Social security and medicare taxes owed. Match each of the following current liabilities
with its meaning.
a. Account payable
b. Note payable
c. Wages payable
d. Interest payable
e. Sales taxes payable
f. FICA taxes payable
g. Unemployment taxes payable
h. Unearned sales revenues
i. Estimated warranty liability
Freight costs incurred by the seller to ship goods to its customers.
Match the costs that might be included as part of the cost of inventory to the listed
accounting treatment. (Choices may be used more than once.)
a. Add to inventory cost c. Not an inventory cost
b. Subtract from inventory cost
A passive investment is one in which the owner
a. is not attempting to exert influence over the company.
b. owns between 15-25% of the company’s outstanding stock.
c. uses the equity method of accounting for the investment.
d. is gradually attempting to gain control over the company.
Which of the following statements is true?
a. Only the effects of internal transactions must be recognized and recorded in the
accounting system.
b. An internal transaction represents a business activity between an entity and its
environment.
c. Evidence used to record transactions affecting a business entity comes from source
documents.
d. Only the effects of external events must be recognized, measured, and recorded in an
entity’s accounting system.
Select the incorrect statement from the following:
a. Adjustments are required to eliminate any transactions between Parent and Sub (e.g.,
selling or other transfer of assets).
b. Even when the parent owns less than 100% of the subsidiary’s stock, 100% of the
subsidiary’s assets and liabilities are included in the consolidated balance sheet.
c. Any consolidated net income attributable to minority interest must be clearly
identified and shown on the consolidated income statement.
d. Consolidated net income is equal to the sum of the parent’s net income and the sub’s
net income.
Refer to Fernbank Farms. What amount should be recorded as depreciation expense
each year starting in 2013?
Fernbank Farms This company purchased a semi truck at the beginning of 2011 at a
cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value
of $20,000, and will be depreciated using the straight-line method. On January 1, 2013,
the company made major repairs of $30,000 to the truck that extended the life 3 years.
Thus, starting with 2013, the truck has a remaining life of 5 years and a new salvage
value of $8,000. a. $16,000
b. $18,000
c. $13,600
d. $12,400
Increase in the inventory balance.
Use the following codes to indicate how the cash flow effect, if any, of each transaction
or event would be reported on a statement of cash flows if the operating activities
section is prepared using the indirect method. (Choices may be used more than once.)
a. Operating activity-add to net income
b. Operating activity-deduct from net income
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
The process used to determine the amount of interest to be recorded in each of the
periods the liability is outstanding. Match these terms with their definitions.
a. Bond i. Lessor
b. Contract, coupon, stated rate j. Leverage
c. Discount k. Long-term debt
d. Effective interest rate method l. Market rate, yield
e. Face value, par value, principal m. Maturity
f. Interest amortization n. Premium
g. Lease o. Straight-line method
h. Lessee
The process of allocating the cost of a tangible fixed asset to expense over the asset’s
useful life Match these terms with their correct definition.
a. Book value e. Depreciation
b. Cost f. Impairment
c. Depletion g. Involuntary disposal
d. Depreciable cost h. Residual value
Difference between total payout and dividend payout.
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a. Debt-to-equity ratio
b. Dividend payout ratio
c. Dividend yield ratio
d. Earnings per share
e. Leverage
f. Return on assets ratio
g. Return on common equity ratio
h. Stock repurchase payout
Length of time required to sell inventory to customers.
Match these terms to their correct definition.
Par value is adjusted annually to reflect the current market value of the stock.
The effective interest rate method will record amortization of a bond discount or
premium in a manner that produces a constant rate of interest expense from period to
period.
The times interest earned ratio divides __________________________ by interest
expense.
The type of business activity that relates to obtaining funds from either issuing stock or
borrowing money is called ____________________.
Cost of goods sold is the difference between costs of goods available for sale and
ending inventory.
In the space provided, indicate whether the journal entry for the transaction described
includes an entry to a stockholders’ equity account and if so, whether the account(s)
should be debited or credited as a result of the entry.
When a retail company sells products to customers on credit for the amount of the sales
price plus the applicable sales tax, the related journal entry includes a debit to accounts
receivable, a credit to sales revenue, and a credit to ____________________.