A typical investment to house excess cash until needed is
a. stocks of companies in a related industry.
b. debt securities.
c. low-risk, highly liquid securities.
d. stock securities.
Answer:
Bacher Company developed the following reconciling information in preparing its
September bank reconciliation:
Using the above information, determine the cash balance per books (before
adjustments) for the Bacher Company.
a. $2,834
b. $5,480
c. $8,148
d. $8,828
Answer:
The following amounts were taken from the financial statements of Leaf Company:
The profit margin ratio for 2015 is
a. 15.4%.
b. 44.9%.
c. 16.5%.
d. 10.7%.
Answer:
Barkley Company uses a periodic inventory system and has the following account
balances: Beginning Inventory $50,000, Ending Inventory $80,000, Freight-in $12,000,
Purchases $330,000, Purchase Returns and Allowances $8,000 and Purchase Discounts
$6,000.
Instructions
Compute each of the following:
(a) Net purchases
(b) Cost of goods available for sale
(c) Cost of goods sold
Answer:
Which of the following would not be included in the operating activities section of a
statement of cash flows?
a. Cash inflows from returns on loans (i.e., interest)
b. Cash inflows from returns on equity securities (i.e., dividends)
c. Cash outflows to governments for taxes
d. Cash outflows to reacquire treasury stock
Answer:
The party who has the right to exercise a call option on bonds is the
a. investment banker.
b. bondholder.
c. bearer.
d. issuer.
Answer:
A check correctly written and paid by the bank for $271 is incorrectly recorded on the
company’s books for $217. The appropriate adjustment on bank reconciliation would be
to
a. deduct $271 from the book’s balance.
b. deduct $54 from the book’s balance.
c. deduct $54 from the bank’s balance.
d. add $54 to the bank’s balance.
Answer:
What is ordinarily the first step in the formation of a corporation?
a. Development of by-laws for the corporation
b. Issuance of the corporate charter
c. Application for incorporation to the appropriate Secretary of State
d. Registration with the SEC
Answer:
Under IFRS, the cash flow statement can be prepared using
a. the direct method only.
b. the indirect method only.
c. either the direct or indirect method.
d. the T-account method only.
Answer:
Additions and improvements
a. occur frequently during the ownership of a plant asset.
b. normally involve immaterial expenditures.
c. increase the book value of plant assets when incurred.
d. typically only benefit the current accounting period.
Answer:
If the transaction causes an asset account to decrease, which of the following related
effects may occur?
a. An increase of equal amount in the common stock account.
b. An increase in a liability account.
c. An increase of equal amount in another asset account.
d. An increase in the combined total of liabilities and stockholders’ equity.
Answer:
The lower-of-cost-or-market basis of valuing inventories is an example of
a. comparability.
b. the cost principle.
c. conservatism.
d. consistency.
Answer:
TB Nelson Company prepares monthly financial statements and uses the gross profit
method to estimate ending inventories. Historically, the company has had a 40% gross
profit rate. During June, net sales amounted to $180,000; the beginning inventory on
June 1 was $54,000; and the cost of goods purchased during June amounted to $90,000.
The estimated cost of TB Nelson Company’s inventory on June 30 is
a. $21,600.
b. $36,000.
c. $72,000.
d. $126,000.
Answer:
Planner Corporation’s comparative balance sheets are presented below.
Additional information:
1> Net income was $27,900. Dividends declared and paid were $22,500.
2> All other changes in noncurrent account balances had a direct effect on cash flows,
except the change in accumulated depreciation. The land was sold for $5,900.
Instruction
(a) Prepare a statement of cash flows for 2015 using the indirect method.
(b) Compute free cash flow.
Answer:
Which of the following accounting problems does not involve a present value
calculation?
a. The determination of the market price of a bond.
b. The determination of the declining-balance depreciation expense.
c. The determination of the amount to report for long-term notes payable.
d. The determination of the amount to report for lease liability.
Answer:
If the single amount of $2,000 is to be received in 2 years and discounted at 11%, its
present value is
a. $1,818.
b. $1,623.
c. $1,802.
d. $2,754.
Answer:
During the year, Salaries Payable decreased by $5,000. If Salary Expense amounted to
$174,000 for the year, the cash paid to employees (including deductions from gross
pay) is
a. $179,000.
b. $174,000.
c. $169,000.
d. $184,000.
Answer:
Which of the following is not a condition which would require the recording of a lease
contract as a capital lease?
a. The lease transfers ownership of the property to the lessee.
b. The lease contains a bargain purchase option.
c. The lease term is less than 75% of the economic life of the leased property.
d. The present value of the lease payments equals or exceeds 90% of the fair value of
the leased property.
Answer:
The maturity value of a $5,000, 9%, 60-day note receivable dated February 10th is
a. $5,000.
b. $5,038.
c. $5,075.
d. $5,450.
Answer:
Mattox Company is building a new plant that will take three years to construct. The
construction will be financed in part by funds borrowed during the construction period.
There are significant architect fees, excavation fees, and building permit fees. Which of
the following statements is true?
a. Excavation fees are capitalized but building permit fees are not.
b. Architect fees are capitalized but building permit fees are not.
c. Interest is capitalized during the construction as part of the cost of the building.
d. The capitalized cost is equal to the contract price to build the plant less any interest
on borrowed funds.
Answer:
Which of the following transactions does not affect cash during a period?
a. Write-off of an uncollectible account
b. Collection of an accounts receivable
c. Sale of treasury stock
d. Exercise of the call option on bonds payable
Answer:
Companies cannot use the
a. periodic inventory system under GAAP.
b. periodic inventory system under IFRS.
c. perpetual system under IFRS.
d. both periodic and perpetual can be used under GAAP and IFRS.
Answer:
Which of the following would not be reported under ‘Other Revenues and Gains’ on the
income statement?
a. Unrealized gain on available-for-sale securities
b. Dividend revenue
c. Interest revenue
d. Gain on sale of short-term debt investments
Answer:
If a business has received cash in advance of services performed and credits a liability
account, the adjusting entry needed after the services are performed will be
a. debit Unearned Service Revenue and credit Cash.
b. debit Unearned Service Revenue and credit Service Revenue.
c. debit Unearned Service Revenue and credit Prepaid Expense.
d. debit Unearned Service Revenue and credit Accounts Receivable.
Answer:
Cash from sales of merchandise will be recorded in the
a. purchases journal.
b. sales journal.
c. cash receipts journal.
d. general journal.
Answer:
The first step in preparing a worksheet is to prepare a ______________ from the
general ledger accounts.
Answer:
Accounting communicates financial information about a business enterprise to both
internal and external users.
Answer:
Ed’s Bookstore has collected $750 in sales taxes during April. If sales taxes must be
remitted to the state government monthly, what entry will Ed’s Bookstore make to show
the April remittance?
Answer:
Chang Company earns 12% on an investment that will return $400,000 eleven years
from now. What is the amount Chang Company should invest now to earn this rate of
return?
Answer:
Equipment was acquired on January 1, 2012, at a cost of $90,000. The equipment was
originally estimated to have a salvage value of $5,000 and an estimated life of 10 years.
Depreciation has been recorded through December 31, 2015, using the straight-line
method. On January 1, 2016, the estimated salvage value was revised to $6,000 and the
useful life was revised to a total of 8 years.
Instructions
Determine the depreciation expense for 2016.
Answer:
Condensed financial data of Drake Company appear below:
Additional information:
1> New plant assets costing $100,000 were purchased for cash in 2015.
2> Old plant assets costing $25,000 were sold for $10,000 cash when book value was
$13,000.
3> Bonds with a face value of $40,000 were converted into $40,000 of common stock.
4> A cash dividend of $15,000 was declared and paid during the year.
5> Accounts payable pertain to merchandise purchases.
Instructions
Prepare a statement of cash flows for the year using the direct method.
Answer:
In a voucher system, vouchers are prepared in the accounts receivable department.
Answer: