Farris Company borrowed $800,000 from BankTwo on January 1, 2014 in order to
expand its mining capabilities. The five-year note required annual payments of
$208,349 and carried an annual interest rate of 8.5%. What is the amount of expense
Farris must recognize on its 2015 income statement?
a. $68,000.
b. $56,070.
c. $43,127.
d. $50,290.
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:
The amount of sales tax collected by a retail store when making sales is
a. a miscellaneous revenue for the store.
b. a current liability.
c. not recorded because it is a tax paid by the customer.
d. recorded as an operating expense.
Answer:
An accounting time period that is one year in length, but does not begin on January 1, is
referred to as
a. a fiscal year.
b. an interim period.
c. the time period assumption.
d. a reporting period.
Answer:
Sargent Corporation bought equipment on January 1, 2015. The equipment cost
$360,000 and had an expected salvage value of $60,000. The life of the equipment was
estimated to be 6 years. The depreciable cost of the equipment is
a. $360,000.
b. $300,000.
c. $200,000.
d. $50,000.
Answer:
A three column form of account is so named because it has columns for
a. debit, credit, and account name.
b. debit, credit, and reference.
c. debit, credit, and balance.
d. debit, credit, and date.
Answer:
Proving the equality of the totals in the columns of multiple-column special journals is
called
a. posting to the subsidiary.
b. debiting and crediting.
c. footing and crossfooting.
d. updating the master file.
Answer:
The conceptual framework that underlies IFRS
a. is very similar to that used to develop GAAP.
b. does not define assets or liabilities.
c. does not define equity.
d. does not define income or expenses.
Answer:
If a company purchases merchandise for cash, the transaction should be recorded in the
a. purchases journal.
b. general journal.
c. cash payments journal.
d. sales journal.
Answer:
Both IFRS and GAAP require disclosure about
a. accounting policies followed.
b. judgements that management has made in the process of applying the entity’s
accounting policies.
c. the key assumptions and estimation uncertainty.
d. All of these answer choices are correct.
Answer:
Discount on Bonds Payable
a. is a contra revenue account.
b. is a contra liability account.
c. is added to Bonds Payable to determine the carrying value of the bond.
d. has a credit balance.
Answer:
Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8
years has been depreciated using the straight-line method for 2 years. Assuming a
revised estimated total life of 5 years and no change in the salvage value, the
depreciation expense for year 3 would be
a. $ 8,400.
b. $18,667.
c. $14,000.
d. $11,200.
Answer:
The Petty Cash account should be debited
a. whenever an expense is paid from the fund.
b. when the fund is established.
c. whenever the fund is replenished.
d. when the fund is liquidated.
Answer:
If a loss of $25,000 is incurred in selling (for cash) office equipment having a book
value of $90,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
a. $65,000.
b. $90,000.
c. $115,000.
d. $25,000.
Answer:
A factor which distinguishes the corporate form of organization from a sole
proprietorship or partnership is that a
a. corporation is organized for the purpose of making a profit.
b. corporation is subject to more federal and state government regulations.
c. corporation is an accounting economic entity.
d. corporation’s temporary accounts are closed at the end of the accounting period.
Answer:
A coal company invests $15 million in a mine estimated to have 20 million tons of coal
and no salvage value. It is expected that the mine will be in operation for 5 years. In the
first year, 1,000,000 tons of coal are extracted and sold. What is the depletion expense
for the first year?
a. $750,000
b. $300,000
c. $75,000
d. Cannot be determined from the information provided.
Answer:
Which of the following is true?
a. Transaction analysis is completely different under IFRS and GAAP.
b. Most transactions are recorded differently under IFRS and GAAP.
c. Transaction analysis is the same under IFRS and GAAP, but some transactions are
recorded differently.
d. All transactions are recorded the same under IFRS and GAAP.
Answer:
A trial balance may balance even when each of the following occurs except when
a. a transaction is not journalized.
b. a journal entry is posted twice.
c. incorrect accounts are used in journalizing.
d. a transposition error is made.
Answer:
The collection of a $6,000 account within the 2 percent discount period will result in a
a. debit to Sales Discounts for $120.
b. debit to Accounts Receivable for $5,880.
c. credit to Cash for $5,880.
d. credit to Accounts Receivable for $5,880.
Answer:
Trade accounts receivable are valued and reported on the balance sheet
a. in the investment section.
b. at gross amounts less sales returns and allowances.
c. at net realizable value.
d. only if they are not past due.
Answer:
Kern Company sells merchandise on account for $8,000 to Block Company with credit
terms of 2/10, n/30. Block Company returns $1,600 of merchandise that was damaged,
along with a check to settle the account within the discount period. What is the amount
of the check?
a. $6,272
b. $6,400
c. $7,840
d. $7,872
Answer:
The following information pertains to Ortiz Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
What is the current ratio for Ortiz?
a. 1.90
b. 1.50
c. 1.30
d. .53
Answer:
Cash provided by operating activities
a. may be larger than net income.
b. equals the change in cash for the year.
c. summarizes cash flows relating to the purchase and sale of long-lived assets.
d. decreases when long-term debt is repaid.
Answer:
Each of the following items may be classified as operating or financing activities under
IFRS except
a. dividends paid.
b. dividends received.
c. interest paid.
d. All of these answers are correct.
Answer:
Compute the maturity date and interest for the following notes.
Answer:
Long-term investments would appear in the property, plant, and equipment section of
the balance sheet.
Answer:
On June 1, during its first month of operations, Crooked Rain purchased supplies for
$4,500 and debited the supplies account for that amount. At June 30, an inventory of
supplies showed $1,000 of supplies on hand. What adjusting journal entry should be
made for June?
Answer:
When debt investments are sold, the gain or loss is the difference between the net
proceeds from the sale and the fair value of the bonds.
Answer:
The cost of goods purchased during a period plus the beginning inventory is the amount
of goods ________________ during the period.
Answer:
Depletion expense for a period is only recognized on natural resources that have been
extracted and sold during the period.
Answer:
The following information was available for Pete Company at December 31, 2015:
beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000;
and sales $1,350,000. Pete’s days in inventory in 2015 was
a 21.6 days.
b. 25.9 days.
c. 29.7 days.
d. 33.5 days.
Answer:
Both accounts receivable and notes receivable represent claims that are expected to be
collected in cash.
Answer:
The chart of accounts is a special ledger used in accounting systems.
Answer: