Indicate where the purchase of land for cash would appear, if at all, on the indirect
statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Answer:
The accountant at Cedric Company has determined that income before income taxes
amounted to $7,000 using the FIFO costing assumption. If the income tax rate is 30%
and the amount of income taxes paid would be $315 greater if the LIFO assumption
were used, what would be the amount of income before taxes under the LIFO
assumption?
a. $5,950
b. $7,000
c. $7,315
d. $8,050
Answer:
XYZ Company accepted a national credit card for a $4,000 purchase. The cost of the
goods sold is $2,400. The credit card company charges a 3% fee. What is the impact of
this transaction on net operating income?
a. Increase by $1,480
b. Increase by $1,552
c. Increase by $1,600
d. Increase by $3,880
Answer:
If a fully depreciated plant asset is still used by a company, the
a. estimated remaining useful life must be revised to calculate the correct revised
depreciation.
b. asset is removed from the books.
c. accumulated depreciation account is removed from the books but the asset account
remains.
d. asset and the accumulated depreciation continue to be reported on the balance sheet
without adjustment until the asset is retired.
Answer:
An unacceptable way to make a correcting entry is to
a. reverse the incorrect entry.
b. erase the incorrect entry.
c. compare the incorrect entry with the correct entry and make a correcting entry to
correct the accounts.
d. correct it immediately upon discovery.
Answer:
Under IFRS
a. companies can apply fair value to property, plant, and equipment and natural
resources.
b. companies can apply fair value to property, plant, and equipment but not to natural
resources.
c. companies can apply fair value to neither property, plant, and equipment nor natural
resources.
d. companies can apply fair value to natural resources but not to property, plant, and
equipment.
Answer:
On February 1, Andrews Company purchased printing supplies of $2,500. A month end
inventory shows that the company has supplies of $600 on hand. The adjusting entry for
this prepaid expense will include
a. a debit to Supplies for $600 and a credit to Supplies Expense for $600
b. a debit to Supplies Expense and a credit to Cash for $1,900
c. a debit to Supplies Expense and a credit to Supplies for $1,900
d. a debit to Supplies and a credit to Cash for $600
Answer:
Which of the following would not result in unearned revenue?
a. Rent collected in advance from tenants
b. Services performed on account
c. Sale of season tickets to football games
d. Sale of two-year magazine subscriptions
Answer:
Todd Corporation issues its bonds at a discount. Amortization of the discount will
a. decrease bond interest expense.
b. increase bond interest expense.
c. decrease the carrying value of the bonds on the balance sheet.
d. be reported as a loss on the income statement.
Answer:
Cost of goods available for sale is computed by adding
a. freight-in to net purchases.
b. beginning inventory to net purchases.
c. beginning inventory to purchases and freight-in.
d. beginning inventory to cost of goods purchased.
Answer:
An example of poor internal control is
a. The accountant should not have physical custody of the asset nor access to it.
b. The custodian of an asset should not maintain or have access to the accounting
records.
c. One person should be responsible for handling related transactions.
d. A salesperson makes the sale, and a different person ships the goods.
Answer:
A company just starting business made the following four inventory purchases in June:
A physical count of merchandise inventory on June 30 reveals that there are 250 units
on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold
for June is
a. $683.
b. $825.
c. $1,290.
d. $1,432.
Answer:
In a period of rising prices, the costs allocated to ending inventory may be understated
in the
a. average-cost method.
b. FIFO method.
c. gross profit method.
d. LIFO method.
Answer:
Lark Corporation retires its $800,000 face value bonds at 104 on January 1, following
the payment of annual interest. The carrying value of the bonds at the redemption date
is $829,960. The entry to record the redemption will include a
a. credit of $2,040 to Loss on Bond Redemption.
b. debit of $2,040 to Loss on Bond Redemption.
c. credit of $32,040 to Premium on Bonds Payable.
d. debit of $32,000 to Premium on Bonds Payable.
Answer:
The assumption that assumes a company will continue in operation long enough to
carry out its existing objectives is the
a. economic entity assumption.
b. going concern assumption.
c. monetary unit assumption.
d. time period assumption.
Answer:
Hooke Company received proceeds of $377,000 on 10-year, 8% bonds issued on
January 1, 2014. The bonds had a face value of $400,000, pay interest semi-annually on
June 30 and December 31, and have a call price of 101. Hooke uses the straight-line
method of amortization.
What is the amount of interest expense Hooke will show with relation to these bonds
for the year ended December 31, 2015?
a. $32,000
b. $30,160
c. $34,300
d. $29,700
Answer:
‘Intent to convert’ does not include an investment used as a resource that
will be used whenever the need for cash arises.
Answer:
Dougan Company purchased equipment on January 1, 2014 for $90,000. It is estimated
that the equipment will have a $5,000 salvage value at the end of its 5-year useful life.
It is also estimated that the equipment will produce 100,000 units over its 5-year life.
Instructions
Answer the following independent questions.
1> Compute the amount of depreciation expense for the year ended December 31, 2014,
using the straight-line method of depreciation.
2> If 16,000 units of product are produced in 2014 and 24,000 units are produced in
2015, what is the book value of the equipment at December 31, 2015? The company
uses the units-of-activity depreciation method.
3> If the company uses the double-declining-balance method of depreciation, what is
the balance of the Accumulated Depreciation’”Equipment account at December 31,
2016?
Answer:
*
Answer:
Using special journals can save time in posting because column totals are often posted
rather than individual entries.
Answer:
Depreciation expense for a period is an ______________ rather than a factual
measurement of cost that has expired.
Answer:
The double-entry system of accounting refers to the placement of a double line at the
end of a column of figures.
Answer: