(TCO A) A corporation has which of the following advantages? (Points : 5)

Reduced taxes

Simple to set up

Limited liability for stockholders

Owner maintains control

Question 2.2. (TCO A) Dividends flow through which one of the following statements? (Points : 5)

The Balance Sheet

The Statement of Retained Earnings

The Income Statement

None of the above

Question 3.3. (TCOs A and B) Below is a partial list of account balances for LBJ Company.

Cash$12,000

Prepaid rent1,300

Accounts receivable7,000

Accounts payable5,000

Notes payable9,000

Common stock22,000

Dividends2,000

Revenues45,000

Expenses35,000

What did LBJ Company show as total debits? (Points : 5)

$57,300

$81,000

$55,300

$56,000

Question 4.4. (TCOs B and E) Which of the following statements is correct with regard to cash-basis accounting? (Points : 5)

Cash-basis accounting is required by GAAP.

Cash-basis accounting does not record any expenses until they are paid.

Cash-basis is never allowed by the IRS.

Cash-basis accounting records revenue when the product is shipped.

Question 5.5. (TCO D) If ending inventory of the current year is understated (Points : 5)

Cost of goods sold for the current year will be understated

Gross profit for the current year will be unaffected

Gross profit for the current year will be understated

Net income for the current year will be overstated

Question 6.6. (TCO A, E) Johnson Company, a calendar year company, purchased a delivery vehicle for $21,000 on 1/1/14. License and insurance costs for the vehicle will be $700 per year. The salvage value is $3,500 and it has an estimated useful life of 5 years. The vehicle will be depreciated using the double declining balance method of depreciation. What will the depreciation expense be in year one? (Points : 5)

$8,400

$7,000

$4,200

$3,500

Question 7.7. (TCOs D and G) When the market rate of interest is less than the stated rate of interest on the bond, the bond will require _____. (Points : 5)

a debit to Discount on Bonds Payable

a credit to Premium on Bonds Payable

a credit to Loss on Bonds Payable

a debit to Gain on Bonds Payable

Question 8.8. (TCO C) Accounts receivable arising from sales to customers amounted to $50,000 and $45,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $150,000. Based on these transactions, the cash flows from operating activities to be reported on the statement of cash flows would be _____. (Points : 5)

$195,000

$145,000

$115,000

$155,000

Question 9.9. (TCO F) Horizontal analysis is also known as _____. (Points : 5)

ratio analysis

vertical analysis

common-size analysis

trend analysis

Question 10.10. (TCO F) Horizontal analysis (Points : 5)

involves calculating a percentage change from one period to the next

can be the basis of comparative analysis or trend analysis

is useful in studying the growth or decline of a company over time

all of the above are correct

Question 11.11. (TCO F) In vertical analysis, the base amount for cost of goods sold expense is generally _____. (Points : 5)

net income

operating profit

gross profit

net sales

Question 12.12. (TCO F) A common ratio to measure profitability is the _____. (Points : 5)

quick ratio

inventory turnover

days sales in receivables

asset turnover

Question 13.13. (TCO F) The rate of return on common stockholder's equity ratio is NOT affected by _____. (Points : 5)

dividends paid to preferred stockholders

net income

dividends paid to common stockholders

average common stockholders equity

Question 14.14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

multiply the stated rate times the bonds face value

calculate the present value of the principal only

calculate the present value of both the principal and the interest

calculate the present value of the interest only