Ramos Corporation sold 400 shares of treasury stock for $45 per share. The cost for the
shares was $35. The entry to record the sale will include a
a. credit to Gain on Sale of Treasury Stock for $14,000.
b. credit to Paid-in Capital from Treasury Stock for $4,000.
c. debit to Paid-in Capital in Excess of Par for $4,000.
d. credit to Treasury Stock for $18,000.
Answer:
The accounting principle that requires that the cost flow assumption be consistent with
the physical movement of goods is
a. called the expense recognition principle.
b. called the consistency principle.
c. nonexistent; that is, there is no accounting requirement.
d. called the physical flow assumption.
Answer:
Auditing is
a. the examination of financial statements by a CPA in order to express an opinion on
their fairness.
b. a part of accounting that involves only recording of economic events.
c. an area of accounting that involves such activities as cost accounting, budgeting, and
accounting information systems.
d. conducted by the Securities and Exchange Commission to ensure that registered
financial statements are presented fairly.
Answer:
Under IFRS, which of the following is not an acceptable way of displaying
the components of other comprehensive income?
a. Combined statement of retained earnings
b. One-statement approach
c. Two-statement approach
d. All of these answer choices are correct.
Answer:
Customarily, a trial balance is prepared
a. at the end of each day.
b. after each journal entry is posted.
c. at the end of an accounting period.
d. only at the inception of the business.
Answer:
The income statement for the year 2015 of Fugazi Co. contains the following
information:
After the revenue and expense accounts have been closed, the balance in Income
Summary will be
a. $0.
b. a debit balance of $7,500.
c. a credit balance of $7,500.
d. a credit balance of $70,000.
Answer:
The following describes the process of identifying the economic events of an
organization
a. Keeping a chronological diary of particular events in an orderly and systematic
manner.
b. Selecting the economic activities relevant to a particular organization.
c. Preparing accounting reports, including financial statements.
d. Quantifying events in dollars and cents.
Answer:
At January 1, 2014, the available-for-sale securities portfolio held by Hyde Corporation
consisted of the following investments:
1> 2,500 shares of Park common stock purchased for $42 per share.
2> 1,500 shares of Grace common stock purchased for $60 per share.
At December 31, 2014, the market values per share were Park $36 and Grace $68.
Instructions
(a) Prepare a schedule showing the cost and fair value of the portfolio at December 31,
2014.
(b) Prepare the adjusting entry to report the portfolio at fair value at December 31,
2014.
Answer:
On the statement of cash flows worksheet,
a. significant noncash investing and financing activities are not entered in the
reconciling columns.
b. a decrease in cash will be offset by a debit in the reconciling items columns at the
bottom of the worksheet.
c. an increase in cash will be offset by a debit in the reconciling items column at the
bottom of the worksheet.
d. income statement accounts are listed after balance sheet accounts in the top half of
the worksheet under the indirect method.
Answer:
Which of the following time periods would not be referred to as an interim period?
a. Monthly
b. Quarterly
c. Semi-annually
d. Annually
Answer:
Crue Company had the following transactions during 2015:
ï€ Sales of $4,500 on account
ï€ Collected $2,500 for services to be performed in 2016
ï€ Paid $1,625 cash in salaries
ï€ Purchased airline tickets for $250 in December for a trip to take place in 2016
What is Crue’s 2015 net income using cash basis accounting?
a. $625.
b. $875.
c. $5,125.
d. $5,375.
Answer:
On January 1, 2015, the stockholders’ equity section of Kingman Corporation shows:
common stock ($5 par value) $2,000,000; paid-in capital in excess of par value
$1,200,000; and retained earnings $1,500,000. During the year, the following treasury
stock transactions occurred.
Mar. 1 Purchased 60,000 shares for cash at $13 per share.
July 1 Sold 15,000 treasury shares for cash at $15 per share.
Sept. 1 Sold 10,000 treasury shares for cash at $11 per share.
Instructions
(a) Journalize the treasury stock transactions.
(b) Prepare the stockholders’ equity section after the entries in (a) are recorded.
(c) Prepare the entry for September 1, assuming the treasury shares were sold at $8 per
share.
Answer:
Which of the following is false with regard to a general journal?
a. It tracks the increases and decreases in an individual account.
b. It provides a chronological record of transactions.
c. It discloses in one place the complete effects of a transaction.
d. It helps to prevent errors since the debit and credit amounts in an individual entry can
be readily compared.
Answer:
A small stock dividend is defined as
a. less than 30% but greater than 25% of the corporation’s issued stock.
b. between 50% and 100% of the corporation’s issued stock.
c. more than 30% of the corporation’s issued stock.
d. less than 20’“25% of the corporation’s issued stock.
Answer:
Information that is not generally reported for each class of stock on the balance sheet is
a. the market value.
b. the par value.
c. shares authorized.
d. shares issued.
Answer:
The authorized stock of a corporation
a. only reflects the initial capital needs of the company.
b. is indicated in its by-laws.
c. is indicated in its charter.
d. must be recorded in a formal accounting entry.
Answer:
Freight costs paid by a seller on merchandise sold to customers will cause an increase
a. in the selling expense of the buyer.
b. in operating expenses for the seller.
c. to the cost of goods sold of the seller.
d. to a contra-revenue account of the seller.
Answer:
The current sections of Donny Inc.’s balance sheets at December 31, 2014 and 2015, are
presented here.
Donny’s net income for 2015 was $203,000. Depreciation expense was $25,000.
Instructions
Prepare the net cash provided by operating activities section of the company’s statement
of cash flows for the year ended December 31, 2015, using the indirect method.
Answer:
You are purchasing a car for $25,000, and you obtain financing as follows: $2,500
down payment, 12% interest, semiannual payments over 5 years.
Instructions
Compute the payment you will make every 6 months.
Answer:
On February 1, Barton Corporation issued 5,000 shares of its $20 par value preferred
stock for $28 per share.
Instructions
Journalize the transaction.
Answer:
Prepare journal entries to record the following transactions entered into by Valente
Company:
Answer:
Hayden Company purchased a machine on January 1, 2015, at a cost of $90,000. It is
expected to have an estimated salvage value of $5,000 at the end of its 5-year life. The
company capitalized the machine and depreciated it in 2015 using the
double-declining-balance method of depreciation. The company has a policy of using
the straight-line method to depreciate equipment but the company accountant neglected
to follow company policy when he used the double-declining-balance method. Net
income for the year ended December 31, 2015 was $55,000 as the result of depreciating
the machine incorrectly.
Instructions
Using the method of depreciation which the company normally follows, prepare the
correcting entry and determine the corrected net income. (Show computations.)
Answer:
The acquisition of a building by issuing bonds would be considered an investing and
financing activity that did not affect cash.
Answer:
CVS leases a building for 20 years. The lease requires 20 annual payments of $10,000
each, with the first payment due immediately. The interest rate in the lease is 10%.
What is the present value of the cost of leasing the building?
Answer: