The formula for the future value of a single amount is p x (1 + i)/n.
Revenue received before it is recognized and expenses used or consumed before being
paid are both initially recorded as liabilities.
The revenue recognition principle applies to merchandising companies by recognizing
sales revenues when the performance obligation is satisfied.
In a single-step income only one step is required in determining net income.
Debit and credit can be interpreted to mean €bad€ and €good€, respectively.
Sales Discounts is a contra revenue account to Sales Revenue.
The accrued interest for a three month note payable of $10,000 dated December 1, 2013
at an interest rate of 6% is $150 on December 31, 2013.
A change in the estimated useful life of a plant asset may cause a change in the amount
of depreciation recognized in the current and future periods, but not in prior periods.
On January 1, 2014, Tri-State Industries had cash and common stock of $180,000. At
that date the company had no other asset, liability or equity balances. On January 2,
2014, it purchased $160,000 of equity securities for cash that it classified as
available-for-sale. It received cash dividends of $9,000 during the year on these
securities. In addition, it had an unrealized holding gain on these securities of $24,000
net of tax. Based on this information, what is the amount of comprehensive income in
2014?
a.$33,000
b.$273,000
c.$9,000
d.$24,000
When a seller records a return of goods, the account that is credited is
a.Sales Revenue.
b.Sales Returns and Allowances.
c.Inventory.
d.Accounts Receivable.
For which of the following pairs of costs will a company record no amortization
expense?
a.Research and development costs and goodwill
b.Copyrights and licenses
c.Franchises and patents
d.Goodwill and trade names
The debt to assets ratio is a
a.liquidity ratio.
b.profitability ratio.
c.solvency ratio.
d.None of the answer choices is correct.
Using the following balance sheet and income statement data, what is the total amount
of working capital?
Average common shares outstanding was 10,000.
a.$7,000
b.$5,000
c.$3,000
d.$2,000
Instructions: Match the terms given below with the definitions or descriptions that
follow by placing the appropriate letter in the space provided.
A. Liquidity F. Profitability
B. Earnings per share G. Dividends
C. Debt to assets ratio H. Working capital
D. Current ratio I. Solvency
E. Free cash flow J. Periodicity
1)Measures the ability of an enterprise to survive over a long period of time
2)Distribution of cash or other assets from a corporation to its stockholders
3)Measures the percentage of total assets that creditors provide
4)The excess of current assets over current liabilities
5)Current assets divided by current liabilities
6)Measures of the income or operating success of an enterprise for a given period of
time
7)A measure of the net income earned on each share of common stock
8)The ability of a borrower to pay obligations when they become due
A corporation issues $200,000, 8%, 5-year bonds on January 1, 2014, for $208,400.
Interest is paid annually on January 1. If the corporation uses the straight-line method of
amortization of bond premium, the amount of bond interest expense to be recognized in
December 31, 2014’s adjusting entry is
a.$14,320.
b.$16,000.
c.$17,680.
d.$1,680.
Instructions: Match the items below by entering the appropriate letter in the space
provided.
A. General journal H. Permanent accounts
B. Trial balance I. Revenue recognition principle
C. Periodicity assumption J. Prepayments
D. Accrual accounting K. Accrued expenses
E. Cash basis accounting L. Adjusting entries
F. Expense recognition principle M. Closing entries
G. Ledger N. Temporary accounts
Piper Pipes has the following inventory data:
Assuming that a periodic inventory system is used, what is the cost of goods sold on a
LIFO basis.
a.$10,992
b.$11,022
c.$23,088.
d.$23,118
A corporation purchases 15,000 shares of its own $20 par common stock for $35 per
share, recording it at cost. What will be the effect on total stockholders’ equity?
a.Increase by $525,000.
b.Decrease by $300,000.
c.Decrease by $525,000.
d.Decrease by $225,000.
Trumpeting Trumpets has the following inventory data:
Assuming that a periodic inventory system is used, what is the cost of goods sold on a
FIFO basis.
a.$10,992
b.$11,022
c.$23,088
d.$23,118
At March 1, I. Repo Inc. reported a balance in Supplies of $200. During March, the
company purchased supplies for $950 and consumed supplies of $700. If no adjusting
entry is made for supplies:
a.stockholders’ equity will be overstated by $700.
b.expenses will be understated by $950.
c.assets will be understated by $450.
d.net income will be understated by $700.
The following ratios have been computed for Southern Company for 2014.
The 2014 financial statements for Southern Company with missing information
follows:
Instructions
Use the above ratios and information from the Southern Company financial statements
to fill in the missing information on the financial statements. Follow the sequence
indicated. Show computations that support your answers.
Wang Company had the following transactions during 2013:
Sales of $10,800 on account
Collected $4,800 for services to be performed in 2014
Paid $3,100 cash in salaries
Purchased airline tickets for $600 in December for a trip to take place in 2014
What is Wang’s 2013 net income using cash basis accounting?
a.$1,100
b.$2,300
c.$12,500
d.$1,700
Which statement is not true concerning the accrual basis of accounting?
a.Transactions are recorded when payment is made for the costs incurred.
b.GAAP requires the accrual basis for financial reporting.
c.Transactions are recorded when events occur.
d.Revenue.is recognized when services are performed.
The accountant at Landry Company is figuring out the difference in income taxes the
company will pay depending on the choice of either FIFO or LIFO as an inventory
costing method. The tax rate is 30% and the FIFO method will result in income before
taxes of $8,740. The LIFO method will result in income before taxes of $8,100. What is
the difference in tax that would be paid between the two methods?
a.$640
b.$448
c.$192
d.Cannot be determined from the information provided.
Which one of the following is not one of the most common types of comparisons used
to improve the decision usefulness of financial information?
a.Industry averages
b.Intracompany basis
c.Intercompany basis
d.Sustainable basis
For each of the following oversights, state whether total assets will be understated (U),
overstated (O), or no affect (NA).
_____1>Failure to record revenue recognized but not yet received.
_____2>Failure to record expired prepaid rent.
_____3>Failure to record accrued interest on the bank savings account.
_____4>Failure to record depreciation.
_____5>Failure to record accrued wages.
_____6>Failure to record the recognized portion of unearned revenues.
Lovett Company provides this information for the month of November, 2014: sales on
credit $140,000; cash sales $50,000; sales discount $2,000; and sales returns and
allowances $8,000. Prepare the sales revenues section of the income statement based on
this information.
Equipment was acquired on January 1, 2010, at a cost of $75,000. The equipment was
originally estimated to have a salvage value of $5,000 and an estimated life of 10 years.
Depreciation has been recorded through December 31, 2013, using the straight-line
method. On January 1, 2014, the estimated salvage value was revised to $7,000 and the
useful life was revised to a total of 8 years.
Instructions
Determine the depreciation expense for 2014.
Frye Company issued $700,000, 10%, 10-year bonds on January 1, 2014, at 105.
Interest is payable annually. Frye uses the effective-interest method of amortization and
has a calendar year end and the bonds were issued for an effective interest rate of 8%.
Instructions
Prepare all journal entries made in 2014 related to the bond issue.
Match the ratios with their formulas by entering the appropriate letter in the space
provided.
Ye Olde Christmas shop signs a three-month note payable to help finance increases in
inventory for the Christmas shopping season. The note is signed on October 1 in the
amount of $20,000 with annual interest of 6%. What is the adjusting entry to be made
on December 31 for the interest expense accrued to that date, if no entries have been
made previously for the interest?
The liquidity ratio, known as the _______________ ratio, has a disadvantage that it
uses year-end balances for current assets and current liabilities. The ___________
partially corrects for this problem by using cash provided by operating activities and
average current liabilities rather than point in time numbers.
The ledger accounts given below, with an identification number for each, are used by
Tactical Supplies. The company uses a perpetual inventory system.
Instructions: Prepare appropriate entries for the month of May by placing the
appropriate identification number(s) in the debit and credit columns provided and the
dollar amounts pertaining to each account in the adjoining columns. Item 0 is given as
an example.
Grother Company uses the periodic inventory method and had the following inventory
information available:
A physical count of inventory on December 31 revealed that there were 350 units on
hand.
Instructions
Answer the following independent questions and show computations supporting your
answers.
1>Assume that the company uses the FIFO method. The value of the ending inventory
at December 31 is $__________.
2>Assume that the company uses the average cost method. The value of the ending
inventory on December 31 is $__________.
3>Assume that the company uses the LIFO method. The value of the ending inventory
on December 31 is $__________.
4>Determine the difference in the amount of income that the company would have
reported if it had used the FIFO method instead of the LIFO method. Would income
have been greater or less?
Annapolis Company reported net income of $365,000 for the current year. Depreciation
recorded on buildings and equipment amounted to $73,000 for the year. Balances of the
current asset and current liability accounts at the beginning and end of the year are as
follows:
Instructions
Prepare the cash flows from the operating activities section of the statement of cash
flows using the indirect method.
A large stock dividend and stock split can frequently have the same effect on the market
price of a corporation’s stock. Explain how stock dividends and stock splits affect the
market price of a corporation’s stock.