1. which financial statement would you utilize to determine whether a

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1. Which financial statement would you utilize to determine whether a company will be able to pay liabilities which are due in 30 days? 
A. Income statement
B. Balance sheet
C. Statement of retained earnings
D. Statement of cash flows

 

2. Which of the following is an objective of the external audit of a company’s financial statements? 
A. To provide a forecast of the company’s future earnings.
B. To assure no fraud has been committed by the company’s management.
C. To provide credibility and assurance that the financial statement information conforms with generally accepted accounting principles in all material respects.
D. To detect all accounting errors made by the accounting system and employees.

 

3. Huron has provided the following year-end balances: 
· Cash, $25,000
· Patents, $7,900
· Accounts receivable, $9,300
· Property, plant, and equipment, $98,700
· Prepaid insurance, $3,600
· Accumulated depreciation, $10,000
· Inventory, $37,000
· Trademarks, $12,600
How much are Huron’s current assets? 
A. $85,900.
B. $71,300.
C. $74,900.    
D. $102,100.

 

4. Which group requires CPAs to follow a professional code of ethics and standards? 
A. American Institute of Certified Public Accountants 
B. Internal Revenue Service
C. Securities & Exchange Commission
D. Local taxing agency

 

5.  Match each career with the related definition by entering the appropriate letter in the space provided.      

                Careers                                                                                                                Definitions

_ ___(1) financial analyst            a.  Chief executive officer who has primary responsibility for the financial information presented in the financial statements.

_____(2) Independent auditor     b.  Advisor who analyzes financial and other economic information to form forecasts and stock recommendations.

_____(3) CEO                            c.  CPA who examines financial statements and attests to their fairness.

_____(4) Tax practitioner            d.  Individual who provides tax planning and tax services.

 

6. Phipps Company borrowed $25,000 cash on October 1, 2010, and signed a six-month, 8% interest-bearing note payable with interest payable at maturity. Assuming that no adjusting entries have been made during the year, what is the amount of accrued interest payable to be reported on the December 31, 2010 balance sheet?                                                                                                   

_____________

 

7. On January 1, 2011 Miller Corporation had retained earnings of $18,000. During 2010, Miller reported net income of $25,000, declared and paid dividends of $20,000, and issued stock for $10,000. What were Miller’s retained earnings on December 31, 2011?                                      

_____________

 

8. A corporation has $80,000 in total assets, $36,000 in total liabilities, and a $10,000 credit balance in retained earnings. What is the balance in the contributed capital account? 

____________

 

9. During 2010, Sigma Company earned service revenues amounting to $900,000, of which $700,000 was collected in cash; the balance will be collected in January 2011. What amount should the 2010 income statement report for service revenues?                                                                         

_______________

 

10. A company receives a $55,000 cash deposit from a customer on December 15 but will not deliver the goods until January 20.  What month will revenue be recorded?                       

_______

 

11. On January 1, 2011, the general ledger of Global Corporation included supplies inventory of $2,000. During 2011, supplies purchases amounted to $6,000. A physical count of inventory on hand at December 31, 2011 determined that the supplies inventory was $1,300. How much is the 2011 supplies expense?                                                                                                            

_______

 

12. A company reported the following information for its most recent year of operation: purchases, $300,000; beginning inventory, $20,000; and cost of goods sold, $10,000. How much was the company’s ending inventory?                                                                                   

__________

 

13. Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:

Date                      Transaction                         Number of Units              Cost per Unit

1/1                         Beginning inventory                       100                           $800

5/5                         Purchase                                             200                           $900

8/10                       Purchase                                             300                         $1,000

10/15                     Purchase                                             200                         $1,050  

During the year, 150 laptop computers were sold.                           

What was cost of goods sold using the FIFO cost flow assumption? _________

 

14. Lauer Corporation uses the periodic inventory system and has provided the following information about one of their laptop computers:

Date                      Transaction                         Number of Units              Cost per Unit

1/1                         Beginning inventory                       100                           $800

5/5                         Purchase                                             200                           $900

8/10                       Purchase                                             300                         $1,000

10/15                     Purchase                                             200                         $1,050  

During the year, 150 laptop computers were sold.                             

What was cost of goods sold using the LIFO cost flow assumption? _____

 

15. On January 1, 2010, Woodstock, Inc. purchased a machine costing $40,000. Woodstock also paid $2,000 for transportation and installation. The expected useful life of the machine is 9 years and the residual value is $6,000. How much is the annual depreciation expense assuming use of the straight-line depreciation method?                                                                                            

__________

 

16. A company purchased an oil well for $50,000. It is estimated that 100,000 barrels can be extracted from the well. What is the depletion expense assuming 30,000 barrels are extracted and sold?                                                                                                                                                 

________

 

17. The following data were provided by the detailed payroll records of Mountain Corporation for the month of March 2011:    

Wages                                                                  $35,000

Income Taxes Withheld                                                    7,350

Union dues                                                                175

FICA taxes at a 7.65% rate (no employee has reached the maximum)

Requirements:

a) Prepare the journal entry to record the payroll and the related employee deductions. 

b) Prepare the journal entry to record the employers FICA payroll tax expense.

 

18.   For each of the transactions listed below, indicate whether it is an operating (O), investing (I) or financing (F) activity on the statement of cash flows. Also, indicate if the transaction increases (+) or decreases (-) cash.  

 

Transaction

Type of Activity

Effect on Cash

A)

Sold stock for cash

 

 

B)

Collected cash from customers on account

 

 

C)

Purchased equipment

 

 

D)

Paid operating expenses

 

 

E)

Repaid the bank loan

 

 

F)

Paid dividends to stockholders

 

 

 

19.   Record the following transactions indicating the account affected and whether the account increased (+) or decreased (-)                                                                              

 

Transaction

Assets

Liabilities

Stockholders’ Equity

A)

Paid accounts payable of $15,000

 

 

 

B)

Purchased $1,000 of supplies on account

 

 

 

C)

 

Borrowed $20,000 cash from the bank

 

 

 

D)

 

Purchased equipment for $18,000 and paid cash

 

 

 

E)

Sold stock and received $50,000 cash

 

 

 

F)

 

Earned $90,000 of revenue on account

 

 

 

G)

 

Collected $70,000 accounts receivable

 

 

 

H)

Paid dividends of $13,000

 

 

 

 

I)

Paid operating expenses of $12,000

 

 

 

 

J)

Depreciation expense for the year, $23,000

 

 

 

K)

Accrued year end wages of $4,000

 

 

 

 

L)

Received cash for services provided, $75,000

 

 

 

M)

Paid $12,000 for a  2 year insurance policy

 

 

 

N)

Insurance expired for the year $6,000

 

 

 

O)

Accrued interest expense on note, $1,000

 

 

 

 

 20 .         Letter       Account Title                           Letter            Account Title

                 A            Cash                                          G             Notes payable

                 B            Accounts receivable                     H             Contributed capital

                 C            Supplies                                     I               Retained earning

                 D            Prepaid Insurance                        J              Revenue

                 E             Equipment                                  K             Operating expenses

                 F             Accounts payable

 

During 2010, the company completed the transactions given below. Indicate the appropriate journal entry for each transaction by giving the account letter and amount.    

 

Transaction

Letter

Debit

Letter

Credit

1)

Paid $500 in operating expenses

 

500

 

500

2)

Paid $12,000 for a two year insurance policy

 

12,000

 

12,000

3)

Purchased equipment for $40,000.  Paid $10,000 cash and signed a $30,000 note

 

40,000

 

10,000

30,000

4)

Issued capital stock and received $8,000 cash

 

8,000

 

8,000

5)

Received cash for services provided $7,500

 

7,500

 

7,500

6)

Received $2,100 on accounts receivable

 

2,100

 

2,100

7)

Insurance expired for the year, $23,000

 

23,000

 

23,000

8)

Accrued year end expenses  of $4,000

 

4,000

 

4,000

9)

Paid accounts payable of $1,2,00

 

1,200

 

1,200

10)

Earned $9,000 of revenue on account

 

9,000

 

9,000

11)

Paid dividends to stockholders, $3,000

 

3,000

 

3,000

 

21. National Shops, Inc. reported the following amounts on its balance sheet as of December 31, 2010: 

Inventory                         $325,000

Notes payable                    100,000

Cash                                 150,000

Contributed capital             250,000

Equipment                         700,000

Accumulated depreciation     600,000

Accounts receivable              30,000
Accounts payable                 45,000

Retained earnings                             210,000

 

Requirements:                                                                                                 

1. What is the amount of National’s total assets?        _______

2. What is the amount of National’s total liabilities?      _____

3. What is the amount of National’s stockholders’ equity    ____ 

 

22. For each of the accounts listed below, indicate whether the normal balance is a    debit (DR) or credit (CR)                                                                              

 ______ Inventory                                  ______ Prepaid insurance

______ Notes payable                            ______ Accounts payable

______ Retained earnings                      ______ Cost of Goods Sold

______ Equipment                                ______ Cash

______ Accounts receivable                   ______ Wage Expense

_____  Revenue                                     _____  Contributed capital

 

23.  Indicate whether the following items would be added (+) or subtracted (-) from the company’s books or the bank statement during the preparation of a bank reconciliation.                          

 

Reconciling item

Company’s Books

Bank Statement

Outstanding checks

 

 

 

Bank service charge

 

 

 

Interest earned on the account

 

 

 

Deposits in transit

 

 

 

A check written for $59 but was incorrectly recorded in the check register for $95

 

 

 

 

24. The following data were taken from the records of Lilo Corporation for the year ended December 31, 2010:                

Sales                                  900,000              

Sales returns and allowances     10,000

Selling and administrative expenses     170,000

Cost of goods sold               510,000

The income tax rate is 35%.

Based on the above data, prepare a multiple-step income statement using good form.  Include gross profit and pretax income.  Use the form below.   

 

25. For each of the accounts listed below, indicate whether they would be classified as an

 ASSET (A) , LIABILITY (L), STOCKHOLDERS EQUITY (SE), REVENUE (R), EXPENSE (E)                                                                                                          

 _____ Inventory                                   ______ Prepaid insurance

______ Notes payable                            ______Accounts payable

______ Retained earnings                       ______Cost of Goods Sold

______ Equipment                                  ______Cash

______ Accounts receivable                     ______ Wage Expense

_____Revenue                                               

 

26. For each of the accounts listed below, indicate which financial statement they would be included on Balance Sheet (BS) or Income Statement (IS)                         

______ Inventory                                     ______ Prepaid insurance

______ Notes payable                               ______Accounts payable

______ Retained earnings                          ______Cost of Goods Sold

______ Equipment                                     ______Cash

______ Accounts receivable                      ______ Wage Expense

______Revenue                                        ______Contributed capital

  

27.  Compute the missing amounts for each independent case.                                

 

 

Total

Revenues

Total

Expenses

Net Income

(Loss)

Total

Assets

Total

Liabilities

Stockholders’

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28.  Compute the missing amounts for each independent case.                                

 

Sales

Revenue

Beginning

Inventory

Purchases

Total

Available

Ending

Inventory

Cost of

Goods Sold

Gross

Profit