GAAP, compared to IFRS, tends to be more
a. simple in accounting requirements.
b. rules-based.
c. principles-based.
d. simple in disclosure requirements.
Answer:
The steps in preparing a trial balance include all of the following except
a. listing the account titles and their balances.
b. totaling the debit and credit columns.
c. proving the equality of the two columns.
d. transferring journal amounts to ledger accounts.
Answer:
The cumulative effect of the declaration and payment of a cash dividend on a
company’s financial statements is to
a. decrease total liabilities and stockholders’ equity.
b. increase total expenses and total liabilities.
c. increase total assets and stockholders’ equity.
d. decrease total assets and stockholders’ equity.
Answer:
All of the following factors in computing depreciation are estimates except
a. cost.
b. residual value.
c. salvage value.
d. useful life.
Answer:
A complete journal entry does not show
a. the date of the transaction.
b. the new balance in the accounts affected by the transaction.
c. a brief explanation of the transaction.
d. the accounts and amounts to be debited and credited.
Answer:
A current liability is a debt the company reasonably expects to pay from existing
current assets within
a. one year.
b. the operating cycle.
c. one year or the operating cycle, whichever is longer.
d. one year or the operating cycle, whichever is shorter.
Answer:
Which of the following is not part of the accounting process?
a. Recording
b. Identifying
c. Financial decision making
d. Communicating
Answer:
Which of the statements below is not true?
a. An adjusted trial balance should show ledger account balances.
b. An adjusted trial balance can be used to prepare financial statements.
c. An adjusted trial balance proves the mathematical equality of debits and credits in the
ledger.
d. An adjusted trial balance is prepared before all transactions have been journalized.
Answer:
The statement of cash flows will not provide insight into
a. why dividends were not increased.
b. whether cash flow is greater than net income.
c. the exact proceeds of a future bond issue.
d. how the retirement of debt was accomplished.
Answer:
On January 1, Jorge Inc. issued $3,000,000, 8% bonds for $2,817,000. The market rate
of interest for these bonds is 9%. Interest is payable annually on December 31. Jorge
uses the effective-interest method of amortizing bond discount. At the end of the first
year, Jorge should report unamortized bond discount of:
a. $164,700.
b. $169,470.
c. $157,467.
d. $153,000.
Answer:
Druganaut Company buys a $21,000 van on credit. The transaction will affect the
a. income statement only.
b. balance sheet only.
c. income statement and retained earnings statement only.
d. income statement, retained earnings statement, and balance sheet.
Answer:
The following data is available for Blaine Corporation at December 31, 2015:
Common stock, par $10 (authorized 30,000 shares) $250,000
Treasury Stock (at cost $15 per share) $ 900
Based on the data, how many shares of common stock have been issued?
a. 30,000
b. 25,000
c. 29,940
d. 24,940
Answer:
Free cash flow equals cash provided by
a. operations less capital expenditures and cash dividends.
b. operations less cash dividends.
c. investing activities less capital expenditures and cash dividends.
d. operations less capital expenditures.
Answer:
Cash-basis accounting is allowed under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.
Answer:
Gains on an exchange of plant assets that has commercial substance are
a. deducted from the cost of the new asset acquired.
b. deferred.
c. not possible.
d. recognized immediately.
Answer:
The Duce Company has five plants nationwide that cost a total of $100 million. The
current fair value of the plants is $500 million. The plants will be recorded and reported
as assets at
a. $100 million.
b. $600 million.
c. $400 million.
d. $500 million.
Answer:
Stanton Corporation had net income for the year of $200,000 and a profit margin of
20%. If total average assets were $400,000, the asset turnover ratio was ____________
times.
Answer:
Unearned revenue is a prepayment that requires an adjusting entry when services are
performed.
Answer:
The following items were taken from the financial statements of Rug, Inc., over a
four-year period:
Instructions
Using horizontal analysis and 2014 as the base year, compute the trend percentages for
net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable
or unfavorable for each item.
Answer:
Assume the indirect method is used to compute cash flows from operations. For each
item listed below, indicate the effect on net income in arriving at cash flows from
operations by choosing one of the following code letters.
1> Increase in accounts receivable
2> Increase in inventory
3> Decrease in prepaid expenses
4> Decrease in accounts payable
5> Increase in accrued liabilities
6> Increase in income taxes payable
7> Depreciation expense
8> Loss on sale of investment
9> Gain on disposal of equipment
10> Amortization expense
Answer:
Garner Supply Company reports net income of $120,000 in 2015. The ending inventory
did not include goods valued at $7,000 that Garner had consigned to Sharif’s Gift Shop.
(1) What is the correct net income for 2015?
(2) What impact will this error have on the balance sheet at 12/31/15?
Answer: