Match the costs that might be included as part of the cost of inventory to the listed
accounting treatment.
a.Add to inventory cost
b.Subtract from inventory cost
c.Not an inventory cost
Freight costs incurred by the seller to ship goods to its customers
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
Denise wants to help pay for her niece’s college tuition. Her niece will begin college in
one year. How much would Denise need to put into a savings account today at 6% so
that her niece can withdraw $10,000 per year for 4 years, and reduce the account
balance to zero at the end of the 4 years?
a. $34,650
b. $37,720
c. $37,600
d. $31,680
Indicate the type of each ratio listed below.
a.Liquidity ratio
b.Solvency ratio
c.Profitability ratio
Gross profit ratio
Cash interest is computed annually when a bond is issued for other than its face value.
For a bond issued at a premium, how will this component change as the bond
approaches maturity?
a.Decrease
b.Increase
c.Remain constant
d.Not enough information given to decide.
Which of the following are generally supplementary information required by GAAP
concerning the accounting treatments used by a company?
a.A Year-End Worksheet
b.Management’s Discussion and Analysis
c.The Report of Independent Accountants
d.Notes to the Consolidated Financial Statements
Match each of the following terms related to interest and time value of money
calculations to their appropriate definition.
a.Time value of money
b.Simple interest
c.Compound interest
d.Future value of a single amount
e.Present value of a single amount
f.Annuity
g.Future value of an annuity
h.Present value of an annuity
The amount needed at the present time to be equivalent to a series of payments and
interest in the future.
The following items were reported on the balance sheets and income statement for
Carlton Co.:
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. $850,000
b. $857,000
c. $843,000
d. Cannot be determined without further information.
Indicate the type of each ratio listed below.
a.Liquidity ratio
b.Solvency ratio
c.Profitability ratio
Price/earnings ratio
Select the term from the list below that matches each of the following six descriptions.
a.Interest
b.Maturity value
c.Principal
d.Payee
e.Discounting
f.Term
g.Recourse
h.Implicit
i.Maker
Transfer a note with a contingent liability
Identify which inventory costing method (LIFO or FIFO) achieves the effect listed in
the following items:
a.LIFO
b.FIFO
Prices are declining; income taxes are higher with this method
Interest is never a part of the cost of property, plant, and equipment or intangible assets.
a.True
b.False
Match the selected items from a classified balance sheet and multiple-step income
statement to the section in which they would appear on the classified balance sheet or
the income statement.
a.Current Assets (balance sheet)
b.Property, Plant, & Equipment (balance sheet)
c.Current Liabilities (balance sheet)
d.Long-term Liabilities (balance sheet)
e.Stockholders’ Equity (balance sheet)
f.Operating Revenue (income statement)
g.Operating Expenses (income statement)
h.Other Revenue & Expenses (income statement)
i.Income Taxes (income statement)
Service revenues
Select the correct revenue recognition principle for each of the following.
a.Recognize revenue over the passage of time.
b.Recognize revenue when the customer takes possession of the product.
c.Recognize revenue when cash is collected.
d.Recognize revenue when service is performed.
Merchandise
Frank Crawford Corporation’s balance sheet showed the following amounts: Current
Liabilities, $15,000¾ Bonds Payable, $8,000¾ Lease Obligations, $9,000¾ and Notes
Payable, $5,600. Total stockholders’ equity was $17,000. The debt-to-equity ratio is:
a. 0.88.
b. 1.18.
c. 0.71.
d. 2.21.
Match the selected items from a classified balance sheet and multiple-step income
statement to the section in which they would appear on the classified balance sheet or
the income statement.
a.Current Assets (balance sheet)
b.Property, Plant, & Equipment (balance sheet)
c.Current Liabilities (balance sheet)
d.Long-term Liabilities (balance sheet)
e.Stockholders’ Equity (balance sheet)
f.Operating Revenue (income statement)
g.Operating Expenses (income statement)
h.Other Revenue & Expenses (income statement)
i.Income Taxes (income statement)
Interest expense
Glitch Company incurred the following costs during 2014 and 2015:
a.Research and development costing $40,000 was conducted on a new product to sell in
future years. A product was successfully developed, and a patent for it was granted
during 2014. Glitch is unsure of the period benefited by the research, but believes the
product will result in increased sales over the next five years.
b.Legal costs and application fees of $25,000 for the 20-year patent were incurred on
January 1, 2014.
c.A patent infringement suit was successfully defended at a cost of $24,000. Assume
that all costs were incurred on January 1, 2015.
Carrying value is computed annually when a bond is issued for other than its face value.
For a bond issued at a discount, how will this component change as the bond
approaches maturity?
a.Decrease
b.Increase
c.Remain constant
d.Not enough information given to decide.
Malco Tile Shop purchased insurance coverage for two years on July 1, 2015, for its
retail shop for $3,600. Malco recorded the prepayment as an asset. Malco prepares its
adjusting entries at year end December 31.
A. What is the effect on the accounting equation of the adjusting journal entry necessary
at December 31, 2015?
B)How much will be reported on the balance sheet at December 31, 2015 for prepaid
insurance?
C)How much will be reported on the income statement for the year ended December
31, 2015, for insurance expense?
D)If the adjustment in part A is not recorded, by what amount will net income be over
or understated at December 31, 2015?
E)How much will be reported on the statement of cash flows for the year ended
December 31, 2015? In which activity? (operating, investing, financing)
F)Identify the effects on accounts adjusted at December 31, 2016.
G)How much will be reported on the balance sheet at December 31, 2016 for prepaid
insurance?
H)How much will be reported on the income statement for the year ended December
31, 2016, for insurance expense?
I)How much will be reported on the statement of cash flows for the year ended
December 31, 2016? In which activity? (operating, investing, financing)
Grenada Corporation
Use the note on Disclosure of Leases for the Grenada Corporation to answer the
questions that follow.
The Corporation leases office, warehouse and showroom space, retail stores and office
equipment under operating leases, which expire no later than 2029. The Corporation
normalizes fixed escalations in rental expense under its operating leases. Minimum
annual rentals under non-cancelable operating leases, excluding operating cost
escalations and contingent rental amounts based upon retail sales, are payable as
follows:
Rent expense was $12,551,000; $8,911,000; and $5,768,000 for the years ended March
31, 2014, 2013,and 2012 respectively.
Review the information for Grenada Corporation.
REQUIRED:
Determine the effect on the accounting equation when recording each type of lease
described in the previous question.
The following is the consolidated statements of income for Scenic View Foods
Corporation for the years ending December 31, 2015 and 2016
Operating costs and expenses
Company-operated restaurants
Refer to the consolidated statements of income for Scenic View Foods Corporation.
Identify three specific accounts of Scenic View Foods that might include expenses accrued
as a result of adjusting journal entries. Show what these entries would look like in journal
format. Ignore amounts.
The following data is available for one of the products sold by Share, Inc., which uses a
perpetual inventory system.
Refer to the data for Share, Inc.
If the moving average method is used, how much is cost of goods sold for May?
The following data is available for one of the products sold by Learning Tree, Inc.,
which uses the perpetual
inventory system:
Refer to the data for Learning Tree, Inc.
If the moving average method is used, what is the amount assigned to cost of goods
sold for the 2,500 units sold on May 10?
PatentCopyright
GoodwillRevenue expenditure
Natural resourcesResearch and development costs TrademarkCapital expenditure
______________________________is an account that can only exist if one company
purchases another business and the cost exceeds the fair market values of the
identifiable net assets at the time acquired.
_________________________depreciation is the GAAP depreciation method
considered to be
“accelerated” in nature.
The following balance sheet items from Fasoli, Inc. are listed for December 31, 2015:
Read the information about Fasoli, Inc.
REQUIRE:
Present the current liabilities section (including the total) of a classified balance sheet.
For each of the following sentences 133-140, select the word or group of words that
best completes the statement.
A(n) results when cash is paid before the related amount is reported on the income
statement.