To determine whether a lottery winner would prefer to receive the money in a single
lump sum immediately or receive an equal amount over a period of years, you would
use which type of time value of money calculation?
a.The future value of an annuity.
b.The present value of an annuity.
c.The present value of a single amount.
d.The future value of a single amount.
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
To calculate the future value of an amount that is invested at 12%, compounded
quarterly, at the end of three years, the interest factor used would be
a.1% for 12 periods
b.12% for three periods
c.3% for 12 periods
d.3% for four periods
Identify the classifications of the following accounts as either current or long-term
liabilities for the December 31, 2014 balance sheet.
a.Current liability
b.Long-term liability
An amount of money owed to a creditor on a note due August 15, 2022.
A source document is a record used to accumulate amounts for each individual asset,
liability, revenue, expense, and component of stockholders’ equity.
a.True
b.False
Refer to the data for Music Corporation.
If the aging approach is used to estimate bad debts, what is the balance in the
Allowance for Doubtful Accounts after the bad debt expense adjustment?
a. $8,000
b. $8,100
c. $8,900
d. $9,600
Accrued wages is not a current liability.
a.True
b.False
Hindsville Company reported revenues of $165,000 and net income of $20,000 for
2014. Cash generated by operations was $40,000. In addition, Hindsville Company
borrowed $24,000 from a bank. During 2014, Hindsville purchased new equipment for
$30,000 cash and paid cash dividends of $15,000 to stockholders. Hindsville’s cash
balance at the beginning of 2014 was $22,000.
A)Identify the amount of cash flows for financing, investing, and operating activities
for 2014 by filling in the amounts below.
Financing Cash Flows: Investing Cash Flows: Operating Cash Flows:
C)How much did Hindsville Company’s cash balance increase or decrease during 2014?
Which of the following statements regarding contingencies is true?
a.Contingencies that are not estimable should not be disclosed even if probable.
b.Contingent assets, if probable and estimable, are treated in much the same way as
contingent liabilities.
c.Contingencies that are probable and estimable must be recorded before the outcome
of future events.
d.The accounting principle that determines whether a contingent asset is recorded is that
of materiality.
Suma Corp. reported the following information for 2015 and 2016.
How much cash was paid for salaries during 2016?
a. $55,100
b. $55,200
c. $57,000
d. $58,900
The journal entry to write down inventory to its market value results in a loss on the
income statement.
a.True
b.False
Marvel Shoes reported the following items on its statement of cash flows for the current
year:
Read the information about Marvel Shoes. What was the amount of net increase or
decrease in the cash balance for Marvel Shoes for the current year?
a.$10,000 increase
b.$30,000 increase
c.$40,000 increase
d.$70,000 increase
Use the equation presented below to answer the question that follows:
Cash = CL + LTL + CS + RE – NCCA – LTA
where:
CL = Current liabilities LTL = Long-term liabilities CS = Common stock
RE = Retained earnings
NCCA = Noncash current assets LTA = Long-term assets
Which of the following activities results in a cash inflow?
a.Increases in noncash current assets (NCCA)
b.Decreases in current liabilities (CL)
c.Increases in common stock (CS)
d.Decreases in retained earnings (RE)
Select the account that would be increased to show each of the following costs.
a.Land
b.Land Improvements
c.Buildings
d.Machinery and Equipment
e.An Expense Account
The interest costs incurred during the construction period of a new building built by a
company for its own use.
For each item listed, select the section of the balance sheet in which the item would be
reported.
a.Current Assets
b.Property. Plant, and Equipment
c.Current Liabilities
d.Long-term Liabilities
e.Stockholders’ Equity
Bonds payable
Promissory notes are non-negotiable.
a.True
b.False
Match each of the following terms related to interest and time value of money
calculations to their appropriate definition.
a.Time value of money
b.Simple interest
c.Compound interest
d.Future value of a single amount
e.Present value of a single amount
f.Annuity
g.Future value of an annuity
h.Present value of an annuity
A series of payments of equal amount.
Moss Company has provided the following information from its accounting records for
the current year:
Read the information for Moss Corporation. What are Moss’ current assets?
a. $100,000
b. $165,000
c. $210,000
d. $240,000
Given below are several ratios. Select the accounts or amounts that would be used in
order to calculate the ratio. You will have more than one response to each ratio. Some
accounts or amounts may not be used at all. (Select all that apply.)
Debt service coverage ratio
a.Interest expense
b.Income tax expense
c.Cash flow from operations before interest and tax payments
d.Cash paid for acquisitions
e.Cash flow from operations
f.Total dividends paid
g.Interest payments
h.Principal payments on debt
On October 1, Lawrence Company borrowed $60,000 from Fourth National Bank on a
1-year, 7% note. If the company’s fiscal year ends as of December 31, Lawrence should
make an entry to increase
a.interest payable, $1,050.
b.prepaid interest, $3,150.
c.notes payable, $1,050.
d.interest expense, $4,200.