The net liability of bonds will decrease each interest period if the bonds were issued at a
premium.
Cutoff errors are failures to record transactions in the correct time period.
Managerial accounting serves external users while financial accounting serves internal
users.
Companies that have a poor credit rating will always issue a bond at a discount.
Buying on credit creates an account receivable.
Which of the following international public accounting firms is not considered one of
the four largest?
A) Deloitte Touche Tohmatsu
B) Ernst & Young
C) KPMG
D) PwC
E) Grant Thornton
Floral Deliveries, Inc. paid $6,000 for January, February, March and April’s rent in
advance on January 1, 20X9. The company recorded this transaction by increasing the
balance in the Prepaid Rent account. The balance in the Prepaid Rent account as of
March 1, 20X9, will be
A) $-0-.
B) $1,500.
C) $2,000.
D) $3,000.
E) $6,000.
Sounds Good Entertainment acquired office equipment valued at $4,000 and office
supplies valued at $600 by paying cash of $1,300 with the balance on account. The
effect of this transaction on Sounds Good Entertainment would be to
A) increase the cash account by $1,300, increase the accounts payable account by
$3,300, and increase the office equipment account by $4,600.
B) increase the office equipment account by $4,600, decrease the cash account by
$1,300, and decrease the accounts payable account by $3,300.
C) decrease the cash account by $1,300, increase the accounts payable account by
$3,300, increase the office equipment account by $4,000, and increase the office
supplies by $600.
D) increase the cash account by $1,300, increase the capital account by $3,300,
decrease the equipment account by $4,000, and increase the office supplies account by
$600.
E) increase the office supplies account by $600, decrease the office equipment account
by $4,000, increase the accounts payable account by $4,000, and decrease the cash
account by $600.
A characteristic of preferred stock that provides increasing dividends when common
dividends increase is known as
A) participating.
B) callable.
C) convertible.
D) liquidating preference.
E) cumulative.
Grogle Company had to calculate book value on its die cutting machine. The company
paid $32,000 for the equipment on January 1, 2012, but its current appraised value is
$46,000. On December 31, 2015, accumulated depreciation on the machine is $12,000.
What is Grogle Company’s book value on the die cutting machine at December 31,
2015?
A) $14,000
B) $32,000
C) $46,000
D) $20,000
E) $34,000
Source documents are prepared
A) continuously as transactions occur.
B) once per month in order to finalize financial statements.
C) once per quarter in accordance with U.S. GAAP.
D) twice per year in accordance with IFRS.
E) once per year in order to finalize year-end financial statements for investors.
Cleft Company had the following account balances on its balance sheet at
December 31, 2012 and 2011, respectively:
Assume no bonds were retired during 2012. What was the positive cash flow associated
with the long-term debt for Cleft Company in 2012?
A) $10,000
B) $3,000
C) $13,000
D) $4,000
E) $7,000
With inflation, a LIFO liquidation will
A) decrease net income.
B) increase cost of goods sold.
C) increase gross profit.
D) increase inventory.
E) increase the current ratio.
Milton Manufacturing manufactures and sells ornamental statues. Because of good
styling and marketing, sales have grown briskly. Milton has no pre-existing deferred tax
liability. During 20X3, the following transactions occurred:
1. On January 1, 20,000 new shares of common stock were sold at $100 per share.
2. Half of the proceeds from the stock sale were immediately invested in tax-free bonds
yielding 8% per annum. The bonds were held throughout the year, resulting in interest
revenue of $1,000,000 x .08 = $80,000.
3. Sales for the year were $9,000,000, with expenses of $4,300,000 reported under
GAAP (not including income tax expense).
4. Tax depreciation exceeded depreciation included in item 3 above by $500,000.
What would Milton report as income tax expense for shareholder reporting using a 40%
tax rate?
A) $1,912,000
B) $1,880,000
C) $1,800,000
D) $1,897,000
E) $1,865,000
Machiel Manufacturing acquired a $60,000 machine on January 1, 2009. The machine
is estimated to have a useful life of 4 years, and a residual value of $10,000. For
units-of-production depreciation purposes, the machine is expected to produce 500,000
units. If Machiel Manufacturing uses double-declining-balance depreciation, what is the
depreciation expense in 2010?
A) $ 8,640
B) $ 9,600
C) $12,500
D) $15,000
E) $25,000
A policy that requires organizations to use procedures manuals to specify the flow of
documents and provide information and instructions to facilitate adequate
record-keeping is an example of
A) adequate documentation.
B) general authorization.
C) specific authorization.
D) proper procedures.
E) an independent check.
Based on the information for the following three companies, a) compute the number of
days’ sales in receivables for 2X13 for each company assuming 365 days in a year and
b) analyze each company in accordance with a 45-day credit policy.
Which statement is FALSE?
A) The economic life of an intangible asset does not always equal its legal life.
B) The cost of developing an intangible asset internally is capitalized as an asset.
C) Intangible assets are similar to fixed assets, in that their acquisition costs are
capitalized as assets, and this cost is expensed over their estimated useful lives.
D) Intangible assets are long-lived assets that are not physical in nature.
E) Examples of intangible assets include patents, copyrights, and goodwill.
On January 1, 20X3, Middleton Industries issued $5 million of 5-year, 9% debentures at
par which are dated as of January 1, 20X3.
Prepare the journal entries to record the
(a) issuance of the bonds.
(b) the first semi-annual interest payment.
(c) the payment of maturity value.
For each of the following items, state whether its effect will be to increase, decrease, or
have no change in total stockholders’ equity.
a) Issue common stock at a price greater than par value
b) Issue common stock at par value
c) Issue preferred stock at a price greater than par value
d) Issue preferred stock at par value
e) Declare the current year preferred stock dividend
f) Pay the declared dividend in e. above
g) Not declaring any dividends on cumulative preferred stock, thus having dividends in
arrears
h) Declaring dividends in arrears for cumulative preferred stock
i) Paying for the dividends in arrears declared in h. above
j) Having a company call all callable preferred stock