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Among the assets listed below, which one is considered the most liquid?
a. Cash
b. Accounts receivable
c. Merchandise inventory
d. Prepaid expenses
Museum Corporation acquired a new manufacturing building by issuing 10,000 shares
of its $50 par value preferred stock with a $75 per share market price. Similar buildings
have recently cost $780,000. What are the effects of this transaction on the accounting
equation for Museum?
a. Building and Preferred Stock increase $780,000.
b. Building and Preferred Stock increase $500,000.
c. Building increases $780,000; Preferred Stock increases $500,000; Additional
PaidÂin Capital-Preferred increases $280,000.
d. Building increases $750,000; Preferred Stock increases $500,000; Additional
PaidÂin Capital-Preferred increases $250,000.
When using the direct method, how is the retirement of bonds payable at their maturity
date shown on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
One example of a temporary difference between financial and tax reporting results from
a. rent expense.
b. tax-exempt interest from municipal bonds.
c. life insurance proceeds resulting from the death of an executive.
d. depreciation of long-term assets.
A company purchased machinery by issuing 2,000 shares of $3 par value common
stock. Since the company is new, there is no established market price for its stock. How
would the company record the transaction?
a. In terms of the par value of the stock issued.
b. At the fair market value of the machine.
c. At the cost recorded by the previous owner of the machine.
d. Recording the transaction would be postponed until a market price for the stock
could be determined.
Krenshaw Rentals
Use the five transactions for Krenshaw Rentals described below to answer the
question(s) that follow(s)
Refer to the transactions for Krenshaw Rentals. Based on the above transactions, how
much is still owed to Krenshaw on October 31 from its customers?
a. $ -0-
b. $ 250
c. $ 500
d. $ 750
An internal control system consists of all the following policies and procedures except :
a. Those necessary to ensure the safeguarding of an entity's assets.
b. Those necessary to ensure that cash on hand and on deposit in checking accounts is
beyond the minimal amount for ongoing operations.
c. Those necessary to ensure the reliability of its accounting records.
d. Those necessary to ensure the accomplishment of its overall objectives.
With the effective interest method of amortization, the amortization of bond premium
results in a(n)
a. increase in stockholders' equity.
b. no change in stockholders' equity.
c. increase in interest expense.
d. decrease in interest expense.
Match the terms to the definitions by selecting the letter of the term. Each term may be
used more than once or not at all.
a. cumulative feature
b. stock dividend
c. retired stock
d. retained earnings
e. callable feature
f. convertible feature
g. outstanding shares
h. treasury stock
i. participating feature
j. additional paid-in capital
Allows preferred stock to be returned to the corporation in exchange for common stock.
When using the direct method, how are salaries paid to employees reported on the
statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
The inflow of assets resulting from the sale of products and services is called a(n)
a. asset
b. liability
c. revenue
d. expense
