Account: Generally Accepted Accounting Principles and Long Term Liabilities

Chapter 12 :
1. As part of the initial investment, a partner contributes office equipment that had cost $20,000 and on which accumulated depreciation of $ 12500 had been recorded. If the partners agree on a valuation of $ 9000 for the equipment, what amount should be debited to the office equipment account?

a). 7500
c). 12500
b). 9000
d). 20000

2. Chip and Dale agree to form a partnership. Chip is to contribute $50000 in assets and to devote one-half time to the partnership. Dale is to contribute 20000 and to devote full time to the partnership. How will Chip and Dale share in the division of net income or net loss?

a). 5:2
b). 1:1
c). 1:2
d). 2. 5:1

3. Tracey and Hepburn invest 100,000 and 50,000, respectively, in a partnership and agree to a division of net income that provides for an allowance of interest at 10 % on original investments, salary allowances of 12,000, and 24000, respectively, with the remainder, divided equally. What would be Tracey’s share of a net income o 45,000?

a). 22500
b). 19,000
c). 22000
d). 10000

4. Lee and Stills are partners who share income in the ratio of 2:1 and who have capital balances of 65,000 and 35,000, respectively. If Morr, with the consent of Stills, acquired one half of lee’s interest for 40,000 for what amount would Morr’s capital account be credited?

a). 32500
b). 50,000
c). 40000
d). 72,500

5. Pavin and Abdel share gains and losses in the ratio of 2:1. After selling all assets for cash, dividing the losses on realization, and paying liabilities, the balances in the capital accounts were as follows: Pavin, 10000 Cr, Abdel, 2000 Cr. How much of the cash of 12000 would be distributed to Pavin?

a). 2000
b). 10000
c). 8000
d). 12000 chapter 13: 1

Chapter 13
1. Which of the following is a disadvantage of the corporate form of organization?

a). limited liability
b). continuous life
c) owner is separate from management
d). ability to raise capital

2. Paid in the capital for a corporation may arise from which of the following sources?

a). issuing preferred stock
b).issuing common stock
c). selling the corporation’s treasury stock
d). all of the above

3. The stockholder’s equity section of the balance sheet may include:

a). common stock
b). stock dividends distributable
c). preferred stock
d). all of the above

4. If a corporation reacquires its own stock, the stock is listed on the balance sheet in the:

a). current assets section
b). long term liabilities section
c). stockholders’ equity section
d). investments section

5. A corporation has issued 25000, shares of 100 par common stock and holds 3000 of these shares as a treasury of stock. If the corporation declares a 2 per share cash dividend, what amount will be recorded as cash dividends?

a). 22000
c).44000
b). 25000
d). 50000

Chapter 15:
1.  If a corpo. Plans to issue 1,000,000 of 12 % bonds of a time when the market rate for similar bonds is 10 % the bonds can be expected to sell at:

a). their face amount
b). a premium a discount
d). a price below their face amount

2. if the bonds payable account has a balance of 900,000 and the discount on bonds payable account has a balance of 72000, what is the carrying amount of the bonds?

a). 828,000
b). 900,000
c). 972,000
d). 580,000

3. The cash and securities that make up the sinking fund established for the payment of bonds at maturity are classified on the balance sheet as:

a). current assets
b). investments
c). long term liabilities
d). current liabilities

4). If a firm purchase 150,000 of bonds of x company at 101 plus accrued interests of 2000 and pays brokers commissions of 50, the amount debited to investment in x company bonds would be:

a). 150,000
b). 151,550
c). 153,500
d). 153,550

5. The balance in the discount on bonds payable account would usually be reported in the balance sheet in the:

a). current assets section
b). current liabilities section
c). the long term liabilities section
d). investments section

Chapter 16:
1. An ex of cash flow from an operating activity is:

a). receipt of cash from the sale of stock
b). receipt of cash from the sale of bonds
c). payment of cash for dividends
d). receipt of cash from customers on account

2. An ex of cash flow from an investing activity is:

a). receipt of cash from the sale of equipment
b). receipt of cash from the sale of stock
c). payment of cash for dividends
d). payment of cash to acquire treasury stock

3. An ex of cash flow from a financing activity is:

a). receipt of cash from customers on account
b). receipt of cash from the sale of equipment
c). payment of cash for dividends
d). payment of cash to acquire land

4. Which of the following methods of reporting cash flows from operating activities adjust net income for revenues and expenses not involving the receipt or payment of cash?

a). direct method
b). purchase method
c). reciprocal method
d). indirect method
e). the net income reported on the income statements for the year was 55000 and depreciation of fixed assets for the year was 22000 .

The balances of the current assets and current liability accounts at the beginning and end of the year are shown at the top of the following page?

a). 740

Chapter 17:
1.  What type of analysis is indicated by the following ?

a). vertical analysis
b). horizontal analysis
c). profitability analysis
d). contribution margin analysis

2. Which of the following measures indicates the ability of a firm to pay its current liabilities?

a). working capital
b). current ratio
c). quick ratio
e). all of the above

3. The ratio determined by dividing total current assets by total current liabilities is:

a). current ratio
b). working capital ratio
c). bankers’ ratio
d). all of the above

4. The ratio of the quick assets to current liabilities, which indicates the “ instant” debt-paying ability of a firm, is the:

a). current ratio
b). working capital ratio
c). quick ratio
d). bankers’ ratio

5. A measure useful in evaluating efficiency in the management of inventories is the:

a). working capital ratio
b). quick ratio
c). a number of days’ sales in inventory
d). the ratio of fixed assets to long term liabilities