Employees earn $5,000 per day, work five days per week, Monday through Friday, and
get paid every Friday. If the previous payday was January 26 and the accounting period
ends on January 31, what amount is the ending balance in the wages payable account?
a. $ 9,000
b. $10,000
c. $15,000
d. $25,000
When using the indirect method, how is the decrease in accounts payable shown on the
statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
Guinther & Sons, Inc. Guinther & Sons, Inc. a retailer of men’s clothing, earned a net
profit of $77,000 for 2014. The balance sheet for Guinther & Sons includes the
following items:
Read the information for Guinther & Sons, Inc. The average current ratio for stores
such as Guinther & Sons is 2.4 to 1. What does this comparison tell you about its
liquidity?
a. It is more liquid than its competitors.
b. It has more long-term assets than its competitors.
c. Since a rule of thumb for current ratios is 2 to 1, neither Guinther & Sons, Inc. nor its
competitors is liquid.
d. Guinther & Sons, Inc. is more profitable than its competitors.
Match the following choices to the listed situation.
a. a deferred expense
b. a deferred revenue
c. an accrued liability
d. an accrued asset
Depreciation on a delivery truck is recorded
Match the selected items from a classified balance sheet and multiple-step income state
ment to the section in which they would appear on the classified balance sheetor the inc
ome statement.
a. Current Assets (balance sheet)
b. Property, Plant, & Equipment (balance sheet)
c. Current Liabilities (balance sheet)
d. Long-term Liabilities (balance sheet)
e. Stockholders’ Equity (balance sheet)
f. Operating Revenue (income statement)
g. Operating Expenses (income statement)
h. Other Revenue & Expenses (income statement)
i. Income Taxes (income statement)
Buildings
Innovate Company borrowed on a one-year, 10%, $150,000 note on May 1, 2014 with
interest and principal to be paid at maturity. How much interest should Innovate
Company report on its income statement for the year ending December 31, 2015?
a. $ 10,000
b. $ 15,000
c. $ 30,000
d. $ 5,000
From the following list, identify whether the change in the account balance during the
year would be reported as operating (O) cash flow, investing (I) cash flow, financing (F)
cash flow or not separately (N) reported on the statement of cash flows. Assume that the
indirect method is used to prepare the operating activities section. Use the following
response choices a-d.
a. operating (O) cash flow
b. investing (I) cash flow
c. financing (F) cash flow
d. not separately (N) reported on the statement of cash flows
Current maturities of long-term debt
If receipts from cash sales of $7,500 were recorded incorrectly as $5,700 in the
company’s books, then this item would be included on the bank reconciliation as a(n)
a. deduction from the balance per company’s records
b. addition to the balance per bank statement
c. deduction from the balance per bank statement
d. addition to the balance per company’s records
The following unadjusted amount was reported on Rental Entertainment Corporation’s
accounting records at December 31, 2015: Unearned Subscription Revenue $ 36,000 A)
Determine the effect on the accounting equation of any adjusting entries necessary at
December 31, 2015, for each of the following transactions: 1) During the year, Rental
Entertainment sold 12-month subscriptions for its newly developed Internet service.
Half of the subscriptions began October 1, 2014, while the other half began December
1, 2015. 2) Rental estimates its income taxes to be 30 percent of its estimated income of
$60,000
B) Prepare the current liabilities section of Rental’s balance sheet by listing any current
liabilities and the related amounts as a result of the adjustments in Part A
A company that uses leverage is attempting to earn an overall return that is higher than
the cost of funds received from
a. preferred and common stockholders.
b. common stockholders only.
c. preferred stockholders and borrowed funds.
d. borrowed funds only.
An example of horizontal analysis is the increase in cost of goods sold by 29% from
2015 to 2016.
a. True
b. False
Which inventory costing method results in the lowest income tax expense during a
period of decreasing prices?
a. FIFO
b. LIFO
c. Specific Identification
d. Weighted Average Cost
Match the following bond and long-term liability related terms to the appropriate
definition.
a. Long-term liability
b. Face value
c. Debenture bonds
d. Serial bonds
e. Callable bonds
f. Face rate of interest
g. Market rate of interest
h. Bond issue price
i. Premium
j. Discount
k. Effective interest method of amortization
l. Carrying value
m. Gain or loss on redemption
Bonds that are backed by the general creditworthiness of the issuer and are not backed
by specific collateral.
McDonald Corp. owns a building with an original cost of $2,000,000 and accumulated
depreciation at the balance sheet date of $300,000. Based on a recent appraisal, the fair
value of the building is $1,800,000. REQUIRED: 1> At what amount will the building
be reported on the year-end balance sheet if McDonald follows U.S. GAAP?
2> Does McDonald have a choice in the amount to report for the building if instead it
follows IFRS? What are those choices?
Harrison Company calculated the following amounts concerning its financial
information for the years ending December 31, 2015 and 2014:
Required:
Examine Harrison’s ratios. Is the change in the current ratio favorable or not? Explain.
Provide at least three source documents and the related event for which each would
provide the evidence to record.
Wentworth Company received advance payments from customers during 2015 of
$10,000. At December 31, 2015,
$1,000 of the advance payments still had not been earned. After the adjustments are
recorded and posted at December 31, 2015, the balances in the Unearned Service
Revenue and Service Revenue accounts will be:
Note Disclosure of Legal Matters Use the Note Disclosure Of Legal Matters below to
answer the questions that follow. Note 13 – Legal Matters On December 14, 2015, the
Company was served with a class action complaint filed in federal court in Burlington,
Vermont. The complaint, captioned John Doe vs. The Company was filed by a
Company’s shareholder on behalf of himself and purportedly on behalf of all other
Company’s shareholders who purchased the common stock of the Company during the
period from March 25, 2014 through December 19, 2014. Plaintiff alleges that the
Company violated the federal securities laws by making, in 2014, untrue statements of
material facts and omitting to state material facts primarily concerning the Company’s
construction and start-up of its new manufacturing facility. Also named as defendants in
the Complaint are certain present and former officers and directors of the Company.
Plaintiff is seeking an unspecified amount of monetary damages. While this action is in
its preliminary stages, management believes, based on an initial review, the allegations
made in the lawsuit are without merit and the Company intends to defend the lawsuit
vigorously.
Review the Note Disclosure of Legal Matters. REQUIRED: (1) If you were to make an
entry for the lawsuit against Company, what monetary amount should be recorded? On
what did you base your decision with regard to the amount? (2) Does the disclosure
imply that the Company is involved in only this litigation at this time? (3) Why did this
lawsuit arise? Do you believe it to be a reasonable one or do you think that the plaintiff,
has little grounds for this lawsuit?
Surplus Warehouse purchased a forklift on January 1, 2015, for $12,000. The forklift is
expected to last for five years and have a residual value of $1,200. Surplus Warehouse
uses the double-declining-balance method for depreciation. REQUIRED: 1> Calculate
the depreciation expense, accumulated depreciation, and book value for each year of the
forklift’s life.
2> Prepare the journal entry to record depreciation expense for 2015.
3> What factors may have influenced Surplus Warehouse to use the
double-declining-balance method?
Presented below are condensed data from the financial statements of Faux Factory for
2015 and 2014. The figures are expressed in thousands. Use this information to answer
the questions that follow.
1> What is the name of Statement A? 2> What is the name of Statement B?