An advantage of the corporate form of business is _____. (Points : 5) it is simple to establish

(TCO A) An advantage of the corporate form of business is _____. (Points : 5) it is simple to establish
the corporate tax rate is less than the personal tax rate
corporations must pay dividends
the shareholders are not responsible for the corporation’s debts

Question 2. 2. (TCO A) Which one of the following statements is correct with regard to dividends? (Points : 5)

Dividends are increased by credits.
Dividends are subtracted on the income statement.
Common stock dividends are required to be paid.
Dividends reduce stockholders’ equity.

Question 3. 3. (TCOs A and B) Below is a partial list of account balances for LBJ Company.

Cash	$30, 000
Prepaid rent	1,000
Accounts receivable	5,500
Accounts payable	3,800
Notes payable	4,200
Common stock	14,000
Dividends	1,700
Revenues	25,000
Expenses	15,500

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

$47,000
$100,700
$48,700
$64,200

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) Two different companies utilize a different inventory costing method. If the price of goods has decreased during the period, then the company using _____. (Points : 5)

LIFO will have the highest cost of goods sold
average cost will have the highest cost of goods sold
FIFO will have the highest ending inventory
LIFO will have the highest ending inventory

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) A company has Preferred stock, 8%, $10 par, 30,000 shares authorized and issued. The balance in the Preferred Stock account is $300,000. This means that: (Points : 5)

Preferred stockholders receive dividends before the common stockholders.
Dividends on preferred stock are always paid even if the board of directors does not declare the dividend.
Preferred stock provides voting rights.
All corporations issue preferred stock.

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) Creditors are usually most concerned with analyzing _____. (Points : 5)

the company stock price
turnover
liquidity
profitability

Question 13. 13. (TCO F) Shareholders are usually most interested in evaluating _____. (Points : 5)

profitability
leverage
turnover
the ability to pay debts as they come due

Question 14. 14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)

multiply the stated rate times the bond’s 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

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