Match each of the following terms related to interest and time value of money
calculations to their appropriate definition.
a. Time value of money
b. Simple interest
c. Compound interest
d. Future value of a single amount
e. Present value of a single amount
f. Annuity
g. Future value of an annuity
h. Present value of an annuity
A series of payments of equal amount.
For each of the following items, indicate whether each would be treated as a
a. capital expenditure
b. revenue expenditure
Costs related to acquiring an asset, such as sales or excise taxes, transportation,
insurance during shipment
Wolfe Inc. Wolfe Inc. reports these account balances at January 1, 2015:
See the account balances for Wolfe Inc. On January 31, Wolfe collected $12,000 of its
accounts receivable and paid $11,000 on its note payable. In Wolfe’s trial balance
prepared on January 31, 2015, the total of the credit column is:
a. $297,000
b. $287,000
c. $286,000
d. $275,000
The journal entry to write down inventory to its market value results in a loss on the
income statement.
a. True
b. False
Which one of the following best defines an external event in terms of accounting?
a. A measured event that must be recognized.
b. An event recognized in a set of financial statements.
c. A happening of consequence to an entity.
d. An interaction between an entity and its environment.
The lower of cost or market (LCM) rule violates the historical cost principle.
a. True
b. False
“Claims to economic resources” are known as
a. Assets and liabilities
b. Liabilities and stockholders’ equity
c. Owners’ equity and stockholders’ equity
d. Retained earnings and revenues
Under FIFO, the units in the ending inventory represent the oldest purchase(s).
a. True
b. False
When using the indirect method for preparing the statement of cash flows, all of the
following will appear in the operating activities section except:
a. Increase in deferred tax.
b. Depreciation expense on leased assets.
c. Interest expense.
d. An increase in long-term liabilities.
Accountants should be aware that LIFO liquidations can potentially result in which of
the following?
a. If older less costly layers are liquidated, a correspondingly lower cost of goods sold
will result.
b. If older less costly layers are liquidated, a correspondingly higher gross profit will
result.
c. If older less costly layers are liquidated, the company may be faced with higher taxes
for those deferred in previous periods.
d. All of these could result.
FASB’s concept of comprehensive income
a. excludes transactions that involve the payment of dividends.
b. requires that all transactions must be shown on the income statement.
c. has a primary drawback because it allows management to manipulate the income
figure to a certain extent.
d. allows items that are not necessarily under management’s control, such as natural
disasters, to be shown as an adjustment of retained earnings.
Gentech Corp. prepared a bank reconciliation as of June 30, 2014. The following items
were identified:
Gentech’s adjusted cash balance at June 30, 2014 is
a. $13,800
b. $14,100
c. $14,000
d. $14,300