Which of the following statements is true concerning intangible assets?
a. Intangible assets have no economic substance.
b. Intangible assets lack physical existence.
c. Intangible assets are listed in the stockholders’ equity section of the balance sheet.
d. Intangible assets appear in the current assets section of the balance sheet.
At the end of the first year of operations, the balance sheet of West Palm Beach
Industries had the following balances: Accounts Receivable, $5,000; Accounts Payable,
$6,000; Inventory, $3,000; and Unexpired Insurance, $2,000. The corporation reported
net income of $79,000 for the year, including depreciation expense of $5,000, and uses
the indirect method of computing net cash flow from operating activities. Based on this
information, net cash flow from operating activities is:
a. $82,000
b. $78,000
c. $80,000
d. $77,000
Cash flow per share is computed by dividing cash on the balance sheet by the number
of shares outstanding.
a. True
b. False
Answer each of the following questions (a-c) with a separate short paragraph per
question. (a) What is the difference between a real account and a nominal account?
Give an example of each type of account. Why is this distinction important for the
closing process?
(b) What two purposes are served in making closing entries?
(c) Why is the Dividends account closed directly to Retained Earnings rather than to the
Income Summary account?
When the amount for a debit entry in a journal is transferred to a specific account in the
general ledger, it must be recorded
a. as a debit to that account in the general ledger.
b. as a credit to that account in the general ledger.
c. in sum only, without any regard for debit or credit, since the general ledger accounts
do not have spaces for debit and credit entries.
d. cannot be determined without further information.
Which of the following is not a current reporting requirement for a statement that
reports changes in cash over a period of time?
a. This statement must classify cash flows into three categories: operating, investing,
and financing activities.
b. Cash equivalents must be combined with cash in preparing this statement.
c. Working capital may be used as a substitute for cash in preparing this statement.
d. The title for this statement is “Statement of Cash Flows.”
Flannery Company uses a worksheet to prepare its statement of cash flows. The
company also uses the indirect method for the Operating Activities section of its
statement. For each of the following changes in the balance sheet, indicate what activity
it affects and whether it is an addition or deduction. a. Deducted from Operating activity
b. Added to Operating activity
c. Deducted from Investing activity
d. Added to Investing activity
e. Deducted from Financing activity
f. Added to Financing activity
Income taxes payable increased
A balance sheet of a sole proprietorship includes only the business assets and liabilities,
not the personal assets of the owner.
a. True
b. False
Match the following choices to the listed situation.
a. a deferred expense
b. a deferred revenue
c. an accrued liability
d. an accrued asset
Income taxes are owed to the federal government at year end
Indicate whether each should be (a) included or (b) excluded from the line item titled
Cash and cash equivalents on the balance sheet.
a. Included
b. Excluded
Certified check
When plant assets are purchased in a group, each asset increases the respective plant
asset account for its fair market value at the time of acquisition.
a. True
b. False
Net income on a cash basis is arrived at by adding depreciation and amortization back
to accrual net income.
a. True
b. False
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations. If Shidan
has $5,000 to invest and wants to have $10,000 at the end of 9 years, what compounded
interest rate must she get on her money (assume annual compounding)?
a. 5%
b. 6%
c. 7%
d. 8%
On January 1, 2015, Corner Store, Inc. issued $400,000, 10-year, 10% bonds for
$354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%.
The cash payment on June 30, 2015 is
a. $20,000.
b. $21,200.
c. $24,000.
d. $17,710.
In an operating lease, the lessee is not required to record the right to use the property as
an asset or to record the obligation for payments as a liability.
a. True
b. False
Acquisition cost includes all of the costs that are normal and necessary to acquire and
maintain a plant asset over its useful life.
a. True
b. False
The following information was taken from the operating activity section of the 2014
statement of cash flows for Limited Corp:
Based on the information provided, which one of the following conclusions is correct?
a. Accounts payable decreased $2,000 in 2014.
b. Inventories increased $8,000 in 2014.
c. The direct method was used to prepare the operating section of the cash flow
statement.
d. Cash payments of merchandise exceeded cost of goods sold by $2,000.
Temporary differences occur when an item affects both book and tax calculations but
not in the same time period.
a. True
b. False
The bond issue price is determined by calculating the
a. present value of the stream of interest payments and the future value of the maturity
amount.
b. future value of the stream of interest payments and the future value of the maturity
amount.
c. future value of the stream of interest payments and the present value of the maturity
amount.
d. present value of the stream of interest payments and the present value of the maturity
amount.
The mechanism that keeps track of the balances owed by individual customers is called
a(n)
_________________________.
is(are) a cost(s) that improves an operating asset and is (are) added to the asset account.
You have just received an email from the new staff person, Jennifer Lark. She has just
started working in the Fixed Assets Department of your company. She would like to
know under what circumstances should she capitalize interest as part of the cost of an
asset. In a brief memo, explain the issues to Ms. Lark.
Almost all current liabilities appear within theActivities category of the Statement of
Cash Flows.
Why does the accrual basis of accounting require adjustments, while the cash basis does
not?