Bond discount should be amortized to comply with
a. the historical cost principle.
b. the matching principle.
c. the revenue recognition principle.
d. conservatism.
Answer:
A reversing entry
a. reverses entries that were made in error.
b. is the exact opposite of an adjusting entry made in a previous period.
c. is made when a business disposes of an asset it previously purchased.
d. is made when a company sustains a loss in one period and reverses the effect with a
profit in the next period.
Answer:
The purpose of recording depreciation on productive assets is to
a. reflect the decline in the market value of the assets each period.
b. reduce income when the company has an exceptionally profitable year.
c. be in conformity with the monetary recognition principle.
d. allocate the original cost of productive assets to expense over its useful life.
Answer:
Freight costs paid by a seller on merchandise sold to customers will cause an increase
a. in the selling expense of the buyer.
b. in operating expenses for the seller.
c. to the cost of goods sold of the seller.
d. to a contra-revenue account of the seller.
Answer:
The accounting process involves all of the following except
a. identifying economic transactions that are relevant to the business.
b. communicating financial information to users by preparing financial reports.
c. recording nonquantifiable economic events.
d. analyzing and interpreting financial reports.
Answer:
The following information is available for Macon Corporation:
Instructions
Based on the preceding information, calculate each of the following:
(a) Total paid-in capital.
(b) Total stockholders’ equity.
Answer:
Joe’s Supply Co. has the following transactions related to notes receivable during the
last 2 months of 2015.
Instructions
(a) Journalize the transactions for Joe’s Supply Co.
(b) Record the collection of the Rondelli note at its maturity in 2016.
Answer:
European companies rely
a. less on historical cost and more on fair values than U.S. companies.
b. less on fair values and more on historical cost than U.S. companies.
c. completely on fair values for financial reporting.
d. completely on historical cost for financial reporting.
Answer:
Inventoriable costs may be thought of as a pool of costs consisting of which two
elements?
a. The cost of beginning inventory and the cost of ending inventory
b. The cost of ending inventory and the cost of goods purchased during the year
c. The cost of beginning inventory and the cost of goods purchased during the year
d. The difference between the costs of goods purchased and the cost of goods sold
during the year
Answer:
Accountants do not attempt to measure the change in a plant asset’s fair value during
ownership because
a. the assets are not held for resale.
b. plant assets cannot be sold.
c. losses would have to be recognized.
d. it is management’s responsibility to determine fair values.
Answer:
Which of the following should be included in the physical inventory of a company?
a. Goods held on consignment from another company.
b. Goods in transit to another company shipped FOB shipping point.
c. Goods in transit from another company shipped FOB shipping point.
d. Goods in transit to or from another company shipped FOB shipping point.
Answer:
The current balance sheet of Greyson Inc. reports total assets of $40 million, total
liabilities of $4 million, and stockholders’ equity of $36 million. Greyson is considering
several financing possibilities in order to expand operations. Each question based on
this data is independent of any others. What will be the effect on Greyson’s debt to
assets ratio if Greyson issues an additional $8 million in stock to finance its expansion?
a. The debt to assets ratio will decrease from .1(4/40) to .083 (4/48) after the additional
stock sale.
b. The debt to assets ratio will decrease from 4/36 before to 4/44 after the additional
stock sale.
c. The debt to assets ratio will increase from 40 before to 48 after the additional
investment.
d. The additional stock issuance will have no effect on the debt to assets ratio.
Answer:
The primary purpose of the statement of cash flows is to
a. provide information about the investing and financing activities during a period.
b. prove that revenues exceed expenses if there is a net income.
c. provide information about the cash receipts and cash payments during a period.
d. facilitate banking relationships.
Answer:
Cash includes all of the following items except
a. checks.
b. currency.
c. money orders.
d. all of these answers are included.
Answer:
Under IFRS, equity investments are generally recorded and reported at
a. amortized cost.
b. fair value.
c. original cost.
d. maturity value.
Answer:
Which of the following would be added to net income using the indirect method?
a. An increase in accounts receivable
b. An increase in prepaid expenses
c. Depreciation expense
d. A decrease in accounts payable
Answer:
Renfro Company had accounts receivable of $100,000 on January 1, 2015. The only
transactions that affected accounts receivable during 2015 were net credit sales of
$1,200,000, cash collections of $1,000,000, and accounts written off of $30,000.
Instructions
(a) Compute the ending balance of accounts receivable.
(b) Compute the accounts receivable turnover for 2015.
(c) Compute the average collection period in days.
Answer:
Horton Company purchased a building on January 2 by signing a long-term $480,000
mortgage with monthly payments of $4,500. The mortgage carries an interest rate of 10
percent. The amount owed on the mortgage after the first payment will be
a. $480,000.
b. $479,500.
c. $476,000.
d. $475,500.
Answer:
Which of the following methods of computing depreciation is production based?
a. Straight-line
b. Declining-balance
c. Units-of-activity
d. None of these answer choices are correct.
Answer:
Depletion expense is computed by multiplying the depletion cost per unit by the
a. total estimated units.
b. total actual units.
c. number of units extracted.
d. number of units sold.
Answer:
Treasury stock is
a. stock issued by the U.S. Treasury Department.
b. stock purchased by a corporation and held as an investment in its treasury.
c. corporate stock issued by the treasurer of a company.
d. a corporation’s own stock which has been reacquired but not retired.
Answer:
Inventory accounting under IFRS differs from GAAP in regard to
a. neither the use of LIFO nor lower-of-cost-or-market.
b. the use of LIFO but not lower-of-cost-or-market.
c. the use of lower-of-cost-or-market but not LIFO.
d. the use of LIFO and lower-of-cost-or-market.
Answer:
Nord Company had $375,000 of current assets and $150,000 of current liabilities before
borrowing $70,000 from the bank with a 3-month note payable. What effect did the
borrowing transaction have on the amount of Nord Company’s working capital?
a. No effect
b. $70,000 increase
c. $140,000 increase
d. $70,000 decrease
Answer:
Theel Company had a balance in the Inventory account of $260,000 at the beginning of
the year and a balance of $340,000 at the end of the year. Inventory turnover for 2015
was 5 times. If gross profit as a percentage of sales was 40%, the amount of sales for
2015 was
a. $2,500,000.
b. $1,500,000.
c. $3,750,000.
d. $937,500.
Answer:
Magnolia Electric Car Cleaning has the following accounts:
Answer:
The three major services rendered by a certified public accountant are
______________, ________________, and management ________________.
Answer:
Match the items below by entering the appropriate letter in the space.
1> Partnership
2> Liabilities
3> Revenues
4> General ledger
5> Expense recognition principle
6> Unearned service revenue
7> Income summary
8> Intangible assets
9> Freight-out
10> Sales returns and allowances
A> A liability created when cash is received in advance of performing a service for a
customer.
B> Freight costs incurred by the seller.
C> Noncurrent resources that do not have a physical substance.
D> An economic entity which is not a separate legal entity.
E> A contra-revenue account.
F> The matching of efforts (expenses) with accomplishments (revenues).
G> Creditors’ claims on total assets.
H> A temporary account used in closing revenue and expense accounts.
I> Contains all asset, liability, and stockholders’ equity accounts.
J> Gross increases in stockholders’ equity resulting from business activities entered into
for the purpose of earning income.
Answer:
Management can choose between two bases in calculating the estimated uncollectible
accounts under the allowance method. One basis emphasizes an income statement
viewpoint whereas the other emphasizes a balance sheet viewpoint. Identify the two
bases and contrast the two approaches. How do the different points of view affect the
amount recognized as Bad Debt Expense during the accounting period?
Answer:
Define par value, and discuss its significance in accounting.
Answer:
Specific Identification must be used for inventory valuation where the inventory items
are not interchangeable under
Answer:
An error that overstates the ending inventory will also cause net income for the period
to be overstated.
Answer:
In general, how does one determine whether or not an expenditure should be included
in the acquisition cost of property, plant, and equipment?
Answer:
A company’s unadjusted balance in Inventory will usually not agree with the actual
amount of inventory on hand at year-end.
Answer: