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Social security and medicare taxes owed. Match each of the following current liabilities with its meaning. a. Account payable b. Note payable c. Wages payable d. Interest payable e. Sales taxes payable f. FICA taxes payable g. Unemployment taxes payable […]

According to the ____________________ principle, bad debt expense must be recorded in the period in which the sale was made. Any transaction or set of transactions that brings together two or more previously separate entities to form a single accounting […]

Exists when another entity owes the security holder some combination of interest and principal Match the following terms to their correct definition: a. equity security j. held-to-maturity securities b. debt security k. amortized cost method c. passive l. fair value […]

Issued a twenty-year mortgage note for cash. Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is […]

The number of issued shares actually in the hands of stockholders rather than held as treasury stock. Match the terms to the definitions. Companies that sell to other retailers. Match the terms with the descriptions provided. a. Manufacturers d. Wholesalers […]

Which of the following is a measure of liquidity? a. operating cash flows ratio b. earnings per share c. accounts receivable turnover ratio d. return on common equity Which of the following statements regarding accounts payable is false? a. Accounting […]

Tom is saving for an engagement ring. If he deposits $500 payments into an account (one at the end of each year) that earns 6% interest compounded annually, how much will he have saved by the end of the 10thyear? […]

Knox Jewelers issued $1,000,000 of 8% interest bearing debt at the beginning of the year. The company reported net income before interest and taxes of $2,000,000 for the current year. Assuming a 40% tax rate, what is the company’s net […]

Represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets and the payment of dividends. Match these terms with their correct definition. a. Cash flow adequacy ratio b. Cash flows […]

The collection of environmental factors that influence the effectiveness of control procedures Match the following terms with their correct definitions. a. Accounting system e. Internal control system b. Business process risks f. Safeguarding c. Control activities g. Segregation of duties […]

Many stockholders choose to invest in preferred stock because a. preferred stock can always be converted into common stock at the stockholder’s option. b. the preferred dividend distributions are generally increased each year. c. dividends are distributed to preferred stockholders […]

Which pair of accounts has the same set of rules for debit and credit entries? a. common stock and accounts payable b. salary expense and retained earnings c. cash and notes payable d. sales revenue and accounts receivable Cost of […]

What types of accounts are Treasury Stock and Paid-in Capital from Treasury Stock Transactions? Treasury StockPaid-in Capital from Treasury Stock Transactions a. contra equity stockholders’ equity b. contra equity contra equity c. stockholders’ equity stockholders’ equity d. retained earnings retained […]

The buyer must pay the shipping costs. Match the terms with the descriptions related to merchandise sales and purchases. a. Transportation-in e. Cost of goods available for sale b. Perpetual inventory system f. Periodic inventory system c. Net purchases g. […]

The receiving department compares the quantity of merchandise received with the quantity ordered. The following set of items describes activities completed by a company in purchasing and paying for merchandise and in collecting cash for merchandise sales. For each activity, […]

Error corrections which involve restatement of prior period income must be reported a. in a separate account within the equity section of the balance sheet. b. within “unrestricted retained earnings” on the balance sheet, with footnote disclosure to describe the […]

Which of the following would appear on the balance sheet as a current liability? a. A loss that could be expected upon the occurrence of a strike by employees. b. Potential damages from the risk of explosions in a fireworks […]

The prospects for future dividend payments. Provided is a list of important users of accounting information. Also provided are descriptions of a major need for accounting information that may be experienced by the various users. Identify the one user group […]

A customer returned damaged goods for credit. Under a perpetual system, which of the seller’s accounts decreases? a. purchase returns b. accounts receivable c. sales returns d. sales revenue Flossil Fossils Company purchased a tract of land containing coal in […]

The quick ratio differs from the current ratio in that it a. represents the amount of cash on hand instead of the total current assets. b. excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence […]

Refer to Art Shoes. How much interest revenue will the company recognize for the year ended December 31, 2013? Art Shoes This company received a promissory note from a customer on July 1, 2013. The face amount of the note […]

Refer to A&B Foods. If the company uses the aging of accounts receivable method to estimate its bad debts, what amount will be reported as bad debt expense for 2013? A&B Foods Data for the year ended December 31, 2013, […]

In periods of inflation, debt financing is preferable to equity financing because the company is able to repay the lender in dollars that have declined in purchasing power. If new equipment purchased in 2013 is reported on the balance sheet […]

The financial statements are prepared after a. business transactions are recorded. b. adjustments are recorded. c. the accounts are closed. d. the adjusted trial balance is prepared. The Discount on Bonds Payable account is shown on the balance sheet as […]

Average stockholders’ equity Select the ratio that would include each amount or account in its calculation. (Choices may be used more than once.) a. Times interest earned ratio b. Operating cash flow ratio c. Debt-to-equity ratio d. Return on equity […]

Kauffman Tire Repair leased a machine that will enable it to repair tires found on monster vehicles. The annual payments are $9,000 and the life of the lease is 7 years. It is estimated that the useful life of the […]

The accounting life of intangible assets is determined by a. their legal lives. b. their useful lives. c. their legal lives or useful lives, whichever is shorter. d. the tax life mandated by the IRS. Manatee Manufacturing sells a piece […]

Which of the following statements regarding bonds payable is true? a. Generally, bonds are issued in denominations of $100. b. When an issuing company’s bonds are traded in the ‘secondary” market, the company will receive part of the proceeds when […]

Depreciation expense Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) a. Balance Sheet-Property, Plant, and Equipment b. Balance Sheet-Intangible Assets c. Balance Sheet-Current Assets d. Balance Sheet-Other […]

The profitability of the company based upon the Internal Revenue Code. Provided is a list of important users of accounting information. Also provided are descriptions of a major need for accounting information that may be experienced by the various users. […]

This method is used in situations where technological advances are rapid. Given the following list of methods of depreciation, select the method that is best for the situation or purpose given. (Choices may be used more than once.) a. Straight-line […]

A convertible bond is one where a. the issuer can convert from a fixed interest rate to a floating rate. b. the issuer can convert the bond from long-term to short-term. c. the issuer can retire the bond before its […]

Select the correct statement from the following: a. Consolidation worksheet adjustments are not entered on the accounting records of either Parent or Sub. b. Consolidation worksheet adjustments are entered on the accounting records of the Parent but not the Sub. […]

A way to estimate bad debts. Match each statement to the item listed below a. Accounts receivable e. Notes receivable b. Aging method f. Realized c. Allowance for Doubtful Accounts g. Securitization d. Earned Mathematical extensions and footings on purchase […]

Information that is material means that an error in recording the dollar amount of a transaction would a. likely affect the judgment of someone relying on the financial statements. b. not affect the decisions of financial statement users. c. not […]

The _______________ method most closely approximates replacement cost of inventory on the balance sheet. If the balance of wages payable increases during the year, then the ____________________ for the period will be greater than the actual cash wages paid in […]

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should a. not be amortized, but should be reviewed annually for impairment. b. be reported on the statement of retained earnings in the […]

A probable loss from a lawsuit that can be reasonably estimated should not be reported on the balance sheet as a current liability. Income from operations includes interest revenue and interest expense because these items are considered to be operating […]

Interest earned on the checking account for May The accountant for a local manufacturing company is reconciling the company’s bank account for May. For each item listed, state how it would be handled on a bank reconciliation. (Choices may be […]

The company financed the equipment purchase with a bank loan. Interest of $3,000 was paid on the loan during 2013. A construction company purchased a piece of equipment with a price of $100,000 on March 1, 2013. The amounts are […]

Patents Several items from the financial statements of Fireside Tires are listed. Use the following choices to identify the type of account for each item listed. (Choices may be used more than once.) a. Assets b. Liabilities c. Revenues d. […]

Dividend payout ratio Indicate the type of each ratio listed. (Choices may be used more than once.) a. Liquidity ratio b. Debt management ratio c. Asset efficiency ratio d. Profitability ratio e. Stockholder ratio Keystone Corporation’s balance sheet showed the […]

Refer to Kalahari Limited. The semiannual cash payment on the bonds is Kalahari Limited On January 2, 2013, this company issued 1,000,000, 10-year bonds for $1,150,000. The bonds pay interest on June 30 and December 31. The stated rate is […]

Under the ____________________ method of preparing a statement of cash flows, the net cash flow from operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments, and all […]

Which of the following statements is false regarding how the cash flow effects of the changes in the equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to prepare […]

Gain on disposal of plant asset Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) a. Balance Sheet-Property, Plant, and Equipment b. Balance Sheet-Intangible Assets c. Balance Sheet-Current […]

A common stock provision that provides for the maintenance of stockholders’ ownership percentage upon the issuance of new stock. Match the terms to the definitions. Any transaction or set of transactions that brings together two or more previously separate entities […]

When using the indirect method to determine operating cash flows, how is the receipt of cash from the sale of long-term investments treated on the statement of cash flows? a. operating activity b. investing activity c. financing activity d. noncash […]

Grand Strand Power & Light provides utilities to a gulf coast community. On November 30, 2012, the utility billed 1,500 residential customers a total of $118,500 for electricity. In addition, the company is required to collect state taxes of 1.5% […]

A company has cash of $800, current liabilities of $500, and long-term liabilities of $600. If the cash ratio is 2.5, then marketable securities must be a. $ 700. b. $ 800. c. $ 450. d. $2,000. Refer to Randstad, […]

Because the allowance method results in better matching, accounting standards require its use rather than the direct write-off method, unless bad debts are immaterial. Explain what costs are included in the acquisition cost of operating assets. Answer:Acquisition costs should include […]

A list of all active accounts and each account’s debit or credit balance. Match the following terms with their correct definition. a. Account f. Debit b. Accounting cycle g. Event c. Chart of accounts h. General ledger d. Cost vs. […]

On October 1, 2013, a company borrowed $200,000 on a two-year, 12% note, with interest and principal to be paid at maturity. How much interest expense will be reported on the income statement for the year ending December 31, 2013? […]

The three financial statements in which net income can be found are the ____________________, ____________________ and ____________________. The reason some major intangible assets are not in the financial statements is because they cannot be measured. Answer: T Cash flows from […]

Refer to Rio Imports. Which of the following statements is true concerning the company’s debt management activities? Rio Imports Information from the financial statements are provided below: a. The company has a smaller percentage of capital from stockholders at the […]

____________________ have claims to an entity’s economic resources. What is the difference between comparability and consistency? Answer:Comparability allows comparisons to be made between or among companies. Even though a certain amount of freedom exists in selecting accounting principles, when this […]

Refer to Kalahari Limited. What is the carrying value of the bonds at the end of ten years before the final maturity payment is made? Kalahari Limited On January 2, 2013, this company issued 1,000,000, 10-year bonds for $1,150,000. The […]

Refer to Rapid Sign Corporation. What is the dividend payout ratio for 2015? Rapid Sign Corporation Selected data from the financial statements are presented below: a. 30.0% b. 30.9% c. 36.3% d. 38.2% The cost of salaries earned by employees, […]

Refer to Abundant Returns. Assume that the company estimates bad debts using the aging method. The aging schedule indicates that $11,500 of the end of the year Accounts Receivable will be uncollected. Abundant Returns This company sells its merchandise only […]

Refer to Rio Imports. The debt-to-equity ratio for 2015 is Rio Imports Information from the financial statements are provided below: a. an indicator that the company’s ability to meet current interest payments to creditors is increasing. b. increasing slightly from […]

On January 1, 2013, Alliance Company had the following balances for accounts receivable and allowance for doubtful accounts: During 2013 the company made $3,200,000 in credit sales, collected $3,000,000 of accounts receivable and wrote off $20,000 of accounts receivable as […]

What will be the increase in the Paid-in capital in excess of par account if a corporation issues 20,000 shares of $1.00 par common stock for $6 per share? a. $140,000 b. $120,000 c. $100,000 d. $20,000 Hunsinger Enterprises purchases […]

A customer’s check for $25 that had been deposited into the company’s checking account the previous month was returned stamped “NSF” by the bank. Which of the following journal entries is required? a. Cash 25 Accounts Receivable 25 b. Cash […]

Several transactions are listed below, with an expanded accounting equation stated to the right side of each. Use the following identification codes to indicate the effects of each transaction on the accounting equation: I = Increase; D = Decrease; NE […]

A company forgot to record four adjustments during 2013. Which one of the following omissions of adjustments will understate assets? a. Unearned revenue is not reduced for the portion that has been earned b. Interest on monies loaned out has […]

The result of using the effective interest method of amortization for bond discounts is that the a. interest expense for each amortization period is constant. b. effective interest rate for each amortization period is constant. c. amount of interest expense […]

Eric is considering buying a car. He can either purchase the car outright or make 5 annual payments of $10,000 at the end of each year. If the interest rate is 7%, how much is the outright purchase price? a. […]

Treasure Distributors, Inc. had no investments in short-term marketable securities prior to 2012. During 2012, the company engaged in the following investment transactions: At the end of 2012, the Toledo Company stock had a market value of $18 per share. […]

Good Time Carts offers a one-year warranty on all its golf carts. Estimates suggest that two percent of carts sold will require warranty service and that the average warranty claim will cost $215. During 2013, the company sold 450 golf […]

Which of the following statements is false regarding the use of source documents? a. Checks and deposit slips are the main source documents backing up the bank statement. b. Retailers may use cash register tapes to recognize sales transactions. c. […]

The cash ratio is calculated by dividing cash flows from operating activities by current liabilities. Preferred stockholders typically do not have the right to vote at stockholders meetings. Answer: T Why are unearned revenues considered current liabilities? Answer:Unearned revenues represent […]

Refer to Fantasy Cruise Lines. What is the depreciation expense for the year ended December 31, 2013? Fantasy Cruise Lines On January 1, 2013, the company purchased a ship for $1,000,000. It has a 10-year useful life and a residual […]

Debt-to-equity ratio Indicate the type of each ratio listed. (Choices may be used more than once.) a. Liquidity ratio b. Debt management ratio c. Asset efficiency ratio d. Profitability ratio e. Stockholder ratio Which of the following underlying assumptions for […]

The worksheet facilitates preparation of all of the following financial statements except: a. Cash Flow Statement c. Retained Earnings Statement b. Balance Sheet d. Income Statement When using the direct method to determine operating cash flows, how is the purchase […]

Situation where the investor owns less than 20% of the common stock of another company and therefore is not attempting to exert influence over the operating and financial policies of the investee Match the following terms to their correct definition: […]

Resold treasury stock for cash. Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using […]

Refer to Lanthier’s Heating & Air. What is the maximum amount that can be reported on the balance sheet for common stock and preferred stock, respectively, if all of the stock is issued? Lanthier’s Heating & Air This company began […]

Received payments from accounts receivable. Use the following codes to indicate how the cash flow effect, if any, of each transaction would be reported on a statement of cash flows if the operating activities section is prepared using the direct […]

On June 3, 2013, Alpine Corporation sold merchandise with a gross price of $45,000 with terms of 2/10, n/30. Prepare the journal entries to: A) Record the sale using the gross method. B) Assume the payment is received on June […]

The excess of an inventory’s value stated on a FIFO basis over its value stated on a LIFO basis is called a(n) ____________________. Many companies assist the users of the financial statements by providing information about the company’s accounting policy […]

Unlike the income statement, no financial ratios are reported on the statement of cash flows. Gospel Ministries purchased on account two pianos on April 3, 2012 for $6,600. The company agreed to pay an extra $100 to have the seller […]

A decrease in the par value of a class of stock brought about by the exchange of original shares for a greater number of new shares. Match the terms to the definitions. If a corporation repurchases 500 shares of its […]

Double-declining-balance depreciation is most commonly used by businesses for financial reporting purposes. Every adjustment involves at least one income statement and one balance sheet account. Answer: T An accumulated ________ account is used when writing off natural resources. Answer: depletion […]

A company reported the following information: How much cash was paid for insurance during 2014? a. $22,700 b. $27,700 c. $39,200 d. $36,700 Used to encourage prompt payment Select the term that matches each of the following descriptions. a. Sales […]

A local tennis club sells season memberships for $1,000 each. During January 2013, 50 season memberships were sold. As of March 31, 2013, only $25,000 of season membership fees had been collected from customers. The tennis season runs for 6 […]

In a common size balance sheet to be used in vertical analysis, the 100% amount is a. current assets. b. working capital. c. total assets. d. total stockholders’ equity. A debit memo appeared on the May bank statement. How should […]

On June 1, a board of directors declared a $3 per share cash dividend, payable on June 30 to all common stockholders of record on June 15. The company has 10,000 shares of common stock authorized, 1,000 shares issued, and […]

Which of the following is not included in Cash and Cash Equivalents on a company’s balance sheet? a. a savings account at the bank b. a checking account at the bank c. a bank certificate of deposit for one year […]

Lasik Vision, Inc. began business on June 1, 2014. The corporate charter authorized issuance of 1,000 shares of no-par common stock and 4,000 shares of $6 par, 6% cumulative preferred stock. As of the beginning of 2015, 200 shares of […]

If the parent owns 90% of the subsidiary’s stock, then 90% of the subsidiary’s assets and liabilities are included in the consolidated balance sheet. During periods of stable purchase prices, FIFO produces the highest ending inventory relative to the other […]

If a company hires honest employees and its top management acts with integrity, no internal control procedures will be necessary. If the investor holds 50% or more of the common stock of the investee, then the two corporations are no […]

The relationship between dividends and the market price of a company’s stock. Select the ratio that each definition most properly satisfies. a. Dividend yield ratio b. Operating cash flow ratio c. Debt-to-total assets ratio d. Return on common equity ratio […]

All of the following are true for a company that uses the allowance method of accounting for bad debts, EXCEPT: a. It uses a contra-asset account called the allowance for doubtful accounts. b. It records bad debt expense each time […]

Provides several pieces of information needed to prepare the cash flow statement. Match these terms with their correct definition. a. Cash flow adequacy ratio b. Cash flows from financing activities c. Cash flows from investing activities d. Cash flow from […]

In anticipation of preparing the July bank reconciliation, the accountant gathered the following information: What is the company’s adjusted cash balance at July 31st? a. $4,300 b. $4,050 c. $4,140 d. $4,500 Device that facilitates combining the financial statements of […]

What is the purpose of an aging schedule for accounts receivable? The dividends account has a normal debit balance. Answer: T On a bank reconciliation, outstanding checks are added to the cash balance per the bank statement. Answer: F A […]

Refer to Happy Heights Country Club. On which date did the country club collect golf lessons revenue in advance? Happy Heights Country Club Selected accounts at July 31 are provided below: a. July 2nd b. July 3rd c. July 5th […]

Refer to A Better Mousetrap. What amount should the company recognize as interest revenue on the maturity date of the note? A Better Mousetrap The company sold merchandise to a customer on December 1, 2013, for $100,000. The customer paid […]

Which of the following statements is false regarding the reason that inventory costs are recorded as expenses when sold rather than when incurred? a. It gives the user’s of the company’s financial statements a clearer picture of profitability. b. It […]

The practice of adjusting the market value of securities that are accounted for using the fair value method is referred to as a. consolidation. b. marking-to-market. c. passive investing. d. segregation of investments. Storage facility used for storing inventory goods […]

Goodwill Identify where each of the following accounts would be reported on the financial statements. (Choices may be used more than once.) a. Balance Sheet-Property, Plant, and Equipment b. Balance Sheet-Intangible Assets c. Balance Sheet-Current Assets d. Balance Sheet-Other Assets […]

Refer to Gainesville Truck Center. Which of the following statements is true regarding the FICA taxes that must be recorded? Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal […]

Strategic risk assessment is primarily concerned with a. possible external threats to the company’s success in accomplishing its objectives. b. allocation of the company’s resources to accomplish its internal processes. c. safeguarding of the company’s computerized assets and records. d. […]

Which of the following statements regarding contingent liabilities is true? a. If they are probable and estimable, then they must be recorded even before the outcome of the future event. b. If they are probable and estimable, then they should […]

Rent paid in advance Match the most probable matching method to the costs listed. (Choices may be used more than once.) a. Directly match a specific revenue b. Indirectly match with the period during which it will provide revenue c. […]

A company purchased inventory on credit. The effect of this transaction is that the a. earnings per share decreased. b. earnings per share increased. c. working capital increased. d. debt-to-equity ratio increased. Refer to Rags to Riches. Which of the […]

Refer to Labor Finders, Inc. The company’s 2015 earnings per share is reported as Labor Finders, Inc. Selected data from the company’s financial statements are presented below: a. $1.08 b. $1.20 c. $1.30 d. $1.43 Liquidity analysis is required to […]

Refer to Mary Kay Cosmetics. What amount was declared and paid for dividends during 2014? Mary Kay Cosmetics Selected data and additional information from the company’s records are presented below: Additional information: Accumulated other comprehensive income is NOT considered to […]

On January 2, Alfredo Corporation sold merchandise with a gross price of $100,000 to a customer with terms of 2/10, n/30. How much Sales Discounts would be recorded if payment was received from the customer on January 8? Assume the […]

Tail Winds Corporation acquired the following equity securities during 2013: The company’s investment in these two companies is passive and classified as available-for-sale. During 2013, TICO paid a dividend of $1.10 per share and Thankful paid a dividend of $1.75 […]

Cash flows related to obtaining capital for the company Match each statement to the item listed below. a. Cash flows from financing activities b. Cash flows from investing activities c. Cash flows from operating activities When using the indirect method […]

Why is the cash basis of accounting too limited for proper financial reporting? When stockholders exchange their shares of stock for additional shares, and there is a corresponding reduction in the par value of the stock, a stock ____________________ has […]

The Cash account is never part of an adjusting entry. Beach Catering sold its business for $75,000 under an asset purchase agreement. Under the agreement, the buyer made an initial payment of $35,000 which Beach Catering invested at 6% compounded […]

The stated value is the price at which employees can exercise stock options. A purchased company must be recorded at the value of the cash and other consideration given by the acquiring company. Answer: T Below are several accounts and […]

A marine company pays its sales personnel 6% commission of the selling price of each yacht. During November 2013, yacht sales totaled $20,400,000. During December 2013, sales totaled $25,100,000. Because its policy is to pay commissions only in the month […]

Prices are declining; income taxes are higher with this method. Identify which inventory costing method achieves the effect listed in the following items. (Choices may be used more than once.) a. FIFO method c. Average cost method b. LIFO method […]

A mailroom employee opens the mail, counts the money received, and updates the accounting records for the amount received. The following set of items describes activities completed by a company in purchasing and paying for merchandise and in collecting cash […]

Refer to Kalahari Limited. At the maturity date, besides an interest payment, the company would repay the bondholders Kalahari Limited On January 2, 2013, this company issued 1,000,000, 10-year bonds for $1,150,000. The bonds pay interest on June 30 and […]

Which one of the following items appears on a balance sheet? a. service revenue b. unearned revenue c. dividends d. cash flow from operations Which of the following is not a requirement of a company’s top managers under the Sarbanes-Oxley […]

Balance sheet accounts are also known as which of the following? a. nominal accounts b. permanent accounts c. temporary accounts d. closing accounts Invoice price paid for resale goods. Match the costs that might be included as part of the […]

Prices are rising; profits are higher under this method. Identify which inventory costing method achieves the effect listed in the following items. (Choices may be used more than once.) a. FIFO method c. Average cost method b. LIFO method d. […]

Issuing common stock to investors Several transactions are listed. Use the choices to identify the effect on the accounting equation for each transaction listed. (Choices may be used more than once.) a. Assets and liabilities increase b. Assets and contributed […]

Refer to A2Z Events. What are the effects on the accounting equation when the company writes off a bad debt under the allowance method? A2Z Events The following data are from the company’s records for 2013: a. Assets decrease and […]

A company had beginning accounts receivable of $175,000. All sales were on account and totaled $550,000. Cash collected from customers totaled $650,000. Calculate the ending accounts receivable balance. a. $725,000 b. $275,000 c. $ 75,000 d. $175,000 A listing of […]

Generally accepted accounting principles (GAAP) require that research and development costs to develop a new product be a. capitalized in the patents account. b. expensed in the period incurred. c. capitalized in the research and development costs account. d. amortized […]