Saira, Inc. has the following income statement (in millions):
Using vertical analysis, what percentage is assigned to Cost of Goods Sold?
a. 40%
b. 60%
c. 100%
d. None of these answer choices are correct.
Answer:
The receivable that is usually evidenced by a formal instrument of credit is a(n)
a. trade receivable.
b. note receivable.
c. accounts receivable.
d. income tax receivable.
Answer:
If a contingent liability is reasonably estimable and it is reasonably possible that the
contingency will occur, the contingent liability
a. should be recorded in the accounts.
b. should be disclosed in the notes accompanying the financial statements.
c. should not be recorded or disclosed in the notes until the contingency actually
happens.
d. must be paid for the amount estimated.
Answer:
Which receivables accounting and reporting issue is essentially the same
for IFRS and GAAP?
a. The use of allowance accounts and the allowance method.
b. How to record discounts.
c. How to record factoring.
d. All of these are essentially the same for IFRS and GAAP.
Answer:
A company receives $265, of which $15 is for sales tax. The journal entry to record the
sale would include a
a. debit to Sales Tax Expense for $15.
b. credit to Sales Taxes Payable for $15.
c. debit to Sales Revenue for $265.
d. debit to Cash for $250.
Answer:
The dominant form of business organization in the United States in terms of dollar sales
volume, earnings, and employees is
a. the sole proprietorship.
b. the partnership.
c. the corporation.
d. not known.
Answer:
A 90-day promissory note dated May 21 matures on
a. August 21.
b. August 20.
c. August 19.
d. August 18.
Answer:
A merchandising company using a perpetual system will make
a. the same number of adjusting entries as a service company does.
b. one more adjusting entry than a service company does.
c. one less adjusting entry than a service company does.
d. different types of adjusting entries compared to a service company.
Answer:
Which board(s) has(have) worked to implement fair value measurement for
financial instruments?
a. FASB, but not IASB.
b. IASB, but not FASB.
c. both FASB and IASB.
d. neither FASB nor IASB.
Answer:
IFRS requires loans and receivables to be recorded at
a. amortized cost.
b. amortized cost, adjusted for allowances for doubtful accounts.
c. unamortized cost.
d. unamortized cost, adjusted for allowances for doubtful accounts.
Answer:
Which of the following would not be an appropriate heading for a column in the cash
receipts journal?
a. Cash
b. Accounts Payable
c. Sales Discounts
d. Sales Revenue
Answer:
Jack Kingman the new controller of Henderson Company, has reviewed the expected
useful lives and salvage values of selected depreciable assets at the beginning of 2015.
His findings are as follows.
All assets are depreciated by the straight-line method. Henderson Company uses a
calendar year in preparing annual financial statement. After discussion, management
has agreed to accept Jack’s proposed changes.
Instructions
(a) Compute the revised annual depreciation on each asset in 2015. (Show
computation.)
(b) Prepare the entry (or entries) to record depreciation on the building in 2015
(c) Show how the building is reported in the 12/31/15 balance sheet.
Answer:
If companies have identical inventoriable costs but use different inventory flow
assumptions when the price of goods have not been constant, then the
a. cost of goods sold of the companies will be identical.
b. cost of goods available for sale of the companies will be identical.
c. ending inventory of the companies will be identical.
d. net income of the companies will be identical.
Answer:
The income statement for the year 2015 of Fugazi Co. contains the following
information:
The entry to close Income Summary to Retained Earnings includes
a. a debit to Revenue for $70,000.
b. credits to Expenses totalling $77,500.
c. a credit to Income Summary for $7,500.
d. a credit to Retained Earnings for $7,500.
Answer:
A company decides to exchange its old machine and $231,000 cash for a new machine.
The old machine has a book value of $189,000 and a fair value of $210,000 on the date
of the exchange. The cost of the new machine would be recorded at
a. $420,000.
b. $441,000.
c. $399,000.
d. cannot be determined.
Answer:
From an accounting standpoint, the acquisition of productive facilities can be thought of
as a long-term
a. accrual of expense.
b. accrual of revenue.
c. accrual of unearned revenue.
d. prepayment for services.
Answer:
If accounts receivable have increased during the period,
a. revenues on an accrual basis are less than revenues on a cash basis.
b. revenues on an accrual basis are greater than revenues on a cash basis.
c. revenues on an accrual basis are the same as revenues on a cash basis.
d. expenses on an accrual basis are greater than expenses on a cash basis.
Answer:
Natural resources have two distinguishing characteristics (1) they are physically
_______________ in operations, and (2) they are _________________ only by an act
of nature.
Answer:
A single-column purchases journal is used to record purchases of merchandise on
account.
Answer:
Vance Company received a bank statement for the month of October 2015, which
showed a balance per bank of $3,600. The company’s Cash account in the general
ledger showed a balance of $1,204 at October 3 Other information that may be relevant
in preparing a bank reconciliation for October follows:
1> The bank returned an NSF check from a customer for $280.
2> The company recorded cash receipts of $250 on October 31 but this amount does not
appear on the bank statement.
3> A check correctly written by Vance and paid by the bank for $1,740 was incorrectly
recorded in the cash payments journal for $1,470. The check was a payment on account.
4> Checks which were written in September but still had not been presented to the bank
for payment at October 31 amounted to $780.
5> The bank included a credit memorandum for $1,236, which represents a collection
of a customer’s note by the bank for the company; principal amount of the note was
$1,200 and the remainder was interest.
6> The bank included a $20 debit memorandum for service charges for the month of
October.
7> Checks written in October which have not been paid by the bank at October 31
amounted to $1,200.
Instructions
1> Prepare a bank reconciliation for Vance Company for October which reconciles the
balance per books and the balance per bank to their adjusted correct balances.
2> Prepare the necessary adjusting entries for Vance Company at October 31, 2015.
Answer:
If the fair value of an available-for-sale security exceeds its cost, the security should be
written up to fair value and a realized gain should be recognized.
Answer:
If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a
loss on redemption will be recorded.
Answer:
Towson Company prepared the tabulation below at December 31, 2014.
Instructions
Show how each item should be reported in the statement of cash flows. Use parentheses
for deductions.
Answer:
Hibbett Company does not segregate sales and sales taxes on its cash register. Its
register total for the month is $312,700, which includes a 6% sales tax.
Instructions
Compute sales taxes payable, and make the entry to record sales and sales taxes
payable.
Answer:
Current assets are listed in the order of liquidity.
Answer:
The balance in retained earnings on January 1, 2015, for Booker Inc., was $575,000.
During the year, the corporation paid cash dividends of $70,000 and distributed a stock
dividend of $25,000. In addition, the company determined that it had overstated its
depreciation expense in prior years by $50,000. Net income for 2015 was $120,000.
Instructions
Prepare the retained earnings statement for 2015.
Answer:
