The subtotal net assets is used in
a. both GAAP and IFRS.
b. GAAP but not IFRS.
c. IFRS but not GAAP.
d. neither IFRS nor GAAP.
Answer:
Interest may be included in the acquisition cost of a plant asset
a. during the construction period of a self-constructed asset.
b. if the asset is purchased on credit.
c. if the asset acquisition is financed by a long-term note payable.
d. if it is a part of a lump-sum purchase.
Answer:
Expenses sometimes make their contribution to revenue in a different period than when
they are paid. When salaries and wages are incurred in one period and paid in the next
period, this often leads to which account appearing on the balance sheet at the end of
the time period?
a. Due from Employees.
b. Due to Employer.
c. Salaries and Wages Payable.
d. Salaries and Wages Expense.
Answer:
During 2015, Parker Enterprises generated revenues of $90,000. The company’s
expenses were as follows: cost of goods sold of $45,000, operating expenses of $18,000
and a loss on the sale of equipment of $3,000.
Parker’s gross profit is
a. $24,000.
b. $27,000.
c. $45,000.
d. $90,000.
Answer:
Which of the following steps in the accounting cycle would not generally be performed
daily?
a. Journalize transactions
b. Post to ledger accounts
c. Prepare adjusting entries
d. Analyze business transactions
Answer:
Reporting investments at fair value is
a. applicable to stock securities only.
b. applicable to debt securities only.
c. applicable to both debt and stock securities.
d. a conservative approach because only losses are recognized.
Answer:
The following information is for Bright Eyes Auto Supplies:
The total dollar amount of liabilities to be classified as current liabilities is
a. $50,000.
b. $130,000.
c. $180,000.
d. $330,000.
Answer:
If a fully depreciated plant asset is still used by a company, the
a. estimated remaining useful life must be revised to calculate the correct revised
depreciation.
b. asset is removed from the books.
c. accumulated depreciation account is removed from the books but the asset account
remains.
d. asset and the accumulated depreciation continue to be reported on the balance sheet
without adjustment until the asset is retired.
Answer:
To qualify as natural resources in the accounting sense, assets must be
a. underground.
b. replaceable.
c. of a mineral nature.
d. physically extracted in operations.
Answer:
The category that is generally considered to be the best measure of a company’s ability
to continue as a going concern is
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.
Answer:
A corporation purchases 40,000 shares of its own $30 par common stock for $45 per
share, recording it at cost. What will be the effect on total stockholders’ equity?
a. Increase by $1,800,000
b. Decrease by $1,200,000
c. Decrease by $1,800,000
d. Increase by $1,200,000
Answer:
A supplier to a company would be most interested in the company’s
a. asset turnover.
b. profit margin.
c. current ratio.
d. earnings per share.
Answer:
At December 31, 2014, the available-for-sale securities for Allison, Inc. are as follows.
Instructions
(a) Prepare the adjusting entry at December 31, 2014, to report the securities at fair
value.
(b) Show the balance sheet and income statement presentation at December 31, 2014,
after adjustment to fair value. The securities are considered to be a long-term
investment.
Answer:
Able Towing Company purchased a tow truck for $180,000 on January 1, 2014. It was
originally depreciated on a straight-line basis over 10 years with an assumed salvage
value of $36,000. On December 31, 2016, before adjusting entries had been made, the
company decided to change the remaining estimated life to 4 years (including 2016)
and the salvage value to $5,000. What was the depreciation expense for 2016?
a. $18,000.
b. $14,400.
c. $45,000.
d. $36,550
Answer:
Black Keys Company began the year with stockholders’ equity of $280,000. During the
year, the company recorded revenues of $375,000, expenses of $285,000, and paid
dividends of $30,000. What was Black Keys’ stockholders’ equity at the end of the
year?
a. $280,000.
b. $340,000.
c. $370,000.
d. $400,000.
Answer:
Which one of the following represents the expanded basic accounting equation?
a. Assets = Liabilities + Common stock + Retained Earnings + Dividends ‘“ Revenues ‘“
Expenses.
b. Assets + Dividends + Expenses = Liabilities + Common stock + Retained Earnings +
Revenues.
c. Assets ‘“ Liabilities ‘“ Dividends = Common stock + Retained Earnings + Revenues ‘“
Expenses.
d. Assets = Revenues + Expenses ‘“ Liabilities.
Answer:
Syfy Company on July 15 sells merchandise on account to Eureka Co. for $5,000, terms
2/10, n/30. On July 20 Eureka Co. returns merchandise worth $2,000 to Syfy Company.
On July 24 payment is received from Eureka Co. for the balance due. What is the
amount of cash received?
a. $2,900
b. $2,940
c. $3,000
d. $5,000
Answer:
In an exchange of plant assets that has commercial substance
a. neither gains nor losses are recognized immediately.
b. gains, but not losses, are recognized immediately.
c. losses, but not gains, are recognized immediately.
d. both gains and losses are recognized immediately.
Answer:
Identify the effect the declaration and distribution of a stock dividend has on the par
value per share.
Par Value per Share
a. Increase
b. Decrease
c. Increase or decrease
d. No effect
Answer:
The accounting is essentially the same under IFRS and GAAP for
a. prior period adjustments.
b. revaluation surplus.
c. treasury stock.
d. All of these answers are correct.
Answer:
The interest on a $9,000, 6%, 90-day note receivable is
a. $135.
b. $270.
c. $405.
d. $540.
Answer:
Ward Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2015, at
103. The journal entry to record the issuance will show a
a. debit to Cash of $5,000,000.
b. credit to Premium on Bonds Payable for $150,000.
c. credit to Bonds Payable for $5,030,000.
d. credit to Cash for $5,150,000.
Answer:
Hal Corp. prepared the following income statement using the cash basis of accounting:
Additional data:
1> Depreciation on a company automobile for the year amounted to $6,000. This
amount is not included in the expenses above.
2> On January 1, 2015, paid for a two-year insurance policy on the automobile
amounting to $1,800. This amount is included in the expenses above.
Instructions
(a) Recast the above income statement on the accrual basis in conformity with generally
accepted accounting principles. Show computations and explain each change.
(b) Explain which basis (cash or accrual) provides a better measure of income.
Answer:
The lower-of-cost-or-market (LCM) basis may be used with all of the following
methods except
a. average cost.
b. FIFO.
c. LIFO.
d. The LCM basis may be used with all of these.
Answer:
The accounts receivable _____________ provides detailed information about customer
accounts which is summarized in one ______________ account in the general ledger.
Answer:
A statement of cash flows indicates the sources and uses of cash during a period.
Answer:
If inventory turnover is 8 times, and the average inventory was $400,000, the cost of
goods sold during the year was $______________ and the days in inventory was
______________ days.
Answer:
The following terms relate to the fundamental qualities of useful information. Match the
key letter of the correct term with the descriptive statement below.
_____ 1> Accounting information that is not biased toward one position or another.
_____ 2> Providing information before it loses its capacity to influence decision.
_____ 3> Independent measures, using the same methods, obtain similar results.
_____ 4> Providing information that would make a difference in a business decision.
_____ 5> Provide information that accurately depicts what really happened.
_____ 6> Confirms or corrects prior decisions.
Answer:
Seaver Books, a small book publishing company, wrote off the debt of The Learning
Center, and the Academy of Basic Education, both small private schools, after it
determined that the schools were facing serious financial difficulty. No notice of the
action was sent to the schools; Seaver Books simply stopped sending bills. Nearly a
year later, The Learning Center was given a large endowment and a government grant.
The resulting publicity brought the school to the attention of Seaver Books, which
immediately reinstated the account, and sent a new bill to the school, including interest
for the entire time the debt was outstanding. No further action was taken regarding the
Academy of Basic Education, which was still operational.
Answer: