Part I. Multiple Choice (4*10=40) 1. Which of the following best describes the balance sheet? A. It includes a listing of assets at their market values. B. It includes a listing of assets, liabilities, and stockholders' equity at their market values. C. It provides information pertaining to a company's assets and the providers of the assets. D. It provides information pertaining to a company's liabilities for a period of time. 2. Which of the following correctly describes the various financial statements? A. An income statement covers a period of time. B. The cash flow statement is a point in time financial statement. C. The balance sheet is a period of time financial statement. D. The statement of retained earnings is a point in time financial statement 3. Which of the following best describes assets? A. Resources with possible future economic benefits owed by an entity as a result of past transactions. B. Resources with probable future economic benefits owned by an entity as a result of past transactions. C. Resources with probable future economic benefits owned by an entity as a result of future transactions. D. Resources with possible future economic benefits owed by an entity as a result of future transactions. 4. Which of the following reflects the impact of a transaction where $200,000 cash was invested by stockholders in exchange for stock? A. Assets and liabilities each increased $200,000. B. Assets and revenues each increased $200,000. C. Stockholders' equity and revenues each increased $200,000. D. Stockholders' equity and assets each increased $200,000. 5. Colby Corporation has provided the following information: Operating revenues were $199,700. Operating expenses were $111,000. Interest expense was $9,200. Gain from sale of plant and equipment was $3,300. Dividend payments to Colby's stockholders were $7,700. Income tax expense was $36,000. How much was Colby's net income? A. $39,100 B. 548,300 C. $52,700 D. $46,800 6. Which of the following journal entries is prepared when a customer pays cash prior to delivery of the goods or services? Revenues B. Cash Unearned revenues C. Unearned revenues Cash D. Cash Accounts receivable A. Option A B. Option B C. Option C D. Option D 7. Which of the following journal entries is correct when a company has incurred interest expense but has not yet paid the interest? A Cash A. Interest expense Operating income B. Interest expense Interest payable C. Interest payable Interest expense D. Retained earnings Interest expense A. Option A B. Option B C. Optionc D. Option D 8. On April 1, 2011, the premium on a one-year insurance policy was purchased for $3,000 cash with the insurance coverage beginning on that date. Which of the following correctly describes the effect of the December 31, 2011 adjusting entry on the financial statements? A. (Assume that no adjusting entries have been made during the year.) B. Prepaid insurance will decrease $750. C. Insurance expense will increase $750. D. Insurance expense will increase $2,250. 9. Which of the following doesn't correctly describe a journal entry which debits supplies expense and credits supplies? A. It increases expenses and decreases assets. B. It decreases net income and decreases assets. C. It increases expenses and increases retained earings. D. It decreases net income and decreases stockholders' equity. 10. Which of the following correctly describes the effects of recording deferred revenues when cash is received from a customer? A. Revenues are increased. B. Liabilities are not affected. C. Retained earnings increases. D. Net income is not affected Part II. Journal, ledger, trial balance and financial statements (60) 1. Wolverine World Wide, Inc., manufactures military, work, sport, and casual footwear and leather accessories under a variety of brand names, such as Hush Puppies, Wolverine, and Bates, to a global market. (20) The following transactions occurred during a recent year. Dollars are in thousands. a. Issued common stock to investors for $959,500 cash. b. Purchased $265,472 of additional inventory on account. c. Purchased for cash $24,126 in additional property, plant, and equipment. d. Sold $1,220,568 of products to customers on account; cost of the products sold was $734,547. e. Incurred $345,183 in selling expenses, paying three-fourths in cash and owing the rest on account. Prepare the journal entries for the transactions
