ERP is a means of organizing computer accounting information.
Gains on disposal of plant assets are generally shown as “other income” on the income
statement.
The rate of return on investment is equal to invested capital divided by income.
Economic value added is a performance measure stating that a company must earn
more than it must pay for its capital if it is to increase in value.
Ratios such as the return on sales ratio allow readers to assess whether or not a
company will provide them with a particular rate of return on their investment.
A main goal of the separation of duties is to make sure that one person, acting alone,
cannot defraud the company.
Income tax withholdings and Social Security withholdings are a type of payroll tax that
is an expense to the employer.
Under a periodic inventory system, cost of goods available for sale is ending inventory
plus purchases.
The stable monetary unit concept is based on a principle of low inflation.
The method of accounting for trading securities and available-for-sale securities in
which the assets are valued at market value on the balance sheet is known as the
A) balance sheet method.
B) market method.
C) equity method.
D) consolidated method.
E) maturity method.
At the beginning of 20X3, Shingles Roofing had a liability for warranties of $7,000 on
the books. During 20X3, Shingles Roofing had sales of $310,000. The company
estimates that the cost of servicing products under warranty will average 2.5% of sales.
Expenditures (all in cash) to satisfy warranty claims during 20X3 were $6,200, of
which $2,500 was for products sold in 20X3.
a. Prepare the journal entries for sales revenue and the related warranty expense for
20X3. Assume
all sales are for cash.
b. Prepare the journal entry for the warranty expenditures.
c. Compute the December 31, 20X3, ending balance in the Liability for Warranties
account.
Biscuit Bakery had the following activity in its inventory account during August 20X3.
Cost per
What is the ending inventory balance at August 31, 20X3, for Biscuit Bakery if the
company uses perpetual LIFO as its inventory valuation method?
A) $240
B) $270
C) $288
D) $300
E) $438
What is the concept that differentiates a corporation from its management?
A) Entity
B) Going concern
C) Reliability
D) Cost-benefit criterion
E) Materiality
A recoverability test for impairment
A) is based on the discounted present value of the future cash flows from the asset.
B) requires SEC approval.
C) establishes that the asset is impaired.
D) only occurs when the asset is sold.
E) identifies the write-up value.
Compatibility Services acquired an $80,000 machine on January 1, 20X3. The machine
is estimated to have a useful life of 8 years, and a residual value of $4,000. For
units-of-production depreciation purposes, the machine is expected to produce 400,000
units. If Compatibility Services uses double-declining-balance depreciation, what is the
depreciation expense in 20X5?
A) $ 5,184
B) $ 5,760
C) $11,250
D) $14,400
E) $16,000
For each of the following transactions, indicate whether the current ratio increases (IN),
decreases (DE), or is not affected (NA).
a. Purchased equipment for cash
b. Paid a current liability
c. Cash received from outstanding accounts receivable
d. Cash sale of a long-term asset for a gain
e. Purchased inventory on credit
Referring to Exhibit 5-1, what was the cash paid for supplies by Cartell Paper Products
in 2012? (Assume all purchases of supplies were for cash.)
A) $3,600
B) $4,500
C) $2,400
D) $2,700
E) $4,800
Which of the following ownership percentages is the correct one(s) for deciding
whether an investor has significant influence over an investee?
A) up to 20%
B) up to 50%
C) between 20% and 50%
D) between 25% and 50%
E) above 20%
Eleston Printing acquired the following short-term equity securities on January 1,
2X12:
The quarter-end prices per share were as follows:
Eleston Printing considers Color, Inc. stock to be a trading security and Black, Inc. and
White, Inc. to be available-for-sale securities.
What will be the net gain or loss reported on the income statement of Eleston Printing
for the 3 month period ending December 31, 2X12?
A) $(500)
B) $-0-
C) $(250)
D) $300
E) $500
Boardman Pet Supplies began operations on January 1, 20X3, and issued preferred and
common stock. The stockholders’ equity section of the Boardman Pet Supplies’s balance
sheet immediately after the issuance of the preferred and common stock was as follows:
Dividend payments were as follows:
No additional shares of preferred or common stock were issued after January 1, 20X3,
nor did the company ever have treasury stock. Assume there was sufficient Retained
Earnings to declare dividends in each year.
How would the dividends be distributed for 20X3 through 20X6 between the preferred
stock and the common stock if
a. the preferred stock were cumulative?
b. the preferred stock were noncumulative?
Dugger Excavating bought a machine for $24,000 on January 1, 20X3, with a useful
life of 5 years and a salvage value of $4,000. At the beginning of 20X4, Dugger finds
the residual value will be zero.
Assume Dugger employs straight-line depreciation. Additionally assume that at the
beginning of 20X4 Dugger finds a $200 attachment that extends the life of the
equipment 2 years beyond the original estimate. What will be the depreciation expense
in 20X4?
A) $4,800
B) $4,667
C) $3,367
D) $4,000
E) $4,200
________ are government- and business-issued notes and bonds with maturities of 1
year or less.
A) Certificates of deposit
B) Commercial paper
C) U.S. Treasury obligations
D) Cash equivalents
E) Short-term debt securities
Companies electing to revalue their fixed assets under IFRS are allowed to
A) only increase the carrying value of the fixed asset.
B) only decrease the carrying value of the fixed asset.
C) only increase the historical cost of the fixed asset.
D) only decrease the historical cost of the fixed asset.
E) increase or decrease the carrying value of the fixed asset.
All of the following would be included in a company’s investing activities except
A) purchase of land.
B) payment of dividends.
C) collection of loan repayments.
D) purchase of equipment.
E) purchase of another company’s stock.
Wetzel Company has the following data:
What is the total-debt-to-total-assets ratio for Wetzel Company in 2X13? Has the
total-debt-to-total-assets ratio improved or not improved since 2X12?
A) 0.14, improved
B) 0.18, improved
C) 0.18, not improved
D) 0.50, improved
E) 0.50, not improved
The accountant at Forgum Corporation is asked to prepare the financial statements for
the month of July. Which financial statement will he NOT prepare?
A) Balance sheet
B) Income statement
C) Statement of earnings and taxation
D) Statement of cash flows
E) Statement of stockholders’ equity
________ are investments in debt securities that are not held for active trading but that
may be sold before maturity.
A) Short-term equity securities
B) Held-to-maturity securities
C) Trading securities
D) Available-for-sale securities
E) Cash equivalents
Given below are the daily balances in the accounts of Travel Tips, Inc.. Assuming only
one transaction occurred each day, explain the nature of each transaction from June 1 to
June 10.
Presented below are the balance sheets of Blanco, Inc. and Stalle Company at January
1, 2X13:
On January 1, 2X13, Stalle Company acquired 70% of the outstanding common stock
of Blanco, Inc., for $119 in cash. Assume the book value of Blanco’s assets and
liabilities equals the market value.
If Blanco, Inc., generated net income during 2X13 of $10, and none of the income was
the result of intercompany sales, what journal entry would Stalle Company make to
reflect this event?
The income statement of Bearwald Company is shown below.
Required:
1. Calculate the gross profit percentage.
2. Calculate the return on sales.
3. What term is often used in place of sales or sales revenue? Which organizations
typically use this term?
When and why are adjustments made to the books after the reconciliation of the bank
account?
Determine the cash flows from operations for Bearpaw Tours assuming the company
uses the direct method.
The entry to record equipment depreciation when the equipment depreciates $100 per
month, the balance in the Accumulated Depreciation, Equipment account is $600 and
the balance in the Equipment account is $5,600 is
Define the term “implicit transaction” and explain how these transactions are recorded
in the financial records. In addition, list two of the four principal types of adjustments
and give an example of each.
Fill in the appropriate blank figures in the income statement below.