The book value of an asset is equal to the
a. asset’s fair value less its historical cost.
b. blue book value relied on by secondary markets.
c. replacement cost of the asset.
d. asset’s cost less accumulated depreciation.
Answer:
The use of IFRS results in more transactions affecting
a. net income but not other comprehensive income.
b. other comprehensive income, but not net income.
c. but net income and other comprehensive income.
d. neither net income nor other comprehensive income.
Answer:
Vision Company purchased treasury stock with a cost of $16,000 during 2014. During
the year, the company paid dividends of $20,000 and issued bonds payable for proceeds
of $860,000. Cash flows from financing activities for 2014 total
a. $840,000 net cash inflow.
b. $856,000 net cash inflow.
c. $860,000 net cash outflow.
d. $824,000 net cash inflow.
Answer:
The income statement for the year 2015 of Fugazi Co. contains the following
information:
The entry to close Income Summary to Retained Earnings includes
a. a debit to Revenue for $70,000.
b. credits to Expenses totalling $77,500.
c. a credit to Income Summary for $7,500.
d. a credit to Retained Earnings for $7,500.
Answer:
Compute bad debt expense based on the following information:
(a) RLF Company estimates that 2% of net credit sales will become uncollectible. Sales
revenue are $600,000, sales returns and allowances are $30,000, and the allowance for
doubtful accounts has a $6,000 credit balance.
(b) RLF Company estimates that 10% of accounts receivable will become uncollectible.
Accounts receivable are $100,000 at the end of the year, and the allowance for doubtful
accounts has a $500 debit balance.
Answer:
What percentage of companies worldwide have experienced fraud in a recent two-year
period?
a. 1%
b. 10%
c. 50%
d. 100%
Answer:
Williams Company established a petty cash fund on May 1, cashing a check for $250.
The company reimbursed the fund on June 1 with the following results.
June 1: Cash in fund $64. Receipts: delivery expense $81; postage expense $39; and
miscellaneous expense $62.
July 1: Cash in funds $43 Receipts: delivery expense $91.00; entertainment expense
$71.00; and miscellaneous expense $45
On July 10, Williams increased the fund form $250 to $400.
Instructions
(a) Prepare journal entries for Williams Company for May 1, June 1, July 1, and July
10.
(b) What internal control features are present in the petty cash fund?
Answer:
If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is
received,
a. a gain on disposal will be recorded.
b. phantom depreciation must be taken as though the asset were still on the books.
c. a loss on disposal will be recorded.
d. no gain or loss on disposal will be recorded.
Answer:
Which of the following is a true statement about closing the books of a corporation?
a. Expenses are closed to the Expense Summary account.
b. Only revenues are closed to the Income Summary account.
c. Revenues and expenses are closed to the Income Summary account.
d. Revenues, expenses, and the dividends account are closed to the Income Summary
account.
Answer:
Allowing only designated personnel to handle cash receipts is an example of
a. establishment of responsibility.
b. segregation of duties.
c. documentation procedures.
d. independent internal verification.
Answer:
Balance sheet accounts are considered to be
a. temporary stockholders’ equity accounts.
b. permanent accounts.
c. equity accounts.
d. nominal accounts.
Answer:
In a lease contract,
a. the owner of the property is called the lessee.
b. the presence of a bargain purchase option indicates that it is a capital lease.
c. the renter of the property is called the lessor.
d. there is always a transfer of ownership at the end of the lease term.
Answer:
To grant a customer a sales return, the seller credits Sales Returns and Allowances.
Answer:
This information is available for Eaton’s Photo Corporation for 2014 and 2015.
Instructions
Calculate inventory turnover, days in inventory, and gross profit rate for Eaton’s Photo
Corporation for 2014 and 2015. Comment on any trends.
Answer:
The three basic tools of analysis are horizontal analysis, vertical analysis, and ratio
analysis.
Answer:
Match the items below by entering the appropriate code letter in the space provided.
1> Obligations that a company expects to pay after one year.
2> A part of owners’ equity in a corporation.
3> An optional tool which facilitates the preparation of financial statements.
4> A temporary account used in the closing process.
5> Balance sheet accounts whose balances are carried forward to the next period.
6> The average time that it takes to go from cash to cash in producing revenues.
7> Entries to correct errors made in recording transactions.
8> The exact opposite of an adjusting entry made in a previous period.
9> Entries at the end of an accounting period to transfer the balances of temporary
accounts to a permanent stockholders’ equity account.
10> Assets that a company expects to pay or convert to cash or use up within one year.
Answer:
At December 31, 2014, the trading securities for Eddy Company are as follows:
Prepare the adjusting entry at December 31, 2014, to report the securities at fair value.
Answer:
An employee’s net pay consists of gross pay less mandatory and voluntary payroll
deductions. Identify the mandatory payroll deductions and give two or three examples
of common voluntary deductions. Are these deductions recognized as payroll expenses
by the employer? What type of payroll expenses does the employer incur related to
having a payroll?
Answer:
Important objectives of a system of internal controls are to safeguard assets and to
enhance the accuracy and reliability of the accounting records. Briefly discuss how (1)
cost-benefit considerations, (2) the human element, and (3) the size of the business,
affect the implementation of a system of internal controls.
Answer:
Sebastien Company earned net income of $44,000 during 2014. The company paid
dividends totalling $20,000 during the period. Prepare the entries to close Income
Summary and the Dividends account.
Answer:
You have recently started to work for Storry Malcom, manufacturers of
cemetery markers and monuments. During your first month at work, you
inadvertently recorded as revenue, about $4,000 of prepayments from
Budger Company. The financial statements had been released within the
company when you discovered your error. The month-end closing had not
been completed, however, and you were able to correct the accounts
without incident.
Prepare a short note to accompany the re-released financial statements
explaining the mistake.
Answer: