Unit 10 : Unit 10: Review - Final Exam
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Question 1.1. Corporations generally issue stock dividends in order to (Points : 3)
increase the market price per share.
exceed stockholders' dividend expectations.
increase the marketability of the stock.
decrease the amount of capital in the corporation.
Question 2.2. Two methods of accounting for uncollectible accounts are the (Points : 3)
allowance method and the accrual method.
allowance method and the net realizable method.
direct write-off method and the accrual method.
direct write-off method and the allowance method.
Question 3.3. A note payable is in the form of (Points : 3)
a contingency that is reasonably likely to occur.
a written promissory note.
an oral agreement.
a standing agreement.
Question 4.4. Investors who receive checks in their names for interest paid on bonds must hold (Points : 3)
registered bonds.
coupon bonds.
bearer bonds.
direct bonds.
Question 5.5. Mott Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $36,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $3,000. What is the depreciation cost per unit? (Points : 3)
$3.30
$3.60
$.33
$.36
Question 6.6. If a company has both an inflow and outflow of cash related to property, plant, and equipment, the (Points : 3)
two cash effects can be netted and presented as one item in the investing activities section.
cash inflow and cash outflow should be reported separately in the investing activities section.
two cash effects can be netted and presented as one item in the financing activities section.
cash inflow and cash outflow should be reported separately in the financing activities section.
Question 7.7. From the standpoint of the issuing company, a disadvantage of using bonds as a means of long-term financing is that (Points : 3)
bond interest is deductible for tax purposes.
interest must be paid on a periodic basis regardless of earnings.
income to stockholders may increase as a result of trading on the equity.
the bondholders do not have voting rights.
Question 8.8. The size of the petty cash fund is dependent on (Points : 3)
the wishes of the custodian of the fund.
anticipated disbursements for the year.
anticipated disbursements for a three- to four-week period.
the size of the regular cash account.
Question 9.9. Stockholders of a company may be reluctant to finance expansion through issuing more equity because (Points : 3)
leveraging with debt is always a better idea.
their earnings per share may decrease.
the price of the stock will automatically decrease.
dividends must be paid on a periodic basis.
Question 10.10. Cash receipts from interest and dividends are classified as (Points : 3)
financing activities.
investing activities.
operating activities.
either financing or investing activities.
Question 11.11. On October 1, 2012, Holt Company places a new asset into service. The cost of the asset is $80,000 with an estimated 5-year life and $20,000 salvage value at the end of its useful life. What is the book value of the plant asset on the December 31, 2012, balance sheet assuming that Holt Company uses the double-declining-balance method of depreciation? (Points : 3)
$52,000
$60,000
$72,000
$76,000
Question 12.12. Moreno Company purchased equipment for $675,000 on January 1, 2011, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and a $30,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2013 will be (Points : 3)
$75,000.
$45,000.
$81,660.
$51,660.
Question 13.13. If a corporation issued $3,000,000 in bonds which pay 10% annual interest, what is the annual net cash cost of this borrowing if the income tax rate is 30%? (Points : 3)
$3,000,000
$90,000
$300,000
$210,000
Question 14.14. In most companies, current liabilities are paid within (Points : 3)
one year through the creation of other current liabilities.
the operating cycle through the creation of other current liabilities.
one year or the operating cycle out of current assets.
the operating cycle out of current assets.
Question 15.15. A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a (Points : 3)
corporation is organized for the purpose of making a profit.
corporation is subject to more federal and state government regulations.
corporation is an accounting economic entity.
corporation's temporary accounts are closed at the end of the accounting period.
Question 16.16. Significant noncash transactions would not include (Points : 3)
conversion of bonds into common stock.
asset acquisition through bond issuance.
treasury stock acquisition.
exchange of plant assets.
Question 17.17. Under the corporate form of business organization (Points : 3)
a stockholder is personally liable for the debts of the corporation.
stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.
the corporation's life is stipulated in its charter.
stockholders wishing to sell their corporation shares must get the approval of other stockholders.
Question 18.18. The category that is generally considered to be the best measure of a company's ability to continue as a going concern is (Points : 3)
cash flows from operating activities.
cash flows from investing activities.
cash flows from financing activities.
usually different from year to year.
Question 19.19. The best managed companies will have (Points : 3)
no uncollectible accounts.
a very strict credit policy.
a very lenient credit policy.
some accounts that will prove to be uncollectible.
Question 20.20. A stockholder who receives a stock dividend would (Points : 3)
expect the market price per share to increase.
own more shares of stock.
expect retained earnings to increase.
expect the par value of the stock to change.
Question 21.21. A petty cash fund of $100 is replenished when the fund contains $4 in cash and receipts for $94. The entry to replenish the fund would (Points : 3)
credit Cash Over and Short for $2.
credit Miscellaneous Revenue for $2.
debit Cash Over and Short for $2.
debit Miscellaneous Expense for $2.
Question 22.22. The allowance method of accounting for uncollectible accounts is required if (Points : 3)
the company makes any credit sales.
bad debts are significant in amount.
the company is a retailer.
the company charges interest on accounts receivable.
Question 23.23. With an interest-bearing note, the amount of assets received upon issuance of the note is generally (Points : 3)
equal to the note's face value.
greater than the note's face value.
less than the note's face value.
equal to the note's maturity value.
Question 24.24. When stock dividends are distributed, (Points : 3)
Common Stock Dividends Distributable is decreased.
Retained Earnings is decreased.
Paid-in Capital in Excess of Par is debited if it is a small stock dividend.
no entry is necessary if it is a large stock dividend.
Question 25.25. A credit balance in Cash Over and Short is reported as a(n) (Points : 3)
asset.
liability.
miscellaneous expense.
miscellaneous revenue.
Question 26.26. An employee authorized to sign checks should not record (Points : 3)
owner cash contributions.
mail receipts.
cash disbursement transactions.
sales transactions.
Question 27.27. Each of the following is an example of a significant noncash activity except (Points : 3)
conversion of bonds into common stock.
exchanges of plant assets.
issuance of debt to purchase assets.
stock dividends.
Question 28.28. If no-par stock is issued without a stated value, then (Points : 3)
the par value is automatically $1 per share.
the entire proceeds are considered to be legal capital.
there is no legal capital.
the corporation is automatically in violation of its state charter.
Question 29.29. Which of the following is not true of a corporation? (Points : 3)
It may buy, own, and sell property.
It may sue and be sued.
The acts of its owners bind the corporation.
It may enter into binding legal contracts in its own name.
Question 30.30. The board of directors must assign a per share value to a stock dividend declared that is (Points : 3)
greater than the par or stated value.
less than the par or stated value.
equal to the par or stated value.
at least equal to the par or stated value.
Question 31.31. Farr Company purchased a new van for floral deliveries on January 1, 2012. The van cost $48,000 with an estimated life of 5 years and $12,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the balance of the Accumulated Depreciation account at the end of 2013? (Points : 3)
$7,680
$23,040
$30,720
$11,520
Question 32.32. Generally, the most important category on the statement of cash flows is cash flows from (Points : 3)
operating activities.
investing activities.
financing activities.
significant noncash activities.
Question 33.33. The entry to record the issuance of an interest-bearing note credits Notes Payable for the note's (Points : 3)
maturity value.
market value.
face value.
cash realizable value.
Question 34.34. Bad Debts Expense is considered (Points : 3)
an avoidable cost in doing business on a credit basis.
an internal control weakness.
a necessary risk of doing business on a credit basis.
avoidable unless there is a recession.
Question 35.35. Of the items below, the one that appears first on the statement of cash flows is (Points : 3)
noncash investing and financing activities.
net increase (decrease) in cash.
cash at the end of the period.
cash at the beginning of the period.
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