What is the effect of a stock dividend on stockholders’ equity?
a. Stockholders’ equity is decreased.
b. Retained earnings is increased.
c. Additional paid-in capital is decreased.
d. Total stockholders’ equity stays the same.
All assets are tangible in nature.
a. True
b. False
Both U.S. GAAP and IFRS classify gains and losses that are both unusual in nature and
infrequent in occurrence as extraordinary and present them in a separate section of the
income statement.
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
Rent is owed by a tenant but not yet collected
Deferred income taxes arise because
a. corporations often make errors in their tax estimations.
b. companies can use accounting methods that minimize net income for tax purposes
and other methods that maximize net income for reporting to shareholders.
c. the IRS owes a company a refund from last year.
d. large corporations generally have operations in foreign countries whose tax law is
quite different from U.S. tax law.
Provided below is a list of important users of accounting information.Below the list are
descriptions of a major need of each of the various users. Fill in the blank with the one
user group that is most likely to have the need described to the right of the blank. Some
user groups may be used more than once or not at all.
a. Stockholder
b. Company management
c. Supplier
d. Banker
e. Internal Revenue Service
f. Securities and Exchange Commission
g. Labor union The company’s profitability since the last work force contract was
signed.
Barton Building Company is ready to sell its bonds. Which one of the following
financial questions is most relevant to the issue of the bonds and that investors will
most likely want answered before they purchase the bonds?
a. How many product lines did Barton Building Company have last year?
b. What will be Barton Building Company’s cost to start operations in another city?
c. How much debt does Barton Building Company already have?
d. Will Barton Building Company pay dividends?
Each of the following situations involves the use of discounts:
1> How much discount may Mallory Inc. take in each of the following transactions?
What was the annualized interest rate?
a. Mallory purchases inventory costing $970, terms 3/10, n/40.
b. Mallory purchases new office furniture costing $2,100, terms 2/10, n/30.
2> Calculate the discount rate that Mallory received in each of these transactions.
a. Mallory purchased office supplies costing $450 and paid within the discount period
with a check for $425.
b. Mallory purchased merchandise for $1,900. It paid within the discount period with a
check for $1,870.
Dividends in Arrears
a. is a liability account.
b. is a contra stockholders’ equity account.
c. is a stockholders’ equity account.
d. appear in the notes to the financial statements.
Cook, Inc., a manufacturer of tires, has given you its most recent annual report in an
effort to obtain a sizable loan. The company is very profitable and appears to have a
sound financial position. Based on a report presented on prime-time television last
night, you are aware that Cook is a defendant in several lawsuits related to its defective
tires that cause vehicles to overturn. The information presented on television is an
example of financial information that is
a. Relevant
b. Consistent
c. Predictable
d. Comparable
Pierce Corp. identified the following data in preparing a bank reconciliation on October
31, 2014.
What is the net amount of the adjustments to Pierce’s cash balance as a result of the
bank reconciliation?
a. No amounts need to be recorded
b. $400 increase
c. $400 decrease
d. $900 decrease
Under IFRS, an item such as a convertible bond must be separated into two parts,
showing one part in the Liability category and the other part in the Stockholders’ Equity
category.
a. True
b. False
Hound Dog Bisquits reported the following financial data for 2014 and 2015:
Provide the answer for each missing letter above. A) $220,000 ($250,000 – $30,000)
B) $210,000 ($250,000 – $40,000)
C) $480,000 ($690,000 – $210,000)
D) $20,000 ($600,000 – $580,000)
E) $40,000 (from 2014 ending inventory)
F) $350,000 ($380,000 – $350,000)
G) $230,000 ($580,000 – $350,000)