Hsu Company purchased a truck on May 31, 2012 for $70,000. The equipment has an
estimated useful life of five years. What amount will appear on Hsu Company’s balance
sheet for total accumulated depreciation at May 31, 2015?
a. $14,000
b. $35,000
c. $42,000
d. $28,000
The primary objective of external auditors is to provide assurance to stockholders and
other users that the statements are fairly presented.
a. True
b. False
Stock dividends affect the par value per share of the stock.
a. True
b. False
Recognition is the process of formally recording or incorporating an item into the
financial statements.
a. True
b. False
If a company borrows money from its bank and the bank deducts the interest in
advance, the company would record the amount of the interest deduction as
a. a discount
b. an expense
c. a loss
d. prepaid interest
Newco Publishing Company purchased equipment at the beginning of 2014 for
$200,000. The company decided to depreciate the equipment over an 8-year period
using the straight-line method. The company estimated the equipment’s residual value
at $20,000. The journal entry to record depreciation expense for 2014 will
a. increase Depreciation Expense and increase Accumulated Depreciation for $25,000.
b. increase Accumulated Depreciation and decrease Equipment for $25,000.
c. increase Depreciation Expense and decrease Equipment for $22,500.
d. increase Depreciation Expense and increase Accumulated Depreciation for $22,500.
Selling on credit protects a company from the risk that some of its receivables will
never be collected.
a. True
b. False
Cash interest is computed annually when a bond is issued for other than its face value.
For a bond issued at a premium, how will this component change as the bond
approaches maturity?
a. decrease
b. increase
c. remain constant
d. not enough information given to decide
Cost of goods sold represents an outflow of an asset, inventory, from the sale of
products.
a. True
b. False
Which one of the following is a correct expression of the accounting equation?
a. Assets + Liabilities = Owners’ Equity
b. Assets = Liabilities  Owners’ Equity
c. Assets + Owners’ Equity = Liabilities
d. Assets = Liabilities + Owners’ Equity
For each item listed, select the section of the balance sheet in which the item would be r
eported.
a. Current Assets
b. Property, Plant, and Equipment
c. Current Liabilities
d. Long-term Liabilities
e. Stockholders’ Equity
Accounts payable
Presented below are selected data from the financial statements of Wizard Corp.
Which of the following statements would be true if you own stock in a company?
a. You are an owner of the retained earnings and capital stock of the company.
b. You have a claim to the assets of the business
c. You have the right to receive interest on an annual basis.
d. You have the right to a portion of the company’s revenues each accounting period.
On a bank reconciliation, interest earned for the month is added to the cash balance per
the books.
a. True
b. False
Match the inventory-related accounts to costs that may be included in inventories for
retailers and manufacturers.
a. Merchandise Inventory
b. Raw Materials
c. Work in Process
d. Finished Goods
e. Cost of Goods Sold
Cost of materials which are not yet entered into the production process.
For each item listed, select the section of the balance sheet in which the item would be r
eported.
a. Current Assets
b. Property, Plant, and Equipment
c. Current Liabilities
d. Long-term Liabilities
e. Stockholders’ Equity
Notes payable-due within one year
When initially recording the cost of land purchased, most companies use the current
value.
a. True
b. False
Owners’ equity is the residual interest that remains after deducting liabilities from
stockholders’ equity.
a. True
b. False
Cole Company had the following accounts and balances on December 31, 2015:
REQUIRED:
1> Compute Cole’s working capital.
2> Compute Cole’s current ratio. What does this ratio indicate about Cole’s condition?
Falcon Services was organized on May 1, 2015. The company received a contribution
of $2,000 from each of the two principal owners. During the month, Falcon Services
provided services for cash of $1,400 and services on account for $600, received $350
from customers in payment of their accounts, purchased supplies on account for
$800 and equipment on account for $1,050, received a utility bill for $150 that will not
be paid until June, and paid the full amount due on the equipment. REQUIRED: Show
your work to determine the company’s Cash balance on May 31, 2015.
Carrington, Inc. began the year with $130,000 in merchandise inventory and ended the
year with $190,000. Sales and cost of goods sold for the year were $900,000 and
$640,000, respectively. (Use a 360 day year in your calculations.)
Accountants define the market value of inventory as its.
Cargo Corporation Listed below is information from the financial records of Cargo
Corporation at December 31, 2015:
Read the information about Cargo Corporation.
Marvin’s Shrimp Restaurant incorporated as a new business on January 1, 2015. The
company is authorized to issue 40,000 shares of $1 par value common stock, and
10,000 shares of 4%, $5 par value, cumulative, participating preferred stock. On
January 1, 2015 the company issued 15,000 shares of common stock for $8 per share.
Net income for the year ended December 31, 2015, was $115,000. Cash dividends in
the amount of $30,000 were declared, but only $25,000 were paid as of year-end.
Prepare the stockholders’ equity section of the balance sheet for Marvin’s Shrimp
Restaurant at December 31, 2015.
The interest rate stated on the bond certificate. It is also called the nominal or coupon
rate.
Presented below are condensed data from the financial statements of Laugh Factory for
2015 and 2014. The figures are expressed in thousands. Use this information to answer
the questions that follow.
Was Laugh Factory profitable both years? What are the amounts of the total revenues
and total expenses, respectively, for 2015? Which financial statement provides this
information to you ?