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 its selling prices.
b. Increase its sales force.
c. Give customers credit terms of 2/10, n/30 rather than 1/10, n/30.
d. Reduce the number of employees working in the credit department.
Krenshaw Rentals
Use the five transactions for Krenshaw Rentals described below to answer the
question(s) that follow(s).
Refer to the transactions for Krenshaw Rentals.Based on the October 15 transaction,
Farmer’s Electric will record which of the following in its accounting records?
a. a credit in Accounts Payable for $150.
b. a credit in Accounts Receivable for $150.
c. a debit in Accounts Payable for $150.
d. a debit in Accounts Receivable for $150.
On the issuance date, the Bonds Payable account had a balance of $50,000,000 and
Premium on Bonds Payable had a balance of $1,000,000. What was the issue price of
the bonds?
a. $50,000,000
b. $49,000,000
c. $51,000,000
d. Unable to determine from the information given
Frank Crawford Corporation’s balance sheet showed the following amounts: Current
Liabilities, $15,000; Bonds Payable, $8,000; Lease Obligations, $9,000; and
Notes Payable, $5,600. Total stockholders’ equity was $17,000. The debt-to-equity ratio
is:
a. 0.88.
b. 1.18.
c. 0.71.
d. 2.21.
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.
Refer to the information for Farley River, Inc. What is the asset turnover ratio for Farley
River for 2015?
a. 1.60 times
b. 1.82 times
c. 4.00 times
d. 4.55 times
A company’s chart of accounts will reflect the nature of its business.
a. True
b. False
For each of the following items, indicate whether it would appear on a statement of
cash flows prepared using the Direct method (a) or the Indirect method (b).
a. Direct
b. Indirect
Cash sales
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. Winston
wins the lottery. He wins $20,000 per year to be paid to him for 10 years. The state
offers him the choice of a cash settlement now instead of the annual payments for 10
years. If the interest rate is 6%, what is the amount the state will offer for a settlement
today?
a. $147,200
b. $154,440
c. $175,000
d. $200,000
If a company purchases treasury stock for $6,000 and then reissues it for $5,000, the
difference of $1,000 is
a. treated as a gain on the sale.
b. treated as a loss on the sale.
c. an increase in stockholders’ equity.
d. a decrease in stockholders’ equity.
On January 2, 2015, Concrete 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%. What is the carrying value of the bonds after the first
interest payment is made on June 30, 2015?
a. $574,540
b. $571,776
c. $568,920
d. $500,000