The following balance sheet information is provided for Victor Company:
What is the company’s working capital?
A.$3,810
B.$9,810
C.$18,610
D.$26,840
Compute the amount of cash a company will receive from the following bond issues.
a) _______________ Issued $200,000 of 5-yr, 8% bonds at 98.
b) _______________ Issued $800,000 of 4-yr, 9% bonds at 95.
c) _______________ Issued $400,000 of 10-yr, 8% bonds at 102 .
d) _______________ Issued $100,000 of 5-yr, 12% bonds at 103.
Flagler Corporation shows a total of $660,000 in its Common Stock account and
$1,600,000 in its Paid-in Capital Excess account. The par value of Flagler’s common
stock is $8. How many shares of Flagler stock have been issued?
A.117,500.
B.200,000.
C.82,500.
D.It cannot be determined
Which of the following could describe the effects of an asset exchange transaction on a
company’s financial statements?
A.
B.
C.
D.
Indicate whether each of the following statements regarding the statement of cash flows
(SCF) is true or false.
_____ a) Purchase of treasury stock would appear in the financing section of the SCF.
_____ b) Purchase of merchandise on account would appear in the operating section of
the SCF.
_____ c) Payment of an account payable is an operating activity.
_____ d) Purchase of office supplies for cash would appear in the operating section of
the SCF.
_____ e) Declarations of cash dividends would appear in the financing section of the
SCF.
Which of the following would be included in the “cash flow from operating activities”
section of the statement of cash flows?
A.Accrual of salary expense at year-end.
B.Purchase of equipment for cash.
C.Payments of cash dividends to the owners of the business.
D.Cash paid for interest on a note payable.
Which of the following would not be classified as a tangible long-term asset?
A.Delivery truck
B.Timber reserve
C.Land
D.Copyright
The Baltimore Company issued a $9,000 face value discount note to Bank of the
Chesapeake on March 1, 2016. The note carried a 5% discount rate and a one-year term
to maturity.
After accruing all interest expense due as of April 1, 2016, Baltimore Company made
the cash payment for the full amount due (i.e., principal and interest) to Bank of the
Chesapeake. Select the answer that shows how the cash payment will affect Baltimore’s
financial statements.
A.
B.
C.
D.
In an inflationary environment,
A.a company’s net income will be higher if it uses LIFO than if it uses FIFO.
B.a company’s cost of goods sold will be lower if it uses LIFO as opposed to FIFO.
C.a company’s net income will be the same regardless of whether LIFO or FIFO is
used.
D.a company’s assets will be lower if it uses LIFO as opposed to FIFO cost flow.
Indicate whether each of the following statements about accounting information is true
or false.
_______ a) Financial accounting is primarily intended to satisfy the information needs
of internal stakeholders.
_______ b) Managerial accounting information includes financial and nonfinancial
information.
_______ c) The accounting information intended to satisfy the needs of a company’s
employees is managerial accounting information.
_______ d) GAAP requires that companies adhere to financial accounting standards.
_______ e) Managerial accounting information is usually less detailed than financial
accounting information.
Madison Company issued an interest-bearing note payable with a face amount of
$24,000 and a stated interest rate of 8% to the Metropolitan Bank on August 1, 2016.
The note carried a one-year term.
The amount of cash flow from operating activities on the 2016 statement of cash flows
would be:
A.$1,920.
B.$800.
C.$24,000.
D.zero.
Which of the following statements best explains the correct handling of depreciation on
the statement of cash flows when using the indirect method?
A.Depreciation expense is a noncash expense that is added to net income to derive cash
flows from operating activities.
B.Depreciation is subtracted in the cash flows from investing activities section because
it reduces the book value of the corresponding plant asset.
C.Depreciation is subtracted from net income because it causes a loss when the related
plant asset is sold.
D.Depreciation adds to the company’s Cash account to help pay for new equipment.
Preston Corporation had the following beginning and ending balances for 2016:
During the year Preston sold equipment for $60,000 that had originally been purchased
for $140,000. The old equipment had accumulated depreciation of $120,000 at the time
of sale. To replace the equipment Preston purchased new equipment by making a
$30,000 down payment and signing a 2-year note for the balance.
a) Calculate the purchase price of the new equipment. Determine how this equipment is
being paid for.
b) If Preston uses the indirect approach to calculate cash flow from operating activities,
what will be the net effect of the sale of the old equipment and what will be the
depreciation on the new equipment reported in cash from operating activities?
c) How will the sale and purchase of equipment be reported in Preston’s cash flow from
investing activities?
d) Will the 2-year note be reported? If so, where?
The Clarion Company provides a one-year warranty on all merchandise it sells. In
2016, the company recorded sales of $500,000. It estimated that the warranty costs on
these sales would amount to $2,000. In July 2017, Clarion paid $250 to satisfy a
warranty claim. Indicate whether each of the following statements is true or false.
_____ a) Clarion’s adjusting entry recording the warranty at the end of 2016 reduced
total assets and total equity.
_____ b) Clarion’s adjusting entry recording the warranties at the end of 2016 increased
Clarion’s total liabilities.
_____ c) The July 2017 entry reduced total assets and net income for 2017.
_____ d) The July 2017 entry reduced Clarion’s total liabilities.
_____ e) The adjusting entry recorded at the end of 2016 did not affect Clarion’s
revenue for the year.
Glebe Company accepted a credit card account receivable in exchange for $1,100 of
services provided to a customer. The credit card company charges a 5% service charge.
The collection of cash from the credit card company when it settles the account
receivable balance will act to:
A.increase assets by $1,045.
B.decrease assets and equity by $55.
C.increase assets by $1,100.
D.none of these answer choices are correct.
Which ratio would you use to examine a company’s ability to pay its debts in the short-
term?
A. Earnings per share
B. Debt to assets ratio
C. Return on equity
D. Acid-test ratio
Morrison Company issued $200,000 of 10-year, 8% bonds at 92 on July 1, 2016.
Interest is payable semiannually on January 1, and July 1. The company uses
straight-line amortization for premium or discount on bonds payable.
Required:
a) Prepare all necessary journal entries related to the bonds for 2016 and 2017.
b) What amount of interest expense will be shown on the 2016 and 2017 income
statements?
c) What amount of interest payments will be shown on the statement of cash flows for
2016 and 2017?
Which of the following transactions would be disclosed on a schedule of noncash
investing and financing activities?
A.A mortgage liability accepted in exchange for title to a building.
B.Writing off an uncollectible account receivable.
C.The issuance of bonds for cash.
D.A mortgage liability accepted in exchange for title to a building and also writing off
an uncollectible account receivable.
Galaxy Company sold merchandise costing $1,700 for $2,600 cash. The merchandise
was later returned by the customer for a refund. If the perpetual inventory method is
used, what effect will the sales return have on the accounting equation?
A.Total assets and total equity decrease by $900.
B.Total assets decrease by $2,600 and total equity is decreased by $1,700.
C.Total assets and total equity decrease by $2,600.
D.Total assets and total equity increase by $900.
Chase Co. uses the perpetual inventory method. The inventory records for Chase
reflected the following
Assuming Chase uses a LIFO cost flow method, the amount of cost of goods sold for
the sales transaction on January 18 is (round the final result to the nearest whole dollar):
A.$1,150.
B.$1,050.
C.$1,070.
D.$1,130.
Indicate whether each of the following statements is true or false.
_____ a) An asset source transaction may involve a debit to an asset and a credit to
equity.
_____ b) An asset use transaction may involve a debit to an asset and a credit to a
liability.
_____ c) A credit to the common stock account would be included in an asset use
transaction.
_____ d) The payment of rent in advance involves a debit to Prepaid Rent and a credit
to Cash.
_____ e) Recognition of Rent Expense (when a cash payment had previously been
made in advance) involves a debit to Rent Expense and a credit to Prepaid Rent.
Fitzpatrick Company recorded $500 of accrued salaries expense. Which of the
following shows the proper entry using T-accounts?
A.
B.
C.
D.
Burton Corporation recorded the following in its general journal on 1/1/16:
Which of the following answers correctly describes the transaction on 1/1/16?
A.Burton issued bonds at 102.
B.Burton issued bonds at 98.
C.Burton issued bonds at a $4,000 premium.
D.Burton signed a note payable for $196,000.
The April 30, 2016 bank statement for Trimble Corporation shows an ending balance of
$34,351. The unadjusted cash account balance was $28,250. The accountant for
Trimble gathered the following information:
1. There was a deposit in transit for $4,240
2. The bank statement reports a service charge of $39
3. A credit memo included in the bank statement shows interest earned of $95
4. Outstanding checks totaled $10,935
5. The bank statement included a $650 NSF check deposited in April
What is the true cash balance as of April 30, 2016?
A.$27,656
B.$27,006
C.$31,801
D.$31,896
Alberta Company accepts a credit card as payment for $450 of services provided for the
customer. The credit card company charges a 4% handling charge for its collection
services. Select the answer that shows how the entry to record the sale would affect
Alberta’s financial statements.
A.
B.
C.
D.
Chestnut, Inc. had the following balances on its 12/31/16 balance sheet, before buying
land.
If Chestnut were to purchase land for $40,000 on credit under an agreement to pay for
the land in one year, what would be its debt-to-assets ratio immediately after the
purchase?
A.0.42
B.0.46
C.0.37
D.0.34
At the beginning of 2016, Grace Company’s accounting records had the general ledger
accounts and balances shown in the table below. During 2016, the following
transactions occurred:
1) Received $95,000 cash for providing services to customers
2) Paid salaries expense, $50,000
3) Purchased land for $12,000 cash
4) Paid $4,000 on note payable
5) Paid operating expenses, $22,000
6) Paid cash dividend, $2,500
Required:
a) Record the transactions in the appropriate general ledger accounts. Record the
amounts of revenue, expense, and dividends in the retained earnings column. Precede
the amount with a minus sign if the transaction reduces that section of the equation.
Enter 0 for items not affected.
Provide appropriate titles for these accounts in the last column of the table.
b) What is the amount of total assets as of December 31, 2016?
c) What is the amount of total stockholders’ equity as of December 31, 2016?
Use the following account numbers and corresponding account titles to answer the next
three questions.
Which accounts would affect operating income?
A.Account numbers 2, 4, and 9.
B.Account numbers 3, 5, 7, and 9.
C.Account numbers 3, 4, 7, and 9.
D.Account numbers 3, 4, 7, 8 and 9.
Pittsburgh Company pays cash for all inventory purchases. The company had a
beginning inventory of $18,500 and an ending inventory of $16,900. Their cost of
goods sold amounted to $75,000. Based on this information, the amount of cash paid
for inventory purchases was:
A.$76,600
B.$73,400
C.$75,000
D.$81,800
Which of the following is an internal control procedure used to safeguard a company’s
assets?
A.Timely deposits of cash receipts into a checking account.
B.Separation of duties.
C.Reconciliation of the bank statement.
D.All of these answer choices are correct.
In a bank reconciliation, a customer’s NSF check included with the bank statement is:
A.deducted from the company’s cash balance to get the true cash balance.
B.added to the bank’s cash balance to get the true cash balance.
C.deducted from the bank’s cash balance to get the true cash balance.
D.added to the company’s cash balance to get the true cash balance.