The amount of interest accrued is added to the note payable account and reported in the
liabilities section of the balance sheet.
a. True
b. False
A note discounted with recourse means that if the original customer fails to pay the
bank the total amount due on the maturity date of the note, the company that transferred
the note to the bank is liable for the full amount.
a. True
b. False
Payment is made for land purchased earlier on credit. For this transaction, identify the
effect on the accounting equation.
a. Assets increase and liabilities increase.
b. Assets increase and stockholders’ equity increases.
c. Liabilities increase and stockholders’ equity decrease.
d. Liabilities decrease and assets decrease.
Match the following bond and long-term liability related terms to the appropriate
definition.
a. Long-term liability
b. Face value
c. Debenture bonds
d. Serial bonds
e. Callable bonds
f. Face rate of interest
g. Market rate of interest
h. Bond issue price
i. Premium
j. Discount
k. Effective interest method of amortization
l. Carrying value
m. Gain or loss on redemption
The process of transferring a portion of premium or discount to interest expense. This
method transfers an amount resulting in a constant effective interest rate.
How is treasury stock shown on the balance sheet?
a. treasury stock is not shown on the balance sheet
b. an increase in stockholders’ equity
c. a decrease in stockholders’ equity
d. an asset
The beginning balance of retained earnings was $630,000, and the ending balance was
$650,000. The company declared and paid dividends of $60,000. A) Determine the
amount of net income for the year. B) What information would one find on the income
statement in addition to net income?
A building with a cost of $163,000 and accumulated depreciation of $32,000 was sold
for a $11,000 gain. When using the indirect method, the cash generated from this
investing activity was $131,000.
a. True
b. False
A 12% change in sales will result in a 12% change in net income.
a. True
b. False
The current maturity of long-term debt is a current liability.
a. True
b. False
Auto Industries Company reported the following on its income statement:
If the income statement also shows interest expense equal to $80,000, what is the
company’s times interest earned ratio?
a. 5 times
b. 8 times
c. 5.25 times
d. 6.25 times
During the most recent year, Grace paid $109,000 in interest to its lenders and $78,000
in dividends to its stockholders. REQUIRED: 1> In which category of the statement of
cash flows (operating, investing, or financing) should each of these amounts be shown
if Grace follows U.S. GAAP? If more than one category is acceptable, indicate what the
choices are. 2> In which category of the statement of cash flows (operating, investing,
or financing) should each of these amounts be shown if Grace follows IFRS? If more
than one category is acceptable, indicate what the choices are.
A hospital corporation contracted with a private company to collect fees and maintain
health facilities that adjoin their property. Users of the health facility can pay cash of
$10 for a daily visit or they can purchase a pass. The pass has a magnetic strip that is
swiped through the entrance device each time an individual enters the facility. This
subtracts daily fee from the pass balance for each day used. The passes are issued for a
fee of $365, which are good for 365 days. Refunds are not issued on the pass. Last year
$18,650 was collected for daily visits, $438,000 of annual passes were issued, and
$206,225 of pass usage was registered on the scanning equipment. How much should
the company recognize as revenue for the year? Explain how the revenue recognition
rule should be applied in this case.
What is comprehensive income and what is contained in a statement of comprehensive
income?
Gently Used Cars is a dealer that uses the periodic inventory system. The data presented
below is from the accounting records of Gently for the year ended December 31, 2014.
Using the amounts provided above, calculate the cost of goods sold for 2014.
Allows the issuing firm to eliminate a class of stock by paying the stockholders a fixed
amount.
Summarize some of the common differences between U.S. GAAP and IFRS.
