The adjusting entry to record $650 of expired insurance would include a debit to
Unearned Insurance.
When computing an impairment loss for a tangible asset, the market price shall be the
fair value unless no active market exists for the asset.
Under the indirect method, a loss from the sale of a fixed asset is subtracted from net
income.
All creditor transactions will result in an adjusting entry.
It is against SEC regulations to promote the corporation in the annual report.
The loss from discontinued operations is reported in the income statement after the tax
effect.
The excess of cash over current liabilities is known as working capital.
In the aging of accounts receivable method, one would expect the bad debts percentages
to increase as the age of the accounts receivable increases.
Cash dividends are an expense, and therefore they appear on the income statement.
All else equal, the lower the accounts receivable turnover ratio and the higher the days
to collect accounts receivable, the better.
The portion of a long-term liability that is due within a year is still included in the
long-term liability section of the balance sheet.
Chorba Chocolates had the following account balances on its balance sheets at
December 31, 2012 and 2011, respectively:
Depreciation expense for 2012 was $7,000. There were no gains or losses on the 2012
income statement. One fixed asset with an original cost of $8,000 was sold during
2012.What was the cash flow associated with the acquisition of fixed assets by Chorba
Chocolates in 2012?
A) $(2,000)
B) $(8,000)
C) $(14,000)
D) $(13,000)
E) $(21,000)
Kendall Corporation has 600,000 shares authorized and 150,000 shares issued and
outstanding of its $4 par value common stock. The stock is currently selling for $50 per
share. There is $900,000 of additional paid-in capital and the firm has $3,000,000 of
retained earnings.
Prepare the appropriate journal entry for Kendall Corporation for each of the alternative
events below.
a) 2% stock dividend
b) 100% stock dividend
c) 2 for 1 stock split (Assume 300,000 new shares were exchanged for the old shares)
The following data pertains to Greenwold Manufacturing. Total assets at January 1,
20X9, were $290,000; at December 31, 20X9, total assets were $334,000. During
20X9, sales were $995,000; cash dividends declared were $10,000; and operating
expenses (exclusive of cost of goods sold) were $545,000. Total liabilities at December
31, 20X9, were $128,000; at January 1, 20X9, total liabilities were $105,000. There was
no additional paid-in capital during 20X9. What was net income for 20X9?
A) $26,000
B) $31,000
C) $201,000
D) $440,000
E) $450,000
Limited liability means
A) that in the event of liquidation, owners need to contribute only enough additional
money so as to fully pay off the creditors of a corporation.
B) the creditors of a corporation can receive only up to and no more than the amount
due to them.
C) that the company is required to pay only current liabilities in the current year and has
no obligation to pay long-term liabilities in the current year.
D) that corporations can have liabilities only up to a certain amount, due to limits on the
company’s borrowing capability.
E) the creditors of the corporation have claims on only the assets of the corporation and
not the assets of the owners of the corporation.
When preparing the statement of cash flows under the direct method, an appropriate
procedure would be to
A) subtract a gain from the sale of a fixed asset to net income.
B) subtract an increase in accounts receivable from sales when calculating cash
received from customers.
C) subtract depreciation expense from net income.
D) add a loss from the sale of a fixed asset to net income.
E) add depreciation expense to net income.
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 periodic LIFO as its inventory valuation method?
A) $240
B) $270
C) $288
D) $300
E) $438
XBRL
A) is only used in the United States.
B) requires ERP programs.
C) is used to compare different companies.
D) is not an XML-based computer language.
E) does not work with accounting data.
Presented below are the balance sheets of Tallton Company and Handel Company at
January 1, 2X13:
On January 1, 2X13, Tallton Company acquired 100% of the outstanding common
stock of Handel
Company for $140 in cash. Assume the book value of Handel’s assets and liabilities
equals the market value.
If the net income for 2X13 was $22 and $30 for Handel Company and Tallton
Company, respectively, and none of the income resulted from intercompany sales, what
would be the net income on the consolidated income statement? Assume Tallton’s net
income includes the equity in earnings of Handel Company.
A) $52.00
B) $22.0
C) $26.00
D) $30.00
E) $-0-
Notes Payable are classified as
A) equity.
B) assets.
C) owner investments.
D) liabilities.
E) expenses.
Payton Industries had the following purchases as of September 30, 20X3.
On September 20, 20X3, the company sold 240 units at $16.00 per unit. On September
30, 20X3, a competitor announced a new model which resulted in the cost of Payton’s
inventory dropping to the new replacement cost, which was $10.75 per unit. The net
realizable value also declined. Payton Industries uses a perpetual inventory system.
1. What is the balance in the inventory account on September 30, 20X3, if Payton
Industries uses:
a. FIFO?
b. LIFO?
2. What journal entry is necessary on September 30, 20X3, if Payton Industries uses
lower-of-cost-or-market, where cost is defined as:
a. FIFO?
b. LIFO?
Payton Corporation, acquired some office equipment, including a desk costing $900.
The owner of the business next door said that he had been searching for a desk just like
that one, so Payton Corporation, sold the desk to its business neighbor at cost, receiving
$400 in cash, with the remainder to be paid in 30 days. The effect of this transaction on
Payton Corporation, would be to
A) increase the cash account by $400, increase the capital account by $500, and
decrease the equipment account by $900.
B) increase the cash account by $400, increase the accounts payable account by $500,
and decrease the equipment account by $900.
C) increase the cash account by $400, decrease the accounts payable account by $500,
and decrease the equipment account by $900.
D) increase the cash account by $400, increase the accounts receivable account by
$500, and decrease the equipment account by $900.
E) increase the cash account by $400, decrease the accounts receivable account by
$500, and decrease the equipment account by $900.
Neutrality is defined as
A) information which is free from bias and not slanted to influence the behavior of
decision makers.
B) the capability of information to make a difference to the decision maker.
C) the quality of information that allows users to depend on it to represent the
conditions or events that it purports to represent.
D) a correspondence between the accounting numbers and the resources or events those
numbers purport to represent.
E) a quality of information such that there would be a high extent of consensus among
independent measures of an item.
By using ________, shareholders may express (vote) their preference without traveling
to the site of the annual meeting.
A) a preemptive right
B) a corporate proxy
C) a stock option
D) a stock split
E) a stock dividend
Montreal Electronics has the following data available:
What is the price-earnings ratio for Montreal Electronics in 2013? Has the
price-earnings ratio improved or not improved since 2012?
A) 15, not improved
B) 15, improved
C) 15, unknown
D) 20, improved
E) 20, not improved
Glass Manufacturing incurred a loss of $28 due to a flood in a place that has floods
once in 100 years.
Prepare the following:
a. Beginning with income from continuing operations before income taxes of $100,
complete the remainder of Glass Manufacturing’s income statement.
b. Prepare the necessary earnings per share disclosure, assuming that Glass
Manufacturing has no convertible securities or common stock equivalents and has 25
common shares outstanding throughout the year. There are no preferred dividends.
Which of the following statements is correct?
A) The perpetual inventory system uses a separate account for Purchase Returns and
Allowances.
B) The periodic inventory system continually updates the Inventory and Cost of Goods
Sold accounts.
C) The perpetual inventory system requires a closing entry in order to determine Cost of
Goods Sold.
D) The Purchases account is used under both the periodic and perpetual inventory
systems.
E) Under the periodic inventory system, neither the Cost of Goods Sold account nor the
Inventory account is updated on a daily basis.
Treasury stock can be
A) used for stock purchase plans.
B) used to increase cash when the treasury stock is purchased.
C) used to distribute to employees for bonuses.
D) both A and B
E) both A and C
The issuance of bonds is shown on the statement of cash flows as
A) a cash inflow from financing activities.
B) a cash inflow from investing activities.
C) a cash inflow from operating activities.
D) a cash outflow from financing activities.
E) a cash outflow from investing activities.