A separate paid-in capital account is used to record each of the following except the
issuance of
a. no-par stock.
b. par value stock.
c. stated value stock.
d. treasury stock above cost.
Answer:
The following exhibit is for Kmart bonds.
The contractual interest rate of the K mart bonds is
a. greater than the market interest rate.
b. less than the market interest rate.
c. equal to the market interest rate.
d. not determinable.
Answer:
Avett Furniture Store has credit sales of $400,000 in 2015 and a debit balance of $600
in the Allowance for Doubtful Accounts at year end. As of December 31, 2015,
$130,000 of accounts receivable remain uncollected. The credit manager prepared an
aging schedule of accounts receivable and estimates that $7,000 will prove to be
uncollectible.
On March 4, 2016, the credit manager authorizes a write-off of the $1,200 balance
owed by B. Fernitti.
Instructions
(a) Prepare the adjusting entry to record the estimated uncollectible accounts expense in
2015.
(b) Show the balance sheet presentation of accounts receivable on December 31, 2015.
(c) On March 4, before the write-off, assume the balance of Accounts Receivable
account is $160,000 and the balance of Allowance for Doubtful Accounts is a credit of
$3,000. Make the appropriate entry to record the write-off of the Fernetti account. Also
show the balance sheet presentation of accounts receivable before and after the
write-off.
Answer:
When an interest-bearing note matures, the balance in the Notes Payable account is
a. less than the total amount repaid by the borrower.
b. the difference between the maturity value of the note and the face value of the note.
c. equal to the total amount repaid by the borrower.
d. greater than the total amount repaid by the borrower.
Answer:
The standard form of a journal entry has the
a. debit account entered first and indented.
b. credit account entered first and indented.
c. debit account entered first at the extreme left margin.
d. credit account entered first at the extreme left margin.
Answer:
Stockholders of a company may be reluctant to finance expansion through issuing more
equity because
a. leveraging with debt is always a better idea.
b. their earnings per share may decrease.
c. the price of the stock will automatically decrease.
d. dividends must be paid on a periodic basis.
Answer:
The specific identification method
a. cannot be used under GAAP.
b. cannot be used under IFRS.
c. must be used under IFRS if the inventory items can be specifically identified.
d. must be used under IFRS if it would result in the lowest net income.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
What is the book value of the equipment at December 31, 2015?
a. $170,000
b. $182,000
c. $210,000
d. $238,000
Answer:
Netta Shutters has the following inventory information.
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Assuming that the specific
identification method is used and that ending inventory consists of 20 units from each
of the three purchases and 30 units from the November 1 inventory, cost of goods sold
is
a. $1,740.
b. $1,772.
c. $1,782.
d. $1,794.
Answer:
On January 1, 2015, Superfuzz Company purchased equipment for $40,000. The
company is depreciating the equipment at the rate of $800 per month. The book value
of the equipment at December 31, 2015 is
a. $0.
b. $9,600.
c. $30,400.
d. $40,000.
Answer:
Having one person post entries to accounts receivable subsidiary ledger and a different
person post to the Accounts Receivable Control account in the general ledger is an
example of
a. inadequate internal control.
b. duplication of effort.
c. external verification.
d. segregation of duties.
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:
Blitzen Corporation had net income of $500,000 and paid dividends to common
stockholders of $40,000 in 2014. The weighted average number of shares outstanding in
2014 was 60,000 shares. Blitzen Corporation’s common stock is selling for $50 per
share on the New York Stock Exchange. Blitzen Corporation’s payout ratio for 2014 is
a. $8.33 per share.
b. 8%.
c. 12%.
d. 16%.
Answer:
Cost of goods available for sale is computed by adding
a. beginning inventory to net purchases.
b. beginning inventory to the cost of goods purchased.
c. net purchases and freight-in.
d. purchases to beginning inventory.
Answer:
Posting of journal entries should be done in
a. account number order.
b. alphabetical order.
c. chronological order.
d. dollar amount order.
Answer:
Net sales are $8,000,000, beginning total assets are $2,500,000, and the asset turnover
is 4.0 times. What is the ending total asset balance?
a. $2,000,000
b. $1,500,000
c. $2,800,000
d. $2,500,000
Answer:
Which of the following is not an intangible asset arising from a government grant?
a. Goodwill
b. Patent
c. Trademark
d. Trade name
Answer:
Inigo Company prepared the following adjusting entries at year end on December 31,
2015:
In an effort to minimize errors in recording transactions, Inigo Company utilizes
reversing entries. Prepare reversing entries on January 1, 2016.
Answer:
Accounts receivable arising from sales to customers amounted to $40,000
and $55,000 at the beginning and end of the year, respectively. Income
reported on the income statement for the year was $180,000. Exclusive of
the effect of other adjustments, the cash flows from operating activities to
be reported on the statement of cash flows is
1. $180,000.
2. $195,000.
3. $220,000.
4. $165,000.
Answer:
Gayton Corporation purchased 1,000 shares of Smart common stock ($50 par) at $80
per share as a short-term investment. The shares were subsequently sold at $78 per
share. The cost of the securities purchased and gain or loss on the sale were
Answer:
In a perpetual inventory system, the cost of goods sold under the FIFO method is based
on the cost of the latest goods on hand during the period.
Answer:
Under Protection provides underground storage facilities for companies
desiring off-site storage of sensitive documents, computer records, and
other items. They have developed a sophisticated surveillance and security
system which they initially used in their own facilities, and have recently
started to market elsewhere as well.
The underground storage facilities are made from natural caves in some
instances [reinforced and modified as appropriate) and from excavations of
natural rock formations in others. The land was purchased over ten years
ago for a total of $2.5 million. The modifications have cost approximately
$15 million more. The company has never depreciated its storage facilities
because the market value of the property has continued to rise. Presently,
the market price is between $30 and $40 million.
Betsy Brantley, a new accounting manager, questioned this depreciation
policy. Will Gray, the controller, has told her that she needn’t worry about
it. For one thing, he says, this is really a special form of Land account,
which should not be depreciated at all. For another, this is a privately held
company, and so they don’t need to worry about misleading investors. All
the owners know about and approve the depreciation policy.
What are the ethical issues in this situation?
Answer:
At December 31, 2015, Biltmore Corporation has the following securities:
Prepare the necessary adjusting entries to report the securities at fair value.
Answer: