When did the SEC drop its long-standing rule that required foreign companies that filed
financial statements with it to adjust those statements to conform with U.S. GAAP and
allow them to use IFRS?
a. 2001
b. 2007
c. 2009
d. 2013
Below are several accounts from Costello Company’s accounting records. Answer the
questions that follow.
A) How much is the balance of retained earnings at the end of the year? B) Show the
accounting equation for Costello Company at the end of the year with the respective
dollar amounts. C) If stockholders’ equity increases during the year, does that mean that
the company is profitable? Explain your answer.
MusicCorporationThe data below is for Music Corporation for 2015.
Refer to the data for Music Corporation.If the aging approach is used to estimate bad
debts, what amount should be recorded as bad debt expense for 2015?
a. $8,000
b. $8,100
c. $8,700
d. $8,900
With the effective interest method of amortization, the amortization of bond discount
results in a(n)
a. increase in stockholders’ equity.
b. decrease of stockholders’ equity.
c. increase in interest expense.
d. decrease in interest expense.
If a company constructs an asset over a period of time and borrows money, the amount
of interest incurred during construction on the borrowed money is
a. capitalized as part of the cost of the plant asset.
b. amortized over the construction period.
c. reported as interest expense on the income statement.
d. reported as depletion on the income statement.
Match the following choices to the listed situation.
a. a deferred expense
b. a deferred revenue
c. an accrued liability
d. an accrued asset
Revenue is earned during the current period, although customers had paid in a previous
period
At December 31, 2015, the accounting records of Farmer Corporation contain the
following:
If Cash is $26,000, what is the December 31, 2015 capital stock balance? a. $272,000
b. $240,000
c. $220,000
d. $400,000
Which one of the following statements is true?
a. Good cash management practices dictate that a company should maintain as large a
balance as possible in its cash account.
b. Sound internal control practice dictates that disbursements should be made by check.
c. The person handling the cash should also prepare the bank reconciliation.
d. Petty cash can be substituted for a checking account to expedite the payment of all
disbursements.
When inventories are written down due to the application of the lower of cost or market
(LCM) rule, the account that is usually increased is
a. Cost of Goods Sold
b. Inventories
c. Loss on Decline in Inventory Value
d. Accumulated Depreciation-Inventory
Debit entries are used to
a. increase asset accounts.
b. decrease expense accounts.
c. increase liability accounts.
d. increase revenue accounts.
The Stockholders’ Equity section of the balance sheet of Sea Turtle Company reveals
the following information: Common stock, $3 par value $150,000
Additional paidÂin capital-common 850,000 There have been two issues of stock since
the corporation began business. The average issue price per share of stock was
a. $ 3.00.
b. $17.00.
c. $20.00.
d. Not enough information to determine.
The buyer must include goods purchased FOB shipping point in its inventory account if
the goods are still in transit.
a. True
b. False
Provided below is a list of important users of accounting information.Below the list are
descriptions of a major need of each of the various users. Fill in the blank with the one
user group that is most likely to have the need described to the right of the blank. Some
user groups may be used more than once or not at all.
a. Capital stock
b. Asset
c. Owners’ equity
d. Time period
e. Dividends
f. Economic entity concept
g. Expense
h. Retained earnings
i. Cost principle
j. Creditor
k. Liability
l. Revenue
m. Going concern
n. Monetary unit
o. Corporation
A category on the balance sheet to indicate the owners’ direct investment in a
corporation.
When an expense is incurred prior to the payment of cash for that expense, an
adjustment that increases an expense account and decreases an asset is prepared.
a. True
b. False
An expense is an inflow of assets resulting from the sale of goods and services.
a. True
b. False
The totaling of each side of a T account is known as.
The amount of cash the maker is to pay the payee on the maturity date of the note is
called the
____________________.
The term cash on the statement of cash flows includes.
The bookkeeper for B. Sebastian & Company, Inc. prepared the following journal
entries and posted the entries to the general ledger as indicated in the T accounts
presented. Assume that the dollar amounts and the descriptions of the entries are
correct.
ACCOUNTS RECEIVABLE SERVICE REVENUE
See the journal entries and T accounts for B. Sebastian & Company. REQUIRED: If
you assume that all journal entries have been posted correctly, use the above
information to answer these questions:
(1) Identify the transactions that the bookkeeper recorded incorrectly in the general
journal.
(2) Prepare the journal entry that the bookkeeper should have made for each transaction
that you have identified as being made incorrectly.
(3) For each journal entry recorded incorrectly, indicate the impact of the error on the
accounting equation. For your answer, indicate whether each element of the accounting
equation, Assets, Liabilities, and Stockholders’ Equity, has been “Understated” or
“Overstated” or there has been “No Effect.”
Contrast stock dividends and stock splits.
Why does the discounting of a note receivable with recourse result in a contingent
liability? Should the liability be reported on the balance sheet? Explain.
Discuss the common reporting characteristics of discontinued operations and
extraordinary items in the financial statements.
is the name given to balance sheet accounts because they are permanent in nature.