The profitability of the company based upon the Internal Revenue Code.
Provided is a list of important users of accounting information. Also provided are
descriptions of a major need for accounting information that may be experienced by the
various users. Identify the one user group that is most likely to have the need described.
(Choices may be used more than once.)
a. Investors
b. Management
c. Supplier
d. Banker
e. Government
f. Employees
g. Labor Union
h. Investors and Banker
i. Supplier and Banker
The party who has the use of a leased asset. Match these terms with their definitions.
a. Bond i. Lessor
b. Contract, coupon, stated rate j. Leverage
c. Discount k. Long-term debt
d. Effective interest rate method l. Market rate, yield
e. Face value, par value, principal m. Maturity
f. Interest amortization n. Premium
g. Lease o. Straight-line method
h. Lessee
Equipment with a residual value of $50,000 at the end of 10 years was acquired at the
beginning of 2011 for $500,000. Assuming the use of the straight-line depreciation
method, the journal entry to record depreciation expense for 2013 will have a debit to
a. depreciation Expense and a credit to Accumulated Depreciation for $50,000.
b. accumulated Depreciation and a credit to Equipment for $50,000.
c. depreciation Expense and a credit to Equipment for $45,000.
d. depreciation Expense and a credit to Accumulated Depreciation for $45,000.
The following information was presented in the balance sheet of Acworth Pools as of
December 31, 2013:
Select the incorrect statement from the following.
a. The company expects to actually collect $1,700,000 of its receivables.
b. The balance in the Accounts Receivable account in the company’s general ledger is
$1,700,000.
c. The net realizable value of the company’s receivables is $1,700,000.
d. The company expects uncollectibles to total $200,000.
The packaging of receivables as financial instruments or securities for sale to investors.
Match each statement to the item listed below
a. Accounts receivable e. Notes receivable
b. Aging method f. Realized
c. Allowance for Doubtful Accounts g. Securitization
d. Earned
The Premium on Bonds Payable account is shown on the balance sheet as
a. a contra asset.
b. a reduction of an expense.
c. a separate valuation account that increases the bond liability to market value at the
issue date
d. a subtraction from a long-term liability.
Equity and debt investments that management intends to sell in the future, but not
necessarily in the near term
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Method of accounting required for all passive investments in which the investment is
valued at the price for which the investor could sell the asset in an orderly transaction
between market participants
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Refer to Red Oak Manufacturing. The total leverage per the DuPont analysis
computation is
Red Oak Manufacturing
The following information is available for the year ended December 31, 2015:
a. 2.30.
b. 2.64.
c. 12.40.
d. 15.20.
Annual reports are filed with the SEC on
a. Form 8-K.
b. Form 10-Q.
c. Form 10-K
d. the MD&A section.
A company has long-term assets of $2,000, current liabilities of $1,250, and long-term
liabilities of $1,500. If the current ratio is 2.5, then current assets must be
a. $5,000.
b. $3,125.
c. $1,563.
d. $500.
A contractual agreement to borrow and repay money. 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 borrowed $100,000 on a one-year, 10% note on September 1, 2013, with
interest and principal to be paid at maturity. How much interest payable will be reported
on the balance sheet at November 30, 2013?
a. $ 2,500
b. $ 7,500
c. $10,000
d. $ 3,333
Cash flows directly related to earning income
Match each statement to the item listed below.
a. Cash flows from financing activities
b. Cash flows from investing activities
c. Cash flows from operating activities
Land
From the list of accounts, determine whether the account is a temporary or permanent
account. (Choices may be used more than once.)
The stockholders’ equity section of the balance sheet appears as follows at January 1,
2014:
On March 1, 2014, the company repurchased 800 shares of its common stock at $12 per
share but on April 6, 2014, it reissued 600 shares of the shares at $20 per share.
Bank service charge on the bank statement for new checks
The accountant for a local manufacturing company is reconciling the company’s bank
account for May. For each item listed, state how it would be handled on a bank
reconciliation. (Choices may be used more than once.)
a. Addition to bank balance
b. Subtraction from bank balance
c. Addition to company balance
d. Subtraction from company balance
e. Not included on the reconciliation
A company’s current ratio is 2.00. If the company makes a payment on account, what is
the effect on the current ratio?
a. increase
b. decrease
c. no change
d. Unable to determine with this limited information.
Refer to Fireworks City. Using the data for 2013, determine the average life of the
company’s property, plant, and equipment rounded to one decimal place.
Fireworks City Information for 2013 and 2012 is presented below for this company
which uses the straight-line depreciation method.
a. 1.6 years
b. 2.5 years
c. 4.0 years
d. 10.0 years
The owners of a sole proprietorship, partnership and corporations have limited liability.
Sales discounts decrease the cost of inventory acquired.
Adjusting entries must be made prior to the preparation of financial statements.
Refer to Fabulous Creations. Explain the impact on net income and cash flows of using
straight-line depreciation for financial reporting and accelerated depreciation methods
for income tax purposes.
Refer to Mary Kay Cosmetics. Prepare the company’s statement of cash flows for the
year ended December 31, 2014. Use the direct method of determining net cash flows
from operating activities.
On January 1, 2012, Parent, Inc., purchases all the outstanding common stock of Sub
Corporation for $750,000. Since Parent has control over Sub, a consolidated balance
sheet must be prepared from the individual balance sheets of both companies. Complete
the following worksheet to prepare the consolidated balance sheet on January 1, 2012.
If ending inventory is overstated, then net income is overstated as well.
As part of a sound system of internal controls, all disbursements (with the exception of
petty cash) should be made by check.
The issuance of common stock increases both ____________________ and
stockholders’ equity.
A company can calculate its average days to sell inventory by dividing 365 days per
year by its _____.