A corporate board of directors does not generally
a. select officers.
b. formulate operating policies.
c. declare dividends.
d. execute policy.
Answer:
On January 1, 2015, Bose Company issued bonds with a face value of $600,000. The
bonds carry a stated interest of 7% payable each January 1 and July
Instructions
a. Prepare the journal entry for the issuance assuming the bonds are issued at 95.
b. Prepare the journal entry for the issuance assuming the bonds are issued at 105.
Answer:
A typical organization chart showing delegation of authority would show
a. stockholders delegating to the board of directors.
b. the board of directors delegating to stockholders.
c. the chief executive officer delegating to the board of directors.
d. the controller delegating to the chief executive officer.
Answer:
Viejo Inc. earns $600,000 and pays cash dividends of $150,000 during 2014. Cruz
Corporation owns 73,500 of the 210,000 outstanding shares of Viejo.
What amount should Cruz show in the investment account at December 31, 2014 if the
beginning of the year balance in the account was $40,000?
a. $197,500
b. $210,000
c. $157,500
d. $250,000
Answer:
A gain or loss on disposal of a plant asset is determined by comparing the
a. replacement cost of the asset with the asset’s original cost.
b. book value of the asset with the asset’s original cost.
c. original cost of the asset with the proceeds received from its sale.
d. book value of the asset with the proceeds received from its sale.
Answer:
Which of the following statements is not true when a fully depreciated plant asset is
retired?
a. The plant asset’s book value is equal to its estimated salvage value.
b. The accumulated depreciation account is debited.
c. The asset account is credited.
d. The plant asset’s original cost equals its book value.
Answer:
European companies rely
a. less on historical cost and more on fair values than U.S. companies.
b. less on fair values and more on historical cost than U.S. companies.
c. completely on fair values for financial reporting.
d. completely on historical cost for financial reporting.
Answer:
The cash records of Jasmin Company show the following four situations.
1> The June 30 bank reconciliation indicated that deposits in transit total $2,110.
During July the general ledger account Cash shows deposits of $23,620, but the bank
statement indicates that only $23,400 in deposits were received during the month.
2> The June 30 bank reconciliation also reported outstanding checks of $1,250. During
the month of July, Jasmin Company books show that $25,800 of checks were issued.
The bank statement showed that $24,600 of checks cleared the bank in July.
3> In September, deposits per the bank statement totaled $40,100, deposits per books
were $38,100, and deposits in transit at September 30 were $2,900.
4> In September, cash disbursements per books were $36,550, checks clearing the bank
were $37,500, and outstanding checks at September 30 were $3,200.
There were no bank debit or credit memoranda. No errors were made by either the bank
or Jasmin Company.
Instructions
Answer the following questions.
(a) In situation (1), what were the deposits in transit at July 31?
(b) In situation (2), what were the outstanding checks at July 31?
(c) In situation (3), what were the deposits in transit at August 31?
(d) In situation (4), what were the outstanding checks at August 31?
Answer:
The maturity value of a $5,000, 9%, 60-day note receivable dated February 10th is
a. $5,000.
b. $5,038.
c. $5,075.
d. $5,450.
Answer:
The ledger accounts should be arranged in
a. chronological order.
b. alphabetical order.
c. financial statement order.
d. order of appearance in the journal.
Answer:
Retained earnings at the end of the period is equal to
a. retained earnings at the beginning of the period plus net income minus liabilities.
b. retained earnings at the beginning of the period plus net income minus dividends.
c. net income.
d. assets plus liabilities.
Answer:
The amount you must deposit now in your savings account, paying 5% interest, in order
to accumulate $10,000 for your first tuition payment when you start college in 3 years
is
a. $8,500.
b. $7,830.
c. $8,638.
d. $8,860.
Answer:
The usual order of accounts in the general ledger is
a. assets, liabilities, common stock, retained earnings, dividends, revenues, and
expenses.
b. assets, liabilities, dividends, common stock, retained earnings, expenses, and
revenues.
c. liabilities, assets, common stock, retained earnings, revenues, expenses, and
dividends.
d. common stock, retained earnings, assets, liabilities, dividends, expenses, and
revenues.
Answer:
The following financial statement information is available for Long Corporation:
The times interest earned for 2015 is
a. 7.4 times.
b. 6.4 times.
c. 9.1 times.
d. 7.8 times.
Answer:
Below are descriptions of internal control problems. In the space to the left of each
item, enter the code letter of the one best internal control principle that is related to the
problem described.
Internal Control Principles
A. Establishment of responsibility
B. Segregation of duties
C. Physical controls
D. Documentation procedures
E. Independent internal verification
F. Human resource controls
1> The same person opens incoming mail and posts the accounts receivable subsidiary
ledger.
2> Three people handle cash sales from the same cash register drawer.
3> A clothing store is experiencing a high level of inventory shortages because people
try on clothing and walk out of the store without paying for the merchandise.
4> The person who is authorized to sign checks approves purchase orders for payment.
5> Some cash payments are not recorded because checks are not prenumbered.
6> Cash shortages are not discovered because there are no daily cash counts by
supervisors.
7> The treasurer of the company has not taken a vacation for over 20 years.
Answer:
The custodian of a company asset should
a. have access to the accounting records for that asset.
b. be someone outside the company.
c. not have access to the accounting records for that asset.
d. be an accountant.
Answer:
Lang, Inc. purchases 1,000 shares of its own previously issued $5 par common stock for
$15,000. The treasury stock is resold by Lang, Inc. for $20,000. What effect does this
transaction have on (a) net income, (b) total assets, (c) total paid-in capital, and (d) total
stockholders’ equity?
Answer:
Swiss Clothing Store had a balance in the Accounts Receivable account of $920,000 at
the beginning of the year and a balance of $980,000 at the end of the year. Net credit
sales during the year amounted to $6,650,000. The average collection period of the
receivables in terms of days was
a. 53.7 days.
b. 52.1 days.
c. 30 days.
d. 50.7 days.
Answer:
Answer:
Schilling Corporation purchased a machine on January 1, 2014, at a total cost of
$1,800,000. The machine has an estimated useful life of 10 years or 1,000,000 units of
output and a salvage value of $300,000.
Instructions: Complete the following table by presenting the annual depreciation
expense for the years 2014 and 2015, under the indicated depreciation methods.
Assume actual activity in terms of units of output was: 2014’”60,000 units and
2015’”120,000 units.
Answer:
Teenage Fanclub Printings sold annual subscriptions to their magazine for $30,000 in
December, 2014. The magazine is published monthly. The new subscribers received
their first magazine in January, 2015.
1> What adjusting entry should be made in January if the subscriptions were originally
recorded as a liability?
2> What amount will be reported on the January 2015 balance sheet for Unearned
Subscription Revenue?
Answer:
After Artie Company had completed all posting for the month of December, the sum of
the balances in the following accounts payable subsidiary ledger did not agree with the
balance of the control account in the general ledger.
The balance in the Accounts Payable control account of $37,380 has been verified as
correct. Also assume that the journals references in the Post Ref. columns of the
accounts payable subsidiary ledger have been verified as correct.
Instructions
Determine the errors in the preceding accounts payable subsidiary accounts and prepare
a corrected schedule of accounts payable.
Answer:
Three items are missing in each of the following columns and are identified by letter.
Instructions
Calculate the missing amounts and identify them by letter.
Answer:
Below is a partial listing of the adjusted account balances of Larson Department Store
at year-end on December 31, 2015.
Instructions
Using whatever data you believe appropriate, prepare a multiple-step income statement
for Larson Department Store for the year ended December 31, 2015.
Answer:
For available-for-sale securities, the unrealized gain or loss account is carried forward
to future periods.
Answer:
On the date of issue, Chudzick Corporation sells $5 million of 5-year bonds at 97. The
entry to record the sale will include the following debits and credits:
Answer:
Randie Company lends Luann Company $10,000 on April 1, accepting a four-month,
6% interest note. Randie Company prepares financial statements on April 30. What
adjusting entry should be made before the financial statements can be prepared?
Answer: