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The market value (present value) of a bond is a function of all of the following except
the
a. dollar amounts to be received.
b. length of time until the amounts are received.
c. market rate of interest.
d. length of time until the bond is sold.
Answer:
Prepare the necessary journal entries for the following transactions:
(a) On September 1, Cole Company borrowed $300,000 from National Bank on a
6-month, 8% note.
(b) On December 31, Cole Company accrued interest (assume adjusting entries are only
made at the end of the year).
Answer:
The following items were shown on the balance sheet of Easton Corporation on
December 31, 2015:
Instructions
Complete the following statements and show your computations.
(a) The number of shares of common stock issued was _______________.
(b) The number of shares of common stock outstanding was ____________.
(c) The sales price of the common stock when issued was $____________.
(d) The cost per share of the treasury stock was $_______________.
(e) The average issue price of the common stock was $______________.
(f) Assuming that 25% of the treasury stock is sold at $20 per share, the balance in the
Treasury Stock account would be $_______________.
Answer:
The debt to assets ratio
a. is a solvency ratio.
b. is computed by dividing total assets by total debt.
c. measures the total assets provided by stockholders.
d. is a profitability ratio.
Answer:
The statement of cash flows will not report the
a. amount of checks outstanding at the end of the period.
b. sources of cash in the current period.
c. uses of cash in the current period.
d. change in the cash balance for the current period.
Answer:
Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014
for $60,000.
If Bay sells all of its Community bonds for $64,500, what gain or loss is recognized?
a. Loss of $9,300
b. Loss of $4,500
c. Gain of $9,300
d. Gain of $4,500
Answer:
Credits
a. decrease both assets and liabilities.
b. decrease assets and increase liabilities.
c. increase both assets and liabilities.
d. increase assets and decrease liabilities.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
What is the amount that would be reported for stockholders' equity at December 31,
2015?
a. $158,000
b. $144,000
c. $130,000
d. $102,000
Answer:
Over the term of the bonds, the balance in the Discount on Bonds Payable account will
a. fluctuate up and down if the market is volatile.
b. decrease.
c. increase.
d. be unaffected until the bonds mature.
Answer:
Using the indirect method, patent amortization expense for the period
a. is deducted from net income.
b. causes cash to increase.
c. causes cash to decrease.
d. is added to net income.
Answer:
Herman Company has a debit balance of $5,000 in its Allowance for Doubtful Accounts
before any adjustments are made at the end of the year. Based on review and aging of
its accounts receivable at the end of the year, Herman estimates that $70,000 of its
receivables are uncollectible. The amount of bad debt expense which should be reported
for the year is:
a. $5,000.
b. $65,000.
c. $70,000.
d. $75,000.
Answer:
Which of the following is not an intangible asset arising from a government grant?
a. Goodwill
b. Patent
c. Trademark
d. Trade name
Answer:
Unearned Rent Revenue is
a. a contra account to Rent Revenue.
b. a revenue account.
c. reported as a current liability.
d. debited when rent is received in advance.
Answer:
A business organized as a corporation
a. is not a separate legal entity in most states.
b. requires that stockholders be personally liable for the debts of the business.
c. is owned by its stockholders.
d. terminates when one of its original stockholders dies.
Answer:
The Constantine Company had the following assets and liabilities on the dates
indicated.
Constantine began business on January 1, 2014, with an investment of $100,000.
Instructions
From an analysis of the change in stockholders' equity during the year, compute the net
income (or loss) for:
(a) 2014, assuming Constantine's dividends were $45,000 for the year.
(b) 2015, assuming Constantine made an additional investment of $50,000 and paid no
dividends in 2015.
(c) 2016, assuming Constantine made an additional investment of $15,000 and paid
dividends of $40,000 in 2016.
Answer:
(a) Brown Company purchased equipment in 2008 for $150,000 and estimated a
$10,000 salvage value at the end of the equipment's 10-year useful life. At December
31, 2014, there was $98,000 in the Accumulated Depreciation account for this
equipment using the straight-line method of depreciation. On March 31, 2015, the
equipment was sold for $40,000.
Prepare the appropriate journal entries to remove the equipment from the books of
Brown Company on March 31, 2015.
(b) Finney Company sold a machine for $15,000. The machine originally cost $35,000
in 2012 and $8,000 was spent on a major overhaul in 2015 (charged to the Equipment
account). Accumulated Depreciation on the machine to the date of disposal was
$28,000.
Prepare the appropriate journal entry to record the disposition of the machine.
(c) Stanley Company sold office equipment that had a book value of $12,000 for
$16,000. The office equipment originally cost $40,000 and it is estimated that it would
cost $50,000 to replace the office equipment.
Prepare the appropriate journal entry to record the disposition of the office equipment.
Answer:
The income statement of Jue's Luggage. includes the items listed below:
Instructions
Use the appropriate items listed above as a basis for determining:
(a) Cost of goods sold.
(b) Cost of goods available for sale.
(c) Ending inventory.
Answer:
The option to value inventory at fair value exists under
Answer:
The ______________ ratio measures the percentage of earnings distributed in the form
of cash dividends.
Answer:
The adjusting entry at the end of the period to record an expired cost may be different
depending on whether the cost was initially recorded as an asset or an expense.
Answer:
Both accounts receivable and notes receivable represent claims that are expected to be
collected in cash.
Answer:
Discontinued operations refers to the disposal of a significant component
of the business such as the stopping of an entire activity or eliminating a
major class of customers. It is important to report discontinued operations
separately from continuing operations because the discontinued component
will not affect future income statements.
A trusted employee of Outback Tours was caught in the act of embezzling
funds. He confessed to earlier embezzlements, but retracted the confession
on the advice of his attorney. Over the course of the most recent quarter, it
has been determined that $20,000 was embezzled.
Outback Tours has suffered adverse publicity in the recent past because of
serious injury to five tourists that occurred during a two week "Winter
Wilds Adventure" tour. The company has therefore decided to avoid
publicity and has agreed to drop all charges against the embezzling
employee. In return, the employee has agreed to a notation of
"Terminated'”Not to be Rehired" to be appended to his personnel file.
1> Who are the stakeholders in the decision not to prosecute?
2> Was it ethical for the company to decide not to prosecute? Explain.
Answer:
Bill and Ellen Sweatt plan to invest $2,500 a year in an educational IRA for their
granddaughter, Sloane Martin. They will make these deposits on December 31 of each
year. Bill and Ellen feel they can safely earn 8%. How much will be in this account on
December 31 of the 18thyear?
Answer:
Contingent liabilities should be recorded in the accounts if there is a remote possibility
that the contingency will actually occur.
Answer:
Current maturities of long-term debt refers to the amount of interest on a note payable
that must be paid in the current year.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
____ 1> Valuation allowance account.
____ 2> Amount for which a security could be sold.
____ 3> Ownership of more than 50% of another company's common stock.
____ 4> Securities that may be sold in the future.
____ 5> Investments that are not readily marketable and not intended to be converted
into cash within the next year.
____ 6> Financial statements that present the total assets and liabilities controlled by
the parent and the total revenues and expenses of the subsidiary companies.
____ 7> The Stock Investments account is adjusted for net income and dividends
received.
____ 8> A company that owns more than 50% of the common stock of another entity.
____ 9> Entity whose stock is owned by the parent company.
____ 10> An account that is reported in the stockholders' equity section.
Answer:
Identify which of the following accounts would have balances on a post-closing trial
balance.
(1) Service Revenue
(2) Income Summary
(3) Notes Payable
(4) Interest Expense
(5) Cash
Answer:
