The primary source of revenue for a wholesaler is
a. investment income.
b. service fees.
c. the sale of merchandise.
d. the sale of fixed assets the company owns.
Answer:
Under IFRS, the term reserves relates to each of the following except
a. asset revaluations.
b. contributed (paid-in) capital.
c. fair value differences.
d. retained earnings.
Answer:
All of the following items would be reported as other expenses and losses except
a. freight-out.
b. casualty losses.
c. interest expense.
d. loss from employees’ strikes.
Answer:
The following reconciling items are applicable to the bank reconciliation for the Spahn
Company. Indicate how each item should be shown on a bank reconciliation.
a. Outstanding checks.
b. Bank credit memorandum for collecting a note for the depositor.
c. Bank debit memorandum for service charge.
d. Deposit in transit.
Answer:
Unearned revenues are
a. cash received and a liability recorded before services are performed.
b. revenue for services performed and recorded as liabilities before they are received.
c. revenue for services performed but not yet received in cash or recorded.
d. revenue for services performed and already received in cash and recorded.
Answer:
The entry to record the proceeds upon issuing an interest-bearing note is
a. Interest Expense
Cash
Notes Payable
b. Cash
Notes Payable
c. Notes Payable
Cash
d. Cash
Notes Payable
Interest Payable
Answer:
Under the corporate form of business organization
a. a stockholder is personally liable for the debts of the corporation.
b. stockholders’ acts can bind the corporation even though the stockholders have not
been appointed as agents of the corporation.
c. the corporation’s life is stipulated in its charter.
d. stockholders wishing to sell their corporation shares must get the approval of other
stockholders.
Answer:
Accrual-basis accounting is allowed under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.
Answer:
In computing depletion, salvage value is
a. always immaterial.
b. ignored.
c. impossible to estimate.
d. included in the calculation.
Answer:
The first step in the recording process is to
a. prepare financial statements.
b. analyze each transaction for its effect on the accounts.
c. post to a journal.
d. prepare a trial balance.
Answer:
If goods in transit are shipped FOB destination
a. the seller has legal title to the goods until they are delivered.
b. the buyer has legal title to the goods until they are delivered.
c. the transportation company has legal title to the goods while the goods are in transit.
d. no one has legal title to the goods until they are delivered.
Answer:
Thomas Company purchased equipment for $760,000 cash on January 1, 2014. The
estimated life is 5 years or 1,000,000 units; salvage value is estimated at $60,000.
Actual activity was 180,000 units in 2014, and 200,000 units in 2015.
Instructions: Compute the annual depreciation expense for 2014 and 2015, and book
value at December 31, 2015, under the following depreciation methods: (a)
units-of-activity, (b) straight-line, and (c) double-declining-balance.
(a) Units-of-activity
2014 depreciation = $_______________.
2015 depreciation = $_______________.
12/31/15 book value = $_______________.
(b) Straight-line
2014 depreciation = $_______________.
2015 depreciation = $_______________.
12/31/15 book value = $_______________.
(c) Double-declining-balance
2014 depreciation = $_______________.
2015 depreciation = $_______________.
12/31/15 book value = $_______________.
Answer:
Ban Co. purchased 50, 5% Waylan Company bonds for $50,000 cash plus brokerage
fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to
record the December 31 interest accrual would include a
a. debit to Interest Receivable for $1,250.
b. debit to Interest Revenue for $1,250.
c. credit to Interest Revenue for $1,262.50.
d. debit to Debt Investments for $1,262.50.
Answer:
The double’“entry accounting system is the basis of accounting systems
a. worldwide.
b. worldwide, except for the U.S.
c. in the U.S. only
d. neither internationally nor in the U.S.
Answer:
On January 1, 2014, Grgante Corporation purchased 25% of the common stock
outstanding of Long Corporation for $270,000. During 2014, Long Corporation
reported net income of $80,000 and paid cash dividends of $40,000. The balance of the
Stock Investments’”Long account on the books of Grgante Corporation at December 31,
2014 is
a. $270,000.
b. $310,000.
c. $350,000.
d. $280,000.
Answer:
Analysis of financial statements is enhanced with the use of comparative data.
Answer:
Beginning inventory plus the cost of goods purchased equals
a. cost of goods sold.
b. cost of goods available for sale.
c. net purchases.
d. total goods purchased.
Answer:
The double-entry system requires that each transaction must be recorded
a. in at least two different accounts.
b. in two sets of books.
c. in a journal and in a ledger.
d. first as a revenue and then as an expense.
Answer:
On January 1, 2015, the stockholders’ equity section of Nance Corporation shows:
Common stock ($5 par value) $1,500,000; paid-in capital in excess of par value
$1,000,000; and retained earnings $1,200,000. During the year, the following treasury
stock transactions occurred.
Instructions
(a) Journalize the treasury stock transactions.
(b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per
share.
Answer:
The following information was taken from the financial statements of Lawson
Company:
Instructions
(a) Compute the net sales for each year.
(b) Compute the cost of goods sold in dollars and as a percentage of net sales for each
year.
(c) Compute operating expenses in dollars and as a percentage of net sales for each
year. (Income taxes are not operating expenses).
Answer:
Harve Reardon, the CEO of Mythic Products, is a successful entrepreneur but a poor
student of accounting. He asks you to explain to him, in a memo, the bases of
comparison for ratio analysis.
Answer:
Ladle Corporation had net income of $2,000,000 in 2014. Using 2014 as the base year,
net income decreased by 70% in 2015 and increased by 180% in 2016.
Instructions
Compute the net income reported by Ladle Corporation for 2015 and 2016.
Answer:
The chart of accounts is a listing of the accounts and the account numbers which
identify their location in the ledger.
Answer:
A corporation is not an entity which is separate and distinct from its owners.
Answer:
The cost of a patent should be amortized over its legal life or useful life, whichever is
shorter.
Answer: