Which of the following is not a satisfactory statement of the accounting equation?
a.Assets = Stockholders’ Equity – Liabilities
b.Assets = Liabilities + Stockholders’ Equity
c.Assets – Liabilities = Stockholders’ Equity
d.Assets – Stockholders’ Equity = Liabilities
Tina’s Boutique has total receipts for the month of $24,255 including sales taxes. If the
sales tax rate is 5%, what are Tina’s sales for the month?
a.$23,043
b.$23,100
c.$24,255
d.It cannot be determined.
Which of the following is not a current liability on December 31, 2014?
a.A Note Payable due December 31, 2015
b.An Accounts Payable due January 31, 2015
c.A lawsuit judgment to be decided on January 10, 2015
d.Accrued salaries payable from 2014
Hooper Company prepared the following income statement using the cash basis of
accounting:
Additional data:
1>Depreciation on a company automobile for the year amounted to $7,000. This
amount is not included in the expenses above.
2>On January 1, 2013, paid for a two-year insurance policy on the automobile
amounting to $1,600. This amount is included in the expenses above.
Instructions:
(a)Recast the above income statement on the accrual basis in conformity with generally
accepted accounting principles. Show computations and explain each change.
(b)Explain which basis (cash or accrual) provides a better measure of income.
A company shows the following balances:
What is the gross profit rate?
a.53%
b.60%
c.40%
d.47%
Anders, Inc has 10,000 shares of 5%, 100 par value, cumulative preference shares and
20,000 ordinary shares with a $1 par value outstanding at December 31, 2014. There
were no dividends declared in 2012. The board of directors declares and pays a 90,000
dividend in 2013 and in 2014. What is the amount of dividends received by the ordinary
shareholders in 2014?
a.30,000
b.50,000
c.90,000
d.0
Cerner Corporation began business by issuing 250,000 shares of $5 par value common
stock for $24 per share. During its first year, the corporation sustained a net loss of
$50,000. The year-end balance sheet would show
a.Common Stock of $1,250,000.
b.Common Stock of $6,000,000.
c.total paid-in capital of $5,950,000.
d.total paid-in capital of $4,750,000.
Salem Company hired Kirk Construction to construct an office building for
₤8,000,000 on land costing ₤2,000,000, which Salem Company owned. The
building was complete and ready to be used on January 1, 2014 and it has a useful life
of 40 years. The price of the building included land improvements costing ₤600,000
and personal property costing ₤750,000. The useful lives of the land improvements
and the personal property are 10 years and 5 years, respectively. Salem Company uses
component depreciation, and the company uses straight-line depreciation for other
similar assets. What is the net amount reported for the building on Salem Company’s
December 31, 2014 statement of financial position?
a.₤7,665,000
b.₤7,573,750
c.₤6,483,750
d.₤7,800,000
Ending retained earnings for a period is equal to beginning
a.Retained earnings + Net income + Dividends
b.Retained earnings – Net income – Dividends
c.Retained earnings + Net income – Dividends
d.Retained earnings – Net income + Dividends
During the year, Salaries Payable decreased by $12,000. Using the direct method of
reporting cash flows from operating activities, if Salary Expense amounted to $400,000
for the year, the cash paid to employees (including deductions from gross pay) is
a.$412,000.
b.$388,000.
c.$400,000.
d.$404,000.
Wesley Hospital installs a new parking lot. The paving cost $45,000 and the lights to
illuminate the new parking area cost $18,000. Which of the following statements is true
with respect to these additions?
a.$45,000 should be debited to the Land account.
b.$18,000 should be debited to Land Improvements.
c.$63,000 should be debited to the Land account.
d.$63,000 should be debited to Land Improvements.
Stine Company purchased machinery with a list price of $64,000. They were given a
10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000.
Stine estimates that the machinery will have a useful life of 10 years and a residual
value of $20,000. If Stine uses straight-line depreciation, annual depreciation will be
a.$4,100.
b.$4,072.
c.$6,100.
d.$3,760.
On October 31, 2014, Williams Company issued a $5,000, 8%, 6-month note to First
National Bank. Williams accrued interest at December 31, 2014. How much will
Williams credit to Cash to record the payment of the note at maturity?
a.$5,000
b.$7,400
c.$5,200
d.$5,133
Logan Corporation issues 50,000 shares of $50 par value preferred stock for cash at $60
per share. The entry to record the transaction will consist of a debit to Cash for
$3,000,000 and a credit or credits to
a.Preferred Stock for $3,000,000.
b.Preferred Stock for $2,500,000 and Paid-in Capital in Excess of Par Value – Preferred
Stock for $500,000.
c.Preferred Stock for $2,500,000 and Retained Earnings for $500,000.
d.Paid-in Capital from Preferred Stock for $3,000,000.