A plant asset cost $288,000 and is estimated to have a $36,000 salvage value at the end
of its 8-year useful life. The annual depreciation expense recorded for the third year
using the double-declining-balance method would be
a. $24,120.
b. $40,500.
c. $35,436.
d. $27,570.
Answer:
Salem Company hired Kirk Construction to construct an office building for
£6,400,000 on land costing £1,600,000, which Salem Company owned. The
building was complete and ready to be used on January 1, 2015 and it has a useful life
of 40 years. The price of the building included land improvements costing £480,000
and personal property costing £600,000. The useful lives of the land improvements
and the personal property are 10 years and 5 years, respectively. Salem Company uses
component depreciation, and the company uses straight-line depreciation for other
similar assets. What total amount of depreciation expense would Salem Company report
on its income statement for the year ended December 31, 2015?
a. £268,000
b. £160,000
c. £341,000
d. £301,000
IFRS:
Answer:
Which of the following accounts should appear in the nonoperating section of a
multiple-step income statement?
a. Freight-out
b. Sales Discounts
c. Sales Returns and Allowances
d. Interest Expense
Answer:
Layton Inc. is considering two alternatives to finance its construction of a new $5
million plant.
(a) Issuance of 500,000 shares of common stock at the market price of $10 per share.
(b) Issuance of $5 million, 9% bonds at par.
Instructions
Complete the following table.
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:
Which of the following are the same under both GAAP and IFRS?
a. The journal.
b. The ledger.
c. The chart of accounts.
d. All of these answers are correct.
Answer:
Jarmin Company received proceeds of $377,000 on 10-year, 8% bonds issued on
January 1, 2013. The bonds had a face value of $400,000, pay interest semi-annually on
June 30 and December 31, and have a call price of 101. Jarmin uses the straight-line
method of amortization.
What is the carrying value of the bonds on January 1, 2015?
a. $400,000
b. $381,600
c. $395,400
d. $379,300
Answer:
A trial balance would only help in detecting which one of the following errors?
a. A transaction that is not journalized
b. A journal entry that is posted twice
c. Offsetting errors are made in recording the transaction
d. A transposition error when transferring the debit side of journal entry to the ledger
Answer:
The order of presentation of activities on the statement of cash flows is
a. operating, investing, and financing.
b. operating, financing, and investing.
c. financing, operating, and investing.
d. financing, investing, and operating.
Answer:
In calculating cash flows from operating activities using the indirect method, a loss on
the sale of equipment will appear as a(n)
a. subtraction from net income.
b. addition to net income.
c. addition to cash flow from investing activities.
d. subtraction from cash flow from investing activities.
Answer:
A daily cash count of register receipts made by a cashier department supervisor
demonstrates an application of which of the following internal control principles?
a. Documentation procedures
b. Segregation of duties
c. Establishment of responsibility
d. Independent internal verification
Answer:
The sale of common stock below par
a. is a common occurrence in most states.
b. is not permitted in most states.
c. is a practice that most stockholders encourage.
d. requires that a liability be recorded for the difference between the sales price and the
par value of the shares.
Answer:
A stockholder who receives a stock dividend would
a. expect the market price per share to increase.
b. own more shares of stock.
c. expect retained earnings to increase.
d. expect the par value of the stock to change.
Answer:
Netta Shutters has the following inventory information.
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Assuming that the specific
identification method is used and that ending inventory consists of 20 units from each
of the three purchases and 30 units from the November 1 inventory, cost of goods sold
is
a. $1,740.
b. $1,772.
c. $1,782.
d. $1,794.
Answer:
At April 30, Yaddof Company has the following bank information: cash balance per
bank $2,300; outstanding checks $390; deposits in transit $275; credit memo for
interest $50; bank service charge $10. What is Mareska’s adjusted cash balance on April
30?
a. $2,185
b. $2,245
c. $2,300
d. $2,340
Answer:
The present value of a bond is also known as its
a. face value.
b. market price.
c. future value.
d. deferred value.
Answer:
Grayson’s Lumber Mill sold two machines in 2016. The following information pertains
to the two machines:
Instructions
(a) Compute the depreciation on each machine to the date of disposal.
(b) Prepare the journal entries in 2016 to record 2016 depreciation and the sale of each
machine.
Answer:
If total liabilities increased by $8,000, then
a. assets must have decreased by $8,000.
b. stockholders’ equity must have increased by $8,000.
c. assets must have increased by $8,000, or stockholders’ equity must have decreased by
$8,000.
d. assets and stockholders’ equity each increased by $4,000.
Answer:
Under the equity method of accounting, the investment in common stock is initially
recorded at cost and the investment account is subsequently
a. credited for cash dividends received.
b. debited for the investor’s share of investee net income.
c. debited for cash dividends received and credited for the investor’s share of investee
net income.
d. debited for the investor’s share of investee net income and credited for cash
dividends received.
Answer:
On January 1, 2015, Howard Company, a calendar-year company, issued $900,000 of
notes payable, of which $225,000 is due on January 1 for each of the next four years.
The proper balance sheet presentation on December 31, 2015, is
a. Current Liabilities, $900,000.
b. Long-term Debt, $900,000.
c. Current Liabilities, $450,000; Long-term Debt, $450,000.
d. Current Liabilities, $225,000; Long-term Debt, $675,000.
Answer:
Here are comparative balance sheets for Porter Company
Additional information:
1> Net income for 2015 was $90,000.
2> Cash dividends of $23,000 were declared and paid.
3> Bonds payable amounting to $50,000 were redeemed for cash $50,000
4> Common stock was issued for $42,000 cash
5> Equipment that cost $50,000 and had a book value of $30,000 was sold
for $36,000 during 2015; land was sold at cost.
Instructions
(a) Prepare a statement of cash flows for 2015 using the indirect method.
(b) Compute free cash flow for 2014
Answer:
Start Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2015. What
is the annual dividend on the preferred stock?
a. $50 per share
b. $25,000 in total
c. $50,000 in total
d. $0.50 per share
Answer:
If a liability is dependent on a future event, it is called a
a. potential liability.
b. hypothetical liability.
c. probabilistic liability.
d. contingent liability.
Answer:
Sargent Corporation bought equipment on January 1, 2015. The equipment cost
$360,000 and had an expected salvage value of $60,000. The life of the equipment was
estimated to be 6 years. The depreciable cost of the equipment is
a. $360,000.
b. $300,000.
c. $200,000.
d. $50,000.
Answer:
Premium on Bonds Payable is a contra account to Bonds Payable.
Answer:
The following information is available for Gordon Corporation:
Instructions
Based on the preceding information, calculate the book value per share.
Answer:
In a corporation, Retained Earnings is a part of stockholders’ equity.
Answer:
A corporation can be organized for the purpose of making a profit or it may be
not-for-profit.
Answer:
Financing activities include the obtaining of cash from issuing debt and repaying the
amounts borrowed.
Answer:
Expense recognition is tied to revenue recognition.
Answer: