A recoverability test is necessary to determine if an asset is impaired.
Over time, the cost of processing accounting information has increased.
The percentage of taxable income paid to the government by corporations is known as
the tax rate.
A lessee may have a leased item on his balance sheet as an asset, even though the lessee
does not have the legal title of ownership to the leased item.
In the United States, most corporations pay dividends every six months.
If ending inventory is overstated by $5,000 in 20X3, retained earnings will be
overstated in 20X3.
International Financial Reporting Standards are
A) used by all European Union countries.
B) never used by corporations operating in the United States.
C) identical to Generally Accepted Accounting Principles.
D) guidelines used by corporations to determine a company’s fair value upon cessation.
E) drastically different from Generally Accepted Accounting Principles.
All Handles, Inc. began operations on February 1, 2012, and purchased $4,000 of
supplies. On December 31, 2012, $1,200 were still on hand. The December 31, 2012,
entry would include a
A) debit to Supplies Expense for $1,200.
B) debit to Supplies for $4,000.
C) credit to Supplies Expense for $1,200.
D) credit to Supplies Expense for $2,800.
E) debit to Supplies Expense for $2,800.
Waddle Enterprise issued an 8-year, 10% bond on January 1, 20X9. Each bond sold for
face value, which is $1,000. The bonds pay interest semi-annually on June 30 and
December 31. The bonds mature on December 31, 2X15. Using present value tables,
what is the market price of each $1,000 bond on January 1, 2X11, if the market rate of
interest has changed to 8%?
A) $ 893.29
B) $ 912.92
C) $1,000.00
D) $1,081.15
E) $1,114.96
A company offers a 2% discount on payments received within 10 days of the invoice
date. Otherwise full payment must be received within 30 days of the invoice date. If the
invoice date is January 5, the payment date is January 13, and the company received the
invoice on January 7, what is the amount that should be remitted assuming a gross sale
of $1,000?
A) $200
B) $1,000
C) $1,020
D) $980
E) $196
The multiple-step income statement is
A) used by most U.S. companies.
B) used when total revenues exceed $1 million.
C) used to segregate current assets from non-current assets.
D) used for income tax purposes.
E) used in order to incorporate the current ratio into the statement.
Which statement about cumulative preferred stock is FALSE?
A) A company does not have to pay a preferred stock dividend every year.
B) No dividends can be paid to common stockholders until all current and prior year
preferred stock dividends are paid.
C) All dividends in arrears must be disclosed in a footnote to a company’s balance
sheet.
D) Any dividends in arrears are considered to be a liability since the company is
obligated to pay these dividends.
E) In the event of liquidation, cumulative unpaid dividends must be paid before
common stockholders receive any cash.
All of the following are tangible assets except
A) tow motor used to relocate inventory.
B) office portion of a building.
C) patent on manufacturing equipment used to make company products.
D) land that will potentially be used by a company in the future.
E) drill press used to manufacture company products.
A debt contract issued by prominent companies that allow the companies to borrow
directly from investors is
A) a promissory note.
B) a line of credit.
C) commercial paper.
D) product warranties.
E) returnable deposits.
Trend analysis can be used
A) only with income statement accounts.
B) only with balance sheet accounts.
C) only with statement of stockholders’ equity accounts.
D) only with common-size financial statements.
E) on any financial statement.
Callton, Inc., had a 6-year, 8%, $375,000 bonds ready to be sold on January 1, 20X3.
The bonds will pay interest every June 30 and December 31. However, due to market
conditions, the company did not sell the bonds until March 1, 20X3, at which time the
bonds was issued at par.
Given the information presented above, prepare the appropriate journal entry for
Callton, Inc., for each of the following dates:
a. January 1, 20X3
b. March 1, 20X3
c. June 30, 20X3
d. December 31, 20X3
Biscuit Bakery had the following activity in its inventory account during August 20X3.
What is the ending inventory balance at August 31, 20X3, for Biscuit Bakery if the
company uses perpetual FIFO as its inventory valuation method?
A) $198.00
B) $270.00
C) $294.00
D) $297.50
E) $358.00
Randolph Company issued $1,000,000 of 6.5%, 8-year bonds dated June 1, 20X3, with
semiannual interest payments on June 1 and December 1. The bonds were issued on
June 1, 20X3, at 103 3/8.
a. Were the bonds issued at a premium, a discount, or at face value?
b. Was the market rate of interest higher, lower, or the same as the coupon rate of
interest?
c. How much cash was received by Randolph Company upon issuance of the bonds?
FIFO tends to decrease taxes when
A) costs are increasing.
B) costs are decreasing.
C) costs are constant.
D) FIFO will always yield the lowest possible taxes.
E) Impossible to determine without specific cost data
If liabilities increase by $10,000 during a given period and stockholders’ equity
decreases by $6,000 during the same period, assets must have
A) increased by $16,000.
B) increased by $4,000.
C) decreased by $4,000.
D) decreased by $16,000.
E) This cannot be determined with the given information.
The Statement of Cash Flows for Urban Athletic Company included the following
items, among others:
Prepare the cash flows from financing activities section of the statement of cash flows.
All items necessary for that section appear above, in addition to items that belong in the
operating and investing sections.
Halton Real Estate has decided to split its common stock two-for-one, but is unsure
whether they would like to reduce or retain the par value of the common stock.
Currently, Halton Real Estate has 10,000 shares of $10 par value common stock
outstanding with a market value of $60 per share. Under option A, Halton Real Estate
would retain par value at $10 per share and under option B, Halton Real Estate would
reduce par value. Under each option, determine the following:
Option A
1. ________ How much is the common stock account increased by?
2. ________ How much is the retained earnings account increased by?
3. ________ How much is the total stockholders’ equity increased by?
4. ________ What is the new expected market value of the common stock?
5. What is the journal entry to account for the stock split under option A?
Option B
1. ________ How much is the common stock account increased by?
2. ________ How much is the retained earnings account increased by?
3. ________ How much is the total stockholders’ equity increased by?
4. ________ What is the new expected market value of the common stock?
5. What is the journal entry to account for the stock split under option B?
Following are accounts in alphabetical order, which are numbered for identification,
followed by a series of transactions. For each transaction, determine what account(s)
should be debited and credited, and place the number associated with that account in the
appropriate debit or credit column.
Hortel, Inc., had the following transactions during 2X03, its first year of operations. For
each transaction, determine the effect each transaction had on the various stockholders’
equity accounts by placing a plus sign (+), a minus sign (-), or an X in each column.
Selected accounts from Taylor Company as of March 31, 2012, follow:
Required:
1. Journalize the transactions for Taylor Company.
2. Prepare an analysis of the transactions using the balance sheet equation.
3. Prepare an income statement for the month ending March 31.
4. Prepare a balance sheet at March 31.
Designate how each transaction would be reported on the statement of cash flows using
OP for operating activities, IN for investing activities, FI for financing activities, I for
an inflow of cash and O for an outflow of cash. If the transaction is included only in a
supplemental schedule, denote this as SS.
The following transactions occurred in August, 2012 for Applegate Consulting:
The billing department at Applegate Consulting was unable to bill Midatlantic on
August 31, 2012 because the company’s computers were malfunctioning and awaiting
service.
What adjusting entries should Applegate Consulting make on August 31, 2012?