Gain on disposal of plant asset
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
A company wishes to issue $600,000 of 10-year, 6.8% bonds, with interest paid
annually at the end of the year. The market rate of interest is currently 5%. What
information is needed in order to determine the selling price?
a. The market rate of interest, the stated rate of interest, the bond rating, and the bond
life.
b. The face value of the bonds, the stated rate of interest, the market rate of interest, and
the bond life.
c. The life of the bonds, the market rate of interest, the bond rating, and the face value
of the bonds.
d. The face value of the bonds, the market rate of interest, the purpose of the issue, and
the bond life.
Transportation costs paid by the buyer.
Match the terms with the descriptions provided.
a. Average days to sell inventory d. Inventory turnover ratio
b. Gross margin e. Freight-in
c. Gross profit ratio f. Freight-out
Cost less residual value
Match these terms with their correct definition.
a. Book value e. Depreciation
b. Cost f. Impairment
c. Depletion g. Involuntary disposal
d. Depreciable cost h. Residual value
Grady Company’s hourly employees earned $55,600 in the pay period ending March
31. Assume further that federal and state income taxes withheld are $9,452 and $2,224,
respectively. In addition, social security and medicare taxes are applicable at rates of
6.2% and 1.45%, respectively, and federal and state unemployment taxes are applicable
at rates of 4.5% and 3%, respectively. All wages are subject to these taxes.
Tidewater Management, Inc. had no investments in short-term marketable securities
prior to 201 During 2013, the company engaged in the following investment
transactions:
At the end of 2013, the Toucan Taxi stock had a market value of $15 per share. A)
Prepare journal entries for each of the three transactions assuming they are
available-for-sale securities.
B) Prepare journal entries, if required, to recognize the year-end market value. What is
the income statement effect of the entry, if any?
C) How will this investment be reported on the company’s balance sheet at December
31, 2013?
During December, Camp David, Inc. purchased $5,000 of supplies for use in its
business. At the end of December, 20% of the supplies were still on hand, but only 70%
had been paid. What amounts will appear on the company’s balance sheet on December
31? Supplies on HandAccounts Payable
a. $5,000 $3,500
b. $1,000 $1,500
c. $4,000 $1,500
d. $1,000 $5,000
Name given to an investor who owns over 50% of the outstanding common stock of the
investee
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
Issues financial accounting concepts that are used as a guide to accounting
standard-setting in the U.S.
Organizations important to accounting are listed. Select the organization that most
closely achieves the role described. (Choices may be used more than once.)
a. Financial Accounting Standards Board (FASB)
b. International Accounting Standards Board (IASB)
c. Securities and Exchange Commission (SEC)
The FASB’s concept of comprehensive income
a. allows items that are not necessarily under management’s control, such as currency
translation adjustments, to be shown as an appropriation of retained earnings.
b. has a primary drawback because it allows management considerable flexibility in
determining the net income figure.
c. excludes transactions that involve the payment of dividends and other transactions
affecting owners.
d. requires that all transactions representing changes in asset and liability accounts must
be shown on the income statement.
A company reported the following information:
How much cash was paid for interest during 2014?
a. $15,000
b. $29,000
c. $30,200
d. $25,200
Which of the following statements is true regarding the relationship of the current ratio
and the acid test ratio?
a. The current ratio is based on a more conservative measure of liquidity.
b. Both ratios focus on the relationship between all or part of a company’s current assets
and all of its current liabilities.
c. Both ratios focus on the relationship between all of a company’s current assets and all
or part of its current liabilities.
d. For a company which carries no inventories, the current ratio and acid test ratio will
be significantly different.
Occurs when a bond’s issue price exceeds its face value. 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
Paying salaries to employees
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
Focal Point Engineering purchased a trademark at the beginning of 2013 for $200,000.
Although the trademark’s legal life is 20 years, economic benefits were expected for
only 10 years. Also, during 2013, the company incurred research and development costs
of $200,000. The book value of the trademarks at December 31, 2013, is
a. $200,000.
b. $180,000.
c. $175,000.
d. $280,000.
A company employs 10 workers in its manufacturing facility. Each employee is paid
$10 per hour and works 8 hours per day, Monday through Friday. Employees are paid
every Wednesday for the previous Monday through Friday workweek. The last payday
was Wednesday, October 28. A) Compute the dollar amount of the company’s weekly
payroll.
B) Prepare the adjusting entry on Friday, October 30, the last day of the fiscal period.
C) What special precautions are necessary upon recording the payment of wages to
employees on the next payday, November 4?
Current liabilities Select the ratio that would include each amount or account in its
calculation. (Choices may be used more than once.)
a. Times interest earned ratio
b. Operating cash flow ratio
c. Debt-to-equity ratio
d. Return on equity
Which of the following ratios is least useful in evaluating a company’s ability to pay its
current obligations when they come due?
a. current ratio
b. quick ratio
c. cash ratio
d. return on assets ratio
The sum of all preferred stock, common stock, and additional paid-in capital account
balances
What adjustments are often necessary after the reconciliation of a bank account?
The interest rate used to calculate interest expense in the effective interest method of
amortization is equal to the market rate of interest at the time the bonds are issued.
Refer to Maritime Marine Services. What was the amount of accumulated depreciation
on the property, plant and equipment disposed of during 2014?
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:
If the Income Summary account has a credit balance just prior to closing it to retained
earnings, the company must have incurred a net income for the year.