Which of the following statements is false regarding how the cash flow effects of the
changes in the equipment and accumulated depreciation accounts would be reported on
a statement of cash flows if the indirect method is used to prepare the operating
activities section?
a. Cash proceeds from the sale of the equipment would be reported as a cash inflow in
the investing activities section.
b. The cash paid to purchase equipment would be reported as a cash outflow in the
investing activities section.
c. Depreciation expense would be added to net income in the operating activities
section.
d. A loss on the sale of the equipment would be subtracted from net income in the
operating activities section.
A set of reports that communicate a company’s financial position and results of
operations
Match each statement to the item listed below.
a. Audit report
b. Fiscal year
c. Financial statements
d. Management’s discussion and analysis
e. Notes to the financial statements
If a company’s bonds are callable,
a. the bondholder has the right to sell an option on the bond.
b. the issuing company is likely to retire the bonds before maturity if the bonds are
paying 8% interest while the market rate of interest is 4%.
c. the bonds are never allowed to remain outstanding until the maturity date.
d. the investor never knows what the redemption price will be until the bonds are
actually called.
Farley Mills purchased new machinery at the beginning of 2012 for $200,000. The
machines had an estimated life of 5 years, an estimated residual value of $25,000, and
were depreciated using the straight-line method. At the beginning of 2013, the machines
were sold for $150,000 because management was unhappy with their performance.
Determine the following amounts:
When a contract establishes a relationship between an amount borrowed and one or
more future cash flows, the initial amount is known as
a. future value.
b. present value.
c. an annuity.
d. interest rate.
Carver Memorial Gardens purchased supplies for $14,500 during the year. At January 1,
supplies on hand were $1,000. At December 31, supplies on hand are $3,500.
Determine the amount of supplies expense for the year.
a. $14,500
b. $12,000
c. $13,500
d. $17,000
A non-bank credit card.
Match each statement to the item listed below
a. Bank credit card c. Sears card
b. Debit card d. American Express
Fleet Rentals purchased equipment with a cost of $200,000 at the beginning of 2013.
The equipment has an estimated life of 10 years or 100,000 units of product. The
estimated residual value is $20,000. During 2013, 11,000 units of product were
produced with this machinery. Determine the following: A) Amount of total
accumulated depreciation at December 31, 2013, using units-of-production depreciation
B) Book value at the end of 2013 using straight-line depreciation
C) Why would the company choose units-of-production depreciation instead of
straight-line?
Refer to AT&U Company. If the company uses the aging of accounts receivable
approach to estimate its bad debts, what will be the net realizable value of its accounts
receivable after the adjustment for bad debt expense?
AT&U Company
Data for the year ended December 31, 2013, are presented below:
a. $640,000
b. $595,000
c. $620,000
d. $615,000
Which of the following would describe a callable bond?
a. Borrower has the right to pay off the bonds prior to due date.
b. Borrower has the right to issue more bonds prior to due date of existing bonds.
c. Borrower has the right to call off the interest payments on the bonds.
d. Investor has the right to call off the interest payments on the bonds.
Merlin is saving money to purchase a new car. If he deposits $5,000 into a saving
account that pays 8% interest, compounded semi-annually, how much will he have in
his account at the end of the first year?
a. $5,400.00
b. $5,200.00
c. $5,408.00
d. $5,008.00
If the sum of the debits is not equal to the sum of the credits in a trial balance, then
a. there is no concern because the two amounts are not meant to be equal.
b. the chart of accounts does not balance.
c. it is safe to proceed with the preparation of financial statements.
d. it is likely that an error was made in journalizing or posting transactions or in
computing the account balance.
Several terms which represent components of an accounting system are listed below.
For each term, write a brief explanation of how that component is used in the
accounting cycle. A) Accounts
B) Chart of Accounts
C) Double-entry system with debits and credits
D) Journal
E) General Ledger
F) Trial Balance
In which form of organization are the owners’ legal responsibility for the debt of the
business limited to the amount they invested in the business?
a. cooperative
b. corporation
c. partnership
d. proprietorship
A transaction that brings together two or more previously separate entities to form a
single legal entity is called
a. stock acquisition.
b. debt acquisition.
c. asset acquisition.
d. business acquisition.
Refer to General Lighting. When the company records this transaction, what is the
impact on the accounting equation?
General Lighting During the first quarter of 2013, the company sold 4,000 batteries on
credit for $150 each plus state sales tax of 6%. a. Both assets and liabilities decrease.
b. Assets decrease and liabilities increase.
c. Assets, liabilities, and stockholders’ equity will all increase.
d. Assets increase and stockholders’ equity decreases.
Business combinations can occur through either an asset or ____________________
acquisition.
Acquisition cost includes all of the costs that are normal and necessary to acquire and
maintain a plant asset over its useful life.
When a company uses past experience to estimate the amount of likely warranty claims
in the future, a current liability account must be created.
As a result of the bank reconciliation process, a company will prepare an adjusting
entry for a debit memo but not for a credit memo.
A(n) ____________________ categorizes the various accounts receivable amounts by
the length of time outstanding.
Refer to King Cotton Company. Which one of the liabilities shown in the balance sheets
is used in the calculation of the debt-to-equity ratio? If we can assume that the
stockholders’ equity total remained relatively constant for the two years, how would the
ratio change (increase/decrease) from 2012 to 2013? What would this say about the
company’s financial position?
King Cotton Company
The liabilities section of the company’s most recent consolidated balance sheets is
provided below:
“You Decide” Essay You are a financial analyst for R&B Communications. One of
your current assignments is to prepare an end-of-the year analysis of your employer’s
financial health. Today, you want to assess the company’s working capital. You note that
the end-of-year working capital is $15,000 greater than the working capital at the
beginning of the year: End-of-Year Beginning-of-Year
Has your company’s current position improved? Explain.