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Accounting Appendix C 1 The concept that interest causes the value of money received today to be greater than the value of that same amount of money received
1. The concept that interest causes the value of money received today to be greater than the value of that same amount of money received in the future is referred to as the: XOAXOA: Critical Thinking XOAXOA: Reflective Thinking XOAXOA: […]
Accounting Appendix C 2 The more frequent the rate of compounding, the more interest that is earned on previous interest, resulting in a higher future value
45. If you put $200 into a savings account that pays annual compound interest of 8% per year and then withdraw the money two years later, you will earn interest of $32. XOAXOA: Analytic XOAXOA: Measurement XOAXOA: Analysis XOAXOA: Medium […]
Accounting Appendix D 1 The primary difference in accounting for available-for-sale securities and accounting for trading securities is
1. One of the primary reasons for investing in equity securities includes: XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Medium XOAXOA: AppD-01 Explain why companies invest in other companies. 2. One of the primary reasons for investing in […]
Accounting Appendix D 2 Investments are reported at fair value when a company has a significant influence over another company in which it invests
34. Investments are reported at fair value when a company has a significant influence over another company in which it invests. XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Medium XOAXOA: AppD-03 Account for investments in equity securities when the […]
Accounting Appendix E 1 Which of the following characteristics of a country most likely affects the extent of companies’ financial disclosure practices
1. IFRS stands for: XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Easy XOAXOA: AppE-01 Determine the financial statement effects of inventory errors. 2. Which of the following characteristics of a country most likely affects the extent of companies’ […]
Accounting Chapter 1 1 Which of the following groups is not among the external users for whom financial statements are prepared
1. The primary focus for financial accounting information is to provide information useful for: XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 01-01 Describe the two primary functions of financial accounting. 2. What is the primary purpose […]
Accounting Chapter 1 2 Given the information below about Thomas Corporation, what was the amount of dividends the company paid in the current period
51. The equation best describing the balance sheet is: XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Easy XOAXOA: 01-03 Discuss how financial accounting information is communicated through financial statements. 52. DW has an ending Retained Earnings balance of $51,100. […]
Accounting Chapter 1 3 The primary functions of financial accounting are to measure business activities of a company and to communicate
103. Accounting information is used by creditors to decide whether to invest in a company’s stock. XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 01-01 Describe the two primary functions of financial accounting. 104. The primary functions […]
Accounting Chapter 1 4 Describe the three fundamental business activities that accountants measure. What account classifications are typically associated
156. Account classifications include assets, liabilities, stockholders’ equity, dividends, revenues, and expenses. Indicate the account classification for each account name. 1. Stockholders’ equity; 2. Asset; 3. Liability; 4. Revenue; 5. Expense; 6. Asset; 7. Expense; 8. Asset; 9. Liability; 10. […]
Accounting Chapter 1 5 A company reports investing cash flows of -$1,400, financing cash flows of $900, and a change in total cash of $200
XOAXOA: Analytic XOAXOA: Reporting XOAXOA: Analysis XOAXOA: Hard XOAXOA: 01-03 Discuss how financial accounting information is communicated through financial statements. 167. Below is balance sheet information for five independent situations. Calculate the answer to each. 1. A company reports total […]
Accounting Chapter 10 1 When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include
1. Which of the following accounts is not reported in the stockholders’ equity section of the balance sheet? XOAXOA: Reflective Thinking XOAXOA: Measurement XOAXOA: Comprehension: Medium XOAXOA: 10-01 Identify the advantages and disadvantages of the corporate form of ownership. 2. […]
Accounting Chapter 10 2 How does the stockholders’ equity section in the balance sheet differ from the statement of stockholders’ equity
46. On February 22, Brett Corporation reacquired 200 shares of its $5 par value common stock for $25 each. On March 15, the company reissued 70 shares for $30 each. What is true of the journal entry for reissuing their […]
Accounting Chapter 10 3 When we reissue treasury stock, we report the difference between its cost and the cash received as an increase/decrease in additional paid-in capital
96. Treasury stock is a contra-equity account since treasury stock increases total stockholders’ equity. XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Application XOAXOA: Easy XOAXOA: 10-04 Account for treasury stock. 97. When we reissue treasury stock, we report the difference between […]
Accounting Chapter 10 4 Explain why preferred stock often is said to have a mixture of attributes somewhere between common stock and bonds
126. Northwest Clothing Supply has the following transactions during the year related to stockholders’ equity: Record each of these transactions. Answer: XOAXOA: Analytic XOAXOA: Measurement XOAXOA: Analysis XOAXOA: Hard XOAXOA: 10-02 Record the issuance of common stock. XOAXOA: 10-03 Contrast […]
Accounting Chapter 11 1 All classifications on the Balance Sheet have a general relationship with sections identified on the Statement of Cash Flows
1. The Statement of Cash Flows: XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Knowledge XOAXOA: Medium XOAXOA: 11-01 Classify cash transactions as operating; investing; or financing activities. 2. The purchase of land is classified in the statement of cash flows as […]
Accounting Chapter 11 2 Cash received from issuing common stock would be classified in which section of the Statement of Cash Flows
47. During 2012, Smithson Corp. had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What […]
Accounting Chapter 11 3 A gain on the sale of long-term assets is added to net income to arrive at net cash flows from operating activities under the indirect method.
92. A gain on the sale of long-term assets is added to net income to arrive at net cash flows from operating activities under the indirect method. XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 11-02 Prepare the […]
Accounting Chapter 11 4 Nathan Herrmann has completed the basic format to be used in preparing the statement of cash flows (indirect method) for CEO Consultants
132. For each of the following five transactions, indicate by letter whether the cash effect of each transaction is reported in a statement of cash flows as an operating (O), investing (I), financing (F), or noncash (NC) activity. Answer: XOAXOA: […]
Accounting Chapter 11 5 For each of the following ten transactions, indicate by letter whether the cash effect of each transaction is reported in a statement of cash flows as an operating
142. Lowes and Home Depot report the following information in their 2010 annual financial statements ($ in millions): Calculate Lowe’s and Home Depot’s cash return on assets, cash flow to sales ratio, and asset turnover ratio for 2010. Which company […]
Accounting Chapter 12 1 Which of the following is a negative sign that a company is not selling its inventory quickly
1. Which of the following is not a common type of comparison in accounting? XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 12-01 Perform vertical analysis. 2. When using vertical analysis, we express income statement accounts as […]
Accounting Chapter 12 2 We use horizontal analysis to analyze trends in financial statement data, such as the dollar amount of change and the percentage change
46. Stealth Company’s 2013 profit margin is: XOAXOA: Analytic XOAXOA: Measurement XOAXOA: Analysis XOAXOA: Medium XOAXOA: 12-04 Use ratios to analyze a company’s profitability. 47. Stealth Company’s 2013 asset turnover is: A. 3.7 times. B. 2.8 times. C. 2.2 times. […]
Accounting Chapter 12 3 Profit margin measures the income earned on each dollar of sales, and is calculated by dividing net income by net sales.
101. Return on assets is calculated as net income divided by ending total assets. XOAXOA: Reflective Thinking XOAXOA: Measurement XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 12-04 Use ratios to analyze a company’s profitability. 102. Profit margin measures the income earned on […]
Accounting Chapter 12 4 How does earnings persistence relate to the reporting of discontinued operations and extraordinary items
131. United Products began the year with an Inventory balance of $180,000, and had a year- end balance of $200,000. Sales of $800,000 generated a gross profit of $150,000. Calculate the inventory turnover ratio for the year. Answer: XOAXOA: Analytic […]
Accounting Chapter 2 1 Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits
1. Which of the following is not part of measuring external transactions? XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 02-01 Identify the basic steps in measuring external transactions. 2. External events include all of the following […]
Accounting Chapter 2 2 Which of the following accounts would normally have a debit balance and appear in the balance sheet
46. Which of the accounts are decreased on the debit side and increased on the credit side? XOAXOA: Reflective Thinking XOAXOA: Measurement XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 02-03 Assess whether the impact of external transactions results in a debit or […]
Accounting Chapter 2 3 External transactions are transactions the firm conducts with a separate economic entity, such as selling products to a customer
95. Finnish Motors has the following balance sheet accounts: If the company has total liabilities and stockholders’ equity of $290,000, what is the balance of the company’s Prepaid Rent account? XOAXOA: Analytic XOAXOA: Measurement XOAXOA: Analysis XOAXOA: Hard XOAXOA: 02-06 […]
Accounting Chapter 2 4 Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms
151. Suppose a company has the following balance sheet accounts: Calculate the missing amounts assuming the company has total assets of $40,000. Answer: Building = $18,000; Common stock = $22,100. Feedback: $40,000 = Land ($9,000) + Building (?) + Cash […]
Accounting Chapter 3 1 Which of the following accounting principles states that expenses are recognized in the same period as the revenues they help to generate
1. The revenue recognition principle states that: XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Comprehension XOAXOA: Easy XOAXOA: 03-01 Record revenues using the revenue recognition principle and expenses using the matching principle. 2. The matching principle is the principle that […]
Accounting Chapter 3 2 When a company makes an end-of-period adjusting entry which includes a credit to Prepaid Rent, the debit is usually made to
31. Which of the following is a possible adjusting journal entry? XOAXOA: Reflective Thinking XOAXOA: Measurement XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 03-03 Demonstrate the purposes and recording of adjusting entries. 32. Adjusting entries are primarily needed for: A. Cash-basis accounting. […]
Accounting Chapter 3 3 Accrual-basis accounting involves recording revenues when earned and recording expenses with their related revenues
71. Of the following six accounts, which ones have temporary balances? (1) Service Revenue (2) Dividends (3) Salaries Expense (4) Common Stock (5) Retained Earnings (6) Cash XOAXOA: Reflective Thinking XOAXOA: Measurement XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 03-06 Demonstrate the […]
Accounting Chapter 3 4 The post-closing trial balance is a list of all accounts and their balances at a particular date after the account balances have been updated for closing entries
134. If the beginning balance of Retained Earnings equals $10,000, net income for the year equals $6,000, and dividends for the year equal $2,000, then the ending balance of Retained Earnings equals $18,000. XOAXOA: Analytic XOAXOA: Measurement XOAXOA: Analysis XOAXOA: […]
Accounting Chapter 3 5 What is the difference between permanent accounts and temporary accounts and why does an accounting system have both types of accounts
162. For each of the following accounts, indicate whether the account is shown in the income statement or the balance sheet: Answer: XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 03-05 Prepare financial statements using the adjusted trial […]
Accounting Chapter 4 1 What key piece of legislation was passed in response to corporate accounting scandals by Enron, WorldCom, and others
1. What key piece of legislation was passed in response to corporate accounting scandals by Enron, WorldCom, and others? XOAXOA: Ethics XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 04-01 Discuss the impact of accounting scandals and the passage of […]
Accounting Chapter 4 2 Common types of financial statement fraud include creating fictitious revenues from a fake customer, improperly valuing assets
51. At the time a $400 petty cash fund is being replenished, the company’s accountant finds vouchers totaling $350 and petty cash of $50. The vouchers include: postage, $100; business lunches, $150; delivery fees, $75; and office supplies, $25. Which […]
Accounting Chapter 4 3 Investing activities include cash transactions involving revenue and expense events during the period
113. Investing activities include cash transactions involving revenue and expense events during the period. XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 04-07 Identify the major inflows and outflows of cash. 114. Investing activities include cash investments in […]
Accounting Chapter 4 4 A company provides services on account. Indicate how this transaction would affect the following five financial statement items
149. Madison Company’s cash ledger reports the following for the month ending March 31, 2012. Information from March’s bank statement and company records reveals the following additional information: a. The ending cash balance recorded in the bank statement is $6,790. […]
Accounting Chapter 5 1 Under the direct write-off method, what adjustment is made at the end of the year to account for possible future bad debts
1. Which of the following best describes credit sales? XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 05-01 Recognize accounts receivable. 2. Credits sales are recorded as: A. Debit Cash; credit Unearned Revenue. B. Debit Service Revenue, […]
Accounting Chapter 5 2 If the direct write-off method is used to account for uncollectible accounts, which of the following statements is false
43. When $2,500 of accounts receivable are determined to be uncollectible, which of the following should the company record to write off the accounts using the allowance method? XOAXOA: Reflective Thinking XOAXOA: Measurement XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 05-04 Apply […]
Accounting Chapter 5 3 Sales returns and allowances occur when the buyer returns the goods or the seller reduces the customer’s balance owed
87. Sales returns and allowances occur when the buyer returns the goods or the seller reduces the customer’s balance owed. XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 05-02 Calculate net revenues using discounts; returns; and allowances. […]
Accounting Chapter 5 4 The amount of the adjustment to the allowance for uncollectible accounts during the period
139. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: a. Accounts […]
Accounting Chapter 5 5 Discuss the differences between the allowance method and the direct write-off method for recording uncollectible accounts
162. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided. Terms: a. Accounts […]
Accounting Chapter 6 1 If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is
1. Inventory does not include: XOAXOA: Reflective Thinking XOAXOA: Critical Thinking XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 06-01 Trace the flow of inventory costs from manufacturing companies to merchandising companies. 2. The largest expense on a retailer’s income statement is typically: […]
Accounting Chapter 6 2 which inventory valuation method would a company likely choose if they want to have the highest possible balance of inventory on the balance sheet
29. The following information relates to inventory for Shoeless Joe Inc. At what amount would Shoeless report cost of goods sold using the weighted-average cost flow assumption? (Round your answer to the nearest dollar) XOAXOA: Analytic XOAXOA: Reporting XOAXOA: Analysis […]
Accounting Chapter 6 3 What effect would an adjustment to record inventory at the lower-of-cost-or-market have on the company’s financial statements
64. On April 1, Robert LLC purchased two units of inventory, A and B. The cost of unit A was $650, and the cost of unit B was $625. On April 30, Robert LLC had not sold the inventory. The […]
Accounting Chapter 6 4 Accountants often call FIFO the balance sheet approach because the amount it reports for ending inventory better approximates the current cost of inventory
108. Accountants often call FIFO the balance sheet approach because the amount it reports for ending inventory better approximates the current cost of inventory. XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Knowledge XOAXOA: Easy XOAXOA: 06-04 Explain the financial statement effects […]
Accounting Chapter 6 5 Calculate ending inventory and cost of goods sold for 2012 assuming the company uses LIFO with a periodic inventory system
148. At the beginning of 2012, Calston Incorporated reports inventory of $9,000. During 2012, the company purchases additional inventory for $25,000. At the end of 2012, the cost of inventory remaining is $8,000. Calculate cost of goods sold for 2012. […]
Accounting Chapter 6 6 What is a multiple-step income statement? What information does it provide beyond “bottom-line” net income
170. For each company, calculate the missing amount. Answer: a. Gross profit = Sales revenue – Cost of goods sold b. Net income = Gross profit – Operating expenses XOAXOA: Analytic XOAXOA: Reporting XOAXOA: Analysis XOAXOA: Medium XOAXOA: 06-06 Prepare […]
Accounting Chapter 7 1 Cowboy Development incurred the following costs associated with the purchase of a piece of land that it will use to re-build an office building
1. Real Angus Steakhouse purchased land for $75,000 cash. They also incurred commissions of $4,500, property taxes of $5,000, and title insurance of $800. The $5,000 in property taxes includes $4,000 in back taxes paid by Real Angus on behalf […]
Accounting Chapter 7 2 International accounting standards allow firms to record development costs that benefit future periods as an intangible asset
43. A building was purchased for $50,000. The asset has an expected useful life of 6 years and depreciation expense each year is $8,000 using the straight-line method. What is the residual value of the building? XOAXOA: Analytic XOAXOA: Measurement […]
Accounting Chapter 7 3 Advertising costs that increase the value of trademarks are recorded to the asset account entitled Trademarks.
87. Advertising costs that increase the value of trademarks are recorded to the asset account entitled Trademarks. XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 07-02 Identify and record the major types of intangible assets. 88. We expense […]
Accounting Chapter 7 4 Why don’t we depreciate land? What are land improvements? Why do we record land and land improvements separately
134. Why don’t we depreciate land? What are land improvements? Why do we record land and land improvements separately? Answer: We don’t depreciate land because its service life never ends. Land improvements are additional amounts spent to improve the land […]
Accounting Chapter 7 5 Contrast the effects of the straight-line, declining-balance, and activity-based depreciation methods on annual depreciation expense
144. Burger Chef acquired a delivery truck on March 1, 2012 for $26,000. The company estimates a residual value of $2,000 and a 6-year service life. It expects to drive the truck 80,000 miles. Actual mileage was 12,000 miles in […]
Accounting Chapter 8 1 Given a choice, most companies would prefer to report a liability as long-term rather than current because
1. Which of the following is not a reason why a company might prefer to report a liability as long-term rather than current? XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 08-01 Distinguish between current and long-term liabilities. […]
Accounting Chapter 8 2 Ogden Motors, Inc. is involved in a lawsuit. It is reasonably possible that the jury will find in favor of the plaintiff
49. Ogden Motors, Inc. is involved in a lawsuit. It is reasonably possible that the jury will find in favor of the plaintiff and Ogden will owe ten million dollars. What is the appropriate reporting of this lawsuit and what […]
Accounting Chapter 8 3 A contingent liability is recorded only if a loss is at least reasonably possible and the amount can be reasonably estimated
106. A contingent liability is recorded only if a loss is at least reasonably possible and the amount can be reasonably estimated. XOAXOA: Reflective Thinking XOAXOA: Reporting XOAXOA: Comprehension XOAXOA: Medium XOAXOA: 08-05 Apply the appropriate accounting treatment for contingencies. […]
Accounting Chapter 8 4 Midwest Shipping pays employees at the end of each month. Payroll information is listed below for January, the first month of the fiscal year
127. During January, Deluxe Printing pays employee salaries of $1 million. Withholdings in January are $76,500 for the employee portion of FICA, $210,000 for federal and state income tax, and $40,000 for the employee portion of health insurance (payable to […]
Accounting Chapter 9 1 The advantages of obtaining long-term funds by issuing bonds, rather than issuing additional common stock, include which of the following
1. Which of the following is not a primary source of corporate debt financing? XOAXOA: Reflective Thinking XOAXOA: Measurement XOAXOA: Knowledge XOAXOA: Medium XOAXOA: 09-01 Explain financing alternatives. 2. The mixture of liabilities and stockholders’ equity a business uses is […]
Accounting Chapter 9 2 How does the amortization schedule for an installment note such as a car loan differ from an amortization schedule for bonds
54. What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six month rate.) A. 3%. B. 4%. C. 6%. D. 8%. ($300,000/$10,000,000) x 2 payments per year […]
Accounting Chapter 9 3 When bonds are issued at a discount (below face amount), the carrying value and the corresponding interest expense increase over time.
108. When bonds are issued at a discount (below face amount), the carrying value and the corresponding interest expense increase over time. XOAXOA: Reflective XOAXOA: Measurement XOAXOA: Comprehension XOAXOA: Easy XOAXOA: 09-04 Account for the issuance of bonds. 109. When […]
Accounting Chapter 9 4 Record the bond issue on January 1, 2012, and the first two semi-annual interest payments on June 30, 2012, and December 31, 2012
1. Premium. The issue price is $21,421,240. 2. Face amount. The issue price is $20,000,000. 3. Discount. The issue price is $18,699,206. Answer: XOAXOA: Analytic XOAXOA: Measurement XOAXOA: Analysis XOAXOA: Hard XOAXOA: 09-03 Determine the price of a bond issue. […]
Accounting Chapter 9 5 Explain how each of the columns in an amortization schedule is calculated, assuming the bonds are issued at a discount
XOAXOA: Analytic XOAXOA: Measurement XOAXOA: Analysis XOAXOA: Medium XOAXOA: 09-04 Account for the issuance of bonds. 150. Sun City issues bonds on January 1, 2012 that pay interest semiannually on June 30 and December 31. Portions of the bond amortization […]