Mize Company owns 30% interest in the stock of Lyte Corporation. During the year,
Lyte pays $20,000 in dividends to Mize, and reports $300,000 in net income. Mize
Company’s investment in Lyte will increase Mize ‚s net income by
a. $6,000.
b. $90,000.
c. $96,000.
d. $10,000.
Answer:
Useful life is expressed in terms of use expected from the asset under the
a. declining-balance method.
b. straight-line method.
c. units-of-activity method.
d. none of these answer choices are correct.
Answer:
For each entry below make a correcting entry if necessary. If the entry given is correct,
then state “No entry required.”
(a) The $60 cost of repairing a printer was charged to Equipment.
(b) The $5,000 cost of a major engine overhaul was debited to Maintenance and Repairs
Expense. The overhaul is expected to increase the operating efficiency of the truck.
(c) The $6,000 closing costs associated with the acquisition of land were debited to
Miscellaneous Expense.
(d) A $500 charge for transportation expenses on new equipment purchased was debited
to Freight-In.
Answer:
Bookkeeping differs from accounting in that bookkeeping primarily involves which part
of the accounting process?
a. Identification.
b. Communication.
c. Recording.
d. Analysis.
Answer:
A corporation has the following account balances: Common stock, $1 par value,
$60,000; Paid-in Capital in Excess of Par, $1,300,000. Based on this information, the
a. legal capital is $1,360,000.
b. number of shares issued are 60,000.
c. number of shares outstanding are 1,360,000.
d. average price per share issued is $22.50.
Answer:
As an incentive for customers to pay their accounts promptly, a business may offer its
customers
a. a sales discount.
b. free delivery.
c. a sales allowance.
d. a sales return.
Answer:
Valerie’s Salon has total receipts for the month of $20,670 including sales taxes. If the
sales tax rate is 6%, what are Valerie’s sales for the month?
a. $19,637
b. $21,910
c. $19,500
d. It cannot be determined.
Answer:
Characteristics associated with faithfully representative accounting information are
a. verifiable and timely.
b. neutral and verifiable.
c. complete and neutral.
d. relevance and verifiable.
Answer:
The accountant at Almira Company is figuring out the difference in income taxes the
company will pay depending on the choice of either FIFO or LIFO as an inventory
costing method. The tax rate is 30% and the FIFO method will result in income before
taxes of $8,190. The LIFO method will result in income before taxes of $7,290. What is
the difference in tax that would be paid between the two methods?
a. $270.
b. $630.
c. $900.
d. Cannot be determined from the information provided.
Answer:
Under a voucher system, a prenumbered voucher is prepared for every
a. cash receipt, regardless of source.
b. transaction entered into by the business.
c. expenditure except those made from petty cash.
d. journal entry.
Answer:
The interest rate investors demand for loaning funds is the
a. market interest rate.
b. stated rate.
c. contractual interest rate.
d. bond interest rate.
Answer:
The ratios that are used to determine a company’s short-term debt paying ability are
a. asset turnover, times interest earned, current ratio, and accounts receivable turnover.
b. times interest earned, inventory turnover, current ratio, and accounts receivable
turnover.
c. times interest earned, acid-test ratio, current ratio, and inventory turnover.
d. current ratio, acid-test ratio, accounts receivable turnover, and inventory turnover.
Answer:
If the single amount of $2,000 is to be received in 2 years and discounted at 11%, its
present value is
a. $1,818.
b. $1,623.
c. $1,802.
d. $2,754.
Answer:
Sebastian Belle has performed $2,000 of CPA services for a client but has not billed the
client as of the end of the accounting period. What adjusting entry must Sebastian
make?
a. Debit Cash and credit Unearned Service Revenue
b. Debit Accounts Receivable and credit Unearned Service Revenue
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Unearned Service Revenue and credit Service Revenue
Answer:
Two companies report the same cost of goods available for sale but each employs a
different inventory costing method. If the price of goods has increased during the
period, then the company using
a. LIFO will have the highest ending inventory.
b. FIFO will have the highest cost of good sold.
c. FIFO will have the highest ending inventory.
d. LIFO will have the lowest cost of goods sold.
Answer:
Which one of the following is primarily interested in the liquidity of a company?
a. Federal government
b. Stockholders
c. Long-term creditors
d. Short-term creditors
Answer:
If bonds are originally sold at a discount using the straight-line amortization method:
a. Interest expense in the earlier years of the bond’s life will be less than the interest to
be paid.
b. Interest expense in the earlier years of the bond’s life will be the same as interest to
be paid.
c. Unamortized discount is subtracted from the face value of the bond to determine its
carrying value.
•Unamortized discount is added to the face value of the bond to determine its
carrying value.
•
Answer:
Norton Company has accounts receivable of $40,000 in its general ledger at July 31:
During August, the following transactions occurred.
Instructions
(a) Journalize the transactions.
(b) Indicate the statement presentation of finance and service charges.
Answer:
Freight terms of FOB shipping point mean that the
a. seller must debit freight out.
b. buyer must bear the freight costs.
c. goods are placed free on board at the buyer’s place of business.
d. seller must bear the freight costs.
Answer:
In deciding whether the U.S. should adopt IFRS, the issue the SEC said should be
considered is
a. whether IFRS is sufficiently developed and consistent in application.
b. whether the IFRS is established for the benefit of investors.
c. the impact of a switch to IFRS on U.S. laws and regulations.
d. all of these answers are correct.
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:
At December 31, 2015, before any year-end adjustments, Murmur Company’s Insurance
Expense account had a balance of $2,450 and its Prepaid Insurance account had a
balance of $3,800. It was determined that $2,800 of the Prepaid Insurance had expired.
The adjusted balance for Insurance Expense for the year would be
a. $2,450.
b. $3,450.
c. $2,800.
d. $5,250.
Answer:
Using the indirect method, if equipment is sold at a gain, the
a. sale proceeds received are deducted in the operating activities section.
b. sale proceeds received are added in the operating activities section.
c. amount of the gain is added in the operating activities section.
d. amount of the gain is deducted in the operating activities section.
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:
A consolidated income statement will reflect only revenue and expense transactions
between the consolidated entity and parties outside the affiliated group.
Answer:
Stock dividends and stock splits have the following effects on retained earnings:
Answer:
The Stock Investments account is debited at acquisition under both the equity method
and cost method of accounting for investments in common stock.
Answer:
Adjusting entries are recorded in the general journal but are not posted to the accounts
in the general ledger.
Answer:
As Mel Smith was doing his year-end accounting, he noticed that the bookkeeper had
made errors in recording several transactions. The erroneous transactions are as follows:
[a] A check for $700 was issued for goods previously purchased on account. The
bookkeeper debited Accounts Receivable and credited Cash for $700.
[b] A check for $180 was received as payment on account. The bookkeeper debited
Accounts Payable for $810 and credited Accounts Receivable for $810.
[c] When making the entry to record the year’s depreciation expense, the bookkeeper
debited Accumulated Depreciation’”Equipment for $1,000 and credited Cash for
$1,000.
[d] When accruing interest on a note payable, the bookkeeper debited Interest
Receivable for $200 and credited Interest Payable for $200.
Instructions
Prepare the appropriate correcting entries. [Do not reverse the original entries.)
Answer:
On October 1, Benji’s Bicycle Store had an inventory of 20 ten speed bicycles at a cost
of $200 each. During the month of October, the following transactions occurred.
Instructions
Prepare the journal entries to record the transactions assuming the company uses a
perpetual inventory system.
Answer:
Noncash investing and financing activities must be reported in the body of a statement
of cash flows.
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: