Depreciation expense
Identify where each of the following accounts would be reported on the financial
statements. (Choices may be used more than once.)
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
When bonds are sold for less than the par amount, this means that the
a. maturity value will be less than the paramount.
b. maturity value will be greater than the paramount.
c. bonds are sold at a premium.
d. stated rate of interest is less than the yield rate of interest.
Providing physical protection of the company’s assets
Match the following terms with their correct definitions.
a. Accounting system e. Internal control system
b. Business process risks f. Safeguarding
c. Control activities g. Segregation of duties
d. Control environment h. Strategic risks
Which of the following would report the market price of the company’s stock?
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. Item 5 in Form 10-K.
Refer to LaFarge North America. What is the amount of retained earnings?
a. $ 98,000
b. $114,000
c. $130,000
d. $860,000
In this section of the annual report, management discusses its views of the financial
condition and performance of the company. Match the term with its correct definition.
What is unearned revenue?
a. stockholders’ equity
b. liability
c. asset
d. revenue
Sold common stock for cash.
Use the following codes to indicate how the cash flow effect, if any, of each transaction
would be reported on a statement of cash flows if the operating activities section is
prepared using the direct method. (Choices may be used more than once.)
a. Inflow from operating activity
b. Outflow from operating activity
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
Refer to Bargain Spot Fabrics. What is the retained earnings balance at the end of the
current year?
Bargain Spot Fabrics
This company’s end-of-year balance sheet consisted of the following amounts:
a. $50,000
b. $550,000
c. $800,000
d. $850,000
Refer to Rainsoft Company. What is the current ratio for 2015?
Rainsoft Company
Selected data from the financial statements are provided below:
a. 0.60
b. 0.99
c. 1.34
d. 1.68
Refer to Happy Heights Country Club. On which date did the country club sell a club
membership on account?
Happy Heights Country Club
Selected accounts at July 31 are provided below:
a. July 2nd
b. July 3rd
c. July 5th
d. July 7th
Refer to Kaleidoscope Paint. The cash payment on June 30, 2013, is
Kaleidoscope Paint
On January 1, 2013, this company issued $500,000, 10-year, 9% bonds for $480,745.
The bonds pay interest on June 30 and December 31. The market rate is 10%. The
company plans to use the effective interest method of amortizing bond discounts and
premiums. a. $25,000.
b. $22,500.
c. $45,000.
d. $50,000.
Collecting from customers for services sold previously on credit
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
Which one of the approaches for the allowance procedure emphasizes the net realizable
value of accounts receivable on the balance sheet?
a. The aging of accounts receivable method
b. The percentage of net credit sales method
c. The percentage of accounts written off method
d. The direct write-off method
German Auto Parts is a defendant in a multi-million dollar lawsuit that was filed in a
prior year. The lawsuit was not previously disclosed in the financial statements or
accompanying footnotes, as the company has vigorously defended its position and its
attorneys initially indicated that the claim was not valid. During the current year,
however, the facts and circumstances have changed such that the likelihood of a loss
approximating $5 million is now considered reasonably possible. How should the
company recognize this lawsuit in its current year financial statements?
a. Do nothing, since it was not recognized in previous periods.
b. Do nothing until the matter is settled or a judgment or verdict is obtained.
c. Disclose the matter in the footnotes accompanying the financial statements.
d. Record a contingent liability in the amount of $5 million.
Companies such as advertising agencies and auto repair shops.
Match the terms with the descriptions provided.
a. Manufacturers d. Wholesalers
b. Merchandisers e. Service companies
c. Retailers
A company purchased a patent for $100,000 at the beginning of 2013 which it believes
has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years.
How much amortization expense should be recorded in 2013?
a. $0
b. $5,000
c. $20,000
d. $100,000
Requires that expenses be recorded in the same period as the revenue that they helped
generate
Match each statement to the item listed below
a. Accrual basis accounting f. Depreciation
b. Adjusted trial balance g. Matching principle
c. Adjusting entries h. Revenue recognition principle
d. Cash basis accounting i. Time period assumption
e. Contra accounts j. Worksheet
Refer to Medstar Ambulance Service. The following statements describe how the
company reported the cash flow effects of the items described above on its 2014
statement of cash flows. The indirect method is used to prepare the operating activities
section. Which of the following has been reported incorrectly?
Medstar Ambulance Service
Information from the company’s financial records is presented below:
At the end of 2014, the company issued notes at par value for $1,200,000 cash. The
proceeds were used to retire the $1,000,000 note issue outstanding at the end of 2013
(before their maturity date). All interest expense was paid in cash during 2014. a.
Proceeds of $1,200,000 from the issuance of notes were reported as a cash inflow in the
financing activities section.
b. The loss on note retirement of $45,000 was added to net income in the operating
activities section.
c. Payments of $1,260,000 were reported as a cash outflow in the investing activities
section.
d. Interest expense of $75,000 was not reported separately because it is included in net
income in the operating activities section.
Refer to Happy Heights Country Club. On which date did the country club sell a club
membership for cash?
Happy Heights Country Club
Selected accounts at July 31 are provided below:
a. July 2nd
b. July 3rd
c. July 5th
d. July 7th
The ____________________ is the U.S. federal government agency with the ultimate
authority to determine the accounting rules for companies whose stock is sold to the
public.
Refer to Maritime Marine Services. Assuming that the book value of the property, plant
and equipment disposed of during 2014 was $90, what were the cash proceeds from the
disposal?
Maritime Marine Services
Selected data from the financial statements for the years ended December 31, 2014 and
2013, are presented below:
The following additional information was obtained from the company’s records:
Creditors use accounting information to evaluate whether to loan money to a company.
Refer to Atlantis Tropicals. If bad debts are estimated at 1% of net credit sales, how
much will the company report as bad debts expense for 2013?
Atlantis Tropicals
The following information was taken from the company’s records at the end of 2013.
What is the difference between authorized, issued, and outstanding shares?
Public companies file their quarterly reports on Form ____________________.
A check that “bounced” or was returned by the bank due to lack of funds is called a(n)
____________________.
____________________ securities are debt investments that are accounted for on an
amortized cost basis because management intends to hold the investment until the debt
contract requires the borrower to completely repay the debt.