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Genuine Parts received a promissory note from a customer on March 1, 2015. The face amount of the note is $8,000; the terms are 90 days and 9% interest. What is the total amount of interest that Genuine Parts will […]

If a company purchases $3,200 worth of inventory with terms of 2/10, n/30 on March 3 and pays March 12, then the amount paid to the seller would be a. $3,136 b. $3,150 c. $3,168 d. $3,200 Which one of […]

For users of financial statements, the current liability classification in the balance sheet is important because it is most closely tied to the concept of profitability. a. True b. False Carlton, Inc. presented the following information in a note to […]

The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the a. matching principle b. full disclosure principle c. revenue realization principle d. […]

a. A liability resulting from the signing of a promissory note. b. A measure of how long it takes to collect receivables. c. A written promise to repay a definite sum of money on demand or at a fixed or […]

Moss Company Moss Company has provided the following information from its accounting records for the current year: Read the information for Moss Company. What are Moss’ current liabilities? a. $ 50,000 b. $ 125,000 c. $ 200,000 d. $ 230,000 […]

Which of the following is a total dollar measure of liquidity? a. accounts receivable turnover ratio b. cash to cash operating cycle c. number of days’ sales in inventory d. working capital Refer to the data for Benton Corporation. What […]

From the following list, select the proper section from the statement of cashflows in whi ch it would beclassified. a. Operating Activities b. Investing Activities c. Financing Activities Sold equipment no longer used in the business The FASB standards do […]

The current portion of long-term debt is a balance sheet item for Flavorful Products Company. How would it most likely be classified on the balance sheet? a. Current liability b. Long-term liability c. Current asset d. Long-term liability Use the […]

Which of the following would not appear on an income statement? a. Sales revenue b. Cost of goods sold c. Accounts receivable d. Insurance expense The FASB has allowed certain items to be reported directly to stockholders’ equity in an […]

The operating cycle for all businesses is one year. a. True b. False Under the double-entry system of accounting, every transaction is entered in at least two accounts on opposite sides of T accounts. a. True b. False Answer: True […]

Checks received from customers are considered to be cash in the company’s books. a. True b. False Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a […]

Finished goods are the equivalent of merchandise inventory for a retailer or wholesaler in that both represent the inventory of goods held for sale. a. True b. False When a lease is classified as an operating lease, the lease liability […]

Which one of the following is an accurate description of Allowance for Doubtful Accounts? a. Contra account b. Liability account c. Revenue account d. Expense account What should a company do to improve its accounts receivable turnover rate? a. Lower […]

All of the following statements are true except: a. The criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under U.S. GAAP than IFRS. b. The criteria to determine […]

Discount on Notes Payable is treated as a reduction of notes payable on the balance sheet. a. True b. False Verilux Company sold merchandise to Flight Corp. on November 1, 2014, for $10,000. Verilux accepted a promissory note from Flight […]

Match the terms with the descriptions related to merchandise sales and purchases. a. Transportation-in b. Perpetual inventory system c. Net purchases d. FOB Destination e. Cost of goods available for sale f. Periodic inventory system g. FOB Shipping point h. […]

Earnings per share is an indication of how much a. the company paid as dividends for each share of stock held by stockholders. b. the company earned for each share of outstanding common and preferred stock. c. the company earned […]

What effects on a retail store’s accounting equation occur when merchandise returned by customers is recorded? a. Assets and stockholders’ equity decrease. b. Assets and stockholders’ equity increase. c. Assets decrease and liabilities increase. d. Stockholders’ equity decreases and liabilities […]

Described below are several transactions which an organization like the Rogers Symphony Orchestra might record. Several accounts from the organization’s financial statements also are listed below. Using these account titles, record each transaction in proper journal entry format in the […]

For the statement of cash flows, companies are required to classify their cash activities into three categories: operating, investing, and borrowing. a. True b. False To review the current market price of the stock, one should review the a. balance […]

Assuming the indirect method for preparing the statement of cash flows is used, indicate whether these items should be added to net income (A), deducted from net income (D), or not be reported in the operating section of the statement […]

Employees earn $5,000 per day, work five days per week, Monday through Friday, and get paid every Friday. If the previous payday was January 26 and the accounting period ends on January 31, what amount is the ending balance in […]

The following list contains several items that appear on an income statement. Select the choice that lists the items in the order they would appear on a multi-step income statement. a. 6, 1, 7, 4, 2, 3, 5 b. 7, […]

The asset account, Supplies, has a balance of $700 on January 1. During January, the company purchased $16,000 of supplies on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance […]

If a company’s asset turnover ratio decreased from 2014 to 2015, which of the following conclusions can be made? a. The company was more efficient during 2015 in using its assets to produce profits. b. The company produced less sales […]

Interest expense is computed annually when a bond is issued for other than its face value. For a bond issued at a discount, how will this component change as the bond approaches maturity? a. decrease b. increase c. remain constant […]

Marshland Company uses the straight-line depreciation for financial reporting purposes and an accelerated depreciation method for tax purposes. As a result, Marshland will record: a. a deferred tax asset. b. a deferred tax liability. c. a permanent difference. d. tax-exempt […]

Provided below is a list of important users of accounting information.Below the list are descriptions of a major need of each of the various users. Fill in the blank with the one user group that is most likely to have […]

Which one of the following statements regarding changing inventory methods is true? a. A change in inventory methods can be justified if the change is made to better match profits with revenue. b. Changing inventory methods affects consistency. c. One […]

Which one of the following events involves a liability for a business? a. Loans to be repaid to banks b. Inventories purchased for cash c. Amounts invested by the owners d. Stock sold to the general public Which of the […]

Which of the following considerations is most important for a stockholder when evaluating whether to purchase stock in a company? a. Will earnings per share be distributed to stockholders? b. Will the company earn a fair return on the amount […]

The concept of conservatism is the capacity of information to make a difference in a decision. a. True b. False Which of the following statements is correct? a. Bonds are issued at a price that reflects the stated rate of […]

A company has $200 in cash, $500 in accounts receivable, and $700 in inventory. If current liabilities are $400, then the current ratio would be a. 1.75 to 1 b. 2.25 to 1 c. 3.00 to 1 d. 3.50 to […]

Given below is a list of items that may be reported on a statement of cash flows. Identify each as one of the following using the indirect method : a. Operating b. Investing c. Financing d. Not separately reported on […]

Under current accounting principles, how is net income on the income statement measured? a. Net change in owners’ equity during the period b. Excess of revenues over expenses during the period c. Net change in the cash balance during the […]

When a company declares a stock dividend, which of the following occurs? a. A liability is created. b. Retained earnings is reduced. c. Stockholders’ equity is decreased. d. The financing section of the statement of cash flows is decreased. Long-term […]

The accounting profession is currently experimenting with financial statements adjusted for the changing value of the dollar since inflation is increasing. a. True b. False Under the periodic inventory system, a physical inventory must be taken at the end of […]

When a company uses coupon or premium offers in conjunction with the sale of its products, there is no need to record any contingent liability. a. True b. False What five-member body created by the Sarbanes-Oxley Act was given authority […]

Arco Corporation declared a cash dividend on June 2 of $6 per common share. The company has 2,000 shares of common stock authorized, 1,000 shares issued, and 200 in the treasury. The entry to record the declaration of the cash […]

When did the SEC drop its long-standing rule that required foreign companies that filed financial statements with it to adjust those statements to conform with U.S. GAAP and allow them to use IFRS? a. 2001 b. 2007 c. 2009 d. […]

Manson World reported the following: Common stock, $1 par, 200,000 shares authorized, 100,000 shares issued and outstanding What is the effect of a 2-for-1 stock split if the market value of the common stock is $20 per share when the […]

Select the letter of the term each statement best describes. a. authorized shares b. issued shares c. outstanding shares d. par value e. additional paid-in capital f. retained earnings g. cumulative feature h. participating feature i. callable stock j. treasury […]

The accounts receivable turnover ratio is a measure of how well a company manages its receivables. a. True b. False On January 2, 2015, Lawn Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay interest on June […]

If your bank gives you a $2,000 loan at 8% per year, but deducts the interest in advance, is 8% the “real” rate of interest that you will pay? a. Yes. b. No. The interest rate is actually lower than […]

When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss. a. True b. False Match each of the following terms pertaining to liabilities to their […]

A company should choose a depreciation method that a. best allocates the original cost of the asset to the periods benefited by the use of the asset. b. saves the most taxes. c. minimizes net income d. shows the highest […]

The net assets of a company are equal to a. current assets less current liabilities. b. total assets less current assets. c. long-term assets less accumulated depreciation. d. the stockholders’ equity. Identify whether the following investor questions are associated with […]

Assuming the indirect method for preparing the statement of cash flows is used, indicate whether these items should be added to net income (A), deducted from net income (D), or not be reported in the operating section of the statement […]

Identify the classifications of the following accounts as either current or long-term liabilities for the December 31, 2014 balance sheet. a. Current liability b. Long-term liability An amount of money owed to a supplier based on the terms 2/20, n/40, […]

There is a universal chart of accounts that is applicable to all businesses. a. True b. False Marcus Roberts operates a small retail establishment. The following unadjusted amounts were taken from Roberts’ accounting records at December 31, 2015: Determine the […]

A company is not required to prepare both a(n) a. Income statement and statement of stockholders’ equity. b. Income statement and statement of retained earnings. c. Statement of stockholders’ equity and statement of retained earnings. d. Statement of cash flows […]

The present value is the value today of a single amount to be paid or received at a specific date in the future. a. True b. False Royal Company purchased a dump truck at the beginning of 2012 at a […]

The establishment of a petty cash fund has no effect on the company’s total cash balance. a. True b. False Inventories and prepaid assets are excluded from the numerator used to compute the quick ratio. a. True b. False Answer: […]

For 2015, Wasabi Company has accounting revenues of $6,000. However, because of temporary differences between tax and accounting, $1,000 of this is not subject to tax. If expenses are $3,000 for both tax and accounting, and the tax rate is […]

In considering equity and debt financing, which of the following statements is true? a. Compared to equity financing, debt is a more expensive source of funding. b. Interest and dividends payments are required to be made by the issuing corporation. […]

Which one of the following is not an external user of financial information? a. Company management b. Internal Revenue Service c. Creditors d. Stockholders In the statement of cash flows, an increase in a current liability will appear as an […]

Dino’s Pizza employs 10 workers in its plant. Each employee is paid $8 per hour and works 8 hours per day, Monday through Friday. Employees are paid every Wednesday for the previous Monday through Friday workweek. The last payday was […]

Operating activities involve the acquiring and selling of goods and services for cash or on account. a. True b. False Promissory notes are non-negotiable. a. True b. False Answer: False Martinez Produce sells fresh vegetables and fruits in Sutton County. […]

Tampa Corporation’s balance sheet showed the following amounts for their liabilities and stockholders’ equity accounts: Current Liabilities, $20,000; Bonds Payable, $60,000; Lease Obligations, $12,000; and Deferred Income Taxes, $2,000. Total stockholders’ equity was $42,000. The debt-to-equity ratio is a. 0.45 […]

The selection of historical cost over current value as the attribute to be measured for assets is an example of the trade-off of a. Reliability over relevance b. Costs over benefit c. Comparability over consistency d. Understandability over verifiability All […]

Accountants are the main reason financial statements are prepared. a. True b. False Each account has a normal balance. For the following list of accounts, indicate whether the normal balance of each is a debit or a credit. a. Debit […]

Blanton Company bought equipment on January 1, 2010 with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was […]

Baker Corp. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10; credit terms were 1/10, n/30. Which one of the following statements is true? a. The customer can take a $10 […]

Pharma Corp. The data presented below for Pharma Corp. is for the year ended December 31, 2015: See the data for Pharma Corp. If Pharma Corp. uses the aging of accounts receivable approach to estimate its bad debts, what amount […]

Stockholders prefer to invest in preferred stock because a. preferred stock confers preferred voting rights. b. preferred stock can always be converted to common stock if they desire. c. the dividends are generally increased each year. d. the dividends are […]

When a note is discounted at a bank, it is normally done with recourse. a. True b. False Tulsa Corp. reported the following information for 2015 and 2016. How much cash was paid for interest during 2016? a. $11,750 b. […]

Prairie Charters reported the following information at December 31, 2015: The average recorded value per share of common stock at December 31, 2015 is a. $1.00 b. $1.75 c. $1.25 d. $2.50 In the statement of cash flows, a decrease […]

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. a. Time value of money b. Simple interest c. Compound interest d. Future value of a single amount e. Present value […]

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called a. Accumulated Amortization b. Accumulated Depreciation c. Amortization Expense d. Depreciation Expense What does the phrase, “Revenue is recognized at the […]

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. If interest is compounded annually, the total amount of interest on an $18,000 note […]

Bing’s Export Co. Bing’s Export Co. purchased a new delivery truck at the beginning of 2015. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year’s depreciation […]

Indicate the type of each ratio listed below. a. liquidity ratio b. solvency ratio c. profitability ratio Profit margin ratio Select the statement on which each of the items provided below would be reported. a. Statement of retained earnings b. […]

Use the information below for Barton Shipping Corp. for 2015 and 2016 to answer the following question. How much cash did Barton Shipping pay for dividends during 2016? a. $ 95,000 b. $105,000 c. $115,000 d. $140,000 Plant assets, current […]

Miguel Foods, Inc. purchased a patent at the beginning of 2013 for $350,000. Economic benefits were expected for 7 years, but the patent’s legal life was 20 years. Also during 2013, the company incurred research and development costs of $270,000. […]

A list of all asset, liability, stockholders’ equity, revenue, and expense accounts, along with their assigned account numbers, which are used by a company is a(an) a. Account b. General Journal c. General Ledger d. Chart of Accounts Lenders are […]

The payment of employee salaries has what effect on the accounting equation? a. Assets decrease and stockholders’ equity decreases. b. Liabilities decrease and stockholders’ equity decreases. c. Assets decrease and liabilities increase. d. Assets increase and liabilities decrease. In the […]

A cancelled check would be a source document for which of the following? a. recording a purchase of inventory on credit b. recording cash received on an customer account c. recording accrued payroll d. recording a cash payment to a […]

Cost of goods sold represents a. Expired costs during a period and is reported on the income statement. b. Unexpired costs and is reported on the balance sheet as an asset. c. The cost of goods that will be purchased […]

Beatrice Equipment Beatrice Equipment sells merchandise only on credit. For the year ended December 31, 2014, the following data is available: Refer to Beatrice Equipment. Assume that Beatrice Equipment estimates bad debts on an aging analysis, and the aging schedule […]

Below are the transactions for the Louisville Company: Based on these transactions, what is the net cash flow from financing activities? a. $285,000 net cash provided by financing activities. b. $275,000 net cash used for financing activities. c. $0, because […]

Davis Corp. has three employees. Each earns $600 per week for a five day work week ending on Friday. This month the last day of the month falls on a Wednesday. The company should make which of the following adjusting […]

Pierce Corp. identified the following data in preparing a bank reconciliation on October 31, 2014. Bank statement balance $29,600 Pierce’s book balance (before adjustments) ? Outstanding checks 3,100 NSF checks 300 Service charges 200 Deposits in transit 2,200 Interest earned […]

Which of the following will not cause a trial balance to be out of balance? a. The balance for an account is incorrectly computed. b. A debit entry is posted as a credit. c. A credit entry is posted to […]

Which of the following organizations is responsible for setting auditing standards followed by public accounting firms in conducting independent audits of financial statements? a. Financial Accounting Standards Board (FASB) b. Securities and Exchange Commission (SEC) c. Public Company Accounting Oversight […]

If the amount assigned to ending inventory is incorrect , a. The balance sheet is affected, but the income statement is not. b. The income statement is affected, but the balance sheet is not. c. The balance sheet is affected, […]

Which of the following is false regarding the issue of stock versus the issue of bonds to raise capital? a. The issuance of stock decreases several important financial ratios. b. Issuing bonds dilutes the voting power of the stockholders. c. […]

The equity method of accounting for an investment is used when a company purchases a. More than 20% of the debt securities of a second company. b. 100% of the debt securities of a second company. c. 15% of the […]

Discounting a note receivable a. Requires using an account called discount on notes receivable b. Is the process of lending money c. Slows the collection process d. Is the process of selling a promissory note If a credit memo appears […]

Match the action with the category of internal control procedures a. One department should check on another b. Internal audit staff ensure all is working as intended c. Accounting and cash collection is properly separated d. Blank checks are locked […]

Which of the following is not an objective of financial reporting? a. To reflect prospective cash receipts to investors and creditors. b. To reflect prospective cash flows to an enterprise. c. To reflect resources and claim to resources. d. To […]

Carl and Stefanie each invest $15,000 in a business and are given shares of stock in Thibeau Industries as evidence of their ownership interests. For this transaction, identify the effect on the accounting equation. a. Assets increase and liabilities increase. […]

Every accounting transaction affects both the balance sheet and the income statement. a. True b. False From the following list, select the proper section from the statement of cashflows in whi ch it would beclassified. a. Operating Activities b. Investing […]

When stock is issued for a noncash asset, the par value of the stock is the best indicator of the value of the asset. a. True b. False Select the letter of the term each statement best describes. a. authorized […]

The excess of current assets over current liabilities is referred to as working capital. a. True b. False Select the statement on which each of the items provided below would be reported. a. Statement of retained earnings b. Statement of […]

Select the ratio that each statement below most properly satisfies. a. Dividend yield ratio b. Cash flow from operations to capital expenditures ratio c. Debt service coverage ratio d. Return on common stockholders’ equity ratio e. Times interest earned ratio […]

Which of the following transactions does not affect the total assets of Horizon Sailing Corp.? a. A bill is received for the telephone service used by Horizon Sailing during the past month. b. Dividends are paid by Horizon Sailing. c. […]

All changes in long-term liabilities are reflected in the financing activities category of the statement of cash flows. a. True b. False Match the selected items from a classified balance sheet and multiple-step income state ment to the section in […]

On December 1, 2014, Xeon Company bought land and an accompanying warehouse from Yen Company for $800,000. The fair market values of the land and the building at the time of purchase were $700,000 and $300,000, respectively. How much of […]

Givens Corp. Givens Corp. is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Refer to the information for Givens Corp. Calculate the gross profit. a. $241,000 b. $275,000 c. $289,000 d. $425,000 Which […]

The Stockholders’ Equity section of the balance sheet for Grant Corp. at the end of 2016 appears as follows: Net income for the year was $1,250,000. Dividends were declared and paid on the preferred shares during the year, and a […]

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. a. Time value of money b. Simple interest c. Compound interest d. Future value of a single amount e. Present value […]

A good system of internal controls requires that the physical custody of assets be separated from the accounting for those assets. This concept is known as safeguarding assets and records. a. True b. False The participating feature of stock allows […]

Assuming the indirect method for preparing the statement of cash flows is used, indicate whether these items should be added to net income (A), deducted from net income (D), or not be reported in the operating section of the statement […]

Which one of the following items is reported as a current asset on a classified balance sheet? a. Inventory b. Accounts payable c. Land d. Common stock If Ash Company had sales during the year of $10,000,000, an average accounts […]

The term “chronological order” is best associated with: a. a journal. b. a trial balance. c. credit entries. d. capital stock. Match the following bond and long-term liability related terms to the appropriate definition. a. Long-term liability b. Face value […]

Which of the following statements is false? a. A balance sheet reports a company’s cash balance at a specific date. b. An income statement reports the amounts of revenue and expense on an accrual basis, not the amount of cash […]

Choose from the following list of account titles the one that most accurately fits the des cription of that account or is an example of that account.An account title may be used m ore than once or not at all. […]

Which of the following statements is true concerning intangible assets? a. Intangible assets have no economic substance. b. Intangible assets lack physical existence. c. Intangible assets are listed in the stockholders’ equity section of the balance sheet. d. Intangible assets […]

Which of the following terms does not describe the interest rate printed on the bond certificate? a. Coupon rate b. Effective rate c. Face rate d. Stated rate Because of its objective nature, historical cost is the attribute used to […]

Under IFRS, if inventory is written down to a new lower market value, this cannot be reversed in later periods. a. True b. False Using the following information, what is the amount of cost of goods sold? a. $26,900 b. […]

What is the effect of a stock dividend on stockholders’ equity? a. Stockholders’ equity is decreased. b. Retained earnings is increased. c. Additional paid-in capital is decreased. d. Total stockholders’ equity stays the same. All assets are tangible in nature. […]

Turnover ratios differ from the current and quick ratios in that they a. are based on working capital instead of cash. b. are based on a point of time instead of a period of time. c. are activity ratios. d. […]

Washington Corp. reported the following information for 2015 and 2016. If Washington uses the indirect method to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities […]

Match the selected items from a classified balance sheet and multiple-step income state ment to the section in which they would appear on the classified balance sheetor the inc ome statement. a. Current Assets (balance sheet) b. Property, Plant, & […]

The justification for the accrual basis of accounting lies in the needs of financial statement users for periodic information on the financial position and the profitability of the entity. a. True b. False The solution to this problem requires time […]

According to the Sarbanes-Oxley Act of 2002, only external auditors can provide bookkeeping services for the clients they audit. a. True b. False Which one of the following documents is used in the control of cash disbursements? a. Income Statement […]

The preparation of financial statements requires that the information be understandable a. Only to CPAs. b. To those willing to spend the time to understand it. c. Only to those who take an accounting course. d. Only to financial analysts […]

Select the term from the list below that matches each of the following six descriptions. a. Interest b. Maturity value c. Principal d. Payee e. Discounting f. Term g. Recourse h. Implicit i. Maker The difference between the principal amount […]

If cost of goods sold does not equal the cost of merchandise purchased during the period, an adjustment must be made to correct the error. a. True b. False Identify which of the following would be recorded as external events, […]

Which of the following statements regarding the activities of Forman Corp. is true? a. Revenues decrease Forman’s stockholders’ equity. b. Expenses increase Forman’s stockholders’ equity. c. Expenses decrease Forman’s stockholders’ equity. d. None of these answer choices is correct. Vegas […]

Which one of the following procedures is incorrect for setting up and maintaining a petty cash fund? a. A check is prepared for a fixed amount; when the check is cashed, the money is entrusted to a petty cash custodian. […]

Parks Company reported an increase of $370,000 in its accounts receivable during the year 2015. The company’s statement of cash flows for 2015 reported $1 million of cash received from customers. What amount of net sales must Parks have recorded […]

Tracy, Inc. Tracy, Inc. adjusts its books each month but closes its books at the end of the year. The trial balance at July 31 before adjustments is as follows: Refer to the trial balance for Tracy, Inc.According to contracts, […]

The income statement is sometimes called the statement of financial position. a. True b. False A check written by a company but not yet presented to the bank for payment is called a check in transit. a. True b. False […]

From the following list, select the proper section from the statement of cashflows in whi ch it would beclassified. a. Working capital will increase b. Working capital will decrease c. Working capital will not change Borrowed cash using a six-month […]

When using the indirect method, how is the issuing of stock for cash shown on the statement of cash flows? a. Operating activity b. Investing activity c. Financing activity d. Non cash investing and financing activity For each item listed, […]

a. A receivable arising from the sale of goods or services with a verbal promise to pay. b. A form used to categorize the various individual accounts receivable according to the length of time each has been outstanding. c. A […]

Ratios that focus on cash are more useful than those that focus on income in the evaluation of the liquidity of a company. a. True b. False From the following list, select the proper section from the statement of cashflows […]

During May, Aniston, Inc. purchased office supplies for cash. The supplies will be used in June. What effect does this purchase transaction have on the accounting equation? a. Assets increase and stockholders’ equity decreases. b. Assets increase and liabilities increase. […]

Among the assets listed below, which one is considered the most liquid? a. Cash b. Accounts receivable c. Merchandise inventory d. Prepaid expenses Museum Corporation acquired a new manufacturing building by issuing 10,000 shares of its $50 par value preferred […]

If the current ratio is 2.5 to 1, net income is $6,000, and current liabilities are $18,000, how much is working capital? a. $ 6,000 b. $ 24,000 c. $ 27,000 d. $ 45,000 Which of the following statements is […]

A question asked by stockholders is, “How much profit did the company make?” What should the stockholder examine to get the most information that will help evaluate the answer to this question? a. The balance sheet, because retained earnings represents […]

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ANSWER: a ANSWER: a ANSWER: d APPENDIX A: INTERNATIONAL FINANCIAL REPORTING STANDARDS 1. All […]

CHAPTER 1: ACCOUNTING AS A FORM OF COMMUNICATION 1. United Airlines is an example of a a. producer b. supplier c. retailer d. service provider ANSWER: d 2. All of the following are examples of retailers except: a. Sports Authority […]

Chapter 1: Accounting as a Form of Communication 91. All assets are tangible in nature. a. True b. False ANSWER: False 92. A liability is a future economic benefit to a business. a. True b. False ANSWER: False 93. An […]

Chapter 1: Accounting as a Form of Communication 162. Classify the following items according to the financial statement on which each belongs, either the income statement (IS) or the balance sheet (BS). Also indicate whether each is a revenue (R), […]

Chapter 1: Accounting as a Form of Communication 180. Presented below are condensed data from the financial statements of Snap Factory for 2015 and 2014. The figures are expressed in thousands. Use this information to answer the questions that follow. […]

CHAPTER 10: LONG-TERM LIABILITIES 1. The current portion of long-term debt is a balance sheet item for Flavorful Products Company. How would it most likely be classified on the balance sheet? a. Current liability b. Long-term liability c. Current asset […]

Chapter 10: Long-Term Liabilities 104. When the market rate of interest is less than the face rate, then the bond issue will be sold at a discount. a. True b. False ANSWER: False 105. The excess of the face value […]

Chapter 10: Long-Term Liabilities Redemption price: $95,000 × 1.02 = $96,900 Carrying value: $95,000 – $2,750 = 92,250 ANSWER: 1. $(4,650) loss 2. The gain or loss on bond redemption should be presented on the income statement. In most cases, […]

CHAPTER 11: STOCKHOLDERS’ EQUITY 1. Use the incomplete stockholders’ equity section of Vargas Company’s balance sheet as of December 31, 2015, to answer the following question. Common stock, $7 par, 100,000 shares authorized $700,000 Additional paid-in capital—common 160,000 Retained earnings […]

Chapter 11: Stockholders’ Equity 88. [APPPENDIX] When an individual wishes to form a sole proprietorship, he or she does so by a. filing a petition with the IRS. b. purchasing stock in the proprietorship. c. filing corporate paperwork with the […]

Chapter 11: Stockholders’ Equity 160. In the space provided, indicate the effect of the dividend transactions on each account listed by writing the amount and whether the account would be increased or decreased. The company has 10,000 shares of $1 […]

Chapter 11: Stockholders’ Equity 178. Information taken from the accounting records of Airways, Inc., for the year ended December 31, 2015, appears in the table below. In the space provided, indicate in which section of the statement of cash flows […]

CHAPTER 12: THE STATEMENT OF CASH FLOWS 1. Which of the following statements is true? a. If a company reports net income on its income statement, it should report an increase in cash on its statement of cash flows. b. […]

Chapter 12: The Statement of Cash Flows 85. Pilot Company reported the following information for 2015 and 2016. Prepaid insurance, December 31, 2015 $ 2,400 Prepaid insurance, December 31, 2016 1,500 Insurance expense—2016 14,200 How much cash was paid for […]

Chapter 12: The Statement of Cash Flows 165. Selected data from the financial statements of Ames Corporation for the years ended December 31, 2015 and 2016 are presented below. (In thousands) 2016 2015 Cash and cash equivalents $ ? $ […]

Chapter 12: The Statement of Cash Flows 186. Use the selected data from the consolidated statements of cash flows for College Corporation for the years ended December 31, 2016 and 2015, to answer the questions that follow. (in thousands) 2016 […]

Chapter 13: Financial Statement Analysis 90. Which of the following statements is true? a. The return on assets ratio indicates whether the company can pay its current debt when it becomes due. b. The causes for an increase or decrease […]

Chapter 13: Financial Statement Analysis 173. Presented below are selected data from the financial statements of Hospital Supply Company for 2016, 2015, and 2014. 2016 2015 2014 Total assets $650,000 $821,000 $800,000 Net credit sales 800,000 650,000 720,000 Accounts receivable […]

Chapter 13: Financial Statement Analysis 193. The following information is available from the balance sheets at the end of 2016 and 2015 for Kitchen Equipment Company. 2016 2015 Accounts payable $ 120,000 $ 100,000 Accrued liabilities 35,000 30,000 Taxes payable […]

Chapter 2: Financial Statements and the Annual Report 88. Which one of the following is a financing activity of a business? a. Paying for purchases of inventory b. Issuing stock for cash c. Paying salaries d. Purchasing a manufacturing plant […]

Chapter 2: Financial Statements and the Annual Report Eagle Corporation Presented below are all of the items from Eagle Corporation’s income statement for the years ending December 31, 2014 and 2013. December 31, 2014 December 31, 2013 Service fees $2,300,000 […]

Chapter 2: Financial Statements and the Annual Report 186. Mill Valley Corporation was organized on January 1, 2014, with the investment of $225,000 in cash by its stockholders. The company immediately purchased an office building for $300,000, paying $201,000 in […]

CHAPTER 3: PROCESSING ACCOUNTING INFORMATION 1. Which one of the following statements is true? a. External events (transactions) involve interactions between an entity and a party outside the entity. b. Every event or transaction which affects an entity is identified […]

Chapter 3: Processing Accounting Information 97. There is a universal chart of accounts that is applicable to all businesses. a. True b. False ANSWER: False 98. A T account for Cash cannot contain any credits. a. True b. False ANSWER: […]

Chapter 4: Income Measurement and Accrual Accounting 96. Which of the following accounts is not closed to Income Summary at the end of the accounting period? a. Rent Expense b. Service Revenue c. Unearned Revenue d. Supplies Expense ANSWER: c […]

Chapter 4: Income Measurement and Accrual Accounting 180. Motor Repair Shop uses the accrual basis of accounting, and had the following account balances on its financial statements at December 31, 2014: Rent Revenue $34,000 Accounts Receivable 8,200 Utilities Payable 1,500 […]

Chapter 4: Income Measurement and Accrual Accounting 196. Quirin Corp. purchases office supplies once a month and prepares monthly financial statements. The asset account Office Supplies on hand has a balance of $1,850 on March 1. Purchases of supplies during […]

Chapter 5: Inventories and Cost of Goods Sold 86. A company fails to record one storeroom full of inventory in its year-end inventory records. As a result, this will cause: a. an overstatement of inventory on the year-end balance sheet. […]

Chapter 5: Inventories and Cost of Goods Sold 184. The cost of goods sold for Johnnie, Inc. totaled $1,305,000. Sales returns and purchase returns were $3,000 and $4,000, respectively. Purchases totaled $1,300,000. Discounts taken by Johnnie totaled $7,000, while discounts […]

Chapter 6: Cash and Internal Control 90. The following set of items describes activities completed by a company in purchasing and paying for merchandise. For each activity, identify whether or not the activity adheres to or violates sound internal control […]

Chapter 6: Cash and Internal Control 172. Sarcon Corp. prepares monthly bank reconciliations of its checking account balance. The bank statement for October, 2014, indicated the following: Balance, October 31, 2014 $7,920 Service charge for October 20 Interest earned during […]

CHAPTER 7: RECEIVABLES AND INVESTMENTS 1. Which one of the following is not an accurate description of Allowance for Doubtful Accounts? a. Contra account b. Balance sheet account c. Income statement account d. Current asset account ANSWER: c 2. The […]

Chapter 7: Receivables and Investments 86. The reason the allowance method of recognizing bad debts is used is primarily because it recognizes the maximum amount of write-off in each period. a. True b. False ANSWER: False 87. Carson Enterprises’ comparative […]

Chapter 7: Receivables and Investments 172. Stream Media Inc. and Techtronics are competitors in the same industry. The following information was summarized from a recent annual report of Stream Media Inc.: (In millions) Receivables: December 31, 2015 $ 1,968 December […]

CHAPTER 8: OPERATING ASSETS: PROPERTY, PLANT, AND EQUIPMENT, AND INTANGIBLES 1. Wyoming Real Estate purchased a building for $600,000 in 2002. At the end of 2014, when it had a book value of $450,000, it was appraised for $1,000,000. A […]

Chapter 8: Operating Assets: Property, Plant, and Equipment, and Intangibles Farley River Inc. Use the information presented below for Farley River, Inc. for 2015 and 2014 to answer the questions that follow. Farley River uses the straight-line depreciation method. 2015 […]

Chapter 8: Operating Assets: Property, Plant, and Equipment, and Intangibles Annual Depreciation Accumulated Depreciation Book Value $13,800* $13,800 $61,200 13,800 27,600 47,400 13,800 41,400 33,600 13,800 55,200 19,800 13,800 69,000 6,000 ANSWER: Depreciation, accumulated depreciation, and book value for the […]

Chapter 8: Operating Assets: Property, Plant, and Equipment, and Intangibles 187. Refer to the information for Hu Corporation. Required: Calculate the following ratios for Hu for 2015. A. Average life of property, plant, and equipment B. Average age of property, […]

CHAPTER 9: CURRENT LIABILITIES, CONTINGENCIES, AND THE TIME VALUE OF MONEY 1. Redfearn Company has current assets of $150,000 and current liabilities of $60,000. How much inventory could it purchase on account and achieve its minimum desired current ratio of […]

Chapter 9: Current Liabilities, Contingencies, and the Time Value of Money 98. Income taxes payable is a current liability. a. True b. False ANSWER: True 99. A company gives a two-year warranty for its product. The estimated liability for product […]

Chapter 9: Current Liabilities, Contingencies, and the Time Value of Money Valance & Company Use the selected data from the balance sheet and cash flow statements for Valance & Company to answer the questions that follow. Valance & Company Balance […]

The accountant for Darden Corp. was preparing a bank reconciliation as of April 30, 2014. The following items were identified: In addition, Darden made an error in recording a customer’s check; the amount was recorded in cash receipts as $150; […]

Which of the following operating activities results in a cash outflow? a. Paying creditors for merchandise b. Collecting accounts receivable c. Making cash sales d. Receiving deposits recorded as unearned revenue An outstanding check is a check that: a. Has […]

Choose from the following list of account titles the one that most accurately fits the des cription of that account or is an example of that account.An account title may be used m ore than once or not at all. […]

When a liability is accrued, the account debited in the transaction is a stockholders’ equity account. a. True b. False Which one of the following is the last step in the accounting cycle? a. Journalizing business transactions b. Recording and […]

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. a. Time value of money b. Simple interest c. Compound interest d. Future value of a single amount e. Present value […]

There is a standard format in various countries for the statement of financial position. a. True b. False Match the costs that might be included as part of the cost of inventory to the listed accounting treatment. a. Add to […]

Given below is a list of items that may be reported on a statement of cash flows. Identify each as one of the following using the indirect method : a. Operating b. Investing c. Financing d. Not separately reported on […]

Identify each of the following items as operating (O), investing (I), or financing (F) activities on the statement of cash flows(assuming the indirect method). If an item is not on the statement, please mark it as none of these (N). […]

The amount of interest accrued is added to the note payable account and reported in the liabilities section of the balance sheet. a. True b. False A note discounted with recourse means that if the original customer fails to pay […]

Which of the following generally indicates a positive change? a. Earnings per share decreases b. The debt service coverage decreases c. The acid-test ratio decreases d. The number of days’ sales in inventory decreases If a company purchases equipment by […]

Gross margin as a percentage of sales is a common analytical tool for service companies. a. True b. False Which one of the following is not a recognized method of recognizing assets as expenses in a particular accounting period? a. […]

Match the following bond and long-term liability related terms to the appropriate definition. a. Long-term liability b. Face value c. Debenture bonds d. Serial bonds e. Callable bonds f. Face rate of interest g. Market rate of interest h. Bond […]

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Cory and Ginger want to buy an airplane. They find one that will cost […]

Hsu Company purchased a truck on May 31, 2012 for $70,000. The equipment has an estimated useful life of five years. What amount will appear on Hsu Company’s balance sheet for total accumulated depreciation at May 31, 2015? a. $14,000 […]

Given below is information for Xu Corporation and Yang Computers, Inc. at the end of 2016. 1) Using the information provided above, compute the following for each company at December 31, 2016: A. Current ratio B. Acid-test ratio 2) Comment […]

Stockholders’ equity is composed of three parts: contributed capital, earnings retained in the business, and dividends paid. a. True b. False The correct term for an entry made to the left side of an account is a. Double-entry system b. […]

The income statement tells the reader about the actual cash inflows during a period of time. a. True b. False Harvest Catering is a local catering service. Conceptually, when should Harvest recognize revenue from its catering service? a. At the […]

Depreciation does not describe the increase or decrease in the market value of the asset. a. True b. False Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price […]

Paulson Transport Company On January 1, 2015, Paulson Transport Company purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method. What was the book value of the […]

Readers.com uses a perpetual inventory system. If Readers.com uses the moving average method, how much is cost of goods sold for the units sold on February 15? a. $245 b. $255 c. $260 d. $270 Convertible bonds are attractive to […]

The set of items below was identified in preparing a bank reconciliation for Heath Corp. as of August 31, 2014. Bank statement balance $18,500 Heath’s book balance (before adjustments) ? Outstanding checks 2,700 Customer’s NSF checks 350 Service Charges 100 […]

Three organizations important to accounting are listed below. Select the organization th at most closely achieves the role described. a. American Institute of Certified Public Accountants (AICPA) b. Financial Accounting Standards Board (FASB) c. Securities and Exchange Commission (SEC) Issues […]

Information taken from the accounting records of Airways, Inc., for the year ended December 31, 2015, appears in the table below. In the space provided, indicate in which section of the statement of cash flows (investing or financing) each item […]

On January 2, 2015, Hi-Tech Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. The annual cash payment (paid […]

Presented below are selected data from the financial statements of Carnival Corp. for 2016 and 2015. The acid-test ratio is a stricter test of a company’s ability to pay its current debts as they are due than the current ratio […]

When plant assets are reported, the current period’s depreciation expense is subtracted from the original cost on the balance sheet. a. True b. False United Airlines is an example of a a. producer b. supplier c. retailer d. service provider […]

Discount on Bonds Payable is a balance sheet item for Covington Products Company. How would it most likely be classified on the balance sheet? a. Current liability b. Long-term liability c. Current asset d. Contra-liability The system of accounting in […]

Identify whether the following investor questions are associated with (a) primary or sec ondary financial reporting objectives. a. primary financial reporting objective b. secondary financial reporting objective How much revenue will Apple generate during the time period in which I […]

Each account has a normal balance. For the following list of accounts, indicate whether the normal balance of each is a debit or a credit. a. Debit b. Credit Dividends Assets may be used to satisfy business obligations and to […]

You are comparing three companies that use different depreciation methods. Which of the following would help you the most in making a comparison of the companies? a. The average earnings per share for the quarter. b. Prospective cash receipts. c. […]

Mellon Corporation The data presented below is for Mellon Corporation for the year ended December 31, 2015: Refer to information for Mellon Corporation. If Mellon uses 2% of net credit sales to estimate its bad debts, what will be the […]

The Financial Accounting Standards Board created the objectives of financial reporting. a. True b. False Identify where each of the following accounts would be reported on CocaÂCola’s financial statements. a. Balance Sheet-Property, Plant, and Equipment b. Balance Sheet-Intangible Assets c. […]

Provided below is a list of important users of accounting information.Below the list are descriptions of a major need of each of the various users. Fill in the blank with the one user group that is most likely to have […]

The alternate term for a credit card draft is an invoice. a. True b. False In a vertical analysis of the balance sheet, the 100% amount is a. Current assets b. Working capital c. Total assets d. Total stockholders’ equity […]

Significant differences exist in terms on financial statements around the world. For example, another name for what we know as Additional Paid-In Capital in the U.S. is: a. Share Capital b. Capital Reserves c. Provisions for Other Risks d. Deferred […]

Which of the following statements is false regarding U.S. GAAP versus IFRS financial statement presentation? a. U.S. GAAP does not require the presentation of a classified balance sheet. b. IFRS requires the classification of assets and liabilities as current and […]