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 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.
REQUIRED:
(A) What is the significance of the positive amounts shown above, for both years, for
accounts payable and accrued liabilities?
(B) At the end of each year, College’s cash balance was approximately $5 to $7 million.
What does this indicate about College’s cash management techniques?
Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1,
2015. The amounts below are related to the equipment purchase. Match the items below
and explain why each revenue expenditure is not capitalized.
a. This item should be included as part of the cost of the equipment.
b. This item should be considered a revenue expenditure.
A state agency required that a pollution-control device be installed on the equipment at
a cost of $5,000.
Which organization would have the ultimate responsibility of deciding if the advantages
outweigh the disadvantages in the adoption of IFRS accounting standards in the U.S.?
a. FASB
b. SEC
c. IASB
d. AICPA
Every business transaction is recorded by a debit to a balance sheet account and a credit
to an income statement account.
a. True
b. False
On January 1, 2015, Chain, Inc. issued $400,000, 10-year, 10% bonds for $354,200.
The bonds pay interest on June 30 and December 31. The market rate is 12%. The
interest expense on the bonds at June 30, 2015 is
a. $20,000
b. $24,000
c. $21,252
d. $17,710
In an operating lease, the lessee acquires the right to use an asset for only a limited
period of time.
a. True
b. False
Assuming a company uses the allowance method, the entry to recognize the write-off of
the specific uncollectible accounts will act to:
a. Increase total assets and total equity
b. Increase total assets and decrease total equity
c. Decrease total assets and total equity
d. Not affect total assets or total equity
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
Bonds Payable
The attitude of the Financial Accounting Standards Board toward deferred tax liabilities
is that they are
a. an amount that results in a future obligation and meets the definition of a liability.
b. a bookkeeping item that is used merely to maintain equality of the accounting
equation.
c. not true liabilities because the balance increases every year.
d. not payable in the immediate future so it not necessary to record them.
All of the following are important provisions of the Sarbanes-Oxley Act except :
a. The establishment of a new Public Company Accounting Oversight Board.
b. The requirement to prepare both FASB and IASB financial statements.
c. A requirement that the external auditors report directly to the company’s audit
committee.
d. A clause to prohibit public accounting firms that audit a company from providing any
other services that could impair their ability to act independently in the course of their
audit.
Use Rizwi Corporation’s list of accounts at December 31, 2015 to answer the following
question. Rizwi Corporation
List of Accounts at December31,2015
What is Rizwi Corp.’s current ratio?
a. 0.48 to 1
b. 2.00 to 1
c. 2.55 to 1
d. 2.86 to 1
Changing inventory methods to take advantage of the tax breaks offered by LIFO is not
a valid reason for a change in methods.
a. True
b. False
An increase in a company’s revenue and expense accounts will automatically cause an
increase in net income for the period.
a. True
b. False
Which of the following represents the board of directors subset that acts as a direct
contact between stockholders and the independent accounting firm?
a. Audit committee
b. Internal audit staff
c. External auditors
d. Stockholders’ representative
Depreciation has no effect on income taxes, since it only reduces a plant asset’s book
value.
a. True
b. False
Utah Co. sold merchandise to Big Sky Corp. on December 1, 2014, for $9,000, and
accepted a promissory note for payment in the same amount. The note has a term of 90
days and a stated interest rate of 8%. Utah’s accounting period ends on December 31.
What is the actual maturity date of the note?
a. December 31, 2014
b. January 29, 2015
c. February 28, 2015
d. March 1, 2015
Which one of the following sections is least likely to be found in a corporate annual
report?
a. Notes to the Financial Statements
b. Forecasts of Cash Flows and Earnings
c. Report of the Independent Accountants
d. Management’s Discussion and Analysis