Regular dividends are declared out of
a. Paid-in Capital in Excess of Par.
b. Treasury Stock.
c. Common Stock.
d. Retained Earnings.
Answer:
The following information pertains to Rural Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
What is the return on assets for Rural?
a. 16%
b. 9.7%
c. 8%
d. 17%
Answer:
Vance Company reported the following summarized annual data at the end of 2015:
The income tax rate is 40%. The controller of the company is considering a switch from
FIFO to LIFO. He has determined that on a LIFO basis, the ending inventory would
have been $180,000.
Instructions
(a) Restate the summary information on a LIFO basis.
(b) What effect, if any, would the proposed change have on Vance’s income tax expense,
net income, and cash flows?
(c) If you were an owner of this business, what would your reaction be to this proposed
change?
Answer:
The Freight-In account
a. increases the cost of merchandise purchased.
b. is contra to the Purchases account.
c. is a permanent account.
d. has a normal credit balance.
Answer:
Pappy’s Staff has the following inventory information.
Assuming that a perpetual inventory system is used, what is the ending inventory on a
FIFO basis?
a. $5,848
b. $5,860
c. $6,068
d. $6,346
Answer:
A truck that cost $72,000 and on which $60,000 of accumulated depreciation has been
recorded was disposed of for $18,000 cash. The entry to record this event would include
a
a. gain of $6,000.
b. loss of $6,000.
c. credit to the Equipment account for $12,000.
d. credit to Accumulated Depreciation for $60,000.
Answer:
The worksheet does not show
a. net income or loss for the period.
b. revenue and expense account balances.
c. the ending balance in the retained earnings account.
d. the trial balance before adjustments.
Answer:
Financial information is presented below:
Gross profit would be
a. $104,000.
b. $116,000.
c. $130,000.
d. $142,000.
Answer:
Romanoff Industries had the following inventory transactions occur during 2015:
The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s after-tax income using LIFO?
(rounded to whole dollars)
a. $2,323
b. $2,486
c. $3,318
d. $3,552
Answer:
Start Inc. has 5,000 shares of 5%, $100 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2015. What
is the annual dividend on the preferred stock?
a. $50 per share
b. $25,000 in total
c. $50,000 in total
d. $0.50 per share
Answer:
On October 1, 2015, Pennington Company issued a $90,000, 10%, nine-month
interest-bearing note. If the Pennington Company is preparing financial statements at
December 31, 2015, the adjusting entry for accrued interest will include a:
a. credit to Notes Payable of $2,250.
b. debit to Interest Expense of $2,250
c. credit to Interest Payable of $4,500.
d. debit to Interest Expense of $3,375.
Answer:
Unearned Rent Revenue is
a. a contra account to Rent Revenue.
b. a revenue account.
c. reported as a current liability.
d. debited when rent is received in advance.
Answer:
Salem Company hired Kirk Construction to construct an office building for
£6,400,000 on land costing £1,600,000, which Salem Company owned. The
building was complete and ready to be used on January 1, 2015 and it has a useful life
of 40 years. The price of the building included land improvements costing £480,000
and personal property costing £600,000. The useful lives of the land improvements
and the personal property are 10 years and 5 years, respectively. Salem Company uses
component depreciation, and the company uses straight-line depreciation for other
similar assets. What total amount of depreciation expense would Salem Company report
on its income statement for the year ended December 31, 2015?
a. £268,000
b. £160,000
c. £341,000
d. £301,000
IFRS:
Answer:
Keeping a systematic, chronological diary of events that are measured in dollars and
cents is called
a. communicating.
b. identifying.
c. processing.
d. recording.
Answer:
An asset’”expense relationship exists with
a. liability accounts.
b. revenue accounts.
c. prepaid expense adjusting entries.
d. accrued expense adjusting entries.
Answer:
In the month of November, Kinsey Company Inc. wrote checks in the amount of
$18,500. In December, checks in the amount of $25,316 were written. In November,
$16,936 of these checks were presented to the bank for payment, and $21,766 were
presented in December. What is the amount of outstanding checks at the end of
November?
a. $1,564
b. $4,830
c. $5,114
d. $6,816
Answer:
Lager Company has other operating expenses of $260,000. There has been an increase
in prepaid expenses of $20,000 during the year, and accrued liabilities are $15,000
lower than in the prior period. Using the direct method of reporting cash flows from
operating activities, what were Lager’s cash payments for operating expenses?
a. $255,000
b. $265,000
c. $225,000
d. $295,000
Answer:
The purchase of treasury stock
a. increases total assets and decreases total stockholders’ equity.
b. decreases total assets and decreases total stockholders’ equity.
c. increases total assets and increases total stockholders’ equity.
d. decreases total assets and increases total stockholders’ equity.
Answer:
A 90-day note dated May 14 has a maturity date of
a. August 14.
b. August 12.
c. August 13.
d. August 15.
Answer:
The final step in the recording process is to
a. analyze each transaction.
b. enter the transaction in a journal.
c. prepare a trial balance.
d. transfer journal information to ledger accounts.
Answer:
On January 1 Jarret Corporation purchased a 35% equity in Dorman Corporation for
$220,000. At December 31 Dorman declared and paid a $60,000 cash dividend and
reported net income of $200,000.
Instructions
(a) Journalize the transactions.
(b) Determine the amount to be reported as an investment in Dorman stock at
December 31.
Answer:
Barr Corporation has the following stock outstanding:
No dividends were paid the previous 2 years. If Barr declares $500,000 of dividends in
the current year, how much will preferred stockholders receive if the preferred stock is
cumulative?
a. $200,000
b. $300,000
c. $400,000
d. $100,000
Answer:
Intangible assets are the rights and privileges that result from ownership of long-lived
assets that
a. must be generated internally.
b. are depletable natural resources.
c. have been exchanged at a gain.
d. do not have physical substance.
Answer:
DMV leases a building for 20 years. The lease requires 20 annual payments of $12,000
each, with the first payment due immediately. The interest rate in the lease is 10%.
What is the present value of the cost of leasing the building?
Answer:
Common Stock Dividends Distributable is shown within the Paid-in Capital subdivision
of the stockholders’ equity section of the balance sheet.
Answer:
Doctor Company prepared the tabulation below at December 31, 2015.
Instructions
Show how each item should be reported in the statement of cash flows. Use parentheses
for deductions.
Answer:
Financing activities include the obtaining of cash from issuing debt and repaying the
amounts borrowed.
Answer:
The primary accounting standard-setting body in the United States is the International
Accounting Standards Board.
Answer:
Under the cost method, dividends received from an investee company are credited to
the _______________ account, whereas under the equity method, dividends received
from an investee company are credited to the _______________ account.
Answer:
Accrued revenues are amounts recorded and received but not yet recognized.
Answer:
An unrealized gain or loss on trading securities is reported as a separate component of
stockholders’ equity.
Answer:
Delmar Company had beginning inventory of $90,000, ending inventory of $110,000,
cost of goods sold of $600,000, and sales of $960,000. Delmar’s days in inventory is:
a 38.0 days.
b. 54.3 days.
c. 60.8 days.
d. 67.5 days.
Answer:
Torres Wholesale Merchandise had 20,000 shares of 4%, $20 par value preferred stock
and 15,000 shares of $25 par value common stock outstanding throughout 2015. These
data apply to each of the independent situations below.
1> Assuming that total dividends declared in 2015 were $25,000 and that the preferred
stock is noncumulative, common stockholders should receive total 2015 dividends of
$.
2> Assuming that total dividends declared in 2015 were $80,000 and that the preferred
stock is cumulative with two years’ preferred dividends in arrears, the preferred
stockholders should receive 2015 dividends totaling
$.
3> Assuming that total dividends declared in 2015 were $30,000 and that the preferred
stock is cumulative with two years’ preferred dividends in arrears, the preferred
stockholders should receive 2015 dividends totaling
$.
4> Assuming that total dividends declared in 2015 were $45,000 and that the
cumulative preferred stock was issued on January 1, 2014, and that $8,000 of preferred
dividends were declared and paid in 2014, the common stockholders should receive
2015 dividends totaling
$.
Answer: