The principles of internal control include all of the following except
a. establishment of responsibility.
b. combining of duties.
c. physical, mechanical, and electronic controls.
d. independent internal verification.
Answer:
Depreciable cost is the
a. book value of an asset less its salvage value.
b. cost of an asset less its salvage value.
c. cost of an asset less accumulated depreciation.
d. book value of an asset.
Answer:
Which of the following statements concerning leases is true?
a. Capital leases are favored by lessees.
b. The appearance of the account, Leased Asset, on the balance sheet, signifies an
operating lease.
c. The portion of a lease liability expected to be paid in the next year is reported as a
current liability.
d. Present value is irrelevant in accounting for leases.
Answer:
The following information is for Sunny Day Real Estate:
The total dollar amount of assets to be classified as property, plant, and equipment is
a. $200,000.
b. $220,000.
c. $285,000.
d. $305,000.
Answer:
A double rule applied to accounts in the ledger during the closing process implies that
a. the account is a temporary account.
b. the account is a balance sheet account.
c. the account balance is not zero.
d. a mistake has been made, since double ruling is prescribed.
Answer:
Under GAAP, companies generally classify income statement items by
a. function.
b. nature.
c. nature or function
d. date incurred.
Answer:
Robert Tingle is studying for the next accounting mid-term examination. What should
Robert know about (a) departing from the cost basis of accounting for inventories and
(b) the meaning of “market” in the lower-of-cost-or-market method?
Answer:
In a service-type business, revenue is considered recognized
a. at the end of the month.
b. at the end of the year.
c. when the service is performed.
d. when cash is received.
Answer:
The use of fair value to report assets
a. is not allowed under GAAP or IFRS.
b. is required by GAAP and IFRS.
c. is increasing under GAAP and IFRS, but GAAP has adopted it more broadly.
d. is increasing under GAAP and IFRS, but IFRS has adopted it more broadly.
Answer:
Each of the following items affect the cash balance per books except
a. bank service charges.
b. notes collected by the bank.
c. NSF checks.
d. outstanding checks.
Answer:
If you are able to earn a 15% rate of return, what amount would you need to invest to
have $15,000 one year from now?
a. $14,852
b. $13,125
c. $12,750
d. $13,044
Answer:
Merriweather Post Pavillion received a $820 check from a customer for the balance
due. The transaction was erroneously recorded as a debit to Cash $280 and a credit to
Service Revenue $280. The correcting entry is
a. debit Cash, $820; credit Accounts Receivable, $820.
b. debit Cash, $540 and Accounts Receivable, $280; credit Service Revenue, $820.
c. debit Cash, $540 and Service Revenue, $280; credit Accounts Receivable, $820.
d. debit Accounts Receivable, $820; credit Cash, $540 and Service Revenue, $280.
Answer:
If a plant asset is retired before it is fully depreciated, and the salvage value received is
less than the asset’s book value,
a. a gain on disposal occurs.
b. a loss on disposal occurs.
c. there is no gain or loss on disposal.
d. additional depreciation expense must be recorded.
Answer:
Which of the following would not be considered internal users of accounting data for a
company?
a. The president of a company.
b. The controller of a company.
c. Creditors of a company.
d. Salesmen of the company.
Answer:
Here are comparative balance sheets for Porter Company
Additional information:
1> Net income for 2015 was $90,000.
2> Cash dividends of $23,000 were declared and paid.
3> Bonds payable amounting to $50,000 were redeemed for cash $50,000
4> Common stock was issued for $42,000 cash
5> Equipment that cost $50,000 and had a book value of $30,000 was sold
for $36,000 during 2015; land was sold at cost.
Instructions
(a) Prepare a statement of cash flows for 2015 using the indirect method.
(b) Compute free cash flow for 2014
Answer:
On a balance sheet, natural resources may be described more specifically as all of the
following except
a. land improvements.
b. mineral deposits.
c. oil reserves.
d. timberlands.
Answer:
At October 1, Arcade Fire Enterprises reported stockholders’ equity of $70,000. During
October, common stock of $4,000 was issued and the company earned net income of
$14,000. If stockholders’ equity at October 31 totals $80,000, what amount of dividends
were paid during the month?
a. $0
b. $4,000
c. $8,000
d. $10,000
Answer:
To determine the net cash provided (used) by operating activities, it is necessary to
analyze
a. the current year’s income statement.
b. a comparative balance sheet.
c. additional information.
d. All of these answers are correct.
Answer:
IFRS requires loans and receivables to be recorded at
a. amortized cost.
b. amortized cost, adjusted for allowances for doubtful accounts.
c. unamortized cost.
d. unamortized cost, adjusted for allowances for doubtful accounts.
Answer:
The cost of a patent should be amortized over
a. 20 years.
b. the shorter of its legal life or its useful life.
c. the longer of its legal life or its useful life.
d. its useful life.
Answer:
International standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Answer:
Companies report current liabilities on the balance sheet in
a. alphabetical order.
b. order of maturity.
c. random order.
d. order of magnitude.
Answer:
When stock is issued for legal services, the transaction is recorded by debiting
Organization Expense for the
a. stated value of the stock.
b. par value of the stock.
c. market value of the stock.
d. book value of the stock.
Answer:
The size of the petty cash fund is dependent on
a. the wishes of the custodian of the fund.
b. anticipated disbursements for the year.
c. anticipated disbursements for a three- to four-week period.
d. the size of the regular cash account.
Answer:
Halpern Corporation is authorized to issue 1,000,000 shares of $3 par value common
stock. During 2015, its first year of operation, the company has the following stock
transactions.
Instructions
Journalize the transactions for Halpern Corporation.
Answer:
The quality of consistency pertains to the use of the same accounting principles by
firms in the same industry.
Answer:
Ellen Corhy and Bryn Davis, two salespersons in adjoining territories, regularly
compete for bonuses. During the last month, their dollar volume of sales, on which the
bonuses are based, was nearly equal. On the last day of the month, both made a large
sale. Both orders were shipped on the last day of the month and both were received by
the customer on the fifth of the following month. Ellen’s sale was FOB shipping point,
and Bryn’s was FOB destination. The company “counts” sales for purposes of
calculating bonuses on the date that ownership passes to the purchaser. Ellen’s sale was
therefore counted in her monthly total of sales, Bryn’s was not. Bryn is quite upset. She
has asked you to just include it, or to take Ellen’s off as well. She also has told you that
you are being unethical for allowing Ellen to get a bonus just for choosing a particular
shipping method.
Write a memo to Bryn. Explain your position.
Answer:
Which of the following adjustments to convert net income to net cash provided by
operating activities is incorrect?
Answer:
With a financial calculator, one can solve for any interest rate or for any number of
periods in a time value of money problem.
Answer:
Once cost is established for a plant asset, it becomes the basis of accounting for the
asset unless the asset appreciates in value, in which case, market value becomes the
basis for accountability.
Answer: