Accounting 26 question multiple choice

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1) Kline Company failed to record depreciation of equipment. How does this omission affect

Kline's financial statements?

A.Net income is understated and assets are overstated.

B.Net income is overstated and assets are understated.

C.Net income is understated and assets are understated.

D.Net income is overstated and assets are overstated.

2) Acton, Inc., uses the double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first year?

A. Estimated residual value

B. Expected useful life in years

C. Original cost

D. All the items listed are needed.

3) Which of the following costs are reported on a company's income statement and balance sheet?

Income Statement Balance Sheet

A. Cost of Goods sold Accumulated depreciation

B. Accumulated depreciation Land

C. Goodwill Accounts payable

D. Gain on sale of land Cost of goods sold

4) Hamilton Company purchased a machine for $ 11,800 on January 1, 2016.

The machine has been depreciated using the straight-line method over a four-year

life with a $ 1,600 residual value. Hamilton sold the machine on January 1, 2018,

for $ 8,000. What is straight-line depreciation for the year ended December 31, 2016, and what is the book value on December 31, 2017?

What is straight-line depreciation for the year ended December 31, 2016?

The depreciation is $____________

What is the book value on December 31, 2017?

The book value is $_____________

5) Harper, Inc., was reviewing its assets for impairment at the end of the current year. Information about one of its assets is as follows:

	Net book value . . . . . . . . . . . . . . . .	$900,000
	Estimated future cash flows . . . . . .	$670,000
	Fair (market) value . . . . . . . . . . . . .	$645,000

Harper should report an impairment loss for the current year of

A. $ 0

B. $ 230,000

C. $ 25,000

D. $ 255,000

6) Failure to accrue interest expense results in

A. an overstatement of net income and an understatement of liabilities.

B. an overstatement of net income and an overstatement of liabilities.

C. an understatement of net income and an overstatement of liabilities.

D. an understatement of net income and an understatement of liabilities.

7) An end-of-period adjusting entry that debits Unearned Revenue most likely will credit

A. an asset.

B. a liability.

C. a revenue.

D. an expense.

8) Myron, Inc., manufactures and sells computer monitors with a three-year warranty. Warranty costs are expected to average 7% of sales during the warranty period. The following table shows the sales and actual warranty payments during the first two years of operations:

Year	Sales	Warranty Payments
2016	$500,000	$4,500
2017	800,000	40,000

Based on these facts, what amount of warranty liability should Myron, Inc., report on its balance sheet at December 31, 2017?

A.$ 46,500

B.$ 91,000

C.$ 40,000

D.$ 44,500

9) Bond carrying value equals Bonds Payable

A. minus Premium on Bonds Payable.

B. plus Discount on Bonds Payable.

C. minus Discount on Bonds Payable.

D. plus Premium on Bonds Payable.

E. both a and b.

F. both c and d.

10) Par value

A. may exist for common stock but not for preferred stock.

B. is an arbitrary amount that establishes the legal capital for each share.

C. represents the original selling price for a share of stock.

D. is established for a share of stock after it is issued.

E. represents what a share of stock is worth.

11) The paid-in capital portion of stockholders' equity does not include

A. Paid-in Capital in Excess of Par Value.

B. Common Stock.

C. Retained Earnings.

D. Preferred Stock.

E. both c and d.

12) Preferred stock is least likely to have which of the following characteristics?

A. The right of the holder to convert to common stock

B. Preference as to dividends

C. Preference as to voting

D. Preference as to assets on liquidation of the corporation

13) Which of the following classifications represents the most shares of common stock?

A. Issued shares

B. Outstanding shares

C. Treasury shares

D. Unissued shares

E. Authorized shares

14) A company paid $ 28per share to purchase 900 shares of its common stock as treasury stock. The stock was originally issued at $ 12 per share. Which of the following is the journal entry to record the purchase of the treasury stock?

Treasury Stock	25,200
Cash		25,200

Treasury Stock	10,800
Retained Earnings	14,400
Cash		25,200

Common Stock	25,200
Cash		25,200

Treasury Stock	10,800
Paid – In Capital in Excess of Par	14,400
Cash		25,200

15) A company declares a 5% stock dividend. The debit to Retained Earnings is an amount equal to

A. the market value of the shares to be issued.

B. the excess of the market price over the original issue price of the shares to be issued.

C. the par value of the shares to be issued.

D. the book value of the shares to be issued.

16) Which of the following statements is not true about a 3-for-1 stock split?

A. Par value is reduced to one-third of what it was before the split.

B. Retained Earnings remains the same.

C. Total stockholders' equity increases.

D. The market price of each share of stock will decrease.

E. A stockholder with 10 shares before the split owns 30 shares after the split.

17) Selling equipment for cash is reported on the statement of cash flows under

A. operating activities.

B. noncash investing and financing activities.

C. investing activities.

D. financing activities.

18) Which of the following terms appears on a statement of cash flows - indirect method?

A. Depreciation expense

B. Collections from customers

C. Cash receipt of interest revenue

D. Payments to suppliers

19) On an indirect method statement of cash flows, an increase in accounts payable would be

A. reported in the financing activities section.

B. added to net income in the operating activities section.

C. deducted from net income in the operating activities section.

D. reported in the investing activities section.

20) On an indirect method statement of cash flows, a gain on the sale of plant assets would be

A. reported in the investing activities section.

B. deducted from net income in the operating activities section.

C. ignored, since the gain did not generate any cash.

D. added to net income in the operating activities section.

21) The Miami Medical Corporation financial statements follow:

Miami Medical Corporation
Consolidated Statements of Financial Position
	December 31,
(In Millions)	2016	2015
Assets:
Current assets
Cash and cash equivalents	$4,369	$4,206
Short-term investments	850	523
Accounts and notes receivable	3,404	2,402
Inventories, at cost	433	404
Prepaid expense and other current assets	1,602	1,221
Total current assets	10,658	8,756
Property and equipment, net	1,545	938
Investments	6,681	5,328
Other non-current assets	302	122
Total assets	$19,186	$15,144
Liabilities and stockholder's equity:
Current liabilities
Accounts payable	$7,702	$6,000
Accrued and other liabilities	3,695	3,099
Total current liabilities	11,397	9,099
Long-term debt	306	307
Other non-current liabilities	1,701	1,175
Total liabilities	13,404	10,581
Stockholders’ equity
Preferred stock and capital in excess of $0.02 par value;
shares issued and outstanding: none	-	-
Common stock and capital in excess of $0.05 par value;
shares authorized: 6,000; shares issued: 1,402 and
1,146, respectively	7,807	7,007
Treasury stock, at cost; 180 and 124 shares, respectively	(6,200)	(4,403)
Retained earnings	4,304	2,036
Other comprehensive loss	(91)	(29)
Other	(38)	(48)
Total stockholders’ equity	5,782	4,563
Total liabilities and stockholders’ equity	$19,186	$15,144

Miami Medical Corporation
Consolidated Statements of Income
	Year ended December 31,
(In Millions, Except per Share Amounts)	2016	2015	2014
Net revenue	$42,041	$35,304	$31,191
Cost of goods sold	35,164	29,111	26,061
Gross profit	6,877	6,193	5,130
Operating expenses:
Selling, general, and administrative	3,748	3,350	2,689
Research, development, and engineering	584	558	529
Special charges	-	-	500
Total operating expenses	4,332	3,908	3,718
Operating income	2,545	2,285	1,412
Investment and other income (loss), net	185	197	(78)
Income before income taxes	2,730	2,482	1,334
Income tax expense	1,137	950	473
Net income	$1,593	$1,532	$861
Earnings per common share:
Basic	$1.42	$0.90	$0.37

During 2016, Miami Medical's total assets

A. increased by 26.7%.

B. increased by $ 1,902 million.

C. Both a and b.

D. increased by 21.1%.

22) The Miami Medical Corporation financial statements follow:

Miami Medical Corporation
Consolidated Statements of Financial Position
	December 31,
(In Millions)	2016	2015
Assets:
Current assets
Cash and cash equivalents	$4,369	$4,206
Short-term investments	850	523
Accounts and notes receivable	3,404	2,402
Inventories, at cost	433	404
Prepaid expense and other current assets	1,602	1,221
Total current assets	10,658	8,756
Property and equipment, net	1,545	938
Investments	6,681	5,328
Other non-current assets	302	122
Total assets	$19,186	$15,144
Liabilities and stockholder's equity:
Current liabilities
Accounts payable	$7,702	$6,000
Accrued and other liabilities	3,695	3,099
Total current liabilities	11,397	9,099
Long-term debt	306	307
Other non-current liabilities	1,701	1,175
Total liabilities	13,404	10,581
Stockholders’ equity
Preferred stock and capital in excess of $0.02 par value;
shares issued and outstanding: none	-	-
Common stock and capital in excess of $0.05 par value;
shares authorized: 6,000; shares issued: 1,402 and
1,146, respectively	7,807	7,007
Treasury stock, at cost; 180 and 124 shares, respectively	(6,200)	(4,403)
Retained earnings	4,304	2,036
Other comprehensive loss	(91)	(29)
Other	(38)	(48)
Total stockholders’ equity	5,782	4,563
Total liabilities and stockholders’ equity	$19,186	$15,144

Miami Medical Corporation
Consolidated Statements of Income
	Year ended December 31,
(In Millions, Except per Share Amounts)	2016	2015	2014
Net revenue	$42,041	$35,304	$31,191
Cost of goods sold	35,164	29,111	26,061
Gross profit	6,877	6,193	5,130
Operating expenses:
Selling, general, and administrative	3,748	3,350	2,689
Research, development, and engineering	584	558	529
Special charges	-	-	500
Total operating expenses	4,332	3,908	3,718
Operating income	2,545	2,285	1,412
Investment and other income (loss), net	185	197	(78)
Income before income taxes	2,730	2,482	1,334
Income tax expense	1,137	950	473
Net income	$1,593	$1,532	$861
Earnings per common share:
Basic	$1.42	$0.90	$0.37

Miami Medical's current ratio at year-end 2016 is closest to

A. 1.2.

B. 0.94.

C. 0.739.

D. 21.1.

23) The Miami Medical Corporation financial statements follow:

Miami Medical Corporation
Consolidated Statements of Financial Position
	December 31,
(In Millions)	2016	2015
Assets:
Current assets
Cash and cash equivalents	$4,369	$4,206
Short-term investments	850	523
Accounts and notes receivable	3,404	2,402
Inventories, at cost	433	404
Prepaid expense and other current assets	1,602	1,221
Total current assets	10,658	8,756
Property and equipment, net	1,545	938
Investments	6,681	5,328
Other non-current assets	302	122
Total assets	$19,186	$15,144
Liabilities and stockholder's equity:
Current liabilities
Accounts payable	$7,702	$6,000
Accrued and other liabilities	3,695	3,099
Total current liabilities	11,397	9,099
Long-term debt	306	307
Other non-current liabilities	1,701	1,175
Total liabilities	13,404	10,581
Stockholders’ equity
Preferred stock and capital in excess of $0.02 par value;
shares issued and outstanding: none	-	-
Common stock and capital in excess of $0.05 par value;
shares authorized: 6,000; shares issued: 1,402 and
1,146, respectively	7,807	7,007
Treasury stock, at cost; 180 and 124 shares, respectively	(6,200)	(4,403)
Retained earnings	4,304	2,036
Other comprehensive loss	(91)	(29)
Other	(38)	(48)
Total stockholders’ equity	5,782	4,563
Total liabilities and stockholders’ equity	$19,186	$15,144

Miami Medical Corporation
Consolidated Statements of Income
	Year ended December 31,
(In Millions, Except per Share Amounts)	2016	2015	2014
Net revenue	$42,041	$35,304	$31,191
Cost of goods sold	35,164	29,111	26,061
Gross profit	6,877	6,193	5,130
Operating expenses:
Selling, general, and administrative	3,748	3,350	2,689
Research, development, and engineering	584	558	529
Special charges	-	-	500
Total operating expenses	4,332	3,908	3,718
Operating income	2,545	2,285	1,412
Investment and other income (loss), net	185	197	(78)
Income before income taxes	2,730	2,482	1,334
Income tax expense	1,137	950	473
Net income	$1,593	$1,532	$861
Earnings per common share:
Basic	$1.42	$0.90	$0.37

Miami Medical's quick (acid-test) ratio at year-end 2016 is closest to

A. 0.46.

B. $ 8,623 million.

C. 0.76.

D. 0.68

24) The Miami Medical Corporation financial statements follow:

Miami Medical Corporation
Consolidated Statements of Financial Position
	December 31,
(In Millions)	2016	2015
Assets:
Current assets
Cash and cash equivalents	$4,369	$4,206
Short-term investments	850	523
Accounts and notes receivable	3,404	2,402
Inventories, at cost	433	404
Prepaid expense and other current assets	1,602	1,221
Total current assets	10,658	8,756
Property and equipment, net	1,545	938
Investments	6,681	5,328
Other non-current assets	302	122
Total assets	$19,186	$15,144
Liabilities and stockholder's equity:
Current liabilities
Accounts payable	$7,702	$6,000
Accrued and other liabilities	3,695	3,099
Total current liabilities	11,397	9,099
Long-term debt	306	307
Other non-current liabilities	1,701	1,175
Total liabilities	13,404	10,581
Stockholders’ equity
Preferred stock and capital in excess of $0.02 par value;
shares issued and outstanding: none	-	-
Common stock and capital in excess of $0.05 par value;
shares authorized: 6,000; shares issued: 1,402 and
1,146, respectively	7,807	7,007
Treasury stock, at cost; 180 and 124 shares, respectively	(6,200)	(4,403)
Retained earnings	4,304	2,036
Other comprehensive loss	(91)	(29)
Other	(38)	(48)
Total stockholders’ equity	5,782	4,563
Total liabilities and stockholders’ equity	$19,186	$15,144

Miami Medical Corporation
Consolidated Statements of Income
	Year ended December 31,
(In Millions, Except per Share Amounts)	2016	2015	2014
Net revenue	$42,041	$35,304	$31,191
Cost of goods sold	35,164	29,111	26,061
Gross profit	6,877	6,193	5,130
Operating expenses:
Selling, general, and administrative	3,748	3,350	2,689
Research, development, and engineering	584	558	529
Special charges	-	-	500
Total operating expenses	4,332	3,908	3,718
Operating income	2,545	2,285	1,412
Investment and other income (loss), net	185	197	(78)
Income before income taxes	2,730	2,482	1,334
Income tax expense	1,137	950	473
Net income	$1,593	$1,532	$861
Earnings per common share:
Basic	$1.42	$0.90	$0.37

What is the largest single item included in Miami Medical's debt ratio at December 31, 2016?

A. Accounts payable

B. Cash and cash equivalents

C. Common stock

D. Investments

25) The Miami Medical Corporation financial statements follow:

Miami Medical Corporation
Consolidated Statements of Financial Position
	December 31,
(In Millions)	2016	2015
Assets:
Current assets
Cash and cash equivalents	$4,369	$4,206
Short-term investments	850	523
Accounts and notes receivable	3,404	2,402
Inventories, at cost	433	404
Prepaid expense and other current assets	1,602	1,221
Total current assets	10,658	8,756
Property and equipment, net	1,545	938
Investments	6,681	5,328
Other non-current assets	302	122
Total assets	$19,186	$15,144
Liabilities and stockholder's equity:
Current liabilities
Accounts payable	$7,702	$6,000
Accrued and other liabilities	3,695	3,099
Total current liabilities	11,397	9,099
Long-term debt	306	307
Other non-current liabilities	1,701	1,175
Total liabilities	13,404	10,581
Stockholders’ equity
Preferred stock and capital in excess of $0.02 par value;
shares issued and outstanding: none	-	-
Common stock and capital in excess of $0.05 par value;
shares authorized: 6,000; shares issued: 1,402 and
1,146, respectively	7,807	7,007
Treasury stock, at cost; 180 and 124 shares, respectively	(6,200)	(4,403)
Retained earnings	4,304	2,036
Other comprehensive loss	(91)	(29)
Other	(38)	(48)
Total stockholders’ equity	5,782	4,563
Total liabilities and stockholders’ equity	$19,186	$15,144

Miami Medical Corporation
Consolidated Statements of Income
	Year ended December 31,
(In Millions, Except per Share Amounts)	2016	2015	2014
Net revenue	$42,041	$35,304	$31,191
Cost of goods sold	35,164	29,111	26,061
Gross profit	6,877	6,193	5,130
Operating expenses:
Selling, general, and administrative	3,748	3,350	2,689
Research, development, and engineering	584	558	529
Special charges	-	-	500
Total operating expenses	4,332	3,908	3,718
Operating income	2,545	2,285	1,412
Investment and other income (loss), net	185	197	(78)
Income before income taxes	2,730	2,482	1,334
Income tax expense	1,137	950	473
Net income	$1,593	$1,532	$861
Earnings per common share:
Basic	$1.42	$0.90	$0.37

Using the earliest year available as the base year, the trend percentage for Miami Medical's

net revenue during 2016 was

A. 135%.

B. up by $ 10,850 million.

C. 119%.

D. up by 19.1%.

26) The Miami Medical Corporation financial statements follow:

Miami Medical Corporation
Consolidated Statements of Financial Position
	December 31,
(In Millions)	2016	2015
Assets:
Current assets
Cash and cash equivalents	$4,369	$4,206
Short-term investments	850	523
Accounts and notes receivable	3,404	2,402
Inventories, at cost	433	404
Prepaid expense and other current assets	1,602	1,221
Total current assets	10,658	8,756
Property and equipment, net	1,545	938
Investments	6,681	5,328
Other non-current assets	302	122
Total assets	$19,186	$15,144
Liabilities and stockholder's equity:
Current liabilities
Accounts payable	$7,702	$6,000
Accrued and other liabilities	3,695	3,099
Total current liabilities	11,397	9,099
Long-term debt	306	307
Other non-current liabilities	1,701	1,175
Total liabilities	13,404	10,581
Stockholders’ equity
Preferred stock and capital in excess of $0.02 par value;
shares issued and outstanding: none	-	-
Common stock and capital in excess of $0.05 par value;
shares authorized: 6,000; shares issued: 1,402 and
1,146, respectively	7,807	7,007
Treasury stock, at cost; 180 and 124 shares, respectively	(6,200)	(4,403)
Retained earnings	4,304	2,036
Other comprehensive loss	(91)	(29)
Other	(38)	(48)
Total stockholders’ equity	5,782	4,563
Total liabilities and stockholders’ equity	$19,186	$15,144

Miami Medical Corporation
Consolidated Statements of Income
	Year ended December 31,
(In Millions, Except per Share Amounts)	2016	2015	2014
Net revenue	$42,041	$35,304	$31,191
Cost of goods sold	35,164	29,111	26,061
Gross profit	6,877	6,193	5,130
Operating expenses:
Selling, general, and administrative	3,748	3,350	2,689
Research, development, and engineering	584	558	529
Special charges	-	-	500
Total operating expenses	4,332	3,908	3,718
Operating income	2,545	2,285	1,412
Investment and other income (loss), net	185	197	(78)
Income before income taxes	2,730	2,482	1,334
Income tax expense	1,137	950	473
Net income	$1,593	$1,532	$861
Earnings per common share:
Basic	$1.42	$0.90	$0.37

Miami Medical's common-size income statement for 2016 would report cost of goods sold as

A. 134.9%.

B. $35,164 million.

C. 83.6%.

D. Up by 20.8%.