A credit balance in retained earnings represents
a. the amount of cash retained in the business.
b. a claim on specific assets of the corporation.
c. a claim on the aggregate assets of the corporation.
d. the amount of stockholders’ equity exempted from the stockholders’ claim on total
assets.
Answer:
Copyrights are granted by the federal government
a. for the life of the creator or 70 years, whichever is longer.
b. for the life of the creator plus 70 years.
c. for the life of the creator or 70 years, whichever is shorter.
d. and therefore cannot be amortized.
Answer:
Eneri Company’s inventory records show the following data:
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units
for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic
inventory method.
Under the FIFO method, the December 31 inventory is valued at
a. $28,000.
b. $32,267.
c. $32,960.
d. $36,800.
Answer:
The concern about international companies adopting SOX-type standards centers on
a. cost-benefit analysis.
b. ethics issues.
c. the governing authorities.
d. comparability.
Answer:
On the dividend record date,
a. a dividend becomes a current obligation.
b. no entry is required.
c. an entry may be required if it is a stock dividend.
d. Dividends Payable is debited.
Answer:
Presented here is a partial amortization schedule for Roseland Company who sold
$300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual
straight-line amortization.
Which of the following amounts should be shown in cell (i)?
a. $31,200
b. $32,400
c. $30,000
d. $6,000
Answer:
Which of the following would not be needed to determine net cash provided by
operating activities?
a. Depreciation expense
b. Change in accounts receivable
c. Payment of cash dividends
d. Change in prepaid expenses
Answer:
On November 30, Thatcher Company issued a $15,000, 6%, 4-month note to the
National Bank. The entry on Thatcher’s books to record the payment of the note at
maturity will include a credit to Cash for
a. $15,000.
b. $15,900.
c. $15,300
d. $15,600
Answer:
The accountant at Cedric Company has determined that income before income taxes
amounted to $7,000 using the FIFO costing assumption. If the income tax rate is 30%
and the amount of income taxes paid would be $315 greater if the LIFO assumption
were used, what would be the amount of income before taxes under the LIFO
assumption?
a. $5,950
b. $7,000
c. $7,315
d. $8,050
Answer:
Depreciation expense for a period is the
a. original cost of an asset ‘“ accumulated depreciation.
b. book value of the asset ÷ useful life.
c. portion of an asset’s cost that expired during the period.
d. market value of the asset ÷ useful life.
Answer:
Presented below is financial information for two different companies.
Instructions
(a) Determine the missing amounts above.
(b) Determine the gross profit rates. (Round to one decimal place.)
Answer:
The factor 1.0816 is taken from the 4% column and 2 periods row in a certain table.
From what table is this factor taken?
a. Future value of 1
b. Future value of an annuity of 1
c. Present value of 1
d. Present value of an annuity of 1
Answer:
When the effective-interest method of bond premium amortization is used, the
a. amount of premium amortized will get larger with successive amortization.
b. carrying value of the bonds will increase with successive amortization.
c. interest paid to bondholders will increase after each interest payment date.
d. interest rate used to calculate interest expense will be the contractual rate.
Answer:
Thomas Company purchased equipment for $760,000 cash on January 1, 2014. The
estimated life is 5 years or 1,000,000 units; salvage value is estimated at $60,000.
Actual activity was 180,000 units in 2014, and 200,000 units in 2015.
Instructions: Compute the annual depreciation expense for 2014 and 2015, and book
value at December 31, 2015, under the following depreciation methods: (a)
units-of-activity, (b) straight-line, and (c) double-declining-balance.
(a) Units-of-activity
2014 depreciation = $_______________.
2015 depreciation = $_______________.
12/31/15 book value = $_______________.
(b) Straight-line
2014 depreciation = $_______________.
2015 depreciation = $_______________.
12/31/15 book value = $_______________.
(c) Double-declining-balance
2014 depreciation = $_______________.
2015 depreciation = $_______________.
12/31/15 book value = $_______________.
Answer:
In its income statement for the year ended 12/31/15, Hickman Company reported the
following condensed data:
Instructions
(a) Prepare a multiple-step income statement.
(b) Prepare a single-step income statement.
(c) How did Hickman compute the amount it is reporting as net sales?
Answer:
After closing entries are posted, the balance in the retained earnings account in the
ledger will be equal to
a. the beginning retained earnings reported on the retained earnings statement.
b. the amount of the retained earnings reported on the balance sheet.
c. zero.
d. the net income for the period.
Answer:
If a company is given credit terms of 2/10, n/30, it should
a. hold off paying the bill until the end of the credit period, while investing the money
at 10% annual interest during this time.
b. pay within the discount period and recognize a savings.
c. pay within the credit period but don’t take the trouble to invest the cash while waiting
to pay the bill.
d. recognize that the supplier is desperate for cash and withhold payment until the end
of the credit period while negotiating a lower sales price.
Answer:
Previously issued financial statements with errors are required to be restated under
a. GAAP only.
b. IFRS only.
c. Both GAAP and IFRS.
d. Neither GAAP or IFRS.
Answer:
A corporation issued $600,000, 10%, 7-year bonds on January 1, 2015 for $648,666,
which reflects an effective-interest rate of 7%. Interest is paid semiannually on January
1 and July 1. If the corporation uses the effective-interest method of amortization of
bond premium, the amount of bond interest expense to be recognized on July 1, 2015, is
a. $30,000.
b. $21,000.
c. $32,434.
d. $22,703.
Answer:
Analysis of financial statements is enhanced with the use of comparative data.
Answer:
The percentage of receivables basis for estimating uncollectible accounts emphasizes
a. cash realizable value.
b. the relationship between accounts receivable and bad debt expense.
c. income statement relationships.
d. the relationship between sales and accounts receivable.
Answer:
A net loss will result during a time period when
a. assets exceed liabilities.
b. assets exceed stockholders’ equity.
c. expenses exceed revenues.
d. revenues exceed expenses.
Answer:
An accountant has debited an asset account for $1,200 and credited a liability account
for $500. What can be done to complete the recording of the transaction?
a. Nothing further must be done.
b. Debit a Stockholders’ equity account for $700.
c. Debit another asset account for $700.
d. Credit a different asset account for $700.
Answer:
The cash account shows a balance of $90,000 before reconciliation. The bank statement
does not include a deposit of $5,000 made on the last day of the month. The bank
statement shows a collection by the bank of $2,400 and a customer’s check for $640
was returned because it was NSF. A customer’s check for $900 was recorded on the
books as $1,080, and a check written for $138 was recorded as $192. The correct
balance in the cash account was
a. $91,580.
b. $91,634.
c. $92,400.
d. $96,634.
Answer:
Match the basic step in the recording process described by each of the following
statements.
A. Analyze each transaction
B. Enter each transaction in a journal
C. Transfer journal information to ledger accounts
____ 1> This step is called posting.
____ 2> Business documents are examined to determine the effects of transactions on
the accounts.
____ 3> This step is called journalizing.
Answer:
A survey of major U.S. companies revealed that 77% of those
companies used either LIFO or FIFO cost !ow methods, while 19%
used average cost, and only 4% used other methods.
Answer:
Assets that do not have a physical substance yet often are very valuable are called
______________ assets.
Answer:
The three primary accounting problems associated with accounts receivable are (1)
______________, (2) _______________, and (3) ______________ of accounts
receivable.
Answer:
At December 31, 2014, the trading securities for Wolfe Company are as follows:
Instructions
Prepare the adjusting entry at December 31, 2014, to report the securities at fair value.
Answer:
The controller of Alt Company is applying the lower-of-cost-or-market basis of valuing
its ending inventory. The following information is available:
Instructions
Compute the value of the ending inventory by applying the lower-of-cost-or-market
basis.
Answer:
Glenda Good and Danny Rock are department managers in the housewares and shoe
departments, respectively, for Litwins, a large department store. Danny has observed
Glenda taking inventory from her own department home, apparently without paying for
it. He hesitates confronting Glenda because he is due to be promoted, and needs
Glanda’s recommendation. He also does not want to notify the company management
directly, because he doesn’t want an ethics investigation on his record, believing that it
will give him a ‘goody-goody’ image. This week, Glenda tried on several pairs of
expensive running shoes in his department before finding a pair that suited her. She did
not, however, buy them. That very pair was missing this morning.
Litwins recently replaced its old periodic inventory system with a perpetual inventory
system using scanners and bar codes. In addition, the annual inventory is to be replaced
by a monthly inventory conducted by an independent firm. On hearing the news of the
changes, Danny relaxes. “The system will catch Glenda now,” he says to himself.
Answer:
L. Phair and Associates is a financial planning service. The account balances at
December 31, 2015 are shown by the following alphabetical list:
Instructions
Prepare a trial balance with the accounts arranged in financial statement order.
Answer:
The following information is available for Lewis Corporation’s available-for-sale
securities at December 31, 2014.
Instructions
Prepare the adjusting entry to record the securities at fair value at December 31, 2014.
Answer:
The effect of the declaration of a cash dividend by the board of directors is to
Answer: