The balance in the Unrealized Gain or Loss’”Equity account will
a. appear on the balance sheet as a contra asset.
b. appear on the income statement under Other Expenses and Losses.
c. appear as a deduction in the stockholders’ equity section.
d. not be shown on the financial statements until the securities are sold.
Answer:
All of the following statements about free cash flow are false except:
a. Significant free cash flow indicates less potential to finance new investments.
b. Free cash flow is most commonly calculated by subtracting capital expenditures from
cash provided by operations and then adding cash dividends.
c. Free cash flow is not reported on the statement of cash flows.
d. Significant free cash flow indicates less potential to pay additional dividends.
Answer:
Layton Inc. is considering two alternatives to finance its construction of a new $5
million plant.
(a) Issuance of 500,000 shares of common stock at the market price of $10 per share.
(b) Issuance of $5 million, 9% bonds at par.
Instructions
Complete the following table.
Answer:
Goodman Company’s inventory records show the following data:
A physical inventory on December 31 shows 6,000 units on hand. Under the FIFO
method, the December 31 inventory is
a. $42,000.
b. $49,200.
c. $49,392.
d. $54,000.
Answer:
Paid-in capital from treasury stock would appear on a balance sheet under the category
a. capital stock.
b. treasury stock.
c. additional paid-in capital.
d. contra to stockholders’ equity.
Answer:
If a department store fails to make the entry to accrue the finance charges due from
customers,
a. accounts receivable will be overstated.
b. interest revenue will be understated.
c. interest expense will be overstated.
d. interest expense will be understated.
Answer:
Most companies pay current liabilities
a. out of current assets.
b. by issuing interest-bearing notes payable.
c. by issuing stock.
d. by creating long-term liabilities.
Answer:
A prior period adjustment that corrects income of a prior period requires that an entry
be made to
a. an income statement account.
b. a current year revenue or expense account.
c. the retained earnings account.
d. an asset account.
Answer:
The first step in posting involves
a. entering in the appropriate ledger account the date, journal page, and debit amount
shown in the journal.
b. writing in the journal the account number to which the debit amount was posted.
c. writing in the journal the account number to which the credit amount was posted.
d. entering in the appropriate ledger account the date, journal page, and credit amount
shown in the journal.
Answer:
In preparing closing entries
a. each revenue account will be credited.
b. each expense account will be credited.
c. the retained earnings account will be debited if there is net income for the period.
d. the dividends account will be debited.
Answer:
At June 1, 2015, Larry Levine Company reported Accounts Payable of $15,000. During
the month, the company made purchases on account of $51,000 and payments on
account of $30,000. At June 30, 2015, the balance in Accounts Payable is
a. $15,000 debit.
b. $36,000 credit.
c. $66,000 credit.
d. $30,000 debit.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
What are total long-term liabilities at December 31, 2015?
a. $0
b. $70,000
c. $88,000
d. $90,000
Answer:
The relationship between current liabilities and current assets is
a. useful in determining income.
b. useful in evaluating a company’s liquidity.
c. called the matching principle.
d. useful in determining the amount of a company’s long-term debt.
Answer:
Plotner Corporation has the following trading portfolio of stock investments as of
December 31, 2014.
On January 22, 2015, Plotner Corporation sold security C for $32,000.
Instructions
(a) Prepare the adjusting entry for Plotner Corporation on December 31, 2014, to report
the portfolio at fair value.
(b) Indicate the balance sheet and income statement presentation of the fair value data
for Plotner Corporation at December 31, 2014.
(c) Prepare the journal entry for the 2015 sale.
Answer:
Grayson’s Lumber Mill sold two machines in 2016. The following information pertains
to the two machines:
Instructions
(a) Compute the depreciation on each machine to the date of disposal.
(b) Prepare the journal entries in 2016 to record 2016 depreciation and the sale of each
machine.
Answer:
Under the equity method of accounting, the investment in common stock is initially
recorded at cost and the investment account is subsequently
a. credited for cash dividends received.
b. debited for the investor’s share of investee net income.
c. debited for cash dividends received and credited for the investor’s share of investee
net income.
d. debited for the investor’s share of investee net income and credited for cash
dividends received.
Answer:
Othello Company understated its inventory by $20,000 at December 31, 2014. It did not
correct the error in 2014 or 2015. As a result, Othello’s stockholder’s equity was:
a. understated at December 31, 2014, and overstated at December 31, 2015.
b. understated at December 31, 2014, and properly stated at December 31, 2015.
c. overstated at December 31, 2014, and overstated at December 31, 2015.
d. understated at December 31, 2014, and understated at December 31, 2015.
Answer:
Ownership of common stock ordinarily carries the right to
a. declare dividends.
b. establish a drawing account.
c. enter into contracts for the corporation.
d. vote on corporate actions that require stockholder approval.
Answer:
Disclosures about inventory should include each of the following except the
a. basis of accounting.
b. costing method.
c. quantity of inventory.
d. major inventory classifications.
Answer:
Garth Company sold goods on account to Kyle Enterprises with terms of 2/10, n/30.
The goods had a cost of $600 and a selling price of $1,100. Both Garth and Kyle use a
perpetual inventory system. Record the sale on the books of Garth and the purchase on
the books of Kyle.
Answer:
A deposit ticket is a negotiable instrument that can be transferred to another party by
endorsement.
Answer:
These financial statement items are for Rugen Company at year-end, July 31, 2015.
Instructions
[a] Prepare an income statement and a retained earnings statement for the year.
Stockholders not make any new investments during the year.
[b] Prepare a classified balance sheet at July 31.
Answer:
The declining-balance method is an accelerated method of depreciation. Briefly explain
what is meant by an accelerated method of depreciation and justify the choosing of an
accelerated method.
Answer:
Natural resources are long-lived productive assets that are extracted in operations and
are replaceable only by an act of nature.
Answer:
Net income from operations is generally not the same as cash provided from operations
because revenues and expenses are recognized in the income statement on the
______________ basis.
Answer:
Metropolitan Symphony sells 200 season tickets for $50,000 that represents a five
concert season. The amount of Unearned Ticket Revenue after the second concert is
$20,000.
Answer: