The amortization period for a patent cannot exceed
a. 50 years.
b. 40 years.
c. 20 years.
d. 10 years.
Answer:
Bank errors
a. occur because of time lags.
b. must be corrected by debits.
c. are infrequent in occurrence.
d. are corrected by making an adjusting entry on the depositor’s books.
Answer:
Instructions: Match the account titles given below with the appropriate balance sheet
classifi-cation. An individual classification may be used more than once, or not at all.
An account may also not appear in the balance sheet.
Classifications
A. Current Assets E. Current Liabilities
B. Long-term Investments F. Long-term Liabilities
C. Property, Plant, and Equipment G. Stockholders’ Equity
D. Intangible Assets H. Not separately presented on the balance sheet
Account Titles
Answer:
The effect of a stock dividend is to
a. decrease total assets and stockholders’ equity.
b. change the composition of stockholders’ equity.
c. decrease total assets and total liabilities.
d. increase the book value per share of common stock.
Answer:
If total liabilities increased by $30,000 and stockholders’ equity increased by $20,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase
Answer:
The private sector organization involved in developing accounting principles is the
a. Feasible Accounting Standards Body.
b. Financial Accounting Studies Board.
c. Financial Accounting Standards Board.
d. Financial Auditors’ Standards Body.
Answer:
On January 1, Staley Corporation had 90,000 shares of no-par common stock issued.
5,000 shares are held as treasury stock. The stock has a stated value of $5 per share.
During the year, the following transactions occurred.
Instructions
(a) Prepare the entries, if any, on each of the three dividend dates.
(b) How are dividends and dividends payable reported in the financial statements
prepared at December 31?
Answer:
The disposal of a significant component of a business is called
a. a change in accounting principle.
b. an extraordinary item.
c. an other expense.
d. discontinued operations.
Answer:
Fugazi City College sold season tickets for the 2015 football season for $240,000. A
total of 8 games will be played during September, October and November. Assuming all
the games are played, the Unearned Ticket Revenue balance that will be reported on the
December 31 balance sheet will be
a. $0.
b. $90,000.
c. $150,000.
d. $240,000.
Answer:
The income statement for Jones Company showed cost of goods sold of $80,000 and
operating expenses of $65,000. The comparative balance sheets for the year show that
inventory decreased $5,000, prepaid expenses increased $7,000, accounts payable
increased $3,000, and accrued expenses payable decreased $5,000.
Instructions
Compute (a) cash payments to suppliers and (b) cash payments for operating expenses
using the direct method.
Answer:
The category that is generally considered to be the best measure of a company’s ability
to continue as a going concern is
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.
Answer:
Indicate which of these items is an asset (A), liability (L) or stockholders’ equity (SE)
account.
_______ (1) Supplies
_______ (2) Dividends
_______ (3) Buildings
_______ (4) Notes Payable
_______ (5) Salaries and Wages Payable
Answer:
A liability’”revenue relationship exists with
a. prepaid expense adjusting entries.
b. accrued expense adjusting entries.
c. unearned revenue adjusting entries.
d. accrued revenue adjusting entries.
Answer:
Which of the following is not a true statement regarding short-term debt investments?
a. The securities usually pay interest.
b. Investments are frequently government or corporate bonds.
c. This type of investment must be currently traded in the securities market.
d. Debt investments are recorded at the price paid less brokerage fees.
Answer:
When opening a bank checking account, a signature card
a. indicates to whom money is to be paid.
b. indicates each person authorized to sign checks on the account.
c. is attached to all pre-printed checks.
d. is required only when dealing with an out-of-state bank.
Answer:
Which costing method cannot be used to determine the cost of inventory items before
lower-of-cost-or-market is applied?
a. Specific identification
b. FIFO
c. LIFO
d. All of these methods can be used.
Answer:
The entry to replenish a petty cash fund includes a credit to
a. Petty Cash.
b. Cash.
c. Freight-in.
d. Postage Expense.
Answer:
Which of the following is not an advantage of issuing bonds instead of common stock?
a. Stockholder control is not affected.
b. Earnings per share on common stock may be lower.
c. Income to common stockholders may increase.
d. Tax savings result.
Answer:
Which of the following statements concerning the statement of cash flows is true?
a. The statement of cash flows is usually more accurate when using the indirect method.
b. If the direct method is used, a supplementary schedule reconciling the net income to
net cash from operating activities must still be provided.
c. The statement of cash flows reflects both earnings per share and cash per share.
d. The statement of cash flows is an optional financial statement for external reporting
purposes.
Answer:
If supplies that have been purchased are used in the course of business, then
a. a liability will increase.
b. an asset will increase.
c. stockholders’ equity will decrease.
d. stockholders’ equity will increase.
Answer:
Rebekah Grace has worked for Specoly Inc., for 20 years without taking a vacation. An
internal control feature that would address this situation would be
a. other controls.
b. establishment of responsibility.
c. physical controls.
d. documentation procedures.
Answer:
The right side of an account
a. is the correct side.
b. reflects all transactions for the accounting period.
c. shows all the balances of the accounts in the system.
d. is the credit side.
Answer:
The requirement that only transaction data capable of being expressed in terms of
money be included in the accounting records relates to the
a. historical cost principle.
b. monetary unit assumption.
c. economic entity assumption.
d. both the historical cost principle and the monetary unit assumption.
Answer:
The income statement for a merchandising company presents five amounts not shown
on a service company’s income statement. Identify and briefly explain the five unique
amounts.
Answer:
Certain agricultural and mineral products can be reported at net realizable value under
Answer:
Your roommate, a marketing major, thinks that debit means decrease and credit means
increase. And, that every account can be debited and credited and as result, every
account can have both a debit and a credit balance. Explain to your roommate (1) the
meaning of debit and credit; (2) which accounts can only be debited, which can only be
credited, and which can be both debited and credited; and (3) which accounts normally
have debit balances and which credit balances.
Answer:
Cash provided by operations is generally equal to operating income.
Answer:
A check correctly written for $270 was incorrectly entered in the cash payments journal
for $720. In preparing a bank reconciliation, $_____________ must be
______________ the cash balance per ______________.
Answer: