Since the balance of the Accumulated Depreciation account will appear on the asset
side of the balance sheet, it is placed on the debit side of the work sheet’s Balance Sheet
columns.
The callable feature of a bond can be exercised by the bondholder.
The conventions of consistency and conservatism require that financial statements
present all the information relevant to users’ understanding of the statements.
Issuing bonds at a discount has the effect of increasing interest expense above the face
amount of interest.
The work sheet is a type of accountant’s working paper.
One of the drawback of the return on investment performance measure is that it
considers both operating and nonoperating income.
The percentage of net sales method of estimating uncollectible accounts is in violation
of the matching principle.
If fixed costs are $24,000, variable costs are $25 per unit, and the product sells for $45,
the total contribution margin at the breakeven point is $24,000.
In a journal entry, debits are always recorded before credits.
Treasury stock is reported as an asset on the balance sheet because treasury shares may
be sold later.
When the equity method is used to account for an investment in stock, dividends
received by the investor decrease the investment account.
Accounting periods should be of equal length to facilitate comparisons between
periods.
Operating expenses include cost of goods sold.
The entry to record the issuance of bonds at a discount includes a credit to the
Unamortized Bond Discount account.
Under the FIFO costing method, separate unit cost analyses are not used for each
accounting period because costs of different periods are averaged.
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Decrease in Inventory’”indicate
the effect on net income in arriving at net cash flows from operating activities by
choosing one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.
Lease agreements are
A.estimates.
B.commitments.
C.liabilities.
D.contingencies.
__________ is the quality that different knowledgeable and independent observers
could reach concensus that a particular depiction is a faithful representation.
A.Verifiability.
B.Consistency.
C.Comparability.
D.Neutrality.
Stock categorized as trading securities is purchased for $72,000. At year end, when the
market value of the stock is $63,000, the adjusting entry that would be recorded is:
A)Allowance to Adjust Short-Term Investments to Market 9,000
Unrealized Loss on Investments 9,000
B)Unrealized Loss on Short-Term Investments 9,000
Allowance to Adjust Short-Term Investments to Market 9,000
C)Allowance to Adjust Short-Term Investments to Market 9,000
Short-Term Investments 9,000
D)Realized Loss on Investments 9,000
Which of the following is not a component of the operating cycle?
A.Sales to customers
B.Collection of accounts receivable
C.Recognition of depreciation
D.Purchases from suppliers
Revenues
A.are decreases in equity resulting from rendering services.
B.are a cost of doing business.
C.are called expired costs.
D.are earned through the sale of goods, even though the cash may not be collected until
later.
The board of directors of Lark Corporation declared a cash dividend of $3.50 per share
on 57,000 shares of common stock on June 14, 20×5. The dividend is to be paid on July
15, 20×5, to shareholders of record on July 1, 20×5. The effects of the entry to record
the payment of the dividend on July 15, 20×5, are to
A.increase assets and decrease stockholders’ equity.
B.decrease stockholders’ equity and decrease liabilities.
C.decrease liabilities and decrease assets.
D.increase stockholders’ equity and decrease liabilities.
The effective interest method of amortization of bond premiums and discounts is
superior to the straight-line method because it results in a(n)
A.more variable interest rate.
B.uniform rate of interest.
C.interest rate that increases or decreases slightly over time.
D.interest rate that is close to the market interest rate.
In conducting horizontal analysis, it is important to focus attention on the changes in
A.the composition of the statements.
B.dollar amounts and their percentages.
C.dollar amounts.
D.percentages.
Which of the following is not a category of investments?
A)Held-to-maturity securities
B)Trading securities
C)Collateral securities
D)Available-for-sale securities
Bank of the Pacific is a local bank operating primarily in Portland, Oregon. The bank
accepts deposits from and makes loans to local businesses and individuals. Which of the
following accounting estimates would be most important for Bank of the Pacific?
A.Uncollectible accounts receivable.
B.Warranty claims.
C.Total units of production.
D.Sales returns.
Ivy Company entered into a long-term lease for a piece of equipment. The lease term
calls for an annual payment of $4,000 for six years, which approximates the useful life
of the equipment. Assume a discount factor of 16 percent. (Note: Present value of a
single sum factor at six years and 16% is 0.410; present value of an annuity factor at six
years and 16% is 3.685.) Round answers to the nearest dollar.
a. Prepare the entry without explanation to record the leased equipment.
b. Prepare the entry without explanation to record annual depreciation, assuming the
straight-line method and no residual value.
c. Prepare the entry without explanation to record the first annual payment of $4,000,
after the company has had the equipment for one year.
Use this inventory information for the month of August to answer the following
question.
Assuming that a perpetual inventory system is used, what is ending inventory on a
FIFO basis?
A.$3,904
B.$3,984
C.$4,024
D.More information is needed.
Which of the following is not TRUE of the direct materials purchases budget?
A.It is determined by the anticipated change in the direct materials inventory level and
the production budget.
B.It does not affect the forecasted balance sheet.
C.It is expressed in units and dollars.
D.It affects the budgeted income statement.
Assume the indirect method is used to compute net cash flows from operating activities.
For this item extracted from the financial statements’”Decrease in Accrued
Liabilities’”indicate the effect on net income in arriving at net cash flows from
operating activities by choosing one of the following:
A.Add to net income to arrive at net cash flows from operating activities.
B.Subtract from net income to arrive at net cash flows from operating activities.
C.Not used to adjust net income to calculate net cash flows from operating activities.
Use the following unadjusted trial balance to prepare adjusting entries, given the
additional information below it. Assume that financial statements are prepared
quarterly. Omit explanations.
a. Of the revenue received in advance, 30 percent remained unearned on September 30.
b. The office furniture has an estimated 12-year useful life and zero value at the end of
that time. Record depreciation for the quarter.
c. Salaries earned, but unpaid, totaled $2,600.
d. The Prepaid Rent applies to the six months beginning September 1, 20×5.
e. Office supplies on hand totaled $120 at the end of the quarter.
f. Services performed but not yet billed or recorded amount to $3,000.
Which of the following is a product-level activity cost?
A.Securing the factory
B.Testing the speakers
C.Redesigning the installation process
D.Materials handling
Liberty Industries purchased merchandise worth $1,800 on credit, terms n/30 and
returned merchandise worth $200 on the next day. What is the required journal entry to
record the merchandise returns under the perpetual inventory system?
On January 2, 2013, Topanga Company purchased a machine for $90,000. The machine
has a five-year estimated useful life and a $6,000 estimated residual value. In addition,
the company expects to use the machine 200,000 hours. Assuming that the machine was
used 35,000 hours during 2014, complete the following chart. If a figure cannot be
determined, indicate so by placing an ‘X’ in the box. (Show your work.)
Joan and Pat Clair are sisters who each own and operate shops selling the latest
electronics in neighboring towns. They decide to have a contest to see whose shop can
be more profitable for the year. At year-end, Joan’s records show sales of $210,000, cost
of goods sold of $110,000, and operating expenses of $42,000. The records of Pat’s
shop reveal sales of $216,000, cost of goods sold of $124,000, and operating expenses
of $38,000. Pat’s shop also had other revenue of $6,000 received for allowing the shop
to be used in taping a television show. Each sister claims to have won the contest.
Provide explanations as to why each would think so, and then name the winner
Why is the LIFO cost flow assumption an acceptable valuation method for merchandise
inventory when it rarely matches the physical movement of the product?
Operating expenses do not match the amount of cash paid to employees, suppliers, and
others for goods and services during a period. Describe the three adjustments that must
be made to operating expenses to arrive at the cash outflow.
Describe how the process costing information is used by managers in every stage of the
management process.
Using the following information from an annual report, prepare a vertical analysis of
the consolidated statement of earnings for the fiscal year ended June 30, 20×5. (Round
percentage answers to one decimal place.)
