In the U.S., Generally Accepted Accounting Principles (GAAP) are established by the:
A) International Accounting Standards Board (IASB).
B) Public Company Accounting Oversight Board (PCAOB).
C) Financial Accounting Standards Board (FASB).
D) American Institute of Certified Public Accountants (AICPA).
A company purchases property that includes land, buildings and equipment for $5.5
million. The company pays $180,000 in legal fees, $220,000 in commissions, and
$100,000 in appraisal fees. The land is estimated at 25%, the buildings are at 40%, and
the equipment at 35% of the property value.
Required:
Part a. Determine the total acquisition cost of this “basket purchase.”
Part b. Allocate the total acquisition cost to the individual assets acquired.
Part c. Prepare the journal entry to record the purchase assuming that the company paid
50% of the amounts using cash and signed a note (due in five years) for the remainder.
The Sarbanes-Oxley Act (SOX) requires the establishment of an audit committee that
includes the:
A) president of the company.
B) chief financial officer of the company.
C) independent directors.
D) company’s external auditors.
When a deferral adjustment is made to an asset account, that asset becomes a(n):
A) liability.
B) other asset.
C) revenue.
D) expense.
If a fully depreciated asset with no residual value is “retired” to a junk yard without
receiving any cash:
A) a gain on disposal will be recorded.
B) depreciation must be recorded as though the asset were still on the books.
C) a loss on disposal will be recorded.
D) no gain or loss on disposal will be recorded.
At December 31, 2017 and 2016, respectively, Tyler Industries reported land, buildings,
and equipment totaling $5,655,000 and $2,152,000 along with Accumulated
Depreciation of $1,000,000 and $600,000 on its balance sheets. Revenues amounted to
$38,227,000 and $12,113,000 for 2017 and 2016, respectively.
Required:
Part a. Compute Tyler’s fixed asset turnover ratio for the year ended December 31,
2017.
Part b. Assume that Tyler’s fixed asset turnover ratio increased from 2016 to 2017. How
might an analyst interpret an increasing ratio?
Part c. Alternatively, assume that Tyler’s fixed asset turnover rate decreased. Does a
declining ratio always indicate a negative trend?
A declining inventory turnover ratio may mean that:
A) goods are not selling as fast as they were in the past.
B) the company is expecting to sell more in the future.
C) goods are selling, but it is taking longer to collect payment.
D) goods cannot be shipped fast enough.
Judging only from the ratios below, which of the following clothing wholesalers is least
likely to be having cash flow problems?
A) Company A: Receivable turnover of 5; inventory turnover of 2
B) Company B: Receivable turnover of 2; inventory turnover of 5
C) Company C: Receivable turnover of 10; inventory turnover of 10
D) Company D: Receivable turnover of 1; inventory turnover of 1
Which account would be increased with a debit?
A) Retained Earnings
B) Accounts Receivable
C) Common Stock
D) Notes Payable
Debentures are:
A) unsecured bonds.
B) secured bonds.
C) serial bonds.
D) callable bonds.
Phelps, Inc. had assets of $67,646, liabilities of $15,466, and 10,718 shares of
outstanding common stock at December 31, 2014. Net income for 2015 was $7,829.
The company had assets of $79,571, liabilities of $18,551, 10,771 shares of
outstanding, and its stock was trading at a price of $10 per share at December 31, 2016.
Net income for 2016 was $9,993.
Required:
Part a. Calculate EPS for 2016.
Part b. Calculate ROE for 2016.
Part c. Calculate the Price/Earnings ratio for 2016
Which of the following sequences indicates the correct order of steps in the accounting
cycle?
A) Post to T-accounts, prepare journal entries, prepare trial balance, and prepare
financial statements.
B) Post to T-accounts, prepare journal entries, prepare financial statements, and prepare
trial balance.
C) Prepare Journal entries, post to T-accounts, prepare trial balance, and prepare
financial statements.
D) Prepare Journal entries, post to T-accounts, prepare financial statements, and prepare
trial balance.
A company reported Salaries and Wages Payable of $750 at the beginning of the year
and $2,500 at the end of the year. The income statement for the year reported Salaries
and Wages Expense of $56,200. How much cash was paid for salaries and wages during
the year?
A) $52,950
B) $56,200
C) $54,450
D) $53,700
BetterBuy uses a perpetual inventory system. BetterBuy sells a computer from
inventory for $599 on credit. BetterBuy originally bought the computer from IBM for
$395. What journal entry (entries) will BetterBuy prepare to record the sale?
A) Debit Cash and credit Sales Revenue for $599; debit Cost of Goods Sold and credit
Inventory for $395
B) Debit Accounts Receivable for $599, credit Inventory for $395, and credit Gross
Profit for $204
C) Debit Accounts Receivable and credit Sales Revenue for $599; debit Cost of Goods
Sold and credit Inventory for $395
D) Debit Inventory for $395, debit Cost of Goods Sold for $204, and credit Accounts
Receivable for $599
Companies A and B both report net income growth of 12% per year. Company A has a
receivables turnover ratio of 5.6, which is lower last year. Company B has a receivables
turnover ratio of 11.3, which is higher than last year. All other things being equal:
A) Company A is more effectively managing its receivables.
B) Company B is more effectively managing its receivables.
C) Company A’s days to collect is lower than Company B’s in both years.
D) Company B’s days to collect increased.
Use the information above to answer the following question. What is the amount of
total revenue to be reported on the income statement for the month of January?
During January 2015, the first month of operations, a consulting firm had following
transactions:
1) Issued common stock to owners in exchange for $20,000 cash.
2) Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note
for $4,000.
3) Received $9,000 in cash for consulting services performed in January.
4) Purchased $1,500 of supplies on account; all of the supplies were used in January.
5) Provided consulting services on account in the amount of $16,000.
6) Paid $750 on account.
7) Paid $3,000 to employees for work performed during January.
8) Received a bill for utilities for January of $3,400; the bill remains unpaid.
A) $45,000.
B) $9,000.
C) $29,000.
D) $25,000.