In preparing the statement of cash flows, determining the net increase or decrease in
cash requires the use of
a. the adjusted trial balance.
b. the current period’s balance sheet.
c. a comparative balance sheet.
d. a comparative income statement.
Answer:
Transactions in a journal are recorded in
a. account number order.
b. dollar amount order.
c. alphabetical order.
d. chronological order.
Answer:
Brandy Corporation’s trading portfolio at the end of the year is as follows:
At the end of the year, Brandy Corporation should
a. set up a Fair Value Adjustment account for Stock D.
b. set up a Fair Value Adjustment account for the portfolio.
c. recognize an Unrealized Gain or Loss’”Income for $4,000.
d. report a loss on the income statement for $4,000 under ‘Other expenses and losses.’
Answer:
Advances from customers are classified as a(n)
a. revenue.
b. expense.
c. current asset.
d. current liability.
Answer:
The journal entry to record a credit sale of merchandise is
a. Cash
Sales Revenue
b. Cash
Service Revenue
c. Accounts Receivable
Service Revenue
d. Accounts Receivable
Sales Revenue
Answer:
A merchandising company using a perpetual system will make
a. the same number of adjusting entries as a service company does.
b. one more adjusting entry than a service company does.
c. one less adjusting entry than a service company does.
d. different types of adjusting entries compared to a service company.
Answer:
Which of the following statements regarding the effective-interest method of
accounting for bonds characteristics is false?
a. GAAP always requires use of the effective interest method.
b. The amount of periodic interest expense decreases over the life of a discounted bond
issue when the effective-interest method is used.
c. Over the life of the bonds, the carrying value increases for discounted bonds when
using the effective-interest method.
d. The effective-interest method applies a constant percentage to the bond carrying
value to compute interest expense.
Answer:
Townson Co. has outstanding $100 million of 7% bonds, due in 7 years, and callable at
104. The bonds were issued at par and are selling today at a market price of 94. If
Townson Co. calls $20 million of these bonds it will report:
a. A $1,400,000 gain.
b. A $800,000 loss.
c. An unrealized gain.
d. Neither gains nor losses are recognized on early retirements of debt.
Answer:
Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset
and are referred to as
a. capital expenditures.
b. expense expenditures.
c. improvements.
d. revenue expenditures.
Answer:
Herman Company has a debit balance of $5,000 in its Allowance for Doubtful Accounts
before any adjustments are made at the end of the year. Based on review and aging of
its accounts receivable at the end of the year, Herman estimates that $70,000 of its
receivables are uncollectible. The amount of bad debt expense which should be reported
for the year is:
a. $5,000.
b. $65,000.
c. $70,000.
d. $75,000.
Answer:
Salvage (residual) value is deducted in the computation of depreciation expense in all of
the following methods with the exception of
a. straight-line.
b. units-of-activity.
c. declining-balance.
d. All of these answer choices include a deduction of salvage value.
Answer:
Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.
Answer:
In the Augie Company, sales were $750,000, sales returns and allowances were
$30,000, and cost of goods sold was $450,000. The gross profit rate was
a. 36%.
b. 37.5%.
c. 40%.
d. 41.7%.
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:
The income statement for the year 2015 of Fugazi Co. contains the following
information:
At January 1, 2015, Fugazi reported retained earnings of $50,000. Dividends for the
year totalled $10,000. At December 31, 2015, the company will report retained earnings
of
a. $17,500.
b. $32,500.
c. $40,000.
d. $42,500.
Answer:
The IASB and FASB are working on a converged statement of financial position using
the headings of
a. assets, liabilities, and equity.
b. revenues and expenses.
c. assets, liabilities, revenues, expenses and equity.
d. operating, investing, and financing.
Answer:
Two classifications appearing in the paid-in capital section of the balance sheet are
a. preferred stock and common stock.
b. paid-in capital and retained earnings.
c. capital stock and additional paid-in capital.
d. capital stock and treasury stock.
Answer:
IFRS uses each of the following terms to describe retained earnings except
a. accumulated profit or loss.
b. retained earnings.
c. retained profits.
d. share earnings.
Answer:
If bonds have been issued at a discount, over the life of the bonds, the
a. carrying value of the bonds will decrease.
b. carrying value of the bonds will increase.
c. interest expense will increase, if the discount is being amortized on a straight-line
basis.
d. unamortized discount will increase.
Answer:
Stahl Consulting started the year with total assets of $60,000 and total liabilities of
$15,000. During the year, the business recorded $48,000 in catering revenues and
$30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during
the year. The stockholders’ equity at the end of the year was
a. $33,000.
b. $54,000.
c. $57,000.
d. $63,000.
Answer:
Dividends in arrears on cumulative preferred stock
a. are considered to be a non-current liability.
b. are considered to be a current liability.
c. only occur when preferred dividends have been declared.
d. should be disclosed in the notes to the financial statements.
Answer:
Gross profit is a measure of the overall profitability of a company.
Answer:
In the stockholders’ equity section, paid-in capital and retained earnings are reported
and the specific sources of paid-in capital are identified.
Answer:
In a service company, revenue is recognized when the service is ______________.
Answer:
On January 1, 2015, Petersen Enterprises purchased natural resources for $1,800,000.
The company expects the resources to produce 12,000,000 units of product. (1) What is
the depletion cost per unit? (2) If the company mined and sold 20,000 units in January,
what is depletion expense for the month?
Answer:
Accrued revenues are revenues that have been recognized and received before financial
statements have been prepared.
Answer: