Salon Company originally issued 4,000 shares of $10 par value common stock for
$120,000 ($30 per share). Salon subsequently purchases 400 shares of treasury stock
for $27 per share and resells the 400 shares of treasury stock for $29 per share. In the
entry to record the sale of the treasury stock, there will be a
a. credit to Common Stock for $10,800.
b. credit to Treasury Stock for $4,000.
c. debit to Paid-In Capital in Excess of Par of $12,000.
d. credit to Paid-In Capital from Treasury Stock for $800.
Answer:
Sandoz Corporation was organized on January 1, 2015, with authorized capital of
500,000 shares of $10 par value common stock. During 2015, Sandoz issued 30,000
shares at $12 per share, purchased 3,000 shares of treasury stock at $13 per share, and
sold 3,000 shares of treasury stock at $14 per share. What is the amount of additional
paid-in capital at December 31, 2015?
a. $0
b. $3,000
c. $60,000
d. $63,000
Answer:
Which of the following is not generally understood to be a major service of a public
accounting firm?
a. Auditing
b. Taxation
c. Budgeting
d. Management consulting
Answer:
Ratios are used as tools in financial analysis
a. instead of horizontal and vertical analyses.
b. because they may provide information that is not apparent from inspection of the
individual components of the ratio.
c. because even single ratios by themselves are quite meaningful.
d. because they are prescribed by GAAP.
Answer:
The resale of treasury stock for an amount greater than its cost
a. increases net income.
b. increases total assets and decreases total stockholders’ equity.
c. decreases total assets and increases total stockholders’ equity.
d. increases total assets and increases total stockholders’ equity.
Answer:
Control over timekeeping does not include
a. having one employee punch the time cards for several employees in the same work
area.
b. time clock procedure monitoring by a supervisor.
c. pay period time reports kept by a supervisor for salaried personnel.
d. overtime approval by a supervisor.
Answer:
A corporation issued $900,000 of 6%, 5-year bonds on January 1, at 10 Interest is paid
semiannually on January 1 and July 1. If the corporation uses the straight-line method
of amortization, the amount of bond interest expense to be recognized on July 1 is
a. $54,000.
b. $27,000.
c. $28,800.
d. $25,200.
Answer:
A lease where the intent is temporary use of the property by the lessee with continued
ownership of the property by the lessor is called
a. off-balance sheet financing.
b. an operating lease.
c. a capital lease.
d. a purchase of property.
Answer:
The basic accounting entries for merchandising are
a. the same under GAAP and under IFRS.
b. required under GAAP but not under IFRS.
c. required under IFRS but not under GAAP.
d. required under IFRS with some differences as compared to GAAP.
Answer:
The Sales Returns and Allowances account
a. normally has a credit balance.
b. should not be closed at the end of the period.
c. is a contra account to Accounts Receivable.
d. is used by a merchandising company, but not a service enterprise.
Answer:
The use of remittance advices for mail receipts is an example of
a. documentation procedures.
b. other controls.
c. physical controls.
d. independent internal verification.
Answer:
Romanoff Industries had the following inventory transactions occur during 2015:
The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using FIFO?
(rounded to whole dollars)
a. $3,318
b. $3,552
c. $6,948
d. $7,182
Answer:
The concept of an ‘artificial being’ refers to which form of business organization?
a. Partnership
b. Sole proprietorship
c. Corporation
d. Limited partnership
Answer:
If an item meets one (but not both) of the criteria for an extraordinary item, it
a. only needs to be disclosed in the footnotes of the financial statements.
b. may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a
loss).
c. is reported as an “other revenue or gain” or “other expense and loss,” net of tax.
d. is reported at its gross amount as an “other revenue or gain” or “other expense or
loss.”
Answer:
The fair value principle is applied for
a. all assets.
b. current assets.
c. buildings.
d. investment securities.
Answer:
The present value of $10,000 to be received in 5 years will be smaller if the discount
rate is
a. increased.
b. decreased.
c. not changed.
d. equal to the stated rate of interest.
Answer:
Restrictions of retained earnings
a. are reported on the balance sheet as liabilities.
b. do not change total stockholders’ equity.
c. provide insurance coverage for contingencies.
d. are reported as expenses on the income statement.
Answer:
If $250,000 of bonds are issued during the year but $130,000 of old bonds are retired
during the year, the statement of cash flows will show a(n)
a. net increase in cash of $120,000.
b. net decrease in cash of $120,000.
c. increase in cash of $250,000 and a decrease in cash of $130,000.
d. net gain on retirement of bonds of $120,000.
Answer:
A bond secured by specific assets set aside to redeem the bonds is called a
a. convertible bond.
b. sinking fund bond.
c. mortgage bond.
d. secured bond.
Answer:
If total liabilities decreased by $30,000 and stockholders’ equity increased by $20,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase
Answer:
The cash effects of transactions that create revenues and expenses are
a. financing activities.
b. investing activities.
c. operating activities.
d. processing activities.
Answer:
Nick’s Place recorded the following data:
The weighted average unit cost of the inventory at January 31 is:
a. $2.50.
b. $2.75.
c. $2.81.
d. $3.400.
Answer:
The book value of an asset will equal its fair market value at the date of sale if
a. a gain on disposal is recorded.
b. no gain or loss on disposal is recorded.
c. the plant asset is fully depreciated.
d. a loss on disposal is recorded.
Answer:
The following information pertains to Manning Video Company.
1> Cash balance per bank, July 31, $8,363.
2> July bank service charge not recorded by the depositor $22.
3> The bank erroneously charged another company’s $700 check against Manning’s
account.
4> Cash balance per books, July 31, $9,784.
5> The bank charged Manning’s account $350 for a customer’s NSF check.
6> Deposits in transit, July 31, $2,700.
7> Manning recorded a cash receipt from a customer as $32. The bank correctly
recorded it at $23
8> Bank collected a $1,750 note for Manning in July, plus interest $36. less fee $20.The
collection has not been recorded by Manning and no interest has been accrued.
9> Outstanding check, July 31, $594.
Instructions
(a) Prepare a bank reconciliation at July 31.
(b) Journalize the adjusting entries at July 31 on the books of Manning Video Company.
Answer:
Using the indirect approach, noncash charges in the income statement are
______________ to net income and noncash credits are ______________ to compute
cash provided by operations.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
1> A general ledger account that summarizes detailed information in a subsidiary
ledger.
2> A subsidiary ledger that contains accounts with individual creditors.
3> A special journal with more than one column.
4> Detailed information about a group of accounts with a common characteristic.
5> Used to record high volume, similar type transactions.
Answer:
Nonoperating activities exclude revenues and expenses that result from secondary or
auxiliary operations.
Answer:
Using the units-of-activity method of depreciating factory equipment will generally
result in more depreciation expense being recorded over the life of the asset than if the
straight-line method had been used.
Answer:
On July 1, 2015, Frog Corporation issued $800,000, 8%, 10-year bonds at face value.
Interest is payable semiannually on January 1 and July Frog Corporation has a calendar
year end.
Instructions
Prepare all entries related to the bond issue for 2015.
Answer:
The ending retained earnings balance is reported on both the retained earnings
statement and the balance sheet.
Answer:
Delmar Company had beginning inventory of $90,000, ending inventory of $110,000,
cost of goods sold of $600,000, and sales of $960,000. Delmar’s days in inventory is:
a 38.0 days.
b. 54.3 days.
c. 60.8 days.
d. 67.5 days.
Answer:
The ledger accounts given below, with an identification number for each, are used by
Riley Company. Instructions: Prepare appropriate adjusting entries for the year ended
December 31, 2015, by placing the appropriate identification number(s) in the debit and
credit columns provided and the dollar amount in the adjoining column. Item 0 is given
as an example.
Answer:
On July 1, 2015, Jeffrey Underwriters Associates received $8,000 from a client for a
2-year insurance policy.
Instructions
Prepare the necessary journal entries for Jeffrey Underwriters Associates on July 1 and
December 31.
Answer: