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The number of years of income statement information to be presented is
a. 2 years under both GAAP and IFRS.
b. 3 years under both GAAP and IFRS.
c. 2 years under GAAP and 3 years under IFRS.
d. 3 years under GAAP and 2 years under IFRS.
Answer:
The financial statements of Gervais Manufacturing Company report net sales of
$500,000 and accounts receivable of $80,000 and $40,000 at the beginning and end of
the year, respectively. What is the average collection period for accounts receivable in
days?
a. 29.2 days
b. 36.5 days
c. 43.8 days
d. 57.9 days
Answer:
Inventories affect
a. only the balance sheet.
b. only the income statement.
c. both the balance sheet and the income statement.
d. neither the balance sheet nor the income statement.
Answer:
Andrews, Inc. paid $45,000 to buy back 9,000 shares of its $1 par value common stock.
This stock was sold later at a selling price of $6 per share. The entry to record the sale
includes a
a. credit to Paid-in Capital from Treasury Stock for $9,000.
b. credit to Common Stock for $9,000.
c. debit to Paid-in Capital from Treasury Stock for $45,000.
d. debit to Retained Earnings for $45,000.
Answer:
Proctor Corporation had beginning inventory $100,000, cost of goods sold $750,000,
and ending inventory $150,000. What was Proctor's inventory turnover?
a. 3 times.
b. 6 times.
c. 7.5 times.
d. 5 times.
Answer:
Under the allowance method, writing off an uncollectible account
a. affects only balance sheet accounts.
b. affects both balance sheet and income statement accounts.
c. affects only income statement accounts.
d. is not acceptable practice.
Answer:
The date a cash dividend becomes a binding legal obligation to a corporation is the
a. declaration date.
b. earnings date.
c. payment date.
d. record date.
Answer:
Which of the following statements is incorrect?
a. Expenses increase stockholders' equity.
b. Expenses have normal debit balances.
c. Expenses decrease stockholders' equity.
d. Expenses are a negative factor in the computation of net income.
Answer:
At October 1, Arcade Fire Enterprises reported stockholders' equity of $72,000. During
October, no stock was issued and the company posted a net loss of $8,000. If
stockholders' equity at October 31 totals $64,000, what amount of dividends were paid
during the month?
a. $0
b. $4,000
c. $8,000
d. $16,000
Answer:
The most efficient way to accomplish closing entries is to
a. credit the income summary account for each revenue account balance.
b. debit the income summary account for each expense account balance.
c. credit the dividends balance directly to the income summary account.
d. credit the income summary account for total revenues and debit the income summary
account for total expenses.
Answer:
If Keene Company issues 9,000 shares of $5 par value common stock for $160,000, the
account
a. Common Stock will be credited for $45,000.
b. Paid-in Capital in Excess of Par will be credited for $45,000.
c. Paid-in Capital in Excess of Par will be credited for $160,000.
d. Cash will be debited for $115,000.
Answer:
The following data are available for Sampson Corporation.
Net cash provided by operating activities is:
a. $140,000.
b. $260,000.
c. $160,000.
d. $240,000.
Answer:
Which one of the following is shown first under current liabilities by many companies
as a matter of custom?
a. Accrued expenses
b. Current maturities of long-term debt
c. Sales taxes payable
d. Notes payable
Answer:
Presented below are two independent situations:
(a) Yount Company exchanged an old machine (cost $150,000 less $90,000
accumulated depreciation) plus $10,000 cash for a new machine. The old machine had a
fair value of $54,000. Prepare the entry to record the exchange of assets by Yount
Company.
(b) Lawson Company trades old equipment (cost $90,000 less $54,000 accumulated
deprecia-tion) for new equipment. Lawson paid $36,000 cash in the trade. The old
equipment that was traded had a fair value of $54,000. Prepare the entry to record the
exchange of assets by Lawson Company. The transaction has commercial substance.
Answer:
The adjusted trial balance for Lamar Corp. at the end of the current year, 2015,
contained the following accounts.
The total long-term liabilities reported on the balance sheet are
a. $1,945,000.
b. $1,935,000.
c. $2,095,000.
d. $2,085,000.
Answer:
Naughty Dog Disc Golf Show uses the lower-of-cost-or market basis for its inventory.
The following data are available at December 31
Instructions
(a) Determine the amount of the ending inventory by applying the lower- of- cost-
or-market basis.
(b) When determining "lower of cost or market", what is "market? Why is defined in
this way?
Answer:
A company just starting business made the following four inventory purchases in June:
A physical count of merchandise inventory on June 30 reveals that there are 250 units
on hand. Using the average-cost method, the amount allocated to the ending inventory
on June 30 is
a. $683.
b. $755.
c. $825.
d. $1,360.
Answer:
Which of the following is not a true statement about the accounting for debt
investments?
a. At acquisition, the historical cost principle applies.
b. The cost includes any brokerage fees.
c. Debt investments include investments in government and corporation bonds.
d. The cost includes any accrued interest.
Answer:
Using prenumbered checks and having an approved invoice for each check is an
example of
a. establishment of responsibility.
b. segregation of duties.
c. documentation procedures.
d. independent internal verification.
Answer:
Sandoz Corporation was organized on January 1, 2015, with authorized capital of
500,000 shares of $10 par value common stock. During 2015, Sandoz issued 30,000
shares at $12 per share, purchased 3,000 shares of treasury stock at $13 per share, and
sold 3,000 shares of treasury stock at $14 per share. What is the amount of additional
paid-in capital at December 31, 2015?
a. $0
b. $3,000
c. $60,000
d. $63,000
Answer:
Gagner Clinic purchases land for $175,000 cash. The clinic assumes $1,500 in property
taxes due on the land. The title and attorney fees totaled $1,000. The clinic has the land
graded for $2,200. What amount does Gagner Clinic record as the cost for the land?
a. $157,200
b. $175,000
c. $179,700
d. $157,500
Answer:
In preparing net cash flow from operating activities using the direct method, each item
in the income statement is adjusted from the accrual basis to the cash basis.
Answer:
Wingate Company borrowed $90,000 on January 2, 2015. This amount plus accrued
interest of 6% compounded annually will be repaid at the end of 3 years. What amount
will Wingate repay at the end of the third year?
Answer:
Jim Coleman, Jr. was appointed the manager of Maris Properties, a recently
formed company that manages residential rental properties. Linda Grider is
the accountant. She prepared a chart of accounts based on an analysis of
the expenditures of the company. Two of the largest expense categories are
Travel and Entertainment. Mr. Coleman believes that it is important to
maintain a presence in the social life of the city. In this, he sharply differs
from his father, Jim Coleman, Sr. The elder Mr. Coleman has set up Maris
Properties in order to test his son's management skills before allowing him
to manage the more lucrative commercial property business. Mr. Coleman,
Sr. provided the capital for Maris, and maintains close contact with the
company. He allowed his son, however, to hire his own employees.
Mr. Coleman has asked Ms. Grider to change the names of the Travel and
Entertainment Expense accounts to Property Development. He hopes to
deflect his father's attention away from the amount he has spent on travel
and entertainment until he has proven that his methods work. When Ms.
Grider resisted, he reminded her that he, not his father, hired her. He also
reminded her that she had been enthusiastic about his business plans when
she was hired.
1> Who are the stakeholders in this situation?
2> Should Ms. Grider agree to the change in the Travel Expense and
Entertainment Expense accounts to Property Development? Explain.
Answer:
Waegelein Company identies the following items for possible
inclusion in the physical inventory. Indicate whether each item should
be included or excluded from the inventory taking.
1> Goods shipped on consignment by Waegelein to another company.
2> Goods in transit from a supplier shipped FOB destination.
3> Goods shipped via common carrier to a customer with terms FOB
shipping point.
4> Goods held on consignment from another company.
Answer:
Ladle Corporation had net income of $2,000,000 in 2014. Using 2014 as the base year,
net income decreased by 70% in 2015 and increased by 180% in 2016.
Instructions
Compute the net income reported by Ladle Corporation for 2015 and 2016.
Answer:
A company exchanged an old machine, which originally cost $22,000 and has
accumulated depreciation to date of $12,000, for a new machine. The old machine had a
fair value of $14,000. The cost of the new machine should be recorded at
$_____________.
Answer:
