North Company reports the following amounts for 2015:
The 2015 rate of return on common stockholders’ equity is:
a. 5.8%.
b. 6.6%.
c. 8.0%.
d. 9.1%.
Answer:
A factory machine was purchased for $375,000 on January 1, 2015. It was estimated
that it would have a $75,000 salvage value at the end of its 5-year useful life. It was
also estimated that the machine would be run 40,000 hours in the 5 years. The company
ran the machine for 4,000 actual hours in 2015. If the company uses the
units-of-activity method of depreciation, the amount of depreciation expense for 2015
would be
a. $37,500.
b. $60,000.
c. $75,000.
d. $30,000.
Answer:
Book value is also referred to as
a. accumulated depreciation.
b. carrying value.
c. fair value.
d. original cost.
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:
Jungle Corporation’s stockholders’ equity section at December 31, 2014 appears below:
On June 30, 2015, the board of directors of Kenner Corporation declared a 15% stock
dividend, payable on July 31, 2015, to stockholders of record on July 15, 2015. The fair
value of Kenner Corporation’s stock on June 30, 2015, was $15.
On December 1, 2015, the board of directors declared a 2 for 1 stock split effective
December 15, 2015. Jungle Corporation’s stock was selling for $20 on December 1,
2015, before the stock split was declared. Par value of the stock was adjusted. Net
income for 2015 was $190,000 and there were no cash dividends declared.
Instructions
(a) Prepare the journal entries on the appropriate dates to record the stock dividend and
the stock split.
(b) Fill in the amount that would appear in the stockholders’ equity section for Jungle
Corporation at December 31, 2015, for the following items:
Answer:
Wilson Company reported net income of $105,000 for the year ended December 31,
2014. During the year, inventories decreased by $15,000, accounts payable decreased
by $20,000, depreciation expense was $18,000 and a gain on disposal of equipment of
$9,000 was recorded. Net cash provided by operating activities in 2014 using the
indirect method was
a. $101,000.
b. $109,000.
c. $120,000.
d. $118,000.
Answer:
On January 1, 2014, Lark Corporation purchased 35% of the common stock outstanding
of Dinc Corporation for $700,000. During 2014, Dinc Corporation reported net income
of $200,000 and paid cash dividends of $100,000. The balance of the Stock
Investments’”Dinc account on the books of Lark Corporation at December 31, 2014 is
a. $700,000.
b. $735,000.
c. $770,000.
d. $665,000.
Answer:
An intangible asset
a. does not have physical substance, yet often is very valuable.
b. is worthless because it has no physical substance.
c. is converted into a tangible asset during the operating cycle.
d. cannot be classified on the balance sheet because it lacks physical substance.
Answer:
Adjusting entries can be classified as
a. postponements and advances.
b. accruals and deferrals.
c. deferrals and postponements.
d. accruals and advances.
Answer:
Horizontal analysis is also called
a. linear analysis.
b. vertical analysis.
c. trend analysis.
d. common size analysis.
Answer:
Under the allowance method of accounting for uncollectible accounts,
a. the cash realizable value of accounts receivable is greater before an account is written
off than after it is written off.
b. Bad Debt Expense is debited when a specific account is written off as uncollectible.
c. the cash realizable value of accounts receivable in the balance sheet is the same
before and after an account is written off.
d. Allowance for Doubtful Accounts is closed each year to Income Summary.
Answer:
Any balance in an unearned revenue account is reported as a(n)
a. current liability.
b. long-term debt.
c. revenue.
d. unearned liability.
Answer:
The interest charged on a $400,000, 90-day note payable, at the rate of 8%, would be
a. $32,000.
b. $17,776.
c. $8,000.
d. $2,666.
Answer:
Working capital is
a. current assets plus current liabilities.
b. current assets minus current liabilities.
c. current assets divided by current liabilities.
d. current assets multiplied by current liabilities.
Answer:
An aging of a company’s accounts receivable indicates that $5,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $900 credit balance, the
adjustment to record bad debts for the period will require a
a. debit to Bad Debt Expense for $5,000.
b. debit to Allowance for Doubtful Accounts for $4,100.
c. debit to Bad Debt Expense for $4,100.
d. credit to Allowance for Doubtful Accounts for $5,000.
Answer:
A debit balance in Cash Over and Short is reported as a
a. contra asset.
b. miscellaneous asset.
c. miscellaneous expense.
d. miscellaneous revenue.
Answer:
Marin Company sells 9,000 units of its product in 2015 for $500 each. The selling price
includes a one-year warranty on parts. It is expected that 3% of the units will be
defective and that repair costs will average $50 per unit. In the year of sale, warranty
contracts are honored on 180 units for a total cost of $9,000.
What amount will be reported on Marin Company’s balance sheet as Warranty Liability
on December 31, 2015?
a. $9,000.
b. $13,500.
c. $4,500.
d. Cannot be determined.
Answer:
Cruz Inc. earns $450,000 and pays cash dividends of $150,000 during 2014. Cruz
Corporation owns 73,500 of the 210,000 outstanding shares of Viejo.
How much revenue from investment should Viejo report in 2014?
a. $52,500
b. $105,000
c. $157,500
d. $210,000
Answer:
Gross profit is calculated by subtracting
a. total expenses from total revenues.
b. cost of goods sold from net sales.
c. cost of goods sold from total revenues.
d. operating expenses from net sales.
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:
The use of a worksheet to prepare a statement of cash flows is optional.
Answer:
The expense recognition principle requires that efforts be matched with
accomplishments.
Answer:
Inventoriable costs are allocated to ______________ and cost of goods ____________.
Answer:
Indicate in the blank spaces below, the section of the balance sheet where the following
items are reported. Use the following code to identify your
Answer:
Under a double-entry system, show how the entry in each statement is entered in the
ledger by using debit or credit to indicate the increase or decrease in the affected
account.
Answer:
Under generally accepted accounting principles, management has the choice of
physically counting inventory on hand at the end of the year or using the gross profit
method to estimate the ending inventory.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
____ 1> Valuation allowance account.
____ 2> Amount for which a security could be sold.
____ 3> Ownership of more than 50% of another company’s common stock.
____ 4> Securities that may be sold in the future.
____ 5> Investments that are not readily marketable and not intended to be converted
into cash within the next year.
____ 6> Financial statements that present the total assets and liabilities controlled by
the parent and the total revenues and expenses of the subsidiary companies.
____ 7> The Stock Investments account is adjusted for net income and dividends
received.
____ 8> A company that owns more than 50% of the common stock of another entity.
____ 9> Entity whose stock is owned by the parent company.
____ 10> An account that is reported in the stockholders’ equity section.
Answer:
The acquisition of inventory is debited to the ____________ account when a perpetual
inventory system is used.
Answer:
Hoyt Company provides this information for the month of November, 2015: sales on
credit $170,000; cash sales $70,000; sales discounts $2,000; and sales returns and
allowances $9,000. Prepare the sales revenues section of the income statement based on
this information.
Answer: