payable $500 Debit Cash $8,000; Credit Sales Tax Revenue $500; Credit Sales $7,500 Debit Cash $7,500; Credit Sales $7,500 Debit Cash $7,500; Debit Sales Tax Expense $500; Credit Sales $8,000 5.(TCO D) Payne Corporation issues 100, 20-year, 6% $1,000 bonds dated July 1, 2010, at 94. The journal entry to record the amount of cash will show a (Points: 5) Debit to Cash of $194,000 Debit to Cash of $100,000 Debit to Cash of $94,000 Debit to Cash of $60,000 6.(TCO A) If Johnson Corporation issues 20,000 shares of $7 par value common stock for $300,000, the account (Points: 5) Common Stock will be credited for $300,000. Paid-in Capital in Excess of Par Value will be credited for $140,000. Cash will be credited for $140,000. Paid-in Capital in Excess of Par Value will be credited for $160,000. 7.(TCO A, C) Outstanding stock of the Horizon Networks included 30,000 shares of $3 par common stock and 40,000 shares of 6%, $5 par non-cumulative preferred stock. In 2009, Horizon declared and paid dividends of $8,000. In 2010, Horizon declared and paid dividends of $18,000. How much of the 2010 dividend was distributed to preferred shareholders? (Points: 5) $8,000 $16,000 $12,000 $18,000 8.(TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $120,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $2,000,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is (Points: 5) $2,040,000 $2,000,000 $1,600,000 $1,200,000 9.(TCO C) LBJ Company reported net income of $90,000 for the year. During the year, accounts receivable increased $8,000, merchandise inventory increased $15,000, accounts payable increased by $25,000, and depreciation expense of $20,000 was recorded. Net cash provided by operating activities for the year is (Points: 5) $158,000 $112,000 $78,000 $72,000 10.(TCO F) If you are making comparisons with other companies to provide insight into a company's competitive position, you are performing what type of analysis? (Points: 5) Common-size analysis Intercompany Intracompany Industry average 11.(TCO F) The formula for performing horizontal analysis is (Points: 5) (Current Year Amount minus Base Year Amount) Divided by Current Year Amount Base Year Amount Divided By Current Year Amount. Current Year Amount minus Base Year Amount (Current Year Amount minus Base Year Amount) Divided by Base Year Amount 12.(TCO F) In vertical analysis, line items on the balance sheet are generally expressed as a percentage of (Points: 5) Total Liabilities. Net Income. Total Assets. Cost of Goods Sold. 13.(TCO F) If we perform vertical analysis of a company that has gross sales of $1,000,000, net sales of $900,000, cost of goods sold of $400,000 and total assets of $10,000,000, the cost of goods sold percentage is (Points: 5) 40% 42% 4% 44% 14.(TCO F) A common measure of liquidity is (Points: 5) Debt to total assets ratio Cash debt coverage Free cash flow Working capital 15.(TCO F) Stockholders would be most interested in which of the following ratios? (Points: 5) Days in inventory Free cash flow Current ratio Average collection period