Generally accepted accounting principles are
a. income tax regulations of the Internal Revenue Service.
b. standards that indicate how to report economic events.
c. theories that are based on physical laws of the universe.
d. principles that have been proven correct by academic researchers.
Answer:
A T-account is
a. a way of depicting the basic form of an account.
b. what the computer uses to organize bytes of information.
c. a special account used instead of a trial balance.
d. used for accounts that have both a debit and credit balance.
Answer:
Under the allowance method of accounting for uncollectible accounts,
a. the cash realizable value of accounts receivable is greater before an account is written
off than after it is written off.
b. Bad Debt Expense is debited when a specific account is written off as uncollectible.
c. the cash realizable value of accounts receivable in the balance sheet is the same
before and after an account is written off.
d. Allowance for Doubtful Accounts is closed each year to Income Summary.
Answer:
Ranger Corporation reports the following amounts in their 2015 financial statements:
Instructions
(a) Compute the December 31, 2013, balance in stockholders’ equity.
(b) Compute the debt to assets ratio at December 31, 2015.
(c) Compute times interest earned for 2015.
Answer:
Stahl Consulting started the year with total assets of $60,000 and total liabilities of
$15,000. During the year, the business recorded $48,000 in catering revenues and
$30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during
the year. The stockholders’ equity at the end of the year was
a. $33,000.
b. $54,000.
c. $57,000.
d. $63,000.
Answer:
Inventoriable costs include all of the following except the
a. cost of the goods purchased.
b. freight in.
c. cost of the beginning inventory.
d. All of these answers are included.
Answer:
Win, Inc. has 10,000 shares of 7%, $100 par value, cumulative preferred stock and
100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the
board of directors declares a $70,000 dividend, the
a. preferred shareholders will receive 1/10th of what the common shareholders will
receive.
b. preferred shareholders will receive the entire $70,000.
c. $70,000 will be held as restricted retained earnings and paid out at some future date.
d. preferred shareholders will receive $35,000 and the common shareholders will
receive $35,000.
Answer:
The most efficient way to accomplish closing entries is to
a. credit the income summary account for each revenue account balance.
b. debit the income summary account for each expense account balance.
c. credit the dividends balance directly to the income summary account.
d. credit the income summary account for total revenues and debit the income summary
account for total expenses.
Answer:
Trendy Company issued $600,000 of 8%, 5-year bonds at 105. Assuming straight-line
amortization and annual interest payments, how much bond interest expense is recorded
on the next interest date?
a. $48,000
b. $54,000
c. $42,000
d. $6,000
Answer:
Soundgarden Company collected $18,200 in May of 2015 for 5 months of service
which would take place from October of 2015 through February of 2016. The revenue
reported from this transaction during 2015 would be
a. $0.
b. $7,280.
c. $10,920.
d. $18,200.
Answer:
Premium on Bonds Payable
a. has a debit balance.
b. is a contra account.
c. is considered to be a reduction in the cost of borrowing.
d. is deducted from bonds payable on the balance sheet.
Answer:
All of the following are services offered by public accountants except
a. budgeting.
b. auditing.
c. tax planning.
d. consulting.
Answer:
The allowance method of accounting for uncollectible accounts is required if
a. the company makes any credit sales.
b. bad debts are significant in amount.
c. the company is a retailer.
d. the company charges interest on accounts receivable.
Answer:
Pakota Company issued $700,000 of 6%, 5-year bonds at 98, with interest paid
annually. Assuming straight-line amortization, what is the carrying value of the bonds
after one year?
a. $686,000
b. $683,200
c. $688,800
d. $697,200
Answer:
A prior period adjustment for understatement of net income will
a. be credited to the Retained Earnings account.
b. be debited to the Retained Earnings account.
c. show as a gain on the current year’s Income Statement.
d. show as an asset on the current year’s Balance Sheet.
Answer:
H. Hunter Company’s records indicate the following information for the year:
On December 31, a physical inventory determined that ending inventory of $500,000
was in the warehouse. H. Hunter’s gross profit on sales has remained constant at 30%.
H. Hunter suspects some of the inventory may have been taken by some new
employees. At December 31, what is the estimated cost of missing inventory?
a. $60,000
b. $100,000
c. $150,000
d. $1,340,000
Answer:
Logan Company owns equipment that cost $140,000 when purchased on January 1,
2012. It has been depreciated using the straight-line method based on estimated salvage
value of $14,000 and an estimated useful life of 5 year.
Instructions
Prepare Logan Company’s journal entries to record the sale of the equipment in five
independent situations. Update depreciation on assets disposed of at time of sale.
(a) Sold for $65,000 on January 1, 2015.
(b) Sold for $65,000 on April 1, 2015.
(c) Sold for $35,000 on January 1, 2015.
(d) Sold for $35,000 on September 1, 2015.
(e) Repeat (c), assuming Logan uses double-declining balance depreciation.
Answer:
Claims for which formal instruments of credit are issued as proof of the debt are
a. accounts receivable.
b. interest receivable.
c. notes receivable.
d. other receivables.
Answer:
A merchandising company that sells directly to consumers is a
a. retailer.
b. wholesaler.
c. broker.
d. service company.
Answer:
The amortization of premium on bonds payable
a. increases interest expense.
b. increases the carrying value of the bond.
c. is recorded by debiting Premium on Bonds Payable.
d. reduces the cash paid to bondholders.
Answer:
Hilton Company issued a four-year interest-bearing note payable for $600,000 on
January 1, 2014. Each January the company is required to pay $150,000 on the note.
How will this note be reported on the December 31, 2015 balance sheet?
a. Long-term debt, $600,000.
b. Long-term debt, $450,000.
c. Long-term debt, $300,000; Long-term debt due within one year, $150,000.
d. Long-term debt, $450,000; Long-term debt due within one year, $150,000.
Answer:
The petty cash fund eliminates the need for a bank checking account.
Answer:
In preparing a statement of cash flows, the issuance of debt should be reported
separately from the retirement of debt.
Answer:
Match the items below by entering the appropriate code letter in the space
provided.
____ 1> Net income retained in the corporation.
____ 2> The amount that must be retained in the business for the
protection of creditors.
____ 3> Preferred stockholders have a right to receive current and unpaid
prior-year dividends before common stockholders receive any dividends.
____ 4> Creditors only have corporate assets to satisfy their claims.
____ 5> Responsible to stockholders for corporate activity.
____ 6> The amount assigned to each share of stock in the corporate
charter.
____ 7> Unit of ownership in a corporation.
____ 8> Enables stockholders to maintain their same percentage ownership
when new shares are issued.
____ 9> Corporation’s own stock that has been reacquired by the
corporation but not retired.
____ 10> Total amount paid-in on capital stock.
____ 11> A dividend declared out of paid-in capital.
____ 12> A pro rata distribution of cash to stockholders.
____ 13> A debit balance in retained earnings.
____ 14> A pro rata distribution of the corporation’s own stock to
stockholders.
____ 15> Shows how many dollars of net income were earned for each
dollar invested by the owners.
____ 16> The date the board of directors formally declares the dividend
and announces it to stockholders.
____ 17> The issuance of additional shares of stock to stockholders
accompanied by a reduction in the par or stated value per share.
____ 18> Widely used by stockholders and potential investors in
evaluating the profitability of a company.
Answer:
If a corporation issued bonds at an amount less than face value, it indicates that the
corporation has a weak credit rating.
Answer:
Ordinary repairs which maintain operating efficiency and expected productive life are
called _______________.
Answer:
The financial information below was taken from the annual financial statements of Falls
Company.
Instructions
Calculate the following ratios for Falls Company for 2013. Round to one decimal place.
1> Return on assets.
2> Average collection period of receivables in days.
3> Current ratio.
4> Debt to assets ratio.
5> Inventory turnover.
6> Profit margin.
7> Asset turnover.
8> Return on common stockholders’ equity.
Answer:
