In the stockholders’ equity section of the balance sheet, the classification of capital
stock consists of
a. additional paid-in capital and common stock.
b. common stock and treasury stock.
c. common stock, preferred stock, and treasury stock.
d. common stock and preferred stock.
Answer:
Presley Supply Co. has the following transaction related to notes receivable during the
last 2 months of 2014.
Instructions
(a) Journalize the above transactions for Presley Supply Co. Round interest to the
nearest dollar.
(b) Record the collection of the Ransey note at its maturity in 2015.
(c) Assume Ransey dishonors its note at its maturity in 2015; Presley expects to
eventually collect the note. Record the dishonors of the Ransey note.
Answer:
The process of totaling the columns of a journal is termed
a. ruling.
b. columnizing.
c. sizing.
d. footing.
Answer:
The fiscal year of a business is usually determined by
a. the IRS.
b. a lottery.
c. the business.
d. the SEC.
Answer:
A patent
a. has a legal life of 40 years.
b. is nonrenewable.
c. can be renewed indefinitely.
d. is rarely subject to litigation because it is an exclusive right.
Answer:
The calculation of depreciation using the declining balance method,
a. ignores salvage value in determining the amount to which a constant rate is applied.
b. multiplies a constant percentage times the previous year’s depreciation expense.
c. yields an increasing depreciation expense each period.
d. multiplies a declining percentage times a constant book value.
Answer:
On January 1, Focus Corporation issued $600,000, 6%, 5-year bonds at face value. Interest is
payable semiannually on July 1 and January
Instructions
Prepare journal entries to record the
(a) Issuance of the bonds.
(b) Payment of interest on July 1, assuming no previous accrual of interest.
(c) Accrual of interest on December 31.
Answer:
Warranty expenses are reported on the income statement as
a. administrative expenses.
b. part of cost of goods sold.
c. contra-revenues.
d. selling expenses.
Answer:
In accounting for debt investments, entries are made for each of the following except
the
a. acquisition.
b. interest revenue.
c. sale.
d. entries are made for each answer choice.
Answer:
Sales revenue less cost of goods sold is called
a. gross profit.
b. net profit.
c. net income.
d. marginal income.
Answer:
Angie’s Blooms purchased a delivery van for $40,000. The company was given a
$4,000 cash discount by the dealer, and paid $2,000 sales tax. Annual insurance on the
van is $1,000. As a result of the purchase, by how much will Angie’s Blooms increase
its van account?
a. $40,000
b. $36,000
c. $39,000
d. $38,000
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. Cost of goods sold (rounded
to the nearest dollar) under the average-cost method is
a. $1,740.
b. $1,772.
c. $1,778.
d. $1,794.
Answer:
Lucky Company borrowed $1,000,000 on January 1, 2015, by issuing $1,000,000, 8%
mortgage note payable. The terms call for semiannual installment payments of $75,000
on June 30 and December 3
Instructions
(a) Prepare the journal entries to record the mortgage loan and the first two installment
payments.
(b) Indicate the amount of mortgage note payable to be reported as a current liability
and as a long-term liability at December 31, 2015.
Answer:
In common size analysis,
a. a base amount is required.
b. a base amount is optional.
c. the same base is used across all financial statements analyzed.
d. the results of the horizontal analysis are necessary inputs for performing the analysis.
Answer:
Relevant accounting information
a. is information that has been audited.
b. must be reported within the operating cycle or one year, whichever is longer.
c. has been objectively determined.
d. is information that is capable of making a difference in a business decision.
Answer:
At December 31, 2014, the trading securities for Saddle, Inc. are as follows:
Saddle should report the following amount related to the securities in its 2014 income
statement:
a. $4,000 gain
b. $7,000 realized loss.
c. $7,000 unrealized loss.
d. $11,000 unrealized loss.
Answer:
Miroz Corporation’s comparative balance sheets are presented below.
Additional information:
1> Net income was $17,700. Dividends declared and paid were $9,300.
2> Equipment which cost $11,000 and had accumulated depreciation of $2,000 was
sold for $4,000.
3> All other changes in noncurrent account balances had a direct effect on cash flows,
except the change in accumulated depreciation.
Instruction
(a) Prepare a statement of cash flows for 2015 using the indirect method.
(b) Compute free cash flow.
Answer:
A company using the same accounting principles from year to year is an application of
a. timeliness.
b. consistency.
c. full disclosure.
d. materiality.
Answer:
If Dolly Company had net income of $550,000 in 2016 and it experienced a 25%
increase in net income over 2015, what was its 2015 net income?
Answer:
Harve Reardon, the CEO of Mythic Products, is a successful entrepreneur but a poor
student of accounting. He asks you to explain to him, in a memo, the bases of
comparison for ratio analysis.
Answer:
Prepare the necessary journal entries to record the following transactions in 2015 for
Jano Company.
March 1 Exchanged old store equipment and $60,000 cash for new store equipment.
The old store equipment originally cost $72,000 and had a book value of $48,000 on the
date of exchange. The old store equipment had a fair value of $57,000 on the date of
exchange. Assume depreciation on the old equipment has already been recorded for the
current year. The exchange had commercial substance.
July 31 Exchanged a delivery truck and $100,000 cash for a new delivery truck. The old
delivery truck originally cost $108,000 and had accumulated depreciation of $76,000 on
the date of exchange. The fair value of the old delivery truck on the date of exchange
was $24,000. Assume the depreciation on the truck has already been recorded for the
current year. The exchange had commercial substance.
Aug. 31 Equipment with a 4-year useful life was purchased on January 1, 2012, for
$80,000 and was sold for $28,000 on September 1, 2015. The equipment had been
depreciated using the straight-line method with an estimated salvage value of $14,000.
Depreciation Expense was last recorded on December 31, 2014.
Answer:
Private accountants are accountants who are not employees of business enterprises.
Answer:
If total credits in the income statement columns of a worksheet exceed total debits, the
enterprise has net income.
Answer:
The declining-balance method of depreciation is called an accelerated depreciation
method because it depreciates an asset in a shorter period of time than the asset’s useful
life.
Answer:
An article recently appeared in the Wall Street Journal indicating that companies are
selling their receivables at a record rate. Why are companies selling their receivables?
Answer:
A cash register tape shows cash sales of $3,500 and sales taxes of $210. The journal
entry to record this information is
Answer: