This method is used in situations where technological advances are rapid.
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
What are the effects on the accounting equation from the recognition of an unrealized
loss on trading securities?
a. Assets and stockholders’ equity decrease.
b. No effects; unrealized gains and losses should not be recorded.
c. Assets and liabilities decrease.
d. Stockholders’ equity decreases and liabilities increase.
Accounts Payable
Several accounts from the financial records of Wynn Linders, Inc. are listed. Indicate its
normal balance and the debit/credit rules for increasing the account. (Choices may be
used more than once.)
Measure the return the company is earning on sales.
Match each statement to the item listed below
a. Bad debt expense d. Percentage of credit sales
b. Net sales revenue e. Profitability ratios
c. Nontrade receivables f. Trade receivables
Prices are declining; gross margin is higher with this method.
Identify which inventory costing method achieves the effect listed in the following items.
(Choices may be used more than once.)
a. FIFO method c. Average cost method
b. LIFO method d. Specific identification method
In evaluating a company’s financial statements, the least useful information would be
derived from a comparison of the current period data with
a. economic and industry data.
b. another company in the same industry for the same period.
c. the same company’s data from five years ago.
d. the same company’s data from the prior year.
Reduction of price granted by the seller for a particular class of customers
Select the term that matches each of the following descriptions.
a. Sales Discount
b. Trade Discount
c. Sales Allowance
d. Sales Returns
Which of the following is an assumption made in the preparation of the financial
statements?
a. Financial statements are prepared for a specific entity that is distinct from the entity’s
owners.
b. The current market value is assumed to be more relevant than the original cost paid.
c. The preparation of financial statements for a specific time period assumes that the
balance sheet covers a designated period of time.
d. Financial statements are prepared assuming that inflation has a distinct effect on the
monetary unit.
During 2013, Going, Going, Gone sold 100 hot air balloons for $4,000 each. The
balloons carry a 5-year warranty for defects. Estimates indicate that repair costs will
average 4% of the total selling price. The estimated warranty liability at the beginning
of the year was $42,000. $11,000 in claims was actually incurred during the year to
honor their warranty. What was the balance in the estimated warranty liability at the end
of the year?
a. $47,000
b. $42,000
c. $37,000
d. $ 5,000
Measure of a company’s success in earning a return for all providers of capital.
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a. Debt-to-equity ratio
b. Dividend payout ratio
c. Dividend yield ratio
d. Earnings per share
e. Leverage
f. Return on assets ratio
g. Return on common equity ratio
h. Stock repurchase payout
Amortization 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
Grayson Flowers borrowed $400,000 from the bank on a six-month, 7%
interest-bearing note on October 1, 2013. The company’s year-end is December 31st.
The note and all related interest was repaid to the bank on April 1, 2014. A) Prepare the
company’s entry for this note on October 1, 2013.
B) Record the adjusting entry for this note on December 31, 2013.
C) Indicate how the note and the accrued interest would be reported on the balance
sheet on December 31, 2013.
D) Prepare the entry to record the repayment of the note on April 1, 2014.
State income taxes For each of the types of payroll taxes and other payroll-related
items listed, indicate whether it is paid by the employee through a paycheck
withholding, by the employer, or both. (Choices may be used more than once.)
a. Employee
b. Employer
c. Both
Amounts owed for purchases on credit. 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 reported the following information:
How much cash was received for interest during 2014?
a. $12,500
b. $19,500
c. $ 8,000
d. $ 3,500
The difference between the principal amount of the note and its maturity value
Select the term that matches each of the following descriptions.
a. Interest
b. Maturity Value
c. Principal
d. Lender
e. Factoring
f. Fraction of year
g. Maturity date
h. Implicit
i. Maker
On January 1, 2012, Teddy Bear Company purchased 25% of the common stock of one
of its major suppliers-Fluff n’ Stuff, for $1,000,000 cash. On November 1, 2012, Fluff n’
Stuff declared and paid a cash dividend of $50,000. Further, for the year ended
December 31, 2012, Fluff n’ Stuff reported net income of $200,000. A) Which method
of accounting for investments should be used for the Fluff n’ Stuff stock?
B) Record all of the necessary journal entries for this investment during 2012.
C) What will be the balance in the investment account at December 31, 2012?
If an investor can use accounting information for two different companies to evaluate
the types and amounts of expenses, the information is said to have the quality of
a. comparability.
b. consistency.
c. neutrality.
d. materiality.
Accrued revenue is recognized when cash is received.
Whenever feasible, cash handling activities and cash record-keeping activities should
be assigned to different employees, according to the internal control activity called
____________________.
Refer to Korn Business Solutions. What are the two types of leases that a company can
have? Describe each briefly.
Korn Business Solutions
The following footnote accompanied the company’s 2013 financial statements: The
Corporation leases office, warehouse and showroom space, retail stores, and office
equipment under operating leases, which expire no later than 2025. The Corporation
normalizes fixed escalations in rental expense under its operating leases. Minimum
annual rentals under non-cancelable operating leases, excluding operating cost
escalations and contingent rental amounts based upon retail sales, are payable as
follows: Fiscal year ending March 31,
Rent expense was $12,551,000; $8,911,000; and $5,768,000 for the years ended March
31, 2013, 2012, and 2011, respectively.
Refer to Cabana Club. Identify three specific expenses that might be accrued as a result
of adjusting journal entries. Show what these entries would look like in journal format.
Ignore amounts.
Cabana Club The company’s consolidated statement of income is provided below:
A ____________________ is a correction of retained earnings resulting from a
previous error that affected net income.
Credits are always on the ____________________ side of a T-account.
“You Decide’ Essay You are the owner of a company that produces an energy drink
that has unique properties. Its primary ingredient, a berry found only in the South
American rain forest, causes a significant prolonged increase in the drinker’s
metabolism rate. You have found only a single supplier of this berry, Tropical Supplies,
Inc., a publicly traded company. What are some things you can do to assure your
company of access to this important raw material?
Prepaid SubscriptionsSelect the correct revenue recognition principle for each of the
following. (Choices may be used more than once.)
a. Recognize revenue over the passage of time.
b. Recognize revenue when the customer takes possession of the product.
c. Recognize revenue when cash is collected.
d. Recognize revenue when service is performed.