The process of excluding intercompany transactions in preparing consolidated
statements is referred to as intercompany eliminations.
Answer:
At the end of an accounting period, all revenue and expense accounts are closed to a
temporary account called ______________.
Answer:
Gains and losses are not recognized when convertible bonds are converted into
common stock.
Answer:
An inexperienced accountant for Morgan Company made the following incorrect
entries.
Facts: Accepted a $20,000, 1 year, 8% note from Joe Wood Company for balance due
on
account.
Facts: Accepted Visa credit card for $20,000; the service fee is 2%.
3>
Facts: M. Adler dishonored a $12,000, 10%, 3-month note because of bankruptcy. Adler
is expected to pay. No interest had been accrued on the note.
Instructions
Prepare entries to correct Morgan Company’s books based on the facts given. Do not
reverse out incorrect entries that were recorded above, but rather correct the account
balances so that they reflect the proper amounts.
Answer:
The _______________ feature of preferred stock gives the preferred stockholders the
right to receive current-year dividends and unpaid prior-year dividends before common
stockholders receive any dividends.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
1> Obligations that a company expects to pay after one year.
2> A part of owners’ equity in a corporation.
3> An optional tool which facilitates the preparation of financial statements.
4> A temporary account used in the closing process.
5> Balance sheet accounts whose balances are carried forward to the next period.
6> The average time that it takes to go from cash to cash in producing revenues.
7> Entries to correct errors made in recording transactions.
8> The exact opposite of an adjusting entry made in a previous period.
9> Entries at the end of an accounting period to transfer the balances of temporary
accounts to a permanent stockholders’ equity account.
10> Assets that a company expects to pay or convert to cash or use up within one year.
Answer:
The holder of a convertible bond can convert an interest payment received into a cash
dividend paid on common stock if the dividend is greater than the interest payment.
Answer:
Metropolitan Symphony sells 200 season tickets for $50,000 that represents a five
concert season. The amount of Unearned Ticket Revenue after the second concert is
$20,000.
Answer:
The current sections of Donny Inc.’s balance sheets at December 31, 2014 and 2015, are
presented here.
Donny’s net income for 2015 was $203,000. Depreciation expense was $25,000.
Instructions
Prepare the net cash provided by operating activities section of the company’s statement
of cash flows for the year ended December 31, 2015, using the indirect method.
Answer:
The dividends account is a subdivision of the retained earnings account and appears as
an expense on the income statement.
Answer: