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A list of all asset, liability, stockholders' equity, revenue, and expense accounts, along
with their assigned account numbers, which are used by a company is a(an)
a. Account
b. General Journal
c. General Ledger
d. Chart of Accounts
Lenders are interested in the value of operating assets as collateral when making
lending decisions.
a. True
b. False
The statement of cash flows summarizes the operating, investing, and financing
activities of a business for a period of time.
a. True
b. False
On January 1, 2015, Clark, Inc. issued $400,000, 10-year, 10% bonds for $354,200. The
bonds pay interest on June 30 and December 31. The market rate is 12%. What is the
carrying value of the bonds at the end of the ten years?
a. $400,000
b. $480,000
c. $380,000
d. $354,200
Use the following codes to indicate how the cash flow effect, if any, of each transaction
or event would be reported on a statement of cash flows if the operating activities
section is prepared using the indirect method.
a. Operating activity-add to net income
b. Operating activity-deduct from net income
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
Recognized a gain on the sale of the securities above.
Router Inc. lends $70,000 on a 120-day, 9% promissory note. The total interest that
Router will receive at maturity is
a. $6,300
b. $2,100
c. $525
d. $1,890
Mendes Company sells merchandise to customers. Mendes should normally recognize
a. Revenue and the related expenses in the same accounting period as earned whether
payment is received or not
b. Revenue when the cash is collected and the expenses when Mendes pays its creditor
for the merchandise
c. Revenue and expenses after all payments are collected
d. Expenses in the period the merchandise is sold and defer revenue until the customer
pays for the merchandise
Under the perpetual inventory system, each time goods are purchased, the inventory
account is transferred to sales revenue.
a. True
b. False
a. A liability resulting from the signing of a promissory note.
b. A measure of how long it takes to collect receivables.
c. A written promise to repay a definite sum of money on demand or at a fixed or
determinable date in the future.
d. The length of time a note is outstanding, that is, the period of time between the date it
is issued and the date it matures.
e. The party that will receive the money from a promissory note at some future date.
f. The process of selling a promissory note.
g. The date the promissory note is due.
h. The amount of cash the maker is to pay the payee on the maturity date of the note.
i. The difference between the principal amount of the note and its maturity value.
j. An asset resulting from the acceptance of a promissory note from another company.
k. Securities issued by corporations and governmental bodies as a form of borrowing.
l. Securities issued by corporations as a form of ownership in the business.
m. The party that agrees to repay the money for a promissory note at some future date.
n. The amount of cash received, or the fair value of the products or services received,
by the maker when a promissory note is issued.
Discounting
Three organizations important to accounting are listed below. Select the organization th
at most closely achieves the role described.
a. American Institute of Certified Public Accountants (AICPA)
b. Financial Accounting Standards Board (FASB)
c. Securities and Exchange Commission (SEC) Since there is a lack of a profit motive
in nonbusiness entities, they do notneed information provided by an accounting system.
a. True
b. False
Which of the following is an example of a credit memorandum?
a. Service charge notice
b. Collection of a note receivable by the bank
c. Outstanding check
d. Company error in recording a $600 deposit as $500
All of the following statements are true except:
a. The threshold for recording items as liabilities is a lower under IFRS than under U.S.
GAAP.
b. The threshold for recording items as liabilities is a lower under U.S. GAAP than
under IFRS.
c. IFRS requires a liability to be recorded as a present value amount.
d. Under U.S. GAAP, a contingent item should be recorded as a liability if the loss or
outflow is probable and can be reasonably estimated.
For each of the following items, indicate whether it would appear on a statement of
cash flows prepared using the Direct method (a) or the Indirect method (b).
a. Direct
b. Indirect
Depreciation expense
If the business has anfrom a customer, then the customer has anto the business.
a. account receivable; account receivable
b. account payable; account payable
c. account receivable; account payable
d. account payable; account receivable
is the name given to revenue, expense, and dividend accounts because they are closed at
the end of the period.
Various transactions may change the amount and composition of the assets and
liabilities, but the
____________________________ must balance after each transaction.
Winston Corp. had $1,800 of supplies on hand at January 1. During the year, supplies
with a cost of $4,000 were purchased. At December 31, the actual supplies on hand
amount to $1,300. After the adjustments are recorded and posted at December 31,
determine the balances in the Supplies and Supplies Expense accounts.
Items that are included on a bank statement and increase the bank account balance are
called
_________________________.
depreciation is the GAAP depreciation method used most frequently.
Explain how a company can control small payments that must be made in cash rather
than by check.
