Which one of the following statements regarding changing inventory methods is true?
a. A change in inventory methods can be justified if the change is made to better match
profits with revenue.
b. Changing inventory methods affects consistency.
c. One place that the reader of an annual report would be able to identify that a
company changed inventory methods is the statement of stockholders’ equity.
d. Tax advantages are valid justification for changing inventory methods.
Grant Company had the following data available for 2015 (before making any
adjustments):
REQUIRED: 1> Prepare the journal entry to recognize bad debts under the following
assumptions: (a) Bad debts expense is expected to be 3% of net credit sales for the year
and (b) Grant expects it will not be able to collect 7% of the balance in accounts
receivable at year-end. 2> Assume instead that the balance in the allowance account is a
$3,800 debit. How will this affect your answers to (1)?
Micro Company wishes to issue $400,000 of 5-year, 6% bonds, with interest paid
annually at the end of the year. The market rate of interest is currently 5%. What
information is needed in order to determine the selling price?
a. The market rate of interest, the stated rate of interest, the bond rating, and the bond
life.
b. The face amount of the bonds, the stated rate of interest, the market rate of interest,
and the bond life.
c. The life of the bonds, the market rate of interest, the bond rating, and the face amount
of the bonds.
d. The face amount of the bonds, the market rate of interest, the purpose of the issue,
and the bond life.
Analysts trying to make investment decisions may very well ignore discontinued
operations, and extraordinary items.
a. True
b. False
Both U.S. GAAP and international financial reporting standards (IFRS) require the use
of the lower-of-cost-or-market rule to value inventories.
a. True
b. False
Marsh Corporation borrowed $90,000 by issuing a 12%, six-month note payable, all
due at the maturity date. After one month, the company’s total liability for this loan
amounts to:
a. $91,800
b. $90,900
c. $90,450
d. $90,000
Beatrice Equipment Beatrice Equipment sells merchandise only on credit. For the year
ended December 31, 2014, the following data is available:
Refer to the data for Beatrice Equipment. Assume that Beatrice Equipment estimates
bad debts at 1% of net credit sales. A) What amount will Beatrice Equipment record as
bad debts expense for 2014? B) How much is the net realizable value of accounts
receivable reported on Beatrice
Equipment’s balance sheet at December 31, 2014?
Which of the following would be a case where an event as a transaction is not
supported by a source document?
a. a purchase of inventory on credit
b. a cash sale
c. the financial consequences of a fire loss
d. recording payroll
When a company declares a 3-for-1 stock split, the number of outstanding shares
a. is tripled compared to the number of shares that were outstanding prior to the split.
b. stays the same, but, the number of issued shares triples.
c. is tripled, while the number of issued shares is reduced to one-third of the original
issued shares.
d. is reduced, and the number of issued shares is tripled.
From the following list, select the proper section from the statement of cashflows in whi
ch it would beclassified.
a. Operating Activities
b. Investing Activities
c. Financing Activities
Paid income taxes
Which one of the following is not considered to be a cash equivalent?
a. Corporate commercial paper due in 90 days after purchase
b. U.S. Treasury bills with an original maturity of six months
c. A money market account with a stock brokerage firm
d. A certificate of deposit with a term of 75 days when acquired
All of the following accounts have normal debit balances except
a. Accounts Receivable
b. Dividends
c. Office Supplies Expense
d. Sales
Which one of the following equations represents retained earnings activity?
a. Beginning balance + net income + dividends = profits for the year
b. Beginning balance + cash inflows – cash outflows = ending balance
c. Beginning balance + dividends – net income = ending balance
d. Beginning balance + net income – dividends = ending balance
Costs incurred to keep assets in normal operating condition are called revenue
expenditures.
a. True
b. False
In order to determine inventory for its balance sheet, it is best for a company to count
the inventory at the end of its accounting period for
a. The periodic inventory system
b. The perpetual inventory system
c. Both the periodic and perpetual inventory systems
d. Neither the periodic nor perpetual inventory systems
A company fails to record one storeroom full of inventory in its year-end inventory
records. As a result, this will cause:
a. an overstatement of inventory on the year-end balance sheet.
b. an understatement of gross profit in the following year.
c. an overstatement of retained earnings at the end of the year.
d. an overstatement of cost of goods sold for the current year.
Which one of the following adjustments decreases net income for the period?
a. Recognition of depreciation on plant assets
b. Recognition of interest on a note receivable
c. Recognition of services that had been provided to customers but the cash has not yet
been received
d. Recognition of rent as earned that had been received in advance from customers
The qualitative characteristics of accounting data include
a. Assets reported on the balance sheet
b. All accounting information
c. Cash flows
d. Reliability
Readers of the financial pages of the daily newspaper noticed the following information
with regard to the Connor Company stock: Daily high, 45.50; Daily low, 42.25; Last,
43.50; Change, +0.75. This tells readers that the
a. stock was selling at 43.50% of par at the close of the day.
b. stock gained $3.00 in value over the previous day.
c. stock gained $.75 in value over the previous day.
d. company’s stock is a popular investment.
When is revenue from the sale of merchandise normally recognized?
a. On the date the sale is made.
b. When the customer pays for the merchandise.
c. Either on the date on which the sale occurs, or the date on which the customer pays
d. When the merchandise is sold, if sold for cash, or when payment is received, if sold
on credit
At December 31, 2016, Corning Company has the following:
Common Stock, $10 par, 10,000 shares authorized, 9,000 issued, 8,000 outstanding
Preferred Stock, $100 par, 8%, cumulative, 1,000 shares authorized, issued, and
outstanding
The company did not pay any dividend during 2015 or 2014.REQUIRED:Compute the
amount of dividend to be received by the common and preferred stockholders in 2016 if
the company declared a dividend of $24,000.
Review the consolidated balance sheets of Backkus Metal Company. REQUIRED: (1)
What are the total long-term liabilities for the two years presented?
(2) What is the percent increase/decrease of long-term liabilities from 2014 to 2015?
Which liability appears to have caused the greatest change?
A decrease in retained earnings represents dividends that wereduring the period, not
necessarily those that were paid.
If the balance of accounts receivable decreases during the year, then cash collections
will ____________________________ sales on account for the period.
Presented below are condensed data from the financial statements of Gallo Factory for
2015 and 2014. The figures are expressed in thousands. Use this information to answer
the questions that follow.
Required: How much of Gallo Factory is financed by creditors at the end of December
of 2015? Evaluate the change from 2014 to 2015.