Refer to Kalahari Limited. At the maturity date, besides an interest payment, the
company would repay the bondholders
Kalahari Limited
On January 2, 2013, this company issued 1,000,000, 10-year bonds for $1,150,000. The
bonds pay interest on June 30 and December 31. The stated rate is 10% and the market
rate is 8%. The company plans to use the effective interest method of amortizing bond
discounts and premiums. a. $850,000.
b. $1,150,000.
c. $1,000,000.
d. only the last interest payment.
This principle requires that the activities of a company be initially measured at their
exchange price at the time the activity occurs.
Match the following principles with their correct definition.
a. Comparability g. Historical cost
b. Conservatism h. Matching
c. Double-entry accounting i. Monetary unit
d. Economic entity j. Revenue recognition
e. Going concern k. Time period
f. Full disclosure
Refer to Fabian Woodworks. If the company uses the straight-line method of
depreciation, what is the book value at December 31, 2014?
Fabian Woodworks This company purchased a truck at a cost of $12,000. The truck
has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000
hours of operation. The truck was purchased on January 1, 2012, and was used 27,000
hours in 2012 and 26,000 hours in 2013. a. $ 8,000
b. $ 6,000
c. $10,000
d. $ 4,000
Flag Financial uses straight-line depreciation for its equipment with an estimated useful
life of 10 years and zero residual value. The CEO points out that the equipment will last
much shorter than 10 years, perhaps 5 years. What is the impact on earnings per share
and net income of depreciating equipment over 5 years rather than 10 years?
a. Both earnings per share and net income will decrease.
b. Both earnings per share and net income will increase.
c. Earnings per share will decrease and net income will increase.
d. Earnings per share will increase and net income will decrease.
Costs related to acquiring an asset, such as sales or excise taxes, transportation,
insurance during shipment.
For each of the following items, indicate whether each would be treated as capital
expenditure or revenue expenditure. (Choices may be used more than once.)
The Securities Exchange Commission (SEC) is concerned with
a. Developing a new conceptual framework in order to reduce differences in financial
reports for global companies.
b. Setting accounting rules for all companies that are incorporated in the United States.
c. Setting accounting rules for publicly-traded companies in the United States.
d. Working to reduce differences in accounting reports issued by governmental units.
The balance in the retained earnings account represents
a. cash in the bank.
b. the amount of cash available for dividends.
c. accumulated revenues from all prior years of operations.
d. accumulated earnings that have not been distributed to stockholders.
Assets become expenses when?
a. Purchased for cash or on credit.
b. Asset is delivered.
c. They are paid for in cash.
d. Their economic benefits expire.
Occurs when a bond is issued for an amount that is less than the principal. 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
Refer to Randstad, Inc. The dividend payout ratio for 2015 is
Randstad, Inc.
Information from the financial statements is provided below:
a. 10%.
b. 28%.
c. 32%.
d. 38%.
Beginning accounts receivable were $200,000 and ending accounts receivable were
$300,000. Assuming cash collections totaled $1,100,000, what were credit sales?
a. $1,200,000
b. $1,100,000
c. $1,300,000
d. $1,500,000
The operating cycle is the elapsed time between the
a. purchase of goods or services and the ultimate collection of cash from customers
related to the sale of those goods.
b. sale of goods or services to customers and the payment to suppliers for those goods.
c. purchase of goods from suppliers and the performance of the related service for
customers.
d. sale of goods and the delivery of those goods to customers.
Futronics purchased a truck at the beginning of 2012 for $41,500 and decided to
depreciate it over a 6-year period using the straight-line method. The estimated residual
value was $5,500. At the beginning of 2013, the company determined that a 4-year life
should have been used to depreciate the truck. The estimated residual value was not
affected by the revision in the asset’s life.
The preferred stock feature which provides for preferred stock to be exchanged for
common stock.
Assets such as coal deposits, oil reserves, and mineral deposits Match these terms with
their correct definition.
a. Franchise e. Organizational costs
b. Intangible operating assets f. Property, plant, and equipment
c. Natural resources g. Trademark
d. Operating assets h. Voluntary disposal
Refer to Metz Vets. Which of the following activities results in a cash inflow?
Metz Vets The company’s accountant prepared this reminder for his intern: Cash = CL –
LTL – CS – RE – NCCA – LTA
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)
Which of the following organizations is primarily responsible for establishing GAAP in
the United States?
a. Securities Exchange Commission (SEC)
b. Financial Accounting Standards Board (FASB)
c. International Accounting Standards Board (IASB)
d. Internal Revenue Service (IRS)
Costs incurred to keep plant assets in normal operating condition are called revenue
expenditures.
A cost-cutting measure used in many business organization is the use of a(n)
____________________ fund, whereby a custodian handles disbursements and
documentation for small expenditures.
Business combinations can occur through either an asset or ____________________
acquisition.
When there is proper segregation of duties, the likelihood of fraud is reduced so that an
employee attempting to carry out a fraudulent scheme would have to work in
____________________ with another employee.
Current liabilities are typically listed in the order in which they will be paid.
Warranty expenses result when a company sells products then estimates the units and
cost per unit for repairs and replacements that may occur during the warranty period.
Under a periodic inventory system, shipping costs are not charged to the inventory asset
account. Instead, such costs are charged to the ____________________ account.
The preparation of _______________ is necessary to get the account balances properly
stated and up to date.