An adjusting entry is not required for
a. outstanding checks.
b. collection of a note by the bank.
c. NSF checks.
d. bank service charges.
Answer:
A flower shop makes a large sale for $1,200 on November 30. The customer is sent a
statement on December 5 and a check is received on December 10. The flower shop
follows GAAP and applies the revenue recognition principle. When is the $1,200
considered to be recognized?
a. December 5.
b. December 10.
c. November 30.
d. December 1.
Answer:
A problem with the specific identification method is that
a. inventories can be reported at actual costs.
b. management can manipulate income.
c. matching is not achieved.
d. the lower-of-cost-or-market basis cannot be applied.
Answer:
On January 1, Soft Corporation had 80,000 shares of $10 par value common stock
outstanding. On June 17, the company declared a 10% stock dividend to stockholders of
record on June 20. Market value of the stock was $15 on June 17. The entry to record
the transaction of June 17 would include a
a. debit to Stock Dividends for $120,000.
b. credit to Cash for $120,000.
c. credit to Common Stock Dividends Distributable for $120,000.
d. credit to Common Stock Dividends Distributable for $40,000.
Answer:
The company whose stock is owned by the parent company is called the
a. controlled company.
b. subsidiary company.
c. investee company.
d. sibling company.
Answer:
The following data are available for Alamo Corporation.
Net cash provided by investing activities is:
a. $285,000.
b. $260,000.
c. $305,000.
d. $425,000.
Answer:
Horizontal analysis evaluates financial statement data
a. within a period of time.
b. over a period of time.
c. on a certain date.
d. as it may appear in the future.
Answer:
Depreciation is the process of allocating the cost of a plant asset over its service life in
a. an equal and equitable manner.
b. an accelerated and accurate manner.
c. a systematic and rational manner.
d. a conservative market-based manner.
Answer:
Which one of the following is not a characteristic generally evaluated in analyzing
financial statements?
a. Liquidity
b. Profitability
c. Marketability
d. Solvency
Answer:
A post-closing trial balance should be prepared
a. before closing entries are posted to the ledger accounts.
b. after closing entries are posted to the ledger accounts.
c. before adjusting entries are posted to the ledger accounts.
d. only if an error in the accounts is detected.
Answer:
Crawl Inc., has 1,000 shares of 6%, $50 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2014, and
December 31, 2015. The board of directors declared and paid a $2,000 dividend in
2014. In 2015, $10,000 of dividends are declared and paid. What are the dividends
received by the common stockholders in 2015?
a. $6,000
b. $5,000
c. $4,000
d. $3,000
Answer:
Deane Company has income from continuing operations of $520,000 for the year ended
December 31, 2015. It also has the following items (before considering income taxes):
(1) An extraordinary fire loss of $140,000.
(2) A gain of $80,000 on the discontinuance of a major segment.
(3) A correction of an error in last year’s financial statement that resulted in a $60,000
overstatement of 2014 net income.
Assume all items are subject to income taxes at a 25% tax rate.
Instructions
(a) Prepare an income statement, beginning with income from continuing operations.
(b) Indicate the statement presentation of any item not included in (a) above.
Answer:
When equipment is sold for cash, the amount received is reflected as a cash
a. inflow in the operating section.
b. inflow in the financing section.
c. inflow in the investing section.
d. outflow in the operating section.
Answer:
Country Company reported the following on its income statement:
An analysis of the income statement revealed that interest expense was $100,000.
Country Company’s times interest earned was
a. 3.4 times.
b. 9.5 times.
c. 6.5 times.
d. 8.5 times.
Answer:
These are selected account balances on December 31, 2015.
What is the total amount of property, plant, and equipment that will appear on the
balance sheet?
a. $975,000
b. $1,125,000
c. $1,175,000
d. $1,400,000
Answer:
Cobb Company’s accounting records show the following at the year ending on
December 31, 2015:
Using the periodic system, the cost of goods purchased is
a. $378,000.
b. $383,000.
c. $393,600.
d. $404,200.
Answer:
When valuing ending inventory under a perpetual inventory system, the
a. valuation using the LIFO assumption is the same as the valuation using the LIFO
assumption under the periodic inventory system.
b. moving average requires that a new average be computed after every sale.
c. valuation using the FIFO assumption is the same as under the periodic inventory
system.
d. earliest units purchased during the period using the LIFO assumption are allocated to
the cost of goods sold when units are sold.
Answer:
Ethics are the standards of conduct by which one’s actions are judged as
a. right or wrong.
b. honest or dishonest.
c. fair or unfair.
d. All of these answers are correct.
Answer:
A company purchased inventory as follows:
150 units at $5
350 units at $6
The average unit cost for inventory is
a. $5.00.
b. $5.50.
c. $5.70.
d. $6.00.
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:
Hsu, Inc. issued 10,000 shares of stock at a stated value of $8/share. The total issue of
stock sold for $15 per share. The journal entry to record this transaction would include a
a. debit to Cash for $80,000.
b. credit to Common Stock for $80,000.
c. credit to Paid-in Capital in Excess of Par for $150,000.
d. credit to Common Stock for $150,000.
Answer:
Barr Corporation has the following stock outstanding:
No dividends were paid the previous 2 years. If Barr declares $500,000 of dividends in
the current year, how much will preferred stockholders receive if the preferred stock is
cumulative?
a. $200,000
b. $300,000
c. $400,000
d. $100,000
Answer:
In order to possess future service potential, an asset must have physical substance.
Answer:
A corporation has a separate __________________________ apart from its owners.
Answer:
Notes receivable represent claims for which formal instruments of credit are issued as
evidence of debt.
Answer:
Three dates are important in connection with cash dividends. Identify these dates, and
explain their significance to the corporation and its stockholders.
Answer:
Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1.
Givens Brick Company signs a $600,000, 8%, 9-month note. The entry made by Givens
Brick Company on January 1 to record the proceeds and issuance of the note is
Answer:
A company will incur product repair costs in the future if products that it sells currently
under warranty are brought in for repair during the warranty period. The company will
also incur bad debt expense in the future if customers who buy on credit currently are
unable to pay their accounts. Are the accounting procedures for these two contingent
costs (warranty expense and bad debt expense) related to or guided by the same
accounting principle? Briefly explain.
Answer:
Specific Identification can be used for inventory valuation under
Answer:
A working knowledge of accounting is not relevant to a lawyer or an architect.
Answer:
Which requires a two-tiered approach to test whether the value of loans and
receivables are impaired?
Answer:
A loss on sale of equipment is added to net income in determining cash provided by
operations under the indirect method.
Answer: