Select the correct statement from the following:
a. Consolidation worksheet adjustments are not entered on the accounting records of
either Parent or Sub.
b. Consolidation worksheet adjustments are entered on the accounting records of the
Parent but not the Sub.
c. Consolidation worksheet adjustments are entered on the accounting records of the
Sub but not the Parent.
d. Consolidation worksheet adjustments are entered on the accounting records of both
the Parent and the Sub.
A passive investment is one in which the owner
a. is not attempting to exert influence over the company.
b. owns between 15-25% of the company’s outstanding stock.
c. uses the equity method of accounting for the investment.
d. is gradually attempting to gain control over the company.
Which internal control activity is followed when the work of one department acts as a
check on the work of another?
a. segregation of duties
b. safeguarding of assets and records
c. checks on recorded amounts
d. clearly defined authority and responsibility
Refer to Academy Grill Supply. The effect on the company’s financial statements on
December 31, 2013is as follows
Academy Grill Supply
On October 1, 2013, the company received a $50,000 promissory note from a customer.
The annual interest rate is 6%. Principal and interest will be collected in cash at the
maturity date of September 30, 2013. a. assets and Stockholders’ equity increase.
b. assets and Stockholders’ equity decrease.
c. assets and liabilities increase.
d. no net change in assets.
On January 2, 2013, Kampai Sushi Bar sold $800,000 of bonds for $785,000. The
bonds will mature in 10 years and pay interest annually on December 31. The company
properly recorded the payment of interest and amortization of the discount using the
effective interest method. Which of the following statements is true about the carrying
value of the bonds and/or the unamortized discount at the end of 2013?
a. The carrying value will be less than $785,000.
b. The carrying value will be $785,000.
c. The carrying value will be greater than $785,000.
d. The unamortized premium will be more than $15,000.
Used to induce the customer to keep damaged goods
Select the term that matches each of the following descriptions.
a. Sales Discount
b. Trade Discount
c. Sales Allowance
d. Sales Returns
The following items were reported by Morris Plumbing Company:
What amount would be reported in the operating activities section of the statement of
cash flows for Collections from Customers under the direct method, assuming that all
sales are on credit?
a. $975,000
b. $1,025,000
c. $1,225,000
d. $1,250,000
The length of time a note is outstanding-the period of time between the date it is issued
and the date the note is due to be paid
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
Which of the following statements is true regarding just-in-time inventory
management?
a. It requires a perpetual inventory system.
b. It requires an average cost inventory costing method.
c. It requires detailed information about profitability and the users of the company’s
financial statements.
d. It requires detailed information about order-to-delivery times, receiving-to-sales
times, and inventory quantities.
Which of the following types of information is not set forth within the corporate
charter?
a. Name and purpose of the corporation.
b. Names of those responsible for incorporating the business.
c. Dates of future dividend distributions.
d. Provisions describing how stock may be issued.
Refer to Ladder Distributors. Suppose the company reissued 1,000 shares of its treasury
stock on June 1, 2015, for $44 each. Which of the following is true regarding the entry
required to record this transaction?
Ladder Distributors
The stockholders’ equity section of the December 31, 2014, balance sheet is provided
below:
Assume that all of the 20,000 shares of stock that was issued as of December 31, 2014,
was issued for $42 per share. On March 1, 2015, the company reacquired 4,000 shares
of its common stock for $50 per share. a. A debit to treasury stock is required for
$44,000.
b. A credit to treasury stock is required for $50,000.
c. A credit to retained earnings is required for $6,000.
d. A debit to paid-in capital from treasury stock transactions is required for $6,000.
The following costs were incurred to acquire and prepare land for a new parking lot:
purchase price for land, cost to clear the land, cost of paving, cost of lighting for the
parking lot, and cost of landscaping for the parking lot. How should the company
determine which costs should be recorded as Land Improvements and which costs
should be recorded as Land?
a. The costs with an unlimited life are debited to Land, and the costs with a limited
useful life are debited to Land Improvements.
b. The costs with a limited life are debited to Land, and the costs with an unlimited
useful life are debited to Land Improvements.
c. The costs to be depreciated are debited to Land, and the costs that will not be
depreciated are debited to Land Improvements
d. Costs that are depreciable are debited to Land Improvements, while other costs are
expensed immediately because of a lack of definite life.
Cash flows from issuing and repurchasing stock or issuing and repaying debt are
classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. borrowing activities.
Failure to record amounts earned for services provided to customers but not yet paid
results in which of the following?
a. Net income being overstated.
b. No effect on total assets.
c. Stockholders’ equity being overstated.
d. Total assets being understated.
When a corporation decides whether to pay a cash dividend, which of the following is
an important consideration?
a. The balances in the corporation’s cash and retained earnings accounts.
b. The number of authorized shares of the corporation’s stock.
c. The book value of the corporation’s stock.
d. The balance of paid-in capital in excess of par on the corporation’s stock accounts.
If a company accepts a major credit card such as VISA from a customer, then the
company is responsible for the amount of the sale in a case of nonpayment from a
cardholder.
When a company recognizes the portion of supplies used during a year, the effect is to
decrease net income.
When reconciling a bank account, the company has to prepare an adjusting entry for
outstanding checks.
Refer to Hatcher Tool Service. Record each transaction in proper journal entry format in
the journal provided. A written explanation for each journal entry is not required.
Hatcher Tool Service
The following transactions occurred during June 2013:
Cash flows that are equal and occur multiple times, one period apart are called
Annuities.
The balance in the account, Rent Collected in Advance, is reported as a liability on the
balance sheet of the landlord.
If preferred stock is convertible, then the preferred shareholders have the option to trade
voting privileges for the dividend payment preference.
All intangible assets are subject to amortization.
A company with healthy cash flows from operating activities is in a good position to
repay its debts.