An asset that cannot be sold individually in the market place is
a. a patent.
b. goodwill.
c. a copyright.
d. a trade name.
Answer:
Under IFRS, comprehensive income may be displayed (reported) in
a. the equity section of the statement of financial position.
b. the one-statement or the two-statement approach.
c. two-statement approach only.
d. the retained earnings statement.
Answer:
Shown below is a page from a special journal.
1> What is the name of this journal?
2> Give an explanation for each of the transactions in this journal.
3> Explain the following:
(a) the numbers under the bottom lines.
(b) the checks entered into the Ref. column.
(c) the numbers 113 and 416 in the Ref. column.
(d) the (x) below the Other Accounts column.
Answer:
Pension funds and mutual funds regularly invest in debt and stock securities to
a. generate earnings.
b. house excess cash until needed.
c. meet strategic goals.
d. control the company in which they invest.
Answer:
The closing entry process consists of closing
a. all asset and liability accounts.
b. out the retained earnings account.
c. all permanent accounts.
d. all temporary accounts.
Answer:
A company that owns more than 50% of the common stock of another company is
known as the
a. charge company.
b. subsidiary company.
c. parent company.
d. management company.
Answer:
If total liabilities decreased by $50,000 and stockholders’ equity increased by $30,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a. $80,000 decrease
b. $20,000 decrease
c. $20,000 increase
d. $80,000 increase
Answer:
Prepare the necessary correcting entry for each of the following.
a. A payment of $5,000 for salaries was recorded as a debit to Supplies Expense and a
credit to Cash.
b. A purchase of supplies on account for $1,000 was recorded as a debit to Equipment
and a credit to Accounts Payable.
Answer:
Beane Corporation shows income tax expense of $82,000. There has been a $6,000
decrease in federal income taxes payable and a $7,000 increase in state income taxes
payable during the year. What was Beane’s cash payment for income taxes?
a. $82,000
b. $81,000
c. $76,000
d. $95,000
Answer:
Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014
for $60,000.
Assume Community pays interest on January 1 and July 1, and the July 1 entry was
done correctly. The journal entry at December 31, 2014 would include a credit to
a. Interest Receivable for $2,400.
b. Interest Revenue for $4,800.
c. Accrued Expense for $4,800.
d. Interest Revenue for $2,400.
Answer:
An aging of a company’s accounts receivable indicates that $7,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the
adjustment to record bad debts for the period will require a
a. debit to Bad Debts Expense for $7,000.
b. debit to Allowance for Doubtful Accounts for $5,900.
c. debit to Bad Debts Expense for $5,900.
d. credit to Allowance for Doubtful Accounts for $7,000.
Answer:
The entry to record the proceeds upon issuing an interest-bearing note is
a. Interest Expense
Cash
Notes Payable
b. Cash
Notes Payable
c. Notes Payable
Cash
d. Cash
Notes Payable
Interest Payable
Answer:
The balance in the Accumulated Depreciation account represents the
a. cash fund to be used to replace plant assets.
b. amount to be deducted from the cost of the plant asset to arrive at its fair market
value.
c. amount charged to expense in the current period.
d. amount charged to expense since the acquisition of the plant asset.
Answer:
Equipment with a cost of $400,000 has an estimated salvage value of $25,000 and an
estimated life of 4 years or 15,000 hours. It is to be depreciated using the
units-of-activity method. What is the amount of depreciation for the first full year,
during which the equipment was used 3,300 hours?
a. $100,000
b. $113,800
c. $82,500
d. $93,750
Answer:
U.S. standards are referred to as
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Answer:
Hooke Company received proceeds of $377,000 on 10-year, 8% bonds issued on
January 1, 2014. The bonds had a face value of $400,000, pay interest semi-annually on
June 30 and December 31, and have a call price of 101. Hooke uses the straight-line
method of amortization.
What is the amount of interest expense Hooke will show with relation to these bonds
for the year ended December 31, 2015?
a. $32,000
b. $30,160
c. $34,300
d. $29,700
Answer:
Revenue recognition fraud is
a. a major issue in the U.S. but not worldwide.
b. a major issue internationally, but not in the U.S.
c. a major issue in the U.S. and worldwide.
d. not a major issue anywhere.
Answer:
A plant asset acquired on October 1, 2015, at a cost of $400,000 has an estimated useful
life of 10 years. The salvage value is estimated to be $40,000 at the end of the asset’s
useful life.
Instructions
Determine the depreciation expense for the first two years using:
(a) the straight-line method.
(b) the double-declining-balance method.
Answer:
Presto Company purchased equipment and these costs were incurred:
Presto will record the acquisition cost of the equipment as
a. $65,000.
b. $68,600.
c. $69,240.
d. $70,100.
Answer:
International standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Answer:
Presented below is information related to plant assets, natural resources, and intangibles
at year end on December 31, 2015, for Hanley Company:
Instructions
Prepare a partial balance sheet for Hanley Company that shows how the above listed
items would be presented.
Answer:
Both the gross amount of receivables and the allowance for doubtful accounts should be
reported in the financial statements.
Answer:
For each of the following accounts indicate the effect of a debit or a credit on the
account and the normal balance. Increase (+), Decrease (‘“).
Debit_ _Credit_ Normal Balance
1> Salaries and wages expense.
2> Accounts receivable.
3> Service revenue.
4> Common stock.
5> Dividends.
Answer:
Cash realizable value is determined by subtracting Allowance for Doubtful Accounts
from Net Sales.
Answer:
The number and types of accounts used by different business enterprises are the same if
generally accepted accounting principles are being followed by the enterprises.
Answer:
A worksheet is a mandatory form that must be prepared along with an income statement
and balance sheet.
Answer:
Profitability ratios are frequently used as a basis for evaluating management’s operating
effectiveness.
Answer:
Identify which of the following would be classified as current liabilities as of December
31, 2014:
1> Salaries and Wages Payable
2> Bonds Payable, maturing in 2019
3> Interest Payable, due July 1, 2015
4> Sales Taxes Payable
5> Notes Payable, due January 30, 2016
Answer:
The following payroll liability accounts are included in the ledger of Clementine
Company on January 1, 2015:
In January, the following transactions occurred:
Instructions
Journalize the January transactions
Answer:
