Every accounting transaction affects both the balance sheet and the income statement.
a. True
b. False
From the following list, select the proper section from the statement of cashflows in whi
ch it would beclassified.
a. Operating Activities
b. Investing Activities
c. Financing Activities
Received cash from bond issuance
One effect on the accounting equation when a firm lends money is
a. stockholders’ equity decreases.
b. liabilities decrease.
c. liabilities increase.
d. total assets remain the same.
Spring Market has an inventory turnover ratio of 15 times. Fall Market has a turnover
of 14 times. Fall is more effective in managing inventory.
a. True
b. False
Which of the following is a commonly cited disadvantage of having a new unified set
of accounting standards?
a. Acquiring foreign companies would become a more confusing proposition.
b. Corporations may find themselves more susceptible to lawsuits due to the
principles-based system.
c. Time and money would not be saved in accessing capital markets abroad.
d. The SEC would be dissolved if international accounting standards were adopted.
Match the following characteristics with the statements about each qualitative character
istic’s importance.
a. Consistency
b. Materiality
c. Conservatism
d. Comparability
e. Reliability
f. Relevance
g. Understandability
Accounting information should use the least optimistic estimate.
The natural progression in items from one statement to another and preparation of
financial statements is best represented by the following order:
a. Balance sheet and statement of cash flows > statement of retained earnings > income
statement
b. Balance sheet and statement of cash flows > income statement > statement of
retained earnings.
c. Statement of retained earnings > income statement > balance sheet and statement of
cash flows
d. Income statement > statement of retained earnings > balance sheet and statement of
cash flows
Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an
estimated residual value of $5,000 and an estimated life of 8 years, or 12,500 hours of
operation. The crane was purchased on January 1, 2015 and was used 2,700 hours in
2015 and 2,600 hours in 2016. Refer to the information about Norwood, Inc. If
Norwood uses the straight-line method, what is the book value at December 31, 2017?
a. $46,875
b. $51,875
c. $62,500
d. $67,500
Match the following business forms with their characteristics below.
a. Sole proprietorship
b. Partnership
c. Corporation
A share of stock acts as evidence of ownership
Which of the following financing activities results in a cash inflow?
a. Buying treasury stock
b. Issuing bonds
c. Repaying a bank loan
d. Paying cash dividends
Which of the following represents the correct sequence of the three business activities
on the Statement of Cash Flows?
a. Financing – Operating – Investing
b. Investing – Operating – Financing
c. Operating – Investing – Financing
d. Financing – Investing – Operating
Macon Enterprises purchased land for $2,000,000 in 2001. In 2015, an independent
appraiser assessed the value at
$3,400,000. What amount should appear on the financial statements in 2015 with
respect to the land?
a. $2,000,000
b. $1,400,000
c. $3,400,000
d. Whatever amount the company believes is the best indicator of the true value of the
land
The amount of cash that could be received by selling an asset currently is called
historical cost.
a. True
b. False
Use the following codes to indicate how the cash flow effect, if any, of each transaction
or event would be reported on a statement of cash flows if the operating activities
section is prepared using the indirect method.
a. Operating activity-add to net income
b. Operating activity-deduct from net income
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
Received cash from the sale of securities.
A cash register tape would be a source document for which of the following?
a. recording a purchase of inventory on credit
b. recognizing a cash sale
c. recording an invoice
d. recording payroll
Matching can occur directly (like cost of goods sold), indirectly (like plant assets), or
immediately when no future benefits from the cost are expected.
a. True
b. False
Select the best answer from the list below to complete statements 131-141 that follow.
A drawing account is sometimes referred to as a ______________________.
What is meant by the term “current maturities of long-term debt” in the current
liabilities section of the balance sheet?
The following accounts appear on Treetop Inc. 2014 financial statements. The accounts
are listed in alphabetical order, and the balance in each account is the normal balance
for that account. All amounts are in millions of dollars. Prepare closing entries for
Treetop for 2014.
Apply the time value of money in the following independent situations:
1> Margaret Carlson made a deposit in the bank on January 1, 2008. The bank pays
interest at the rate of 8% compounded annually. On January 1, 2015, the deposit has
accumulated to $40,000. How much money did Margaret originally deposit on January
1, 2008? 2> Claude Cooper deposited $15,600 in the bank on January 1 a few years
ago. The bank pays an interest rate of 10% compounded annually, and the deposit is
now worth $40,420. For how many years has the deposit been invested?
The names of the four financial statements are ________________________________,
________________________________, ________________________________, and
________________________________.
Select the best answer from the list below to complete statements 131-141 that follow.
The maximum number of shares a company may issue are.
On the statement of cash flows, thesection involves the purchase and sale of products
and services.
Sarcon Corp. prepares monthly bank reconciliations of its checking account balance.
The bank statement for October, 2014, indicated the following:
An analysis of canceled checks and deposits and the records of Sarcon revealed the
following items:
REQUIRED:
Prepare a bank reconciliation at October 31, 2014 in proper form.
Why are increases in accounts receivable reported as an adjustment to net income in the
operating activities section of a statement of cash flows?
Assume that Momentum Inc. has total accounts receivable of $250,000 and an
associated allowance for doubtful accounts of $10,000 at the end of 2015. 1) What is
the net realizable value of receivables for Momentum?
2) How should Momentum present this information on its balance sheet?