Victor Company issued bonds with a $250,000 face value and a 6% stated rate of
interest on January 1, 2016. The bonds carried a 5-year term and sold for 95. Victor uses
the straight-line method of amortization. Interest is payable on December 31 of each
year.
The amount of cash flow from operating activities on the December 31, 2018 statement
of cash flows would be:
A.$17,500.
B.$15,000.
C.$14,250.
D.$12,500.
The bank statement for Tetra Company contained the following items: a bank service
charge of $10; a credit memo for interest earned, $15; and a $50 NSF check from a
customer. The company had outstanding checks of $100 and a deposit in transit of
$300.
Assuming that the unadjusted bank balance was $500, determine the unadjusted book
balance.
A.$745.
B.$455.
C.$700.
D.$800.
The study of an individual item or account over several accounting periods, such as
months, quarters or years is known as:
A. Percentage analysis
B. Ratio analysis
C. Vertical analysis
D. Horizontal analysis
On December 31, 2014, Avon Company’s total current assets were $350,000 and its
total current liabilities were $185,000. On January 1, 2015, Avon paid $20,000 on
accounts payable.
Required:
(a) Compute Avon’s working capital before and after paying the account payable.
(b) Compute Avon’s current ratio before and after paying the account payable.
On January 1, 2016, the Vanguard Company purchased a copyright for $12,000.
Vanguard estimated the remaining useful life of the copyright to be 6 years.
Which of the following correctly shows the effect of the first year’s amortization of
Vanguard’s copyright?
A.
B.
C.
D.
Credit entries
A.decrease liability accounts.
B.increase asset accounts.
C.increase the common stock account.
D.increase asset and common stock accounts, and decrease liability accounts.
At the time of liquidation, Fairchild Company reported assets of $200,000, liabilities of
$120,000, common stock of $90,000 and retained earnings of ($10,000). What amount
of Fairchild’s assets are the shareholders entitled to receive?
A.$200,000
B.$80,000
C.$90,000
D.$100,000
Indicate whether each of the following statements about bonds payable is true or false.
_____ a) Premium on Bonds Payable is recorded when bonds are issued at less than
their face value.
_____ b) Premium on Bonds Payable is a liability account.
_____ c) The balance in the Discount on Bonds Payable account increases liabilities.
_____ d) Discount on Bonds Payable is an expense account.
_____ e) A discount on bonds payable occurs when the stated interest rate on the bonds
is less than the market or effective interest.
Select the incorrect statement regarding horizontal analysis.
A.Percentage analysis involves establishing the relationship of one amount to another.
B.In doing horizontal analysis, an account is expressed as a percentage of the previous
balance of the same account.
C.A horizontal analysis of cost of goods sold on the income statement includes dividing
net income by total revenue.
D.Percentage analysis attempts to eliminate the materiality problem of comparing firms
of different sizes.
Chico Company began 2016 with balances in accounts receivable and allowance for
doubtful accounts of $44,300 and $1,675, respectively. The company reported credit
sales of $490,250 during the year, and wrote off $1,400 of uncollectible accounts. Chico
Company prepared the following aging schedule on December 31, 2016:
Required: a) Prepare general journal entries to record the 2016 credit sales, collection of
accounts receivable, write-off of uncollectible accounts, and estimate of uncollectible
accounts.
b) What is Chico Company’s net realizable value of receivables after all of the above
entries have been made?
Stosch Company’s balance sheet reported assets of $40,000, liabilities of $15,000 and
common stock of $12,000 as of December 31, 2015. If Retained Earnings on the
December 31, 2016 balance sheet is $18,000 and Stosch paid a $14,000 dividend during
2016, then the amount of net income for 2016 was which of the following?
A.$17,000
B.$19,000
C.$13,000
D.$21,000
Hanover Corporation issued $300,000 in bonds payable on January 1, 2016 when the
market interest rate at the time was 7%. Assume that the 10-year bonds were issued at
103.5, and the annual interest payment was $22,495. (Round your answers to the
nearest dollar.)
a) What was the amount of premium on the bonds when they were issued?
b) Hanover Corporation uses the effective interest method to amortize premium or
discount on bonds payable. What was the amount of interest expense for 2016? What
was the amount of premium amortization for 2016?
c) What was the carrying value of the bond liability on January 1, 2017? What was the
amount of interest expense for 2017?
The balance in a revenue account at the beginning of an accounting period will always
be
A.zero.
B.last period’s ending balance.
C.higher than the previous periods beginning balance.
D.equal to the amount of retained earnings for the previous period.
On August 1, 2016, Benjamin and Associates collected $18,000 in advance for legal
services to be rendered for one year. Which of the following entries reflect the
end-of-the-year adjustment to reflect revenue earned?
A.
B.
C.
D.
Hoover Company purchased two identical inventory items. The item purchased first
cost $33.00. The item purchased second cost $35.00. Then Hoover sold one of the
inventory items for $62.00. Based on this information:
A.the amount of ending inventory is $35.00 if Hoover uses the LIFO cost flow method.
B.the amount of gross margin is $28.00 if Hoover uses the weighted average cost flow
method.
C.the amount of cost of goods sold is $35.00 if Hoover uses the FIFO cost flow method.
D.the amount of cost of goods sold is $33.00 if Hoover uses the LIFO cost flow
method.
The following items appeared on the financial statements of Monroe, Inc. on December
31, 2015:
On September 10, 2016, when the market value of the Monroe stock was $140 the
company declared and distributed an 8% stock dividend. Indicate whether each of the
following statements is true or false.
_____ a) Retained earnings would increase by $224,000 as a result of the stock
dividend.
_____ b) The balance in common stock would increase by $64,000 as a result of the
stock dividend.
_____ c) Total paid-in capital would be $2,224,000 after the dividend had been
distributed.
_____ d) Total equity would not be affected by the dividend.
_____ e) Cash flow from financing activities would increase by $224,000 as a result of
the stock dividend.
Indicate whether each of the following statements is true or false.
_____ a) To compute cost of goods sold under the weighted average method, it is
necessary to first compute the weighted-average cost per unit.
_____ b) The weighted average cost per unit is computed by dividing the total cost of
goods purchased by the number of units sold.
_____ c) Under the FIFO method, each time units are sold the unit cost of the oldest
inventory is applied to the number of units sold.
_____ d) Under a perpetual inventory system, it is not possible to use the LIFO method
of cost flow.
_____ e) A U.S. company can use LIFO for income tax purposes only if it also uses
LIFO for financial reporting purposes.
The following data were taken from the accounting records of Li Company at
December 31, 2016 after adjusting entries have been entered. The December 31, 2016
closing entries have not been made.
Required:
a) List the accounts that should be closed at the end of 2016.
b) Prepare an income statement for Li Company for 2016.
c) What is the balance in retained earnings after closing entries have been made?
Lakeland Corporation has working capital of $440,000, and Houston Corporation has
working capital of $320,000. Which of the following statements is incorrect?
A. Since working capital is an absolute amount, other factors such as size of the
company and materiality will help to determine liquidity of these two companies.
B. Since Lakeland’s working capital exceeds Houston’s working capital, it is safe to
conclude that Lakeland is more liquid than Houston.
C. If Houston Corporation is smaller than Lakeland or has lower current liabilities;
Houston could be more liquid than Lakeland.
D. None of these answer choices are correct.
Laramie Co. paid $800,000 for a purchase that included land, building, and office
furniture. An appraiser provided the following estimates of the market values of the
assets if they had been purchased separately: Land, $100,000, Building, $740,000, and
Office Furniture, $160,000. Based on this information the cost that would be allocated
to the land is:
A.$80,000.
B.$70,000.
C.$100,000.
D.$107,000.
Which of the following statements is true with regard to depreciation expense?
A.Different companies in the same industry always depreciate similar assets by the
same methods.
B.A company using straight line will show a smaller book value for assets than if the
same company uses double declining balance.
C.Choosing double declining balance over straight line will produce a greater total
depreciation expense over the asset’s life.
D.A company should use the depreciation method that best matches expense
recognition with the use of the asset.
On January 1, 2016, Kincaid Company’s Accounts Receivable and the Allowance for
Doubtful Accounts carried balances of $31,000 and $500, respectively. During the year
Kincaid reported $72,500 of credit sales. Kincaid wrote off $550 of receivables as
uncollectible in 2016. Cash collections of receivables amounted to $74,550. Kincaid
estimates that it will be unable to collect one percent (1%) of credit sales.
Kincaid’s entry required to recognize the uncollectible accounts expense for 2016 will
A.increase total assets and retained earnings.
B.decrease total assets and increase retained earnings.
C.decrease total assets and net income.
D.increase total assets and decrease net income.
Which of the following statements is a reason why a company would buy treasury
stock?
A.Because management believes the market price of stock is undervalued.
B.To have stock available to issue to employees in stock option plans.
C.To avoid a hostile takeover.
D.All of these are reasons a company would buy treasury stock.
Vernon Company recorded a business event in T-accounts as follows:
Which of the following reflects how this event affects the company’s financial
statements?
A.
B.
C.
D.
Greer Company pays Jamal Perry a salary of $3,000 per week. How much FICA tax
must Greer pay on Jamal’s behalf, including both the employee and employer portions?
A.$225.
B.$360.
C.$0.00 Jamal is responsible for making his own payments.
D.$450.