Which one of the following payroll taxes does not result in a payroll tax expense for the
employer?
a. FICA tax
b. Federal income tax
c. Federal unemployment tax
d. State unemployment tax
Answer:
The December 31, 2014 balance sheet of Jensen Company showed Equipment of
$76,000 and Accumulated Depreciation of $18,000. On January 1, 2015, the company
decided that the equipment has a remaining useful life of 6 years with a $4,000 salvage
value.
Instructions
Compute the (a) depreciable cost of the equipment and (b) revised annual depreciation.
Answer:
Which of the following would not be included in the operating activities section of a
statement of cash flows?
a. Cash inflows from returns on loans (i.e., interest)
b. Cash inflows from returns on equity securities (i.e., dividends)
c. Cash outflows to governments for taxes
d. Cash outflows to reacquire treasury stock
Answer:
Priscilla has the following inventory information.
A physical count of merchandise inventory on July 31 reveals that there are 35 units on
hand. Using the average-cost method, the value of ending inventory is
a. $680.
b. $704.
c. $723.
d. $730.
Answer:
If accounting information has relevance, it is useful in making predictions about
a. future tax audits.
b. new accounting principles.
c. foreign currency exchange rates.
d. the future events of a company.
Answer:
Remington Company discovered the following errors made in January 2015
1> A payment of salaries and wages of $1,000 was debited to Equipment and credited
to Cash, both for $1,000. Remington recorded $200 of depreciation on this
“equipment”.
2> A collection of $3,000 from a client on account was debited to Cash $300 and
credited to Service Revenue $300.
3> The purchase of supplies on account for $840 was debited to Supplies $480 and
credited to Accounts Payable $480.
4> The purchase of short-term investments for $1,500 cash was debited to Prepaid Rent
and credited to Cash. At year end, $500 of the “prepaid rent” was recorded as rent
expense.
Instructions
[a) Correct the errors by reversing the incorrect entry and preparing the correct entry.
[b) Correct the errors without reversing the incorrect entry.
Answer:
Which of the following statements about liabilities in incorrect?
Under IFRS, companies sometimes show
a. liabilities before assets.
b. long-term liabilities before current assets.
c. current liabilities netted against current assets.
d. liabilities in order of magnitude.
Answer:
The cost of an asset and its fair value are
a. never the same.
b. the same when the asset is sold.
c. irrelevant when the asset is used by the business in its operations.
d. the same on the date of acquisition.
Answer:
Which of the following items does not appear in the statement of cash flows under the
direct method?
a. Cash payments to suppliers
b. Cash collections from customers
c. Depreciation Expense
d. Cash from the sale of equipment
Answer:
In the month of May, Kijak Company Inc. wrote checks in the amount of $56,000. In
June, checks in the amount of $76,000 were written. In May, $50,000 of these checks
were presented to the bank for payment, and $66,000 in June. What is the amount of
outstanding checks at the end of June?
a. $6,000
b. $10,000
c. $16,000
d. $20,000
Answer:
On January 1, 2015, Howard Company, a calendar-year company, issued $900,000 of
notes payable, of which $225,000 is due on January 1 for each of the next four years.
The proper balance sheet presentation on December 31, 2015, is
a. Current Liabilities, $900,000.
b. Long-term Debt, $900,000.
c. Current Liabilities, $450,000; Long-term Debt, $450,000.
d. Current Liabilities, $225,000; Long-term Debt, $675,000.
Answer:
Under IFRS, Revaluation Surplus is part of
a. share premium.
b. retained earnings.
c. general reserves.
d. contributed capital.
Answer:
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:
The income statement for the month of June, 2015 of Camera Obscura Enterprises
contains the following information:
At June 1, 2015, Camera Obscura reported retained earnings of $35,000. The company
had no dividends during June. At June 30, 2015, the company will report retained
earnings of
a. $29,300.
b. $35,000.
c. $36,300.
d. $42,000.
Answer:
All of the following statements regarding changes in accounting principles are true
except:
a. Most changes in accounting principles are only reported in current periods when the
principle change takes place.
b. Changes in accounting principles are allowed when new principles are preferable to
old ones.
c. Most changes in accounting principles are retroactively reported.
d. Consistency is one of the biggest concerns when a change in accounting principle is
undertaken.
Answer:
At the beginning of the year, Hunt Company had an inventory of $750,000. During the
year, the company purchased goods costing $2,400,000. If Hunt Company reported
ending inventory of $900,000 and sales of $3,750,000, the company’s cost of goods sold
and gross profit rate must be
a. $1,500,000 and 66.7%.
b. $2,250,000 and 40%.
c. $1,500,000 and 40%.
d. $2,250,000 and 60%.
Answer:
During August, 2015, Baxter’s Supply Store generated revenues of $60,000. The
company’s expenses were as follows: cost of goods sold of $36,000 and operating
expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the
sale of a delivery truck of $2,000.
Baxter’s nonoperating income (loss) for the month of August, 2015 is
a. $0.
b. $1,000.
c. $2,000.
d. $3,000.
Answer:
Suppose you have a winning lottery ticket and you are given the option of accepting
$3,000,000 three years from now or taking the present value of the $3,000,000 now.
The sponsor of the prize uses a 6% discount rate. If you elect to receive the present
value of the prize now, the amount you will receive is
a. $2,518,860.
b. $2,830,189.
c. $2,670,000.
d. $3,000,000.
Answer:
Which of the following would not be considered an internal user of accounting data for
the GHI Company?
a. President of the company.
b. Production manager.
c. Merchandise inventory clerk.
d. President of the employees’ labor union.
Answer:
On July 1, Runner’s Sports Store paid $14,000 to Corona Realty for 4 months rent
beginning July 1. Prepaid Rent was debited for the full amount. If financial statements
are prepared on July 31, the adjusting entry to be made by Runner’s Sports Store is
a. Debit Rent Expense, $14,000; Credit Prepaid Rent, $3,500.
b. Debit Prepaid Rent, $3,500; Credit Rent Expense, $3,500.
c. Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500.
d. Debit Rent Expense, $14,000; Credit Prepaid Rent, $14,000.
Answer:
When two or more people get together for the purpose of circumventing prescribed
controls, it is called
a. a fraud committee.
b. collusion.
c. a division of duties.
d. bonding of employees.
Answer:
Long Company recently incurred the following costs:
Land should be recorded on Long’s books at
a. $280,000.
b. $294,000.
c. $333,000.
d. $363,000.
Answer:
Ban Co. purchased 50, 5% Waylan Company bonds for $50,000 cash plus brokerage
fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to
record the December 31 interest accrual would include a
a. debit to Interest Receivable for $1,250.
b. debit to Interest Revenue for $1,250.
c. credit to Interest Revenue for $1,262.50.
d. debit to Debt Investments for $1,262.50.
Answer:
Which of the following is not a common cost flow assumption used in costing
inventory?
a. First-in, first-out
b. Middle-in, first-out
c. Last-in, first-out
d. Average cost
Answer:
aUnder the direct method, the formula for computing cash collections from customers is
sales revenues plus the increase in accounts receivable or minus the decrease in
accounts receivable.
Answer:
Common size analysis expresses each item within a financial statement in terms of a
percent of a base amount.
Answer:
Use the following income statement for the year 2015 for Belle Company to prepare
entries to close the revenue and expense accounts for the company.
Answer:
In general, documents should be prenumbered and all documents should be accounted
for.
Answer:
In preparing a statement of cash flows, the issuance of debt should be reported
separately from the retirement of debt.
Answer: