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
effort to mitigate the possibility of income fluctuating widely from period to period.
a. True
b. False
The following information is given for Sego Company:
What are the company’s current assets?
a. $220,000
b. $155,000
c. $130,000
d. $95,000
Assets are unexpired costs, and expenses are expired costs.
a. True
b. False
Identify which of the following would be recorded as external events, recorded as
internal events, or not recorded.
a. Internal event
b. External event
c. Not recordedA vendor for a company’s supplies is paid an amount owed on account.
Which one of the following statements is false ?
a. Differences in cash flows between LIFO and FIFO inventory methods are a direct
result of the differences in the purchases
b. Differences in cash flows between LIFO and FIFO inventory methods are caused by
differences in taxes.
c. The amount of cash to acquire inventory is the same for companies that use LIFO as
for those companies that use FIFO.
d. The primary determinant in selecting an inventory costing method should be the
ability of the method to accurately reflect the net income of the period.
Bonds are a popular source of financing because
a. bond interest expense is deductible for tax purposes, while dividends paid on stock
are not.
b. financial analysts tend to downgrade a company that has raised large amounts of cash
by frequent issues of stock.
c. a company having cash flow problems can postpone payment of interest to
bondholders.
d. the bondholders can always convert their bonds into stock if they choose.
Use the following data to answer the question presented below for Raines Corp.’s
preparation of a bank reconciliation on October 31, 2014:
What is the net amount of the increase or decrease in Raines’ cash balance which must
be recorded as a result of the adjustments identified by the bank reconciliation?
a. $100 decrease
b. $300 decrease
c. $400 decrease
d. $600 decrease
Cushion Sports accepted a credit card account receivable in exchange for $5,000 of
services provided to a customer. The credit card company charges a 5% service charge.
Recording the transaction in the company’s accounting records will have what effect on
the accounting equation?
a. Increase assets and equity by $4,750
b. Decrease assets and equity by $250
c. Increase assets by $5,000
d. Increase equity by $5,000
Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an
estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of
operation. The crane was purchased on January 1, 2015 and was used 2,700 hours in
2015 and 2,600 hours in 2016. Refer to the information for Norwood, Inc, Based on this
information, what method of depreciation will produce the maximum depreciation
expense in 2016?
a. Straight-line
b. Double-declining-balance
c. Units-of-production
d. All methods produce the same expense in 2016.
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.
$3,000 freight costs were paid to ship the equipment from the manufacturer.
You are a potential stockholder and are concerned that a particular company you are
ready to invest in might have too much debt. Which financial statement would provide
you information needed in order to evaluate your concern?
a. Balance sheet
b. Income statement
c. Statement of retained earnings
d. Statement of public accounting
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 a statement of cash flows
Purchase of equipment for cash
Business entities generally carry on:
a. Operating, investing, and financing activities
b. Operating activities, but only corporations engage in financing and investing
activities
c. Investing and operating activities, but only corporations engage in financing activities
d. Either investing or financing activities, but not both
The terms referring to contingencies differ between U.S. GAAP and IFRS.
a. True
b. False
A work sheet is an alternative to T accounts to help in the preparation of a statement of
cash flows.
a. True
b. False
Adam Inc. uses a perpetualinventory system.
If Adam uses the LIFO method, how much is cost of goods sold for the month of
January?
a. $204
b. $208
c. $212
d. $560
Because of changing market conditions, Friendly Corporation made the decision to
redeem $300,000 of its bonds prior to maturity. The bonds had been issued at a discount
and the balance in the discount account at the time of redemption was $15,000. The
corporation’s bond certificates indicated that the bonds could be retired early at 103.
Friendly’s retirement of the bonds would result in a(n)
a. loss of $24,000.
b. gain of $6,000.
c. decrease in owners’ equity of $9,000.
d. increase in assets of $15,000.
Skyline, Inc. The balance sheet of Skyline Inc. includes the following items:
Read the information about Skyline, Inc. What is Skyline’s current ratio?
a. 0.8 to 1
b. 1.6 to 1
c. 1.2 to 1
d. 2.5 to 1
On August 16, 2015, Blenim Corp. purchases 6,000 shares of common stock in
Mountain Inc. at a market price of $17 per share. In addition, Blenim pays brokerage
fees of $2,000. On October 21, 2015, Blenim sells the Mountain stock for $12 per
share. REQUIRED:
Prepare all necessary entries on Blenim’s books in connection with the investment
beginning with the purchase of the common stock on August 16, 2015, and the sale on
October 21, 2015.
Burke Company The following income statement items are taken from the records of
Burke Company for the year ended December 31, 2014:
Read the information about Burke Company Required:
Prepare a single-step income statement for the year ended December 31, 2014.
Cyprus Corp. received a 7%, 6-month promissory note with a face amount of $8,000
from the Mustafa Company for the sale of merchandise on May 1, 2014. Cyprus’
accounting yearÂend is December 31. REQUIRED : How much interest income will
Cyprus Corp. recognize over the term of the note?
Genenco, Inc., a supplier, is thinking of extending credit to a Fab Company but decides
not to because the Fab’s current ratio is only 0.60. Do you agree with the supplier’s
decision? What other factors need to be considered in drawing any conclusions about a
company’s liquidity?
When an investor is able to secure significant influence over an investee, themethod of
accounting is used.
What are two reasons for why a company’s accounts receivable turnover may decrease?
Crystal, Inc.
Crystal, Inc. reported $52,000 of net income for 2014. Crystal’s balance sheet at
December 31, 2014 includes the following amounts:
Read the information about Crystal, Inc. Which item is most “liquid”? Why is liquidity
important?
Use the current asset section of the balance sheets of the Breeze Company as of June
30, 2016 and 2015 presented below to answer the questions that follow.
REQUIRED:
In the spaces provided below, complete a horizontal analysis of the current asset section
of Breeze Company’s balance sheet for 2016. Your answers for ‘œ% Change’ should be
rounded to one decimal place, e.g., 10.3%. Provide a short evaluation of this analysis.
Marion Construction owns property in Polk County. Marion’s 2014 property taxes
amounted to $85,000. Polk County will send out the 2015 property tax bills to property
owners during April 2016. Taxes must be paid by June 1, 2016. Assume that Marion
prepares adjusting entries only once a year, on December 31 for the entire year’s taxes,
and that property taxes for 2015 are expected to increase by 9% over those for 2014.
REQUIRED:
1> Prepare the adjusting entry required to record the 2015 property taxes payable on
December 31, 2015.
2> Prepare the journal entry to record the payment of the 2015 property taxes on June 1,
2016.
