Ch 12
Monday, December 7, 2009
1. Having significant influence over another company is presumed if the investor owns at least 50 percent but less than 100 percent of the outstanding voting shares of the company.
A) True
B) False
2. Which of the following is TRUE about the classification of investments in the equity securities of other companies?
A) Significant influence exists when ownership is 20 to 50 percent of the voting stock.
B) Passive investments exist when ownership is less than 20 percent of the voting stock.
C) Control over the other company exists when ownership of the voting stock exceeds 50 percent.
D) All of the above are true.
3. If you own less than 20% of another company’s outstanding stock, what kind of investment is this?
- Passive
- Significant influence
- Control
- None of the above
4. If you own greater than 50% of a company’s outstanding stock, what kind of investment is this?
a.Passive
b.Significant influence
c.Control
d.None of the above
5. Which of the following groups of accounts, with normal balances, would appear in the credit column of an unadjusted trial balance?
A) Accounts Payable, Unearned Revenues, Cost of Sales, and Investment Income.
B) Unearned Revenues, Accumulated Depreciation, and Prepaid Expenses.
C) Accounts Payable, Unearned Revenues, and Accumulated Depreciation.
D) Contributed Capital, Retained Earnings, and Cost of Sales.
6. A deferred expense would be shown on the balance sheet as:
A) A receivable
B) A payable
C) A prepaid expense
D) An unearned expense
7. An accrued revenue would be shown on the balance sheet as:
A) A receivable C) A prepaid revenue
B) A payable D) Unearned revenue
8. Olivehurst Incorporated has made three quarterly prepaid income tax payments of $4,500 each. On December 31, it is determined that the income tax for the year is $15,000. What is the correct journal entry to adjust the Income Tax Expense account?
A) Income Tax Expense, debit, $1,500; Cash, credit, $1,500
B) Income Taxes Payable, debit, $1,500; Income Tax Expense, credit $1,500
C) Income Taxes Receivable, debit, $1,500; Income Tax Expense, credit , $1,500
D) Income Tax Expense, debit, $1,500; Income Taxes Payable, credit, $1,500
9. If the accountant forgets to adjust the Prepaid Expenses account, there will be
A) an understatement of net income.
B) an overstatement of net income.
C) an overstatement of expense.
D) no under- or overstatement of net income.
10. Which is the normal sequence in preparing the financial statements?
A) income statement, balance sheet, statement of stockholders' equity, and statement of cash flows
B) balance sheet, income statement, statement of cash flows, and statement of stockholders' equity
C) income statement, statement of stockholders' equity, balance sheet, and statement of cash flows
D) income statement, balance sheet, statement of cash flows, and statement of stockholders' equity.