A change in estimate of an asset’s residual value involves restating the income
statements of past periods for the
estimate change.
a.True
b.False
Shidan Apartments purchased an apartment building to rent to university students on
November 18, 2015. The following costs were incurred during 2015, before the tenants
moved in:
Purchase price of the building $220,000
Purchase price of the land 100,000
Transfer taxes 10,000
Interest incurred on the mortgage loan to purchase 4,000
Attorney and real estate agent’s fees 15,000
Repave the parking lot 6,000
How much will Shidan Apartments record as an asset? a. $320,000
b. $345,000
c. $351,000
d. $355,000
Costs incurred for purchases of merchandise result in an asset, Merchandise Inventory,
and are eventually matched with revenue at the time the product is sold.
a.True
b.False
Identify where each of the following accounts would be reported on CocaCola’s
financial statements
a.Balance Sheet – Property, Plant, and Equipment
b.Balance Sheet – Intangible Assets
c.Balance Sheet – Current Assets
d.Balance Sheet – Other Assets
e.Income Statement – Operating Section
f.Income Statement – Other Revenue and Expense Section
g.Statement of Cash Flows
Patents
Flannery Company uses a worksheet to prepare its statement of cash flows. The
company also uses the indirect method for the Operating Activities section of its
statement. For each of the following changes in the balance sheet, indicate what activity
it affects and whether it is an addition or deduction.
a.Deducted from Operating activity
b.Added to Operating activity
c.Deducted from Investing activity
d.Added to Investing activity
e.Deducted from Financing activity
f.Added to Financing activity
Accounts Receivable increased
Conceptually, anytime a cost is incurred, an asset is acquired.
a.True
b.False
Presented below are selected data from the financial statements of Parade Corp.
The price/earnings ratio for 2016 is
a. .80 to 1
b. 1.43 to 1
c. 8.39 to 1
d. 12.50 to 1
Carter, Inc. paid salaries expense of $292,000 during 2015. However, additional salaries
of $14,000 had been earned by employees, but not paid or recorded at December 31,
2015 by Carter.
A)What is the effect on the accounting equation of the adjusting entry necessary at
December 31, 2015?
B)Under which basis, cash, accrual, or both, would the adjustment in part A be
prepared?
Explain.
C)Under the accrual basis of accounting, what is the total amount of salaries expense
for the year ended December 31, 2015?
D)Under the accrual basis of accounting, what is the total amount of salaries payable to
be reported at December 31, 2015?
E)Under the cash basis of accounting, what is the total amount of salaries expense for
the year ending December 31, 2015?
F)Under the cash basis of accounting, what is the total amount of salaries payable at
December 31, 2015?
Use the information below for Barton Shipping Corp. for 2015 and 2016 to answer the
following question.
How much cash did Barton Shipping pay for dividends during 2016?
a. $ 95,000
b. $105,000
c. $115,000
d. $140,000
Presented below are a list of source documents and a list of transactions. Using the
identification letters before each source document, indicate next to each transaction
which source document serves as evidence for the recording of the transaction.
Source Documents
A)Purchase invoice
B)Sales invoice
C)Cash register tape
D)Check
E)Time card
F)Monthly statement
G)Promissory note
H)Stock certificate
You are comparing three companies that use different depreciation methods. Which of
the following would help you the most in making a comparison of the companies?
a.The average earnings per share for the quarter.
b.Prospective cash receipts.
c.Claims to resources.
d.Disclosure of accounting policies.
Marvel Shoes reported the following items on its statement of cash flows for the current
year:
Read the information about Marvel Shoes. What was the cash balance for Marvel Shoes
at the end of the current year?
a. $10,000
b. $30,000
c. $40,000
d. $70,000
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
Pablos wants to save some money so that he can make a down payment of $3,000 on a
car when he graduates from college 4 years from now. If he opens a savings account
and earns 3% on his money, compounded annually, how much will he have to invest
now?
a. $2,664
b. $3,000
c. $2,520
d. $2,910
Since inflation is an important consideration in analyzing financial statements, the
FASB requires the submission of all financial statements in an inflation-adjusted format
to the SEC.
a.True
b.False
A bond with a face value of $10,000 is issued at a discount of $800 on January 1, 2014.
The face rate of interest on the bond is 7%.
REQUIRED:
1)Was the market rate at the time of issuance greater than 7% or less than 7%?
2)If a balance sheet is presented on January 1, 2014, how will the bonds appear on the
balance sheet?
3)If a balance sheet is presented on December 31, 2014, will the amount for the bonds
be higher or lower than on January 1, 2014?
Tyson Trucking won a settlement in a lawsuit and was offered four different payment
alternatives by the defendant’s insurance company. The interest rate is 6%. Ignoring tax
considerations, which of the following four alternatives has the highest present value?
At December 31, 2015, Ashland Company has the following amounts on its financial
statements:
The following accounts are listed in a company’s general ledger:
REQUIRED:
1>Which items are cash equivalents?
2>Explain where items that are not cash equivalents should be classified on the balance
sheet.
3>What are the amount and the direction of change in cash and cash equivalents for
2015? Is the company as liquid at the end of 2015 as it was at the end of 2014? Explain
your answer.
