Which board(s) has(have) faced bitter opposition when working to
implement fair value measurement for financial instruments?
a. FASB, but not IASB.
b. IASB, but not FASB.
c. both FASB and IASB.
d. neither FASB nor IASB.
Answer:
Costs incurred to increase the operating efficiency or useful life of a plant asset are
referred to as
a. capital expenditures.
b. expense expenditures.
c. ordinary repairs.
d. revenue expenditures.
Answer:
The first step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. identify the alternatives.
c. recognize an ethical situation and the ethical issues involved.
d. weigh the impact of each alternative on various stakeholders.
Answer:
Overstating ending inventory will overstate all of the following except
a. assets.
b. cost of goods sold.
c. net income.
d. stockholder’s equity.
Answer:
The information below relates to the Cash account in the ledger of Lee Company.
Balance September 1’”$25,725; Cash deposited’”$96,000.
Balance September 30’”$22,225; Checks written’”$99,500.
The September bank statement shows a balance of $24,635 on September 30 and the
following memoranda.
At September 30, deposits in transit were $4,695, and outstanding checks totaled
$3,575.
Instructions
Prepare the bank reconciliation at September 30.
Answer:
A computer company has $2,800,000 in research and development costs. Before
accounting for these costs, the net income of the company is $2,000,000. What is the
amount of net income or loss after these R & D costs are accounted for?
a. $800,000 loss
b. $2,000,000 net income
c. $0
d. Cannot be determined from the information provided.
Answer:
Indicate which one of the following would appear on the income statement of both a
merchandising company and a service company.
a. Gross profit
b. Operating expenses
c. Sales revenues
d. Cost of goods sold
Answer:
The market value (present value) of a bond is a function of all of the following except
the
a. dollar amounts to be received.
b. length of time until the amounts are received.
c. market rate of interest.
d. length of time until the bond is sold.
Answer:
If the market interest rate is greater than the contractual interest rate, bonds will sell
a. at a premium.
b. at face value.
c. at a discount.
d. only after the stated interest rate is increased.
Answer:
A company purchased inventory as follows:
150 units at $5
350 units at $6
The average unit cost for inventory is
a. $5.00.
b. $5.50.
c. $5.70.
d. $6.00.
Answer:
Queen Company is in the electronics industry and the price it pays for inventory is
decreasing.
Instructions
Indicate which inventory method will:
a. provide the highest ending inventory.
b. provide the highest cost of goods sold.
c. result in the highest net income.
d. result in the lowest income tax expense.
e. produce the most stable earnings over several years.
Answer:
A classmate is considering dropping his accounting class because he cannot understand
the rules of debits and credits.
a. Can the student be successful in the course without an understanding of the rules of
debits and credits?
b. Explain the rules of debits and credits in a way that will help him understand them.
Answer:
The total assets and liabilities of Company at January 1 and December 31, 2015 are
presented below.
Instructions:
1> Assume dividends of $10,800 were paid and no additional stock was issued during
the year. Revenues were $110,000. Compute (a) net income, and (b) expenses.
2> Assume additional stock was issued for $4,800 and no dividends were paid during
the year. Expenses were $42,000. Compute (a) net income, and (b) revenues.
3> Assume additional stock was issued for $62,000 and dividends of $15,600 were paid
during the year. Compute net income.
4> Assume additional stock was issued for $6,000 and net income was $51,000.
Compute dividends paid.
Answer:
It is not true that current assets are assets that a company expects to
a. realize in cash within one year.
b. sell within one year.
c. use up within one year.
d. acquire within one year.
Answer:
In recording business transactions, evidence that an accounting transaction has taken
place is obtained from
a. business documents.
b. the Internal Revenue Service.
c. the public relations department.
d. the SEC.
Answer:
During August, 2015, Baxter’s Supply Store generated revenues of $60,000. The
company’s expenses were as follows: cost of goods sold of $36,000 and operating
expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the
sale of a delivery truck of $2,000.
Baxter’s net income for August, 2015 is
a. $20,000.
b. $21,000.
c. $23,000.
d. $24,000.
Answer:
(a) Karns Company purchased merchandise on account from Bailey Office Suppliers
for $174,000, with terms of 2/10, n/30. During the discount period, Karns returned
some merchandise and paid $156,800 as payment in full. Karns uses a perpetual
inventory system. Prepare the journal entries that Karns Company made to record:
(1) the purchase of merchandise.
(2) the return of merchandise.
(3) the payment on account.
(b) Hinds Company sold merchandise to Peter Company on account for $146,000 with
credit terms of ?/10, n/30. The cost of the merchandise sold was $86,140. During the
discount period, Peter Company returned $6,000 of merchandise and paid its account in
full (minus the discount) by remitting $137,200 in cash. Both companies use a perpetual
inventory system. Prepare the journal entries that Hinds Company made to record:
(1) the sale of merchandise.
(2) the return of merchandise.
(3) the collection on account.
Answer:
In accounting for stock investments between 20% and 50%, the _______ method is
used.
a. consolidated statements
b. controlling interest
c. cost
d. equity
Answer:
Art, Inc., has 5,000 shares of 4%, $100 par value, cumulative preferred stock and
20,000 shares of $1 par value common stock outstanding at December 31, 2015. There
were no dividends declared in 2013. The board of directors declares and pays a $45,000
dividend in 2014 and in 2015. What is the amount of dividends received by the
common stockholders in 2015?
a. $30,000
b. $20,000
c. $45,000
d. $0
Answer:
The date on which a cash dividend becomes a binding legal obligation is on the
a. declaration date.
b. date of record.
c. payment date.
d. last day of the fiscal year-end.
Answer:
Wainwright Stores accepts both its own and national credit cards. During the year the
following selected summary transactions occurred.
Instructions
(a) Journalize the transactions for Wainwright Stores.
(b) Indicate the statement presentation of the financing charges and the credit card
service charge expense for Wainwright Stores.
Answer:
The entry to record patent amortization usually includes a credit to
a. Amortization Expense.
b. Accumulated Amortization.
c. Accumulated Depreciation.
d. Patents.
Answer:
If a company maintains special journals, sales of merchandise on credit should be
recorded in a _______________ whereas sales of merchandise for cash should be
recorded in the _______________.
Answer:
Match the codes assigned to the following payroll functions to the procedures listed
below:
1> ____ Distribution of checks by the treasurer.
2> ____ Supervisor approves hours worked.
3> ____ Posting job openings.
4> ____ Maintenance of payroll records.
5> ____ Verification of payroll calculations.
6> ____ Screening and interviewing of job applicants.
7> ____ Employment authorization.
8> ____ Signing prenumbered payroll checks.
9> ____ Use of a timeclock.
10> ____ Payroll tax return preparation.
11> ____ Employee signs receipt acknowledging cash received.
12> ____ Documentation of employee hiring.
Answer:
‘Intent to convert’ does not include an investment used as a resource that
will be used whenever the need for cash arises.
Answer:
Darman Company issued 700 shares of no-par common stock for $7,700. Which of the
following journal entries would be made if the stock has a stated value of $2 per share?
Answer:
The worksheet for Gibler Rental Company appears below. Using the adjustment data
below, complete the worksheet. Add any accounts that are necessary.
Adjustment data:
[a] Prepaid rent expired during August, $3.
[b] Depreciation expense on equipment for the month of August, $8.
[c] Supplies on hand on August 31 amounted to $6.
[d] Salaries and wages expense incurred at August 31 but not yet paid amounted to $10.
Answer:
Measures of a company’s liquidity are concerned with the frequency and amounts of
dividend payments.
Answer:
Fleming Sign Company uses the allowance method in accounting for uncollectible
accounts. Past experience indicates that 1% of net credit sales will eventually be
uncollectible. Selected account balances at December 31, 2014, and December 31,
2015, appear below:
Instructions
[a] Record the following events in 2015.
(b) Prepare the adjusting journal entry to record the bad debt provision for the year
ended December 31, 2015.
(c) What is the balance of Allowance for Doubtful Accounts at December 31, 2015?
Answer:
