In a service-type business, revenue is recognized:
a.at the end of the month.
b.at the end of the year.
c.when the service is performed.
d.when cash is received.
Use the following information for Boxter, Inc., Clifford Company, Danforth Industries,
and Evans Services to answer the question “Using the LIFO adjustment, which
company shows the greatest improvement in its current ratio from 2013 to 2014?”
a.Boxter
b.Clifford
c.Danforth
d.Evans
(a)A company purchased a patent on January 1, 2014, for $2,500,000. The patent’s legal
life is 20 years but the company estimates that the patent’s useful life will only be 5
years from the date of acquisition. On June 30, 2014, the company paid legal costs of
$162,000 in successfully defending the patent in an infringement suit. Prepare the
journal entry to amortize the patent at year end on December 31, 2014.
(b)Milner Company purchased a franchise from the Tasty Food Company for $450,000
on January 1, 2014. The franchise is for an indefinite time period and gives Milner
Company the exclusive rights to sell Tasty Wings in a particular territory. Prepare the
journal entry to record the acquisition of the franchise and any necessary adjusting entry
at year end on December 31, 2014.
(c)Huerter Company incurred research and development costs of $500,000 in 2014 in
developing a new product. Prepare the necessary journal entries during 2014 to record
these events and any adjustments at year end on December 31, 2014.
Lansing Cycles failed to record an adjusting entry for accrued expenses at the end of
June. What effect does this have on the financial statements?
a.Expenses are overstated and revenues are understated.
b.Assets are overstated and expenses are understated.
c.Expenses and liabilities are understated.
d.Revenues and expenses are understated.
Downs Company issued $400,000 of 8%, 5-year bonds at 106, which pays interest
annually. Assuming straight-line amortization, what is the total interest cost of the
bonds?
a.$184,000
b.$136,000
c.$112,000
d.$160,000
Valente Company is about to issue $3,000,000 of 5-year bonds, with a contract rate of
interest of 10%, payable semiannually. The discount rate for such securities is 8%. How
much can Valente expect to receive from the sale of these bonds?
a.$2,768,338
b.$3,000,000
c.$3,243,315
d.$3,231,660
The United States and the international standard-setting environment are primarily
driven by meeting the needs of
a.investors and creditors.
b.tax authorities.
c.central government planners.
d.academic researchers.
Sunny Salon is a tanning salon that caters to college students. The accountant
transferred journal entries to the ledger accounts at the end of the month. What is the
name of this process?
a.Ledgering
b.Closing
c.Recording
d.Posting
The adjusted trial balance for Hamilton Corp. at the end of the current year, 2014,
contained the following accounts.
The total long-term liabilities reported on the balance sheet are
a.$1,565,000
b.$1,550,000
c.$1,665,000
d.$1,650,000