Cost of goods sold represents
a. Expired costs during a period and is reported on the income statement.
b. Unexpired costs and is reported on the balance sheet as an asset.
c. The cost of goods that will be purchased during the next operating cycle and is
reported on the balance sheet as an asset.
d. Expired costs and is reported on the balance sheet as an expense.
From the list of accounts below, determine whether the account would be a nominal
account or a real account.
a. nominal account
b. real account
Utilities Expense
To determine whether a lottery winner would prefer to receive the money in a single
lump sum immediately or receive an equal amount over a period of years, you would
use which type of time value of money calculation?
a. The future value of a single amount.
b. The present value of a single amount.
c. The future value of an annuity.
d. The present value of an annuity.
Simple interest on a loan can be calculated by multiplying the principal by the annual
interest rate expressed as a percentage of the time in years or a fraction of the time in
years.
a. True
b. False
Which of the following factors is not related to the decline in the usefulness of plant
and equipment assets, and therefore does not need to be considered in selecting an
appropriate depreciation method?
a. Physical deterioration
b. Obsolescence
c. Repair and maintenance policies
d. Current replacement cost
Administrative controls
a. are concerned with efficient operations and adherence to managerial policies.
b. are concerned with the reliability of the financial statements.
c. are the responsibility of the company’s auditors.
d. are concerned primarily with safeguarding assets.
The basic accounting equation can be restated in terms of cash by the following
equation: Cash = current liabilities + long-term liabilities + capital stock – retained
earnings – noncash current assets + long-term assets.
a. True
b. False
Latahmer Corporation is reconciling its May bank account. For each item listed, state
how it would be handled on the bank reconciliation.
a. Addition to bank balance
b. Subtraction from bank balance
c. Addition to book balance
d. Subtraction from book balance
e. Would not appear on the May reconciliation
Customer’s NSF check is returned with the bank statement
Identify whether the following investor questions are associated with (a) primary or sec
ondary financial reporting objectives.
a. primary financial reporting objective
b. secondary financial reporting objective How much has Apple invested in research
and development projects?
Match the following characteristics with the statements about each qualitative character
istic’s importance.
a. Consistency
b. Materiality
c. Conservatism
d. Comparability
e. Reliability
f. Relevance
g. Understandability
Accounting information must be verifiable and faithfully represent actual transactions.
Mayflower Company had a machine with a cost of $123,000 and accumulated
depreciation of $87,000 that was sold at for a gain of $5,000. What amount of cash was
received from the sale?
a. $30,000
b. $36,000
c. $41,000
d. $128,000
Failure to record accrued interest expense would result in which of the following?
a. Assets being overstated
b. Assets being understated
c. Liabilities being overstated
d. Liabilities being understated
Use the following codes to indicate how the cash flow effect, if any, of each transaction
would be reported on a statement of cash flows if the operating activities section is
prepared using the direct method.
a. Inflow from operating activity
b. Outflow from operating activity
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
Paid employee salaries and wages.
Carrying value is computed annually when a bond is issued for other than its face value.
For a bond issued at a premium, how will this component change as the bond
approaches maturity?
a. decrease
b. increase
c. remain constant
d. not enough information given to decide
Several transactions occurred for Shadow Dreams Corporation during 2015. Indicate
the effect each item has directly on retained earnings by writing the amount in the space
provided. Place a + (plus sign) in front of the amount if the item increases retained
earnings, or ( ) parentheses around the amount if the item decreases retained earnings.
Place an X in the blank for items that have no direct effect on retained earnings. (Items
that affect the income statement do not directly affect retained earnings.) A)
____ A tornado completely destroyed the company’s warehouse on March 1. The
original cost was $300,000, and the book value was $160,000 on that date. The
company had no insurance on the warehouse. B)
____ Shadow Dreams earned net income in the amount of $450,000 for the year ending
December 31, 2015. C)
____ Shadow Dreams declared and paid $320,000 of cash dividends to common and
preferred stockholders during 2015.
Harkin Company purchased a building on a tract of land and allocated the entire cost of
the purchase to building. Normally it depreciates buildings over 20 years using the
straight-line method with zero residual value and does not depreciate land. Because of
its accounting treatment of the purchase, Harkin’s income before taxes for the next 20
years will be
a. overstated.
b. understated.
c. unaffected.
d. in conformance with GAAP.
Indicate whether each should be (a) included or (b) excluded from the line item titled
Cash and cash equivalents on the balance sheet.
a. Included
b. Excluded
Savings account
If a company uses the direct write-off method of accounting for bad debts,
a. It is applying the matching principle.
b. It will record bad debt expense only when an account is determined to be
uncollectible.
c. It will reduce the accounts receivable account at the end of the accounting period for
estimated uncollectible accounts.
d. It will report accounts receivable in the balance sheet at their net realizable value.