Tangible frauds include
a. asset misappropriation.
b. false pretenses.
c. counterfeiting.
d. all of the above.
Answer:
Most companies that follow IFRS present balance sheet (statement of financial
position) information in this order:
a. current assets; investments; property, plant and equipment; intangible assets; current
liabilities; long term liabilities; equity.
b. intangible assets; property, plant and equipment; investments; current assets; current
liabilities; equity; long term liabilities.
c. current assets; noncurrent assets; current liabilities; noncurrent liabilities; equity.
d. noncurrent assets; current assets; equity; noncurrent liabilities; current liabilities.
Answer:
The acid-test ratio
a. is a quick calculation of an approximation of the current ratio.
b. does not include all current liabilities in the calculation.
c. does not include inventory as part of the numerator.
d. does include prepaid expenses as part of the numerator.
Answer:
Changes from cost are reported as part of net income for
a. available-for-sale securities.
b. held-to-maturity securities.
c. debt securities.
d. trading securities.
Answer:
IFRS, compared to GAAP, tends to be more
a. detailed.
b. rules-based.
c. principles-based.
d. full of disclosures requirements.
Answer:
The cash account shows a balance of $40,000 before reconciliation. The bank statement
does not include a deposit of $9,200 made on the last day of the month. The bank
statement shows a collection by the bank of $3,960 and a customer’s check for $1,300
was returned because it was NSF. A customer’s check for $1,380 was recorded on the
books as $1,920, and a check written for $318 was recorded as $390. The correct
balance in the cash account was
a. $42,048.
b. $42,192.
c. $43,128.
d. $51,392.
Answer:
Devendra Company pays cash dividends of $600. The entry for this transaction will
include a debit of $600 to
a. Dividends
b. Retained Earnings.
c. Owner’s Salaries Expense.
d. Salaries and Wages Expense.
Answer:
Ban Co. purchased 50, 5% Waylan Company bonds for $50,000 cash plus brokerage
fees of $500. Interest is payable semiannually on July 1 and January 1. The entry to
record the July 1 semiannual interest payment would include a
a. debit to Interest Receivable for $1,250.
b. credit to Interest Revenue for $1,250.
c. credit to Interest Revenue for $1,262.50.
d. credit to Debt Investments for $1,262.50.
Answer:
Mize Company owns 30% interest in the stock of Lyte Corporation. During the year,
Lyte pays $20,000 in dividends to Mize, and reports $300,000 in net income. Mize
Company’s investment in Lyte will increase Mize ‚s net income by
a. $6,000.
b. $90,000.
c. $96,000.
d. $10,000.
Answer:
Kennedy Company had the following account balances at year-end: cost of goods sold
$85,000; inventory $15,000; operating expenses $39,000; sales revenue $144,000; sales
discounts $1,600; and sales returns and allowances $2,300. A physical count of
inventory determines that inventory on hand is $14,400.
Instructions
(a) Prepare the adjusting entry necessary as a result of the physical count.
(b) Prepare closing entries.
Answer:
Which of the following is true regarding the corporate form of business organization?
a. Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than partnerships and
proprietor-ships.
c. The revenues of corporations are greater than the combined revenues of partnerships
and proprietorships.
d. Corporations are separate legal entities organized exclusively under federal law.
Answer:
Under IFRS, liabilities
a. must be legally enforceable by a contract.
b. must be legally enforceable by law.
c. may be legally enforceable by a contract or law but need not be.
d. are defined differently than under GAAP.
Answer:
Under the LCM approach, the market value is defined as
a. FIFO cost.
b. LIFO cost.
c. current replacement cost.
d. selling price.
Answer:
Under IFRS, income statement items are generally described as
a. administration, distribution, manufacturing, etc.
b. salaries, depreciation, utilities, etc.
c. administration, depreciation, manufacturing, etc.
d. salaries, distribution, utilities, etc.
Answer:
In a period of rising prices, the inventory method that will show the highest net income
is
a. Average Cost.
b. FIFO.
c. LIFO.
d. Moving Average.
Answer:
Blitzen Corporation had net income of $200,000 and paid dividends to common
stockholders of $50,000 in 2014. The weighted average number of shares outstanding in
2014 was 40,000 shares. Blitzen Corporation’s common stock is selling for $35 per
share on the New York Stock Exchange. Blitzen Corporation’s price-earnings ratio is
a. 5.6 times.
b. 7 times.
c. 5 times.
d. 9.3 times.
Answer:
Meat Puppets Company purchased equipment for $7,200 on December 1. It is estimated
that annual depreciation on the equipment will be $1,800. If financial statements are to
be prepared on December 31, the company should make the following adjusting entry:
a. Debit Depreciation Expense, $1,800; Credit Accumulated Depreciation, $1,800.
b. Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150.
c. Debit Depreciation Expense, $5,400; Credit Accumulated Depreciation, $5,400.
d. Debit Equipment, $7,200; Credit Accumulated Depreciation, $7,200.
Answer:
Companies adopt different cost flow methods for each of the following reasons except
a. balance sheet effects.
b. cost effects.
c. income statements effects.
d. tax effects.
Answer:
A horizontal analysis performed on a statement of retained earnings would not show a
percentage change in
a. dividends paid.
b. net income.
c. expenses.
d. beginning retained earnings.
Answer:
The term residual claim refers to a stockholders’ right to
a. receive dividends.
b. share in assets upon liquidation.
c. acquire additional shares when offered.
d. exercise a proxy vote.
Answer:
Salem Company hired Kirk Construction to construct an office building for
£6,400,000 on land costing £1,600,000, which Salem Company owned. The
building was complete and ready to be used on January 1, 2015 and it has a useful life
of 40 years. The price of the building included land improvements costing £480,000
and personal property costing £600,000. 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, 2015 statement of financial position?
a. £6,132,000
b. £6,059,000
c. £5,187,000
d. £6,240,000
IFRS:
Answer:
If stock is issued for a noncash asset, the asset should be recorded on the books of the
corporation at
a. fair value.
b. cost.
c. zero.
d. a nominal amount.
Answer:
A company purchased land for $90,000 cash. Real estate brokers’ commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. Under the historical cost principle, the cost
of land would be recorded at
a. $107,000.
b. $90,000.
c. $70,000.
d. $102,000.
Answer:
Owners of business firms are the only people who need accounting information.
Answer:
The number and types of accounts used by different business enterprises are the same if
generally accepted accounting principles are being followed by the enterprises.
Answer:
When bonds are converted into common stock, the carrying value of the bonds is
transferred to paid-in capital accounts.
Answer:
Cash flow from investing activities is considered the most important category on the
statement of cash flows because it is considered the best measure of expected income.
Answer:
Analyze the transactions of a business organized as a corporation described below and
indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an
increase and a minus sign (‘“) to indicate a decrease.
Answer:
A proxy is a legal document that instructs a stockholder’s agent how to vote shares of
stock for the stockholder.
Answer:
Checks received in the mail should be immediately stamped “NSF” to prevent
unauthorized cashing of the check.
Answer:
Depletion cost per unit is computed by dividing the total cost of a natural resource by
the estimated number of units in the resource.
Answer:
Consolidated financial statements are prepared in place of the financial statements for
the parent and subsidiary companies.
Answer:
Noncash investing and financing activities must be reported in the body of a statement
of cash flows.
Answer: