On March 1, 2014, Cross Corporation borrowed $10,000 by issuing a note payable. How did this transaction affect Cross's financial statements?

Choice A

Choice B

Choice C

Choice D

2 Chicago Company sold merchandise to a customer for $600 cash in a state with a 6% sales tax rate. The total amount of cash collected from the customer was

$558.

$600.

$642.

$636.

3.

Nevada Company remitted to the state $1,800 in sales taxes that it had previously collected from customers. The effects on the financial statements were:

Choice A

Choice B

Choice C

Choice D

4.

In accounting for a contingent liability, if the likelihood of the obligation is probable and the amount can be estimated, a company must

report the liability on the balance sheet.

provide disclosure in the footnotes to the financial statements.

not recognize the liability until it is certain and the exact amount is known.

do nothing.

5

Quayle Company has been sued by a customer who claims injury from use of Quayle's product. The company's lawyers and a consultant believe that the likelihood of a judgment against Quayle is remote. What should Quayle do to account for this potential liability?

recognize the liability and report it on the balance sheet

provide disclosure in the footnotes to the financial statements

report an allowance account on the balance sheet

do nothing

6.

Regardless of the specific type of long-term debt, which of the following are normally required with debt transactions?

to repay the debt

to pay dividends

to pay interest

to repay the debt and to pay interest are both correct

7.

On January 1, 2014, Hays Corporation arranged a $3,000 line of credit with the Barnett Bank. It agreed to accept the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and payments on principal are to take place on January 1 of each year. Hays began its loan transactions with Barnett Bank by borrowing $1,000 on January 1, 2014. Which of the following answers shows the effect of this event on the financial statements?

Choice A

Choice B

Choice C

Choice D

8

On January 1, 2014, Hays Corporation arranged a $1,000 line of credit with the Barnett Bank. It agreed to accept the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and payments on principal are to take place on January 1 of each year. Hays paid the first year's interest payment on December 31, 2014. Barnett Bank's prime rate was 4 percent for 2014. Which of the following answers shows the effect of this event on the financial statements?

rev: 09_03_2015_QC_CS-21565

Choice A

Choice B

Choice C

Choice D

9

On January 1, 2014, Hays Corporation arranged a $3,000 line of credit with the Barnett Bank. It agreed to accept the bank's offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and payments on principal are to take place on January 1 of each year. On January 1, 2013, Hays borrowed an additional $1,000 from Barnett Bank, bringing the total amount borrowed to $2,000. On January 1, 2014, Hays paid $500 on the principal of the loan. On December 31, 2014, Hays records the 2014 interest payment. The prime rate for 2014 was 5 percent. Which of the following answers shows the effect of the 2014 interest payment on the financial statements?

Choice A

Choice B

Choice C

Choice D

10

Which of the following is a disadvantage of a sole proprietorship?

Entrenched management.

Unlimited liability of the owner.

Double taxation.

Excessive regulation.

11

Which form of business organization is established as a separate legal entity from its owners?

Sole proprietorship

Corporation

Partnership

None of these

12

The term "double taxation" refers to which of the following:

Sole proprietorships must pay income taxes on their net incomes and the owners are also required to pay income taxes on their withdrawals.

In a partnership, both partners are required to claim their share of net income on their tax returns.

Corporations must pay income taxes on their net income and their stockholders pay income tax on the dividends they receive.

Limited Liability Companies are forced to pay income taxes to both the state and the federal governments.

13

Laverne and Shirley started a partnership. Laverne invested $4,000 in the business and Shirley invested $6,000. The partnership agreement stipulated that profits would be divided as follows. Each partner would receive a 10% return on their invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $4,500 during an accounting period, the amount of income assigned to the two partners would be:

Choice A

Choice B

Choice C

Choice D

14

The difference between the corporate form of business organization and other forms is most clearly shown in which of the following sections of the financial statements?

equity section of the balance sheet

expenses section of the income statement

assets section of the balance sheet

operating activities section of the statement of cash flows

15

Flynn Company issued 2,000 shares of $10 par value common stock at a market price of $16. As a result of this accounting event, total paid-in capital would

increase by $12,000.

be unaffected by the event.

increase by $32,000.

increase by $20,000.

16

Flynn Corp., which is authorized to issue 25,000 shares of no-par common stock, issued 10,000 shares for $150,000. What effect will this event have on the accounting equation?

Increase assets by $375,000 increase, equity by $375,000.

Increase assets by $150,000, increase net income by $150,000.

Increase assets by $150,000, increase equity by $150,000.

Increase assets by $150,000, increase net income by $150,000 and increase assets by $150,000, increase equity by $150,000.

17

On January 12, 2014, the Picard Corporation issued 750 shares of $12 par-value common stock for $15 per share. Which of the following answers describes the effect of the January 12, 2014 transaction?

Choice A

Choice B

Choice C

Choice D

18

Mitchell Company was authorized to issue 50,000 shares of common stock. The company issued 27,000 shares of stock and later purchased 5,000 shares of treasury stock. The number of outstanding shares of common stock is:

45,000.

28,000.

22,000.

17,000.

19

At the end of the accounting period, Isaac Company had a balance of $4,000 in its common stock account, additional paid in capital of $4,000, retained earnings of $3,000, and $1,000 of treasury stock. The total amount of stockholders' equity is:

$10,000.

$13,000.

$12,000.

$8,000.

20

Madison Co. paid dividends of $3,000; $6,000; and $10,000 during 2012, 2013 and 2014 respectively. The company had 500 shares of preferred stock outstanding with a $10 per share cumulative dividend. The amount of dividends received by the common shareholders during 2014 would be:

$6,000.

$5,000.

$3,000.

$4,000.

21

The following balance sheet information is provided for Duke Company for 2014: What is the company's current ratio?

1.16

1.31

2.53

3.79

22

The following balance sheet information is provided for Apex Company for 2014: What is the company's working capital?

$20,300

$4,900

$22,900

$24,500

23

The following balance sheet information was provided by O'Connor Company: Assuming that net credit sales for the year 2014 totaled $270,000, what is the company's most recent accounts receivable turnover?

18 times

20 times

22.5 times

7.7 times

24

The following balance sheet information was provided by Western Company: Assuming 2014 net credit sales totaled $270,000, what was the company's average days to collect receivables? (Use 365 days in a year. Do not round your intermediate calculations.)

18.25 days

47.31 days

16.22 days

20.28 days

25

The following balance sheet information is provided for Gaynor Company: Assuming 2014 cost of goods sold is $153,300, what is the company's inventory turnover?

4.0 times

4.4 times

4.2 times

None of these answers is correct.

26

The following balance sheet information is provided for Patton Company: Assuming 2014 cost of goods sold is $730,000, what is the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)

17.5 days

18.25 days

19 days

20.86 days

27

The following balance sheet information is provided for Patton Company: Assuming 2014 cost of goods sold is $730,000, what is the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)

17.5 days

18.25 days

19 days

20.86 days

28

An analysis procedure that uses percentages to compare each of the parts of an individual statement to a key dollar amount from the financial statements is:

Ratio analysis.

Contribution analysis.

Horizontal analysis.

Vertical analysis.

29

The study of an individual financial statement item over several accounting periods is called:

Horizontal analysis.

Vertical analysis.

Ratio analysis.

Time and motion analysis.