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If your bank gives you a $2,000 loan at 8% per year, but deducts the interest in advance,
is 8% the "real" rate of interest that you will pay?
a. Yes.
b. No. The interest rate is actually lower than 8 percent.
c. No. The interest rate is actually higher than 8 percent.
d. There is not enough information to answer this question accurately.
Which of the following statements is true?
a. If a debit entry is made to an account in the general journal, the same account will
receive a credit entry when the amount is posted to the general ledger.
b. If all transactions are correctly posted to the general ledger, the sum of the accounts
with debit balances should be equal to the sum of the accounts with credit balances.
c. Posting occurs when numbers in the general ledger accounts are transferred to the
general journal.
d. If the sum of the debit balances equals the sum of the credit balances then there were
no mistakes made in the posting process.
Verilux Company sold merchandise to Flight Corp. on November 1, 2014, for $10,000.
Verilux accepted a promissory note from Flight Corp. for $10,000. The note has a term
of 5 months and a stated interest rate of 7%. Verilux's accounting period ends on
December 31, 2014. What amount should Verilux recognize as interest revenue on
December 31, 2014?
a. $ -0-
b. $ 116.67
c. $ 291.67
d. $ 280.00
[APPPENDIX] When an individual wishes to form a sole proprietorship, he or she does
so by
a. filing a petition with the IRS.
b. purchasing stock in the proprietorship.
c. filing corporate paperwork with the state.
d. contributing cash or other assets.
Farley River Inc. Use the information presented below for Farley River, Inc. for 2015
and 2014 to answer the questions that follow. Farley River uses the straight-line
depreciation method.
Refer to the information for Farley River Inc. Using the 2015 data, what is the average
age of Farley River's property, plant, and equipment?
a. 1.60 years
b. 2.50 years
c. 4.00 years
d. 10.00 years
For each of the following items, indicate whether it would appear on a statement of
cash flows prepared using the Direct method (a) or the Indirect method (b).
a. Direct
b. Indirect
Gain on early retirement of bonds
Bing's Export Co. Bing's Export Co. purchased a new delivery truck at the beginning of
2015. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated
residual value of $7,000. A full year's depreciation expense is to be recorded in 2015.
The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016. The
number of expected miles over five years is 100,000.
Refer to information for Bing's Export Co. What is the amount by which
double-declining-balance depreciation exceeds straight-line depreciation over the
5-year life of the truck?
a. $ -0-
b. $ 7,000
c. $37,000
d. $ 6,000
Webb Company
Selected data from the accounting records of Webb Company are listed below:
Read the information about Webb Company. By what amount will net income on a
single-step income statement differ from net income on a multi-step income statement if
Webb Company prepares both formats?
a. $ 800
b. $ 600
c. $ 200
d. $ -0-
Flannery Company uses a worksheet to prepare its statement of cash flows. The
company also uses the indirect method for the Operating Activities section of its
statement. For each of the following changes in the balance sheet, indicate what activity
it affects and whether it is an addition or deduction.a. Deducted from Operating activity
b. Added to Operating activity
c. Deducted from Investing activity
d. Added to Investing activity
e. Deducted from Financing activity
f. Added to Financing activity
Accounts Receivable increased
When a company declares a 2-for-1 stock split,
a. stockholders' equity is doubled.
b. there is no effect on total stockholders' equity.
c. a shareholder who previously held 100 shares will have 300 shares after the split.
d. the price of each share will be one third of what it was before the stock split.
An aging schedule typically categorizes the various accounts by the length of time each
invoice is outstanding.
a. True
b. False
Which one of the following types of inventory accounts would be used by a wholesaler
or retailer?
a. Raw materials inventory
b. Work in process inventory
c. Finished goods inventory
d. Merchandise inventory
If a bank discounts a note, then the borrower needs to only pay the cash received and
not the face value of the note.
a. True
b. False
Fennel Flooring purchased office supplies for its showroom during the month of April
for $2,600. The supplies were paid for during April. On April 1, the Supplies account
had a balance of $350. On April 30, supplies on hand amounted to $200. A) What is the
effect on the accounting equation of the adjusting journal entry necessary at April 30th?
B) How much will be reported on the balance sheet at April 30 for Supplies? C) How
much will be reported on the income statement for the month of April for supplies
expense? D) If the adjustment in part A is not recorded, by what amount will net income
be over or understated at April 30?
Which the following organizations is primarily responsible for establishing GAAP
today?
a. Financial Accounting Standards Board (FASB)
b. Securities and Exchange Commission (SEC)
c. Internal Revenue Service (IRS)
d. Federal Government
All of the following statements are true regarding the use of a work sheet at the end of
an accounting period except:
a. all companies use a ten-column work sheet.
b. the net income of the period is extended from the income statement debit column to
the balance sheet credit column.
c. the beginning balance in the Retained Earnings account is entered initially on the
work sheet on the unadjusted trial balance.
d. cash is always carried over from the unadjusted trial balance columns of the work
sheet to the balance sheet columns without any adjustment.
A 15% stock dividend will increase the number of shares outstanding but the book
value per share will decrease.
a. True
b. False
Paulson Transport Company On January 1, 2015, Paulson Transport Company
purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of
$50,000. The company uses the double-declining-balance method.
What was the depreciation expense for Paulson Transport for the year ended December
31, 2015? a. $ -0-
b. $195,000
c. $390,000
d. $400,000
A firm's year ends on December 31. Its tax is computed and submitted to the U.S.
Treasury on March 15 of the
following year. When should the taxes be reported as a liability?
Assume that Banker Company purchased a new machine on January 1, 2014, for
$96,000. The machine has an estimated useful life of nine years and a residual value of
$6,000. Banker has chosen to use the straight-line method of depreciation. On January
1, 2016, Banker discovered that the machine would not be useful beyond December 31,
2019, and estimated its value at that time to be $4,000. REQUIRED:
1> Calculate the depreciation expense, accumulated depreciation, and book value of the
asset for each year 2014 to 2019. 2> Was the depreciation recorded in 2014 and 2015
wrong? If so, why was it not corrected?
Park Avenue Toys reported the following information at December 31, 2015:
Answer the following questions for Park Avenue Toys. 1> Would the book value per
share increase, decrease, or remain the same, if the company declared a 3-for-1 stock
split on December 31, 2015? Explain. 2> If cash dividends were declared on January
10, 2016, at $1 per share, by how much would retained earnings decrease as a result?
(Assume that the 3-for-1 stock split occurred.)
Share, Inc. The following data is available for one of the products sold by Share, Inc.,
which uses a perpetual inventory system.
Refer to the data for Share, Inc.
If the LIFO method is used, how much is cost of goods sold for May?
The concept that assumes that assets are recorded at the amount to acquire them is
called the
_________________________.
You have just taken a job as the accountant for a stucco repair firm whose accounting
year ends on December 31. As part of the management team, you receive a yearÂend
bonus directly related to the firm's earnings for the year. One of your duties is to review
the journal entries recorded by the bookkeepers. A new bookkeeper prepared the
following journal entry:
You notice that the explanation for the journal entry refers to the amount as a deposit,
and the bookkeeper explains to you that the firm plans to provide the services to the
client in March of the following year.Required1> Did the bookkeeper prepare the
correct journal entry to account for the client's deposit? Explain your answer.
2> What is your responsibility in this situation as the new accountant for the firm?
Explain your answer.
What do profitability ratios measure? Explain.
