The accounting life of intangible assets is determined by
a. their legal lives.
b. their useful lives.
c. their legal lives or useful lives, whichever is shorter.
d. the tax life mandated by the IRS.
Manatee Manufacturing sells a piece of equipment to make room for new machinery.
Manatee will receive the sales price of $50,000 at the end of 4 years. Assuming interest
at a rate of 6% per year, the Present Value of this future cash flow is how much?
a. $39,604.50
b. $39,515.50
c. $63,124.00
d. $173,255.50
Shipping costs paid to acquire merchandise.
Match the terms with the descriptions related to merchandise sales and purchases.
a. Transportation-in e. Cost of goods available for sale
b. Perpetual inventory system f. Periodic inventory system
c. Net purchases g. FOB shipping point
d. FOB destination h. Delivery expense
What is the distinguishing characteristic between accounts receivable and notes
receivable?
a. Accounts receivable are usually current assets while notes receivable are usually
long-term assets.
b. Accounts receivable require payment of interest while notes receivable does not have
payment of interest.
c. Notes receivable result from credit sale transactions for merchandising companies,
while accounts receivable result from credit sale transactions for service companies.
d. Notes receivable generally specify an interest rate and a maturity date at which any
interest and principle must be repaid.
Cash Flows from Operating Activities / Current Liabilities Match each of the ratios
named with the proper formula for computation.
a. Current Ratio
b. Quick Ratio
c. Cash Ratio
d. Operating Cash Flow Ratio
A law firm purchased supplies at a cost of $20,000 during 2013. At January 1, 2013, the
beginning balance in the supplies account was $1,300. For 2013, supplies expense was
$11,200. How much “Supplies” are on hand as of December 31, 2013?
a. $10,100
b. $10,400
c. $20,000
d. $21,300
Refer to Gainesville Truck Center. What is the impact on the accounting equation of the
journal entry for the employer’s tax expenses and related liabilities for this payroll
transaction?
Gainesville Truck Center This company has a weekly payroll of $10,000 for its
employees who work Monday through Friday. Federal and state income taxes are
withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld
at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In
addition, the federal and state unemployment taxes are applied at rates of 2% and 5%,
respectively. The company’s year-end is December 31. a. Assets and liabilities will
increase.
b. Assets and stockholders’ equity will increase.
c. Assets and liabilities will decrease.
d. Liabilities will increase and stockholders’ equity will decrease.
Refer to HVAC Service. The journal entry to record the bills sent to clients will include
a debit of $12,000 to
HVAC Service
The following transactions occurred during November:
a. service revenue.
b. cash.
c. accounts receivable.
d. retained earnings.
In transactions involving the borrowing or lending of money, as interest is paid, the
balance in the liability account of the borrower
a. decreases.
b. increases.
c. remains unchanged.
d. is transferred to interest income
Dinah Corp. prepares monthly bank reconciliations of its checking account balance.
The bank statement for June 2013 indicated the following:
An analysis of canceled checks and deposits and the records of Dinah revealed the
following items:
The correct amount of check # 3549 is $760, but it was recorded as a cash disbursement
of $670. The check was issued to pay for merchandise purchased. The check was
written correctly and appeared on the bank statement correctly.
Requires that publicly traded companies file financial information on a timely basis.
Organizations important to accounting are listed. Select the organization that most
closely achieves the role described. (Choices may be used more than once.)
a. Financial Accounting Standards Board (FASB)
b. International Accounting Standards Board (IASB)
c. Securities and Exchange Commission (SEC)
This method is the easiest to use. Given the following list of methods of depreciation,
select the method that is best for the situation or purpose given. (Choices may be used
more than once.)
a. Straight-line
b. Units-of-production
c. Double-declining-balance
d. MACRS
Refer to Rags to Riches. Which of the following would be found through ratio analysis
of the company’s financial statements?
Rags to Riches
Selected data from the financial statements are provided below:
a. The accounts receivable turnover ratio is 7.76 in 2015.
b. Cost of goods sold increased $50,000 or 23.8% in 2015.
c. Accounts receivable increased $22,000 during 2015.
d. Total assets decreased 18.4% during 2015.
The stockholders’ equity section of the balance sheet immediately before a recent stock
dividend is provided below:
A 10% stock dividend was declared and paid when the market price per share was $12.
Immediately after the stock dividend, the components of stockholders’ equity section
were: Common StockPaid-in CapitalRetained Earnings
a. $620,000 $100,000 $605,000
b. $550,000 $170,000 $725,000
c. $620,000 $100,000 $725,000
d. $550,000 $170,000 $605,000
This principle divides the life of a company into artificial time periods such as quarters
and years.
Match the following principles with their correct definition.
Match the following principles with their correct definition.
a. Comparability g. Historical cost
b. Conservatism h. Matching
c. Double-entry accounting i. Monetary unit
d. Economic entity j. Revenue recognition
e. Going concern k. Time period
f. Full disclosure
A company’s control environment is primarily influenced by the tone at the top. This
refers to each of the following except
a. the philosophy and operating style of management.
b. the policies and practices that are promoted within the company.
c. the experiential background of management.
d. the priority placed upon the company’s internal control system.
Refer to Kalahari Limited. The interest expense on the bonds at June 30, 2013 is
Kalahari Limited
On January 2, 2013, this company issued 1,000,000, 10-year bonds for $1,150,000. The
bonds pay interest on June 30 and December 31. The stated rate is 10% and the market
rate is 8%. The company plans to use the effective interest method of amortizing bond
discounts and premiums. a. $50,000
b. $46,000
c. $40,000
d. $42,400
The annual painting costs of an office building.
Select the account to which each of the following costs would be debited. (Choices may
be used more than once.)
a. Land
b. Land Improvements
c. Buildings
d. Machinery and Equipment
e. An Expense Account
Which of the following statements is true?
a. Inventory data can be identified and controlled better under the perpetual system.
b. Inventory can only be sold at the end of an accounting period under the periodic
system.
c. There is no difference in cost to implement a perpetual as compared to a periodic
system.
d. The perpetual system eliminated the need for an annual inventory count.
On November 1, 2013, Aero Graphics sold merchandise to a customer and received a
10%, 90-day promissory note with a principal amount of $60,000. A) Identify the
maturity date of the note.
B) How much total interest revenue will the company earn over the term of the note?
C) By how much will net income be understated if the company fails to make a
year-end adjusting entry for the note?
Refer to Mary Kay Cosmetics. Prepare the company’s statement of cash flows for the
year ended December 31, 20 Use the indirect method of determining net cash flows
from operating activities.
Mary Kay Cosmetics
Selected data and additional information from the company’s records are presented
below:
Additional information:
When computing the dividend yield, net income is divided by the common stock price.
A(n) ____________________ is the process used by an accountant to ensure
consistency between the balance shown on the bank statement for a particular account
and the balance shown on the accounting records.
The purchase of inventory is an important ____________________ activity for a
retailer.
Under the indirect method, a gain from the sale of land is subtracted from ___________
in the operating activities section of the statement of cash flows.
An obligation that involves an existing condition for which the outcome is not known
with certainty and depends upon some event that will occur in the future is called a(n)
____________________.
If ending inventory is understated, then cost of goods sold is understated.
Refer to Mary Kay Cosmetics. Prepare the investing activities section of the company’s
statement of cash flows for 2014.
Mary Kay Cosmetics
Selected data and additional information from the company’s records are presented
below:
Additional information:
Thomkin Enterprises purchased several investment securities on November 1, 2013.
Various transactions and market activities occurred regarding these investments
between acquisition and December 31st (the company’s year-end), as shown below:
Additional information:
Prepare journal entries to record the purchase of the securities, the receipt of dividends
and interest, the sale of the TRL stock, and the end-of-year mark-to-market adjustments.
For the end-of-year entries, indicate how the resulting gains or losses should be
recognized in Thomkin’s year-end financial statements.
The following information pertains to Leapfrog Academy at December 31, 2015:
Prepare the stockholders’ equity section of the balance sheet at December 31, 2015.
