The net amount of a bond liability that appears on the balance sheet is equal to the face
value of the bond plus any related discount or minus any related premium.
Goods placed in inventory are initially recorded at market value.
Using the T-account approach to preparing the statement of cash flows, an increase in
Accounts Payable would appear on the debit side of the Cash account.
Costs that benefit future periods are reported as assets.
There are no significant differences between GAAP and IFRS with regards to the
accounting for tangible and intangible assets.
In each accounting period, a manager can select the inventory costing method that
yields the highest net income.
A business is obliged to repay both debt and equity financing.
A stock split increases total stockholders’ equity.
If the total dollar value of credits to an account exceeds the total dollar value of debits
to that account, the ending balance of the account will be a debit balance.
Net income is based on estimates.
The Sarbanes-Oxley Act (SOX) requires external auditors to test the company ‘s
internal control system.
Owners of a company:
A) hold promissory notes as evidence of their ownership claim.
B) are entitled to repayment of their investment.
C) have a claim that is secondary to creditor ‘s claims.
D) have a claim equal to the amount of liabilities a company owes.
On February 16, a company declares a 68¢ dividend to be paid on April 5. There are
950,000 shares of common stock issued and outstanding. The entry recorded by the
company on April 5 includes a debit to:
A) A debit to Dividends Payable and a credit to Cash for $680,000.
B) A debit to Dividends and a credit to Dividends Payable for $646,000.
C) A debit to Dividends Payable and a credit to Cash for $646,000.
D) A debit to Dividends and a credit to Dividends Payable for $680,000.
Choose the appropriate letter to match the description of the business activity with the
category.
BUSINESS ACTIVITY
1> ____ The purchase of a new line of assembly equipment
2> ____ Company payment of a dividend
3> ____ The purchase of office supplies
4> ____ The purchase of advertising time by the company
5> ____ The building of a new factory
6> ____ Company repayment of a bank loan
CATEGORY
A. Operating activity
B. Investing activity
C. Financing activity
How competitors calculate inventory cost is least likely to affect comparisons between
competitors if inventory makes up a:
A) large percentage of assets and inventory costs are stable.
B) large percentage of assets and inventory costs are not stable.
C) small percentage of assets and inventory costs are not stable.
D) small percentage of assets and inventory costs are stable.
Which of the following statements about a multistep income statement is not correct?
A) Income before income taxes = Net income + Income tax expense
B) Depreciation is subtracted in the calculation of core operating results.
C) Income from operations = Income before income tax expense + Other revenues
(expenses), net
D) Income from operations = Net income + Income tax expense – Other revenues
(expenses), net
Using straight-line amortization, when a bond is sold at a premium:
A) the amortized premium is added to the interest payable to calculate interest expense.
B) Bonds Payable rises by a constant amount each year.
C) interest expense is calculated by subtracting the amortized premium from the interest
payment that is to be made.
D) interest expense rises each year.
Which one of the following statements about inventory is not correct?
A) An increase in inventory levels is always a sign of inefficiency in inventory
management.
B) The measurement of inventory affects both the balance sheet and the income
statement within an accounting period.
C) The ending inventory of one accounting period becomes the beginning inventory of
the next accounting period.
D) The cost of inventory can vary over time and may be affected by technological
innovation.
Which of the following statements is not correct?
A) An “A” rating is the best credit rating a company can earn.
B) Credit ratings below BB are called “junk.”
C) A credit rating agency indicates a company’s ability to pay its debts on a timely
basis.
D) Standard and Poor’s, Fitch, and Moody’s are the names of credit rating agencies.
If a company borrows money from a bank and signs an agreement to repay the loan
several years from now, in which account would the company report the amount
borrowed?
A) Common Stock
B) Accounts Payable
C) Notes Payable (long-term)
D) Retained Earnings
Goodwill may be attributable to all of the following except:
A) a significant amount of charitable contributions.
B) a great reputation.
C) an established customer base.
D) successful business operations.
An adjustment to accrue the amount of salaries and wages owed was recorded on
December 31. These salaries and wages were paid on the following January 5. The
entry on January 5 would include a debit to:
A) Salaries and Wages Expense and Credit to Cash.
B) Salaries and Wages Payable and Credit to Cash.
C) Cash and Credit to Salaries and Wages Payable.
D) Cash and Credit to Salaries and Wages Expense.