Long-term creditors are usually most interested in evaluating:
A.Liquidity.
B.Managerial effectiveness.
C.Solvency.
D.Profitability.
In countries of Latin America:
A.accounting practice is designed to provide adequate information to investors and
creditors.
B.accounting standards emphasize accounting for high inflation situations.
C.banks are the primary source of financing for companies.
D.accounting focuses are based recent market economy reforms.
E.accounting information is prepared to meet the needs of governmental planners.
A company that was to be liquidated had the following liabilities:
Total unsecured non-priority liabilities are calculated to be what amount?
A.$44,000.
B.$51,050.
C.$75,000.
D.$85,000.
E.$194,000.
Lechter Co. is preparing to issue stock. Its revenues for last year were $85,000,000, and
it had $52,000,000 in stock held by non-affiliates. The company had been filing with
the SEC for eight years. Which one of the following forms should have been used for
registration?
A.S-1.
B.S-3.
C.S-4.
D.S-8.
E.S-11.
The balance in a revenue account at the beginning of an accounting period will always
be
A.equal to the amount of retained earnings for the previous period.
B.last period’s ending balance.
C.higher than the previous periods beginning balance.
D.zero.
Which ratios measure a company’s long-term debt paying ability and its financing
structure?
A.Solvency
B.Liquidity
C.Profitability
D.None of these answers is correct.
The practice of reporting the net realizable value of receivables in the financial
statements is commonly called:
A.the cash flow method of accounting for uncollectible accounts.
B.the direct write-off method of accounting for uncollectible accounts.
C.the allowance method of accounting for uncollectible accounts.
D.the cash flow method of accounting for uncollectible accounts and the direct
write-off method of accounting for uncollectible accounts are correct.
Which statement is false regarding the registration of public accounting firms with the
PCAOB under the Sarbanes-Oxley Act?
A.Registration is required of all U.S. firms that prepare, issue, or participate in the
preparation of an audit report for an entity that issues securities.
B.Foreign accounting firms are exempt from registration.
C.Disclosure requirements include annual fees received from each issuer for the firm’s
audit and non-audit services.
D.The Public Company Accounting Oversight Board subjects registered firms to
periodic inspections.
E.Information regarding disagreements between the issuer and the audit firm during the
previous year must be disclosed.
Which of the following statements is true in regard to accrual accounting?
A.Revenue is recorded only when cash is received.
B.Expenses are recorded when they are incurred.
C.Revenue is recorded in the period when it is earned.
D.Expenses are recorded when they are incurred and revenue is recorded in the period
when it is earned.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts.
Greene Co. paid $211,000 cash in salaries to its employees.
Grayson Corporation reports the following cash transactions for the year ending
December 31, 2012, its first year of operation:
1) issued common stock for $36,000
2) borrowed $20,000 from a local bank
3) purchased land for $24,000
4) provided services to clients for $28,000
5) paid operating expenses of $21,500
6) paid $2,500 cash dividends to stockholders
Required:
a) What are the total assets for Grayson Corporation at December 31, 2012?
b) Prepare an income statement for 2012.
Rialto Company experienced an accounting event that affected its financial statements
as indicated below:
Which of the following accounting events could have caused these effects on Rialto’s
statements?
A.Paid a cash dividend.
B.Earned cash revenue.
C.Borrowed money from a bank.
D.None of these.
Petras Company engaged in the following transactions during 2012, its first year in
operations: (Assume all transactions are cash transactions)
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $600 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During 2013, Petras engaged in the following transactions: (Assume all transactions are
cash transactions)
1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750.
4) Incurred expenses of $360.
5) Paid dividends of $100.
The amount of retained earnings on Petras’s 2013 balance sheet is
A.$915.
B.$890.
C.$590.
D.$690.
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments
of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed
to (1) interest of 10% of the beginning capital balance each year, (2) annual
compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss
in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was
$150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use
every month during 2012 and 2013.
What was Wasser’s total share of net income for 2013?
A.$34,420.
B.$75,540.
C.$65,540.
D.$70,040.
E.$61,420.
Indicate whether each of the following statements is true or false.
_____ a) A variance is a difference between an expected amount and a standard amount.
_____ b) When actual sales revenue exceeds the expected revenue, a company has a
favorable sales variance.
_____ c) A cost variance is considered to be unfavorable when actual costs are less than
standard costs.
_____ d) A company can calculate variances for both revenues and costs.
_____ e) Flexible budgets can be used for both planning and performance evaluation.
“IASB” stands for
A.Internal Accounting Standards Board.
B.Internationally Authorized Statements Board.
C.International Accounting Standards Board.
D.Initial Accounting Statements Bureau.
Quincy Corp., about to be liquidated, has the following amounts for its assets and
liabilities:
The mortgage is secured by the land and building, and the note payable is secured by
the equipment. Quincy expects that the expenses of administering the liquidation will
total $40,000.
How much should Quincy expect to pay on the accounts payable?
A.$240,000.
B.$128,000.
C.$120,000.
D.$96,000.
E.$146,000.
The IASB and FASB are working on several joint projects. What is the purpose of the
Financial Statement Presentation Project?
A.to provide guidance on the application of the acquisition method.
B.to enhance the usefulness of information in assessing the financial performance of the
reporting enterprise.
C.to develop a common comprehensive standard on revenue recognition.
D.to develop a common conceptual framework that both boards can use as a basis for
future standard-setting.
E.to agree upon financial statement titles that will have no differentiation after
translation to various languages.
Mandich Co. had the following amounts for its assets, liabilities, and stockholders’
equity accounts just before filing a bankruptcy petition and requesting liquidation:
Of the salaries payable, $30,000 was owed to an officer of the company. The remaining
amount was owed to salaried employees who had not been paid within the previous 80
days: John Webb was owed $10,600, Samantha Jones was owed $15,000, Sandra
Johnson was owed $11,900, and Dennis Roberts was owed $2,500. The maximum
owed for any one employee’s claims for contributions to benefit plans was $800.
Estimated expense for administering the liquidation amounted to $40,000.
What was the total amount of unsecured liabilities with priority?
A.$130,000.
B.$155,000.
C.$167,475.
D.$170,000.
E.$200,000.
Whetstone Co. performed services for a customer on account. Indicate whether each of
the following statements about this transaction is true or false.
_____ a) Assets and equity both increase when the revenue is recognized.
_____ b) This transaction did not affect cash flows.
_____ c) The company recorded an increase in revenue and a decrease in accounts
receivable.
_____ d) Recognition of revenue would be delayed until cash was received.
_____ e) This transaction is an example of an asset source transaction.
Describe the general approaches companies may use in evaluating potential capital
investments.
What is shelf registration?
Burgess Corporation is considering purchasing equipment that costs $235,000. The
equipment has an estimated useful life of 5 years and no salvage value. Burgess
believes that the annual cash inflows from using the equipment will be $65,000.
Required:
1) Calculate the net present value of the equipment assuming that Burgess’s cost of
capital is 12%. Is the equipment an acceptable investment?
2) Calculate the net present value of the equipment assuming that Burgess’s cost of
capital is 10%. Is the equipment an acceptable investment?
3) Based on your results to parts 1) and 2), estimate the internal rate of return for the
investment in the equipment.
Explain some of the accounting similarities and differences between not-for-profit
organizations and for-profit businesses.
Which types of accounts are closed out to retained earnings at the end of an accounting
period?
What is the primary focus of the Sarbanes-Oxley Act of 2002?