The basic accounting equation may be expressed as
a. Assets = Equities.
b. Assets ‘“ Liabilities = Stockholders’ Equity.
c. Assets = Liabilities + Stockholders’ Equity.
d. All of these answers are correct.
Answer:
A small stock dividend is defined as
a. less than 30% but greater than 25% of the corporation’s issued stock.
b. between 50% and 100% of the corporation’s issued stock.
c. more than 30% of the corporation’s issued stock.
d. less than 20’“25% of the corporation’s issued stock.
Answer:
Which of the following items would not be identified if a contingent liability were
disclosed in a financial statement note?
a. The nature of the item
b. The expected outcome of the future event
c. A numerical probability of the expected loss
d. The amount of the contingency, if known
Answer:
Silk Company issued $500,000 of 7%, 10-year bonds on one of its interest dates for
$431,850 to yield an effective annual rate of 9%. The effective-interest method of
amortization is to be used. Interest is paid annually.
What amount of discount (to the nearest dollar) should be amortized for the first interest
period?
a. $4,770
b. $6,133
c. $7,732
d. $3,867
Answer:
A company purchased factory equipment on April 1, 2015 for $160,000. It is estimated
that the equipment will have a $20,000 salvage value at the end of its 10-year useful
life. Using the straight-line method of depreciation, the amount to be recorded as
depreciation expense at December 31, 2015 is
a. $16,000.
b. $14,000.
c. $10,500.
d. $12,000.
Answer:
The difference between the cost of a depreciable asset and its related accumulated
depreciation is referred to as the
a. market value of the asset.
b. blue book value of the asset.
c. book value of the asset.
d. depreciated difference of the asset.
Answer:
Macrinez Company assembled the following information in completing its July bank
reconciliation: balance per bank $22,920; outstanding checks $4,650; deposits in transit
$7,500; NSF check $480; bank service charge $150; cash balance per books $26,400.
As a result of this reconciliation, Macrinez will
a. reduce its cash account by $150.
b. reduce its cash account by $630.
c. reduce its cash account by $2,850.
d. increase its cash account by $330.
Answer:
Julie’s Boutique has total receipts for the month of $31,920 including sales taxes. If the
sales tax rate is 5%, what are Julie’s sales for the month?
a. $30,324
b. $30,400
c. $33,516
d. It cannot be determined.
Answer:
Which of the following transactions would not be classified as a financing activity?
a. Purchase of treasury stock
b. Payment of dividends
c. Issuance of bonds at a discount
d. Purchase of a long-term investment in bonds
Answer:
Inventory turnover is computed by dividing the average inventories into
a. net sales.
b. total assets.
c. stockholders’ equity.
d. cost of goods sold.
Answer:
Kanet Company issued common stock for proceeds of $386,000 during 2014. The
company paid dividends of $80,000 and issued a long-term note payable for $95,000 in
exchange for equipment during the year. The company also purchased treasury stock
that had a cost of $15,000. The financing section of the statement of cash flows will
report net cash inflows of
a. $291,000.
b. $481,000.
c. $306,000.
d. $371,000.
Answer:
Control over cash disbursements is generally more effective when
a. all bills are paid in cash.
b. disbursements are made by the accounts payable subsidiary clerk.
c. payments are made by check.
d. all purchases are made on credit.
Answer:
The procedure of transferring journal entries to the ledger accounts is called
a. journalizing.
b. analyzing.
c. reporting.
d. posting.
Answer:
On January 2, 2015, Pine Company purchased 100% of the outstanding common shares
of Seely Company for $520,000. Any excess of cost over the book value of the net
assets of Seely Company should first be allocated to Land $55,000, and Buildings
$40,000 and any remainder to goodwill.
Instructions
(a) Complete the following worksheet below for preparing a consolidated balance sheet
on the date of acquisition. You may add accounts to the worksheet that may be
necessary.
(b) Prepare a consolidated balance sheet for Pine Company and Subsidiary on January
2, 2015.
Answer:
The sales revenue section of an income statement for a retailer would not include
a. Sales discounts.
b. Sales revenue.
c. Net sales.
d. Cost of goods sold.
Answer:
During 2015, Parker Enterprises generated revenues of $90,000. The company’s
expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000
and a loss on the sale of equipment of $3,000.
Parker’s income from operations is
a. $18,000.
b. $27,000.
c. $45,000.
d. $90,000.
Answer:
A 3-for-1 common stock split will increase total stockholders’ equity but reduce the par
or stated value per share of common stock.
Answer:
The preparation of a ______________ and ______________ entries are two optional
steps in the accounting cycle.
Answer:
The account Allowance for Doubtful Accounts is closed out at the end of the year.
Answer:
How is a gain or loss on the sale of a plant asset computed?
Answer:
Identify the factors that are considered in classifying an expenditure as a capital or a
revenue expenditure. Are there instances where it may be difficult to classify an
expenditure as one or the other (e.g., the purchase of a wastebasket that has a useful life
of 5 years and cost $10)? What basis would be used in a decision?
Answer:
Sales revenue should be recorded in accordance with the matching principle.
Answer:
A contra asset account is subtracted from a related account in the balance sheet.
Answer:
The _________________ basis of estimating uncollectibles normally results in the best
approximation of _______________ value and therefore emphasizes balance sheet
relationships.
Answer:
An operating lease transfers substantially all the benefits and risks of ownership to the
lessee.
Answer: