On October 1, 2013, a company borrowed $200,000 on a two-year, 12% note, with
interest and principal to be paid at maturity. How much interest expense will be
reported on the income statement for the year ending December 31, 2013?
a. $ 6,000
b. $18,000
c. $24,000
d. $12,000
Julie expects to receive payments of $1,200 at the end of the year for the next 3 years.
Assuming Julie invests the payments into an account earning 8%, how much will she
have at the end of the 3 years?
a. $3,985.68
b. $3,600.00
c. $10,670.81
d. $3,092.52
Which financial statement would you analyze to assess a firm’s operating performance
for the past year?
a. Balance Sheet
b. Statement of Retained Earnings
c. Income Statement
d. Statement of Public Accounting
Measurement of the proportion of each sales dollar that is available to pay other
expenses and provide profit for owners.
Match these terms to their correct definition.
Refer to Gainesville Truck Center. Which of the following expense accounts will be
recorded as a result of this payroll transaction?
Gainesville Truck Center This company has a weekly payroll of $10,000 for its
employees who work Monday through Friday. Federal and state income taxes are
withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld
at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In
addition, the federal and state unemployment taxes are applied at rates of 2% and 5%,
respectively. The company’s year-end is December 31.
a. 1, 2, and 3
b. 1, 4, and 5
c. 2, 3, 4, and 5
d. All of the accounts are needed to record the company’s payroll.
On January 01, 2013, Kale Farms purchased a tractor for $20,000. The company signed
a 6% installment note to pay off the debt with 48 monthly payments over four years.
Each payment is $469.70. How much interest must be paid over the life of the loan?
a. $4,800.00
b. $2,545.60
c. $1,200.00
d. $0 since all of the interest was paid at the time the loan was recorded.
All of the following are reasons that a corporation may purchase treasury stock except
a. it needs the stock for its employee stock bonus program.
b. it desires to make an investment in its own stock.
c. to buy out the ownership of stockholders.
d. to increase the reported amount of earnings per share.
Go Cars has $200 in cash, $500 in accounts receivable, $400 in marketable securities,
and $700 in inventory. Assuming the company also has $200 in accounts payable and
$200 in unearned sales revenue, what is its cash ratio?
a. 4.50
b. 3.00
c. 2.75
d. 1.50
The following unadjusted amounts were taken from the accounting records of an
insurance company at December 31, 2013:
Refer to Aardvark Resale. Assume that the company estimates bad debts based on the
aging method, and the aging schedule indicates that $30,100 of the year-end accounts
receivable will be uncollected.
Aardvark Resale
This company sells merchandise only on credit. For the year ended December 31, 2013,
the following data are available:
Refer to Kaleidoscope Paint. What is the carrying value of the bonds after the first
interest payment is made on June 30, 2013?
Kaleidoscope Paint
On January 1, 2013, this company issued $500,000, 10-year, 9% bonds for $480,745.
The bonds pay interest on June 30 and December 31. The market rate is 10%. The
company plans to use the effective interest method of amortizing bond discounts and
premiums. a. $480,745
b. $482,282
c. $503,245
d. $500,000
When the shipping terms are FOB destination, the buyer must record transportation
costs as an additional cost of acquiring the inventory under the perpetual inventory
system.
provides analysts with a wealth of information to evaluate such things as the
corporation’s profitability, asset and debt management, and short-term liquidity.
Match these terms to their correct definition
A lease is accounted for as an operating lease if the present value of the lease payments
is at least 90 percent of the fair value of the leased property.
Sales taxes collected from customers should be recorded in a liability account until the
cash is passed along to the taxing authority.
Refer to Atlantis Tropicals. If the aging approach is used to estimate bad debts, how
much is the net realizable value of the accounts receivable at December 31, 2013?
Atlantis Tropicals
The following information was taken from the company’s records at the end of 2013.
Many companies use software such as Microsoft PowerPoint to construct their cash
flow statements.
Refer to Fabulous Creations. Which items on the company’s balance sheet could be
considered intangible assets? Explain the nature of each of these.
Items that are included on a bank statement and increase the bank account balance are
called ____________________.
A call provision sets forth provisions for a corporation to redeem its preferred stock at a
fixed price on or after a specified date.