The worksheet facilitates preparation of all of the following financial statements except:
a. Cash Flow Statement c. Retained Earnings Statement
b. Balance Sheet d. Income Statement
When using the direct method to determine operating cash flows, how is the purchase
of equipment for cash shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
When is a liability for dividends created?
a. at the end of each fiscal year
b. at the date of declaration
c. at the date of record
d. at the date of payment
Borrowing cash from a bank
Several transactions are listed. Use the choices to identify the effect on the accounting
equation for each transaction listed. (Choices may be used more than once.)
a. Assets and liabilities increase
b. Assets and contributed capital increase
c. Assets and retained earnings increase
d. Two asset accounts are impacted, but there is no net effect on total assets
e. Assets and liabilities decrease
f. Assets and retained earnings decrease
g. Liabilities increase and retained earnings decrease
h. Liabilities decrease and retained earnings increase
Forms that companies must file with the SEC to “register” their securities prior to
offering them to investors.
Match the term with its correct definition.
Liabilities that do not mature within one year. 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
In 2013, Fisher Apartments purchased an apartment building to rent to university
students. It cost the company $250 to repair damage done by a tenant to one of its units.
How should this cost be recorded?
a. It should be recorded as part of the asset account.
b. It should be recorded as repair and maintenance expense.
c. It should not be recorded as the tenants will be charged for the damage.
d. It should not be recorded since this is an immaterial amount to the landlord.
On May 1, a company borrowed $30,000 from the First National Bank on a 1-year, 6%
note. Assuming the company keeps its records on a calendar year basis, an entry is
needed on December 31st to increase
a. interest expense by $600.
b. interest expense by $1,800.
c. interest payable by $900.
d. interest payable by $1,200.
Intangibles
Several accounts from the financial records of Wynn Linders, Inc. are listed. Indicate its
normal balance and the debit/credit rules for increasing the account. (Choices may be
used more than once.)
Refer to the information for Accent Flooring. What is the total amount of interest the
company will receive when the note is collected?
Accent Flooring
The company received a promissory note from a customer on March 1, 2013. The
principal amount of the note is $20,000; the terms are 3 months and 9% annual interest.
a. $ 300
b. $ 150
c. $ 450
d. $1,800
Debt that does not have collateral and is thus unsecured.
Match these terms with their definitions.
a. Callable bonds f. Mortgage bonds
b. Capital lease g. Notes payable
c. Convertible bonds h. Operating lease
d. Debenture bonds i. Secured bonds
e. Junk bonds
Diamond Corp. prepares monthly bank reconciliations of its checking account balance.
The bank statement for October 2013 indicated the following:
An analysis of canceled checks and deposits and the records of Diamond revealed the
following items:
The correct amount of check # 627 is $980, but it was recorded as a cash disbursement
of $890. The check was issued to pay for merchandise purchased. The check was
written correctly and appeared on the bank statement correctly.
Each of the following represents an effective cash management practice except
a. short-term investments should be purchased with excess cash in order to maximize
the interest-earning potential.
b. payments should be delayed as long as possible (without compromising the
relationship with the payee) in order to maximize the interest-earning potential.
c. payments should be expedited in order to simplify record keeping.
d. receivable collections should be expedited or receivables should be sold in order to
minimize the costs associated with accounting for customer accounts and servicing
delinquent accounts.
A banker is analyzing a company which operates in the automotive industry. Which of
the following will likely be the banker’s most important consideration in determining
whether the company should receive a loan?
a. The automotive industry suffers from political pressures concerning environmental
regulation of products.
b. Inflation has been consistently high for several years.
c. The company has state-of-the-art automated equipment which enhances the
efficiency of its operating process.
d. The company has a large amount of interest payments related to other outstanding
loans.
Refer to Beard Marine. What was the economic effect of the dividend payment?
Beard Marine
The company reported the following information for the year ended December 31,
2013:
a. The dividend reduced net income for 2013.
b. The dividend should be added to net income if the company’s accounting equation is
in balance.
c. The dividend reduced total retained earnings.
d. The dividends must be paid whenever the company reports net income.
Refer to Absolute Appliances. What amount should the company recognize as interest
revenue on December 31, 2013?
Absolute Appliances
The company sold merchandise to a customer on December 1, 2013, for $120,000. The
company accepted a promissory note as payment. The note has a term of three months
and an annual interest rate of 10%. The company’s accounting period ends on
December 31. a. $ -0-
b. $ 1,000
c. $12,000
d. $11,000
Probable future sacrifices of economic benefits Match the following terms with the
appropriate definition.
a. Accrued liabilities f. Payroll taxes
b. Contingent liabilities g. Sales taxes
c. Current liabilities h. Warranty
d. Interest rate i. Withholdings
e. Liabilities
Refer to Academy Grill Supply. If the company’s year ends December 31, 2013, an
adjusting entry is needed to
Academy Grill Supply
On October 1, 2013, the company received a $50,000 promissory note from a customer.
The annual interest rate is 6%. Principal and interest will be collected in cash at the
maturity date of September 30, 2013. a. increase interest revenue by $2,250.
b. increase notes receivable by $750.
c. increase interest receivable by $750.
d. increase notes receivable by $2,250.
The amount of cash or trade-in consideration that is expected when an asset is retired
from service 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
An accountant is uncertain about the best estimate of an amount for a business
transaction. If there are two possible amounts that could be recorded, the amount least
likely to overstate assets and earnings is selected. Which of the following qualities is
characterized by this action?
a. comparability.
b. conservatism.
c. materiality.
d. neutrality.
Distinguish between current assets and operating assets.
Describe the relationship between the depreciation method chosen and income taxes
paid in the early years of asset life.
The bond’s ____________________ price is typically quoted as a percentage of the
face value of the bond.
A purchased company must be recorded at the value of the cash and other consideration
given by the acquiring company.
Any transaction or set of transactions that brings together two or more previously
separate entities to form a single accounting entity is called a ____________________.
A business combination is recorded at the cost of acquisition, without regard to the
seller’s ____________________ value.
Selling on credit protects a company from the risk that some of its receivables will
never be collected.