A company purchases a $300,000 building, paying $200,000 in cash and signing a
$100,000 promissory note. What will be reported on the statement of cash flows as a
result of this transaction?
A) A $300,000 cash outflow from investing activities
B) A $200,000 cash outflow from investing activities and a $100,000 cash inflow from
financing activities
C) A $200,000 cash outflow from investing activities and a $100,000 noncash
transaction
D) A $300,000 cash outflow from investing activities and a $100,000 cash inflow from
financing activities
Goodwill
A) is not amortized, but is tested annually for impairment.
B) is amortized using the straight-line method.
C) is amortized using the units-of-production method.
D) is not amortized and is not tested for impairment.
A company’s unadjusted trial balance at the end of the year includes the following:
The company uses the aging of accounts receivable method. Its estimate of
uncollectible receivables resulting from the aging analysis equals $5,800. What is the
amount of Bad Debt Expense to be recorded for the year?
A) $5,800
B) $4,800
C) $6,800
D) $7,800
DigDug Corporation had outstanding checks totaling $5,400 on its June bank
reconciliation. In July, DigDug issued checks totaling $38,900. The July bank statement
shows that $26,300 in checks cleared the bank in July. The amount of outstanding
checks on DigDug’s July bank reconciliation should be:
A) $12,600.
B) $18,000.
C) $5,400.
D) $7,200.
Accrued revenues recorded at the end of the current year:
A) often result in cash receipts from customers in the next period.
B) often result in cash payments in the next period.
C) are also called Unearned Revenues.
D) are recorded in the current year when cash is received.
Brief Respite, Inc. sold underwear made from a fabric that gave many of its customers a
serious rash. The customers are suing the company in a class action suit. Although the
verdict is not yet in, Brief Respite’s attorneys think it is probable that the case will cost
the company $2 million. The company should:
A) not include this information in its annual report.
B) record a liability and a gain for $2 million.
C) only explain the situation in the notes to the financial statements.
D) record a liability and a loss for $2 million.
Use the information above to answer the following question. What is the amount to be
reported as total liabilities on the balance sheet at the end of January?
During January 2015, the first month of operations, a consulting firm had following
transactions:
1) Issued common stock to owners in exchange for $20,000 cash.
2) Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note
for $4,000.
3) Received $9,000 in cash for consulting services performed in January.
4) Purchased $1,500 of supplies on account; all of the supplies were used in January.
5) Provided consulting services on account in the amount of $16,000.
6) Paid $750 on account.
7) Paid $3,000 to employees for work performed during January.
8) Received a bill for utilities for January of $3,400; the bill remains unpaid.
A) $4,750.
B) $4,150.
C) $8,150.
D) $8,500.
Which of the following accounts could have a non-zero balance on a post-closing trial
balance?
A) Salaries and Wages Expense
B) Premium on Bonds Payable
C) Income Tax Expense
D) Interest Expense
The income statement reports:
A) the assets, liabilities, and stockholders’ equity of a company.
B) cumulative earnings that have not been distributed to stockholders.
C) the amount of profit distributed to owners during the period.
D) the amount of revenues earned and expenses incurred during the period.
On June 15, Oakley Inc. sells inventory on account to Sunglass Hut (SH) for $1,000,
terms 2/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased
for $300. On June 24, SH completely fulfills its obligation to Oakley by making a cash
payment. What is the amount of cash paid by SH to Oakley?
A) $680
B) $686
C) $700
D) $1,000
Free cash flow may be used for all of the following except:
A) expanding the business.
B) paying off debt.
C) building up the cash balance.
D) paying employees.
When accounts receivable are collected:
A) stockholders’ equity increases.
B) total assets increase.
C) total assets decrease.
D) the amount of total assets is unchanged.
On January 1, 2016, a company issues 3-year bonds with a face value of $50,000 and a
stated interest rate of 7%. Because the market interest rate is 5%, the company receives
$52,723 for the bonds.
Required:
Part a. Determine the interest expense, the cash payment for interest, and the amount of
the premium that will be amortized during the year ending December 31, 2016.
Part b. Prepare the journal entry to record the first interest payment on December 31,
2016.
In this period, a company recorded Sales Revenue of $50,000 from sales of goods to
customers who agreed to pay later. In the next period, the company received payment
from customers of $45,000. Which of the following statements is correct?.
A) Revenue for this period is $45,000.
B) Accounts Receivable at the end of this period is $50,000.
C) Accounts Payable at the end of this period is $5,000 (or $50,000 – $45,000).
D) Expenses for next period will increase by $5,000 (or $50,000 – $45,000).
The Retained Earnings balance was $22,900 on January 1. Net income for the year was
$18,100. If Retained Earnings had a credit balance of $23,800 after closing entries were
made for the year, and if additional stock of $5,200 was issued during the year, what
was the amount of dividends declared during the year?
A) $17,200
B) $23,700
C) $23,300
D) $13,000