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Securities bought and held primarily for sale in the near term to generate income on
short-term price differences are
a. trading securities.
b. available-for-sale securities.
c. never-sell securities.
d. held-to-maturity securities.
Answer:
In analyzing the financial statements of a company, a single item on the financial
statements
a. should be reported in bold-face type.
b. is more meaningful if compared to other financial information.
c. is significant only if it is large.
d. should be accompanied by a footnote.
Answer:
The ledger of Laurie Rental Agency on March 31 of the current year includes the
following selected accounts before adjusting entries have been prepared
An analysis of the accounts shown the following.
1> The equipment depreciates $400 per month.
2> Two-thirds of the unearned rent revenue was recognized during the quarter.
3> The note payable is dated January 1 and bears 12% interest.
4> Suppliers on hand total $800.
5> The insurance policy is a two-year policy dated January 1.
Instructions
A. Prepare the adjusting entries at March 31, assuming that adjusting entries are made
quarterly. Additional accounts are: Depreciation Expense, Insurance Expense, Interest
Payable, and Supplies Expense.
B. Compute the ending balances for Prepaid Insurance, Supplies, Unearned Rent
Revenue, and Rent Revenue, and indicate in which financial statement those items will
be reported.
Answer:
If a stockholder receives a dividend that reduces retained earnings by the fair value of
the stock, the stockholder has received a
a. large stock dividend.
b. cash dividend.
c. contingent dividend.
d. small stock dividend.
Answer:
A patent should
a. be amortized over a period of 20 years.
b. not be amortized if it has an indefinite life.
c. be amortized over its useful life or 20 years, whichever is longer.
d. be amortized over its useful life or 20 years, whichever is shorter.
Answer:
The common characteristic possessed by all assets is
a. long life.
b. great monetary value.
c. tangible nature.
d. future economic benefit.
Answer:
The basic accounting equation cannot be restated as
a. Assets '“ Liabilities = Stockholders' Equity.
b. Assets '“ Stockholders' Equity = Liabilities.
c. Stockholders' Equity + Liabilities = Assets.
d. Assets + Liabilities = Stockholders' Equity.
Answer:
Unearned revenue is classified as
a. an asset account.
b. a revenue account.
c. a contra-revenue account.
d. a liability account.
Answer:
Patton Company bought real estate, on which there was an old office building, for
$500,000. It paid $50,000 in cash as a down payment and signed a 10% mortgage for
the remainder. It immediately had the old building razed at a net cost of $35,000.
Attorneys were paid $6,000 in connection with the land purchase and an additional
$3,000 in connection with permits and zoning variances necessary for Patton's new
office building. $20,000 was paid for excavation for the basement of the new building,
$1,500,000 was paid for construction of the new building, and $75,000 was paid for a
parking lot and necessary walkways and driveways.
Land should be recorded at a cost of
a. $535,000.
b. $541,000.
c. $564,000.
d. $561,000.
Answer:
IFRS, compared to GAAP, tends to be more
a. detailed.
b. rules-based.
c. principles-based.
d. full of disclosure requirements.
Answer:
Notes or accounts receivables that result from sales transactions are often called
a. sales receivables.
b. non-trade receivables.
c. trade receivables.
d. merchandise receivables.
Answer:
The return on common stockholders' equity is computed by dividing net income
available to common stockholders by
a. ending total stockholders' equity.
b. ending common stockholders' equity.
c. average total stockholders' equity.
d. average common stockholders' equity.
Answer:
The process of recording transactions has become more efficient because
a. fewer events can be quantified in financial terms.
b. computers are used in processing business events.
c. more people have been hired to record business transactions.
d. business events are recorded only at the end of the year.
Answer:
A term that is not synonymous with property, plant, and equipment is
a. plant assets.
b. fixed assets.
c. intangible assets.
d. long-lived tangible assets.
Answer:
The best managed companies will have
a. no uncollectible accounts.
b. a very strict credit policy.
c. a very lenient credit policy.
d. some accounts that will prove to be uncollectible.
Answer:
A statement of comprehensive income is presented in
a. a single-statement format only.
b. a two-statement format only.
c. an operating format.
d. either a one- or two-statement format.
Answer:
At October 1, 2015, Padilla Industries had an accounts payable balance of $40,000.
During the month, the company made purchases on account of $33,000 and made
payments on account of $48,000. At October 31, 2015, the accounts payable balance is
a. $25,000.
b. $41,000.
c. $55,000.
d. $121,000.
Answer:
The following section is taken from Blue Corp's balance sheet at December 31, 2014.
Interest is payable semiannually on January 1 and July 1. The bonds are callable on any
interest date.
Instructions
(a) Journalize the payment of the bond interest on January 1, 2015.
•Assume that on January 1, 2015, after paying interest, Blue calls bonds having a
face value of $600,000. The call price is 106. Record the redemption of the bonds.
•Prepare the entry to record the payment of interest on July 1, 2015, assuming no
previous accrual of interest on the remaining bonds.
•
Answer:
Small Company reported cost of goods sold of $179,000 on its 2014 income statement.
The company's beginning inventory was $35,000. The ending inventory was valued at
$40,000. The Accounts Payable balance at January 1 was $25,000. The December 31
balance in Accounts Payable was $22,000.
Instructions
Compute cash payments to suppliers.
Answer:
An error in the physical count of goods on hand at the end of a period resulted in a
$15,000 overstatement of the ending inventory. The effect of this error in the current
period is
Answer:
GAAP's accounting and internal control procedures related to cash and the definition of
cash equivalents, as compared to IFRS are:
Answer:
Wingate Company borrowed $90,000 on January 2, 2015. This amount plus accrued
interest of 6% compounded annually will be repaid at the end of 3 years. What amount
will Wingate repay at the end of the third year?
Answer:
The separate balance sheets of Platt Company and its wholly owned subsidiary, Speer
Company, as of the date of acquisition are shown below.
Instructions
(Provide the amount that should appear in the Consolidated Data column for each of the
selected accounts. If the accounts should not appear in the Consolidated Data column,
indicate 'None'. Assume that all accounts have normal balances and that Speer
Company stock was acquired for cash at a price equal to its book value.
Answer:
A balance sheet reports the assets and liabilities of a company for a specific period of
time.
Answer:
The quality of consistency pertains to the use of the same accounting principles by
firms in the same industry.
Answer:
