Flynn Company purchased a building for $400,000. At the end of the current year, the
book value of the building is $220,000 and its fair value is $180,000. Assuming the
building is rented to a tenant, the sum of future cash flows from the rental of the
building is expected to be $160,000. What is the amount of impairment loss?
A) $0
B) $20,000
C) $40,000
D) $120,000
A company has net income of $5.6 million and earnings per share of $2.00. Average
common stockholders’ equity is $32 million. The company’s current stock price is $10
per share. What is its Price/Earnings (P/E) ratio?
A) 0.2
B) 5.0
C) 0.175
D) 5.7
Assume a periodic inventory system is used. Which inventory costing method generally
results in the most recent costs being assigned to ending inventory?
A) LIFO
B) FIFO
C) Weighted average cost
D) Simple average cost
Use the information above to answer the following question. What journal entry will
Brickyard make when paying the interest at maturity?
A) Debit Notes Payable and credit Cash for $206,000
B) Debit Interest Expense for $4,000, and credit Cash for $4,000
C) Debit Interest Expense for $6,000 and Cash for $206,000
D) Debit Interest Payable for $4,000, credit Interest Expense for $2,000, and credit
Cash for $6,000
BetterBuy sells $50,000 of TVs to a customer. The credit terms state a 2% discount if
paid in 7 days and a 1% discount if paid in 8-14 days. The customer pays in 12 days.
How would BetterBuy record the customer’s payment?
A) Debit Cash for $50,000 and credit Accounts Receivable for $50,000
B) Debit Accounts Receivable for $50,000, credit Cash for $49,500, and credit
Inventory for $500
C) Debit Cash for $49,500, credit Accounts Receivable for $50,000, and debit Sales
Discounts for $500
D) Debit Cash for $49,500, credit Accounts Receivable for $49,000, and credit Sales
Returns & Allowances for $500
Which of the following would be reported as a cash outflow from investing activities?
A) Donating an old piece of equipment to charity
B) Repaying the principal of a bond
C) Buying another company’s bonds with cash
D) Acquiring an investment security by issuing company stock
Financial statements are most commonly prepared:
A) daily.
B) monthly, quarterly and annually.
C) as needed.
D) weekly.
When the amount of a contingent liability cannot be reasonably estimated but its
likelihood is probable, the company should:
A) include a description in the notes to the financial statements.
B) record the amount of the liability times the probability of its occurrence.
C) record the amount of the liability as a long-term liability on the balance sheet.
D) exclude the information about the contingent liability from its financial statements
and footnotes.
Which of the following is the primary goal of internal controls for cash payments?
A) Ensure that the business pays only for properly authorized transactions
B) Confirm that the request for payments is made by someone who is approved to order
goods or services of the type and amount requested
C) Ensure that the supplier charges only for items received at approved prices
D) Make payments only when a purchase is supported by complete voucher
documentation
The Accounts Receivable account:
A) has a normal credit balance.
B) is increased by a debit.
C) is a liability.
D) is increased when a company receives cash from its customers.
A one-year, $15,000, 12% note is signed on April 1. If the note is repaid on September 1
of the same year, how much interest expense is incurred?
A) $1,800
B) $900
C) $750
D) $600
Use the information above to answer the following question. What is the amount of
Total Assets on the balance sheet?
A company’s trial balance included the following account balances:
A) $240,116.
B) $214,300.
C) $442,924.
D) $480,232.
Which of the following statements about trend analysis is correct?
A) Time-series analysis is an example of trend analysis.
B) Trend data are always in dollars.
C) Trend analysis is also known as vertical analysis.
D) Common-size analysis is an example of trend analysis.
If a company’s P/E ratio is 12.5 and the company’s stock price is $17.50 per share then
the company’s EPS is:
A) $0.71.
B) $1.40.
C) $5.00.
D) $0.40.
Use the information above to answer the following question. What is the amount of
current assets on the classified balance sheet?
A company reported the following information at December 31, Year 1:
A) $113,540.
B) $64,040.
C) $32,840.
D) $82,170.
Which of the following statements concerning electronic funds transfers is not correct?
A) Businesses sometimes receive payments from customers via EFT.
B) An EFT occurs when a customer electronically transfers funds from his or her bank
account to the company’s bank account.
C) Because electronic funds transfers are deposited directly into the company’s bank
account, they require additional internal control procedures.
D) To process an EFT, the accounting department merely records journal entries to
debit Cash and credit Account Receivable from each customer.
On January 1, 2016, Coopers Industries bought a parcel of land for use in its operations
by paying the seller $400,000 in cash and signing a five year, 12% note payable in the
amount of $100,000. In connection with the purchase of the land, Coopers incurred
legal fees of $19,000, a real estate agent sales commission of $25,000, surveying fees of
$1,000, and an appraisal fee of $5,000.
Required:
Part a. Compute the total acquisition cost of the parcel of land.
Part b. Prepare the journal entry to record the purchase of the parcel of the land.
Interest on an obligation is recorded:
A) as time passes.
B) when goods are purchased on account.
C) at maturity.
D) when a bank loan is obtained.