Error corrections which involve restatement of prior period income must be reported
a. in a separate account within the equity section of the balance sheet.
b. within “unrestricted retained earnings” on the balance sheet, with footnote disclosure
to describe the appropriation.
c. as a prior period adjustment on the statement of changes in retained earnings.
d. only within the footnotes accompanying the financial statements.
Which method of preparing the operating activities section of a statement of cash flows
reports major classes of gross cash receipts and cash payments for revenues and
expenses?
a. the direct method
b. the indirect method
c. Both the direct method and the indirect method.
d. Neither the direct method nor the indirect method.
An accrued liability that represents the cost of borrowing.
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
A company completed the following transactions involving investments during 2014.
The company uses the indirect method to prepare the operating activities section of the
statement of cash flows. The following statements describe how the company reported
the cash flow effects of the above transactions. Which of the following has been
reported incorrectly?
a. Payments of $50,000 for money market funds were reported as a cash outflow in the
investing activities section.
b. Proceeds of $70,000 were reported as a cash inflow in the investing activities section.
c. Payments of $55,000 for trading securities were reported as a cash outflow in the
operating activities section.
d. A gain of $10,000 on the sale of available-for-sale securities was deducted from net
income in the operating activities section.
Refer to the information for Accent Flooring. At the maturity date, the customer pays
the amount due for the note and interest. What entry is required on the books of Accent
Flooring on the maturity date assuming that none of the interest had already been
recognized?
Accent Flooring
The company received a promissory note from a customer on March 1, 2013. The
principal amount of the note is $20,000; the terms are 3 months and 9% annual interest.
a. Increase Cash and decrease Notes Receivable by $20,000
b. Increase Cash by $20,450, increase Interest Revenue by $450, and decrease Notes
Receivable by $20,000
c. Increase Cash by $20,450, increase Notes Receivable by $20,000, and increase
Interest Revenue by $450
d. No entry is required; the customer pays the amount due to Accent Flooring.
Which allowance method approach is considered to be an income statement approach to
estimating bad debts?
a. The percentage of accounts receivable approach
b. The percentage of accounts written off approach
c. The percentage of net credit sales approach
d. The direct write off method
The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11%
simple annual interest is?
a. $1,980
b. $9,900
c. $49,500
d. $139,500
Which method of accounting for investments results in unrealized gains and losses
because the investments must be marked to market?
a. equity method
b. amortized cost method
c. fair value method
d. trading method
A corporation reported the following information at December 31, 2015:
A) On December 31, 2015, the board of directors issues a 3-for-1 stock split. What
impact will the split have on the stock’s par value?
B) What journal entry is required to record the split?
C) Record the declaration of a cash dividend of $1 per share on January 10, 2016. The
dividend will be paid on January 31, 2016 to shareholders of record on January 24,
2016.
Prepaid Insurance
From the list of accounts, determine whether the account is a temporary or permanent
account. (Choices may be used more than once.)
Which of the following is an internal event for a business entity?
a. An attorney provides services for clients.
b. An attorney purchases computer equipment.
c. An attorney uses computer equipment to maintain business records and prepare legal
documents.
d. An attorney receives cash payments from clients who were billed for legal services.
Refer to Ready Mix USA. Complete a common size vertical analysis of the company’s
income statement for the three years. Your answers should be expressed as percentages
and rounded to one decimal place.
Ready Mix USA
Three recent income statements are presented below:
Assume a company has a current ratio of 0.75. The purchase of inventory on account
would cause the current ratio to
a. decrease.
b. increase.
c. be unchanged since the effects offset one another.
d. be unchanged since it has no impact on any current asset or liability accounts.
A bond’s ____________________ is computed by taking the bond’s face value, then
either subtracting any unamortized discount or adding any unamortized premium.
Refer to Mary Kay Cosmetics. What amount of cash was collected from customers
during 2014?
Mary Kay Cosmetics
Selected data and additional information from the company’s records are presented
below:
Additional information:
A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis
exceeds the cost of goods sold on a LIFO basis for the current year.
On January 1, 2013, Kroger Corporation issued $10,000,000 of 8% bonds, due in five
years with interest payable annually on December 31. The market yield rate is 9
percent. Calculate the present value (market value) of the bonds.
Fuzziwig’s Candles has two intangible assets. Information concerning each is provided
in the following table:
Calculate the amount of amortization expense that should be reported for 2013.
Consider the following financial statement information:
Calculate the return on common equity and earnings per share ratios.
The understatement of ending inventories in one period leads to a(n)
____________________ of cost of goods sold in the same period.