Audit committees perform the internal audits of a company.
Examples of assets include cash, inventory, and capital stock.
Implicit interest is a form of interest expense that is not explicitly recognized in a loan
agreement.
A callable bond is one in which the bondholder can sell the bond back to the company,
even if the company does not want the bond returned.
A decrease in inventory will be added to net income when preparing the operating
activities section under the indirect method.
Liquidity focuses on whether there are sufficient current assets to satisfy current
liabilities as they become due.
Prepaid expenses are listed as current assets on the balance sheet.
Any differences between the acquisition costs and the resale proceeds of treasury stock
must never be reported as losses, expenses, revenues, or gains in the income statement.
Health insurance, life insurance, and other employee benefits paid to employees
(excluding pensions) upon retirement are referred to as other postretirement benefits.
Debt securities classified as available-for-sale securities are carried at amortized cost on
the balance sheet.
An account is a summary record of the changes in a particular asset, liability, or owners’
equity.
Assets such as prepaid rent may be thought of as costs that are stored to be carried
forward to future periods and recorded as expenses in the future.
Higher rated bonds are safer, and companies with better ratings generally pay lower
interest rates.
What is the present value of $2,000 with 16% interest, to be received in 18 years?
A) $161.61
B) $150.30
C) $155.83
D) $148.48
E) $138.20
Machiel Manufacturing acquired a $60,000 machine on January 1, 20X9. The machine
is estimated to have a useful life of 4 years, and a residual value of $10,000. For
units-of-production depreciation purposes, the machine is expected to produce 500,000
units. If Machiel Manufacturing uses units-of-production depreciation, and the
company produces 80,000 units in 20X9, what will be the depreciation expense for
20X9?
A) $5,760
B) $6,400
C) $7,200
D) $8,000
E) $8,800
When the market interest rate is 13% and the coupon rate is 10%, a bond sells at
A) a discount.
B) a premium.
C) par.
D) liquidation value.
E) Cannot be determined without more information
Recording an accrual entry involves recording a(n) ________ or ________ at the end of
an accounting period even though no explicit transaction occurs.
A) fixed asset; long-term liability
B) intangible asset; long-term liability
C) cash sale; credit sale
D) dividends; retained earnings
E) receivable; payable
Which of the following statements is incorrect?
A) Both freight-in and freight-out affect gross profit.
B) Freight-in appears as part of cost of goods sold under the periodic inventory system.
C) Freight-out is a shipping expense.
D) Freight-in for the purchaser occurs when the terms of the invoice are FOB shipping
point.
E) When the seller bears the shipping cost, the invoice is stated as FOB destination.
An example of stockholders’ equity is
A) accounts payable.
B) accounts receivable.
C) capital stock.
D) marketable securities.
E) cash and cash equivalents.
Which of the following is NOT a typical attribute of an audit committee?
A) Audit committees are being used more and more throughout the world.
B) The audit committee is employed by the external auditors.
C) Audit committees are comprised solely of outside board members.
D) Audit committees act as a liaison among the full board of directors, internal auditors,
external auditors, and management.
E) The audit committee oversees the internal accounting controls, financial statements
and financial affairs of a corporation.
R&D costs are expensed in the period that they occur,
A) which is a violation of the matching principle.
B) because FASB determined that the benefits of R&D are often harder to pinpoint than
the costs.
C) because is was the only way FASB could get verifiability.
D) because IASB lobbied FASB to do so.
E) because the U.S. Congress passed a law on it.
On January 1, 2X13, Soothing Massage Company acquired, as a long-term investment,
20 bonds with a face value of $1,000 each. The bonds have a 10-year life, a 10%
coupon rate, and pay interest semi-annually every June 30 and December 31. If the
bonds were purchased by Soothing Massage Company to yield 12%, and were acquired
for $17,705.90, what is the interest revenue to be recognized by Soothing Massage
Company with respect to the interest to be received on December 31, 2X13?
A) $1,200.00
B) $1,062.35
C) $1,066.10
D) $1,000.00
E) $2,124.71
Nonmonetary assets are
A) permitted to be exchanged in lieu of cash when a company’s stock exceeds 20% of
its fair value.
B) permitted to be exchanged in lieu of cash when a company’s stock exceeds 50% of
its fair value.
C) assets with a price in terms of units of currency that could change over time.
D) assets with a price that are fixed in terms of units of currency.
E) assets that are sold to an independent third party.