Depreciation does not describe the increase or decrease in the market value of the asset.
a. True
b. False
Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased
100 tile cutters with a list price of $20 each on August 5, 2015, on account. Tile Magic
Corp. paid the invoice on August 31, 2015. How much sales discount will Floors
recognize?
a. $ -0-
b. $ 40
c. $ 200
d. $ 236
When using the indirect method, how is an increase in accounts receivable during the
year shown on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
Which of the following statements is false regarding how the cash flow effects of the
changes in the equipment and accumulated depreciation accounts would be reported on
a statement of cash flows if the indirect method is used to prepare the operating
activities section?
a. Cash proceeds from the sale of the equipment would be reported as a cash inflow in
the investing activities section.
b. The cash paid to purchase equipment would be reported as a cash outflow in the
investing activities section
c. Depreciation expense would be added to net income in the operating activities
section.
d. A loss on the sale of the equipment would be subtracted from net income in the
operating activities section
Income taxes payable is a current liability.
a. True
b. False
Match each of the following terms related to interest and time value of money
calculations to their appropriate definition.
a. Time value of money
b. Simple interest
c. Compound interest
d. Future value of a single amount
e. Present value of a single amount
f. Annuity
g. Future value of an annuity
h. Present value of an annuity
The amount that will be accumulated in the future when a series of payments is invested
and accrues interest until the future time.
Why do businesses invest in short-term investments?
a. They are trying to gain control over the activities of other companies.
b. They are investing excess cash to meet future business operation or investment
needs.
c. They are lending money to companies that cannot obtain bank loans.
d. More than one of the above is correct.
Mendes Charters reported the following information at December 31, 2015:
Mendes’ total contributed capital is a. $ 650,000b. $ 675,000c. $1,500,000d. $ 625,000
The following account balances are taken from the records of Morgantown Corp. for
the past two years. (Credit balances are shown in parentheses.)
Other information available for 2016 is as follows:
a. Net income for the year was $240,000.
b. Depreciation expense on plant and equipment was $60,000.
c. Plant and equipment with an original cost of $210,000 were sold for $84,000. (You
will need to determine the book value of the assets sold.)
d. Amortization expense on patents was $11,000.
e. Both new plant and equipment and patents were purchased for cash during the year.
REQUIRED:
Indicate, with amounts, how all items related to these long-term assets would be
reported in the 2016 statement of cash flows, including any adjustments in the
Operating Activities section of the statement. Assume that Morgantown uses the
indirect method.
Assume the current ratio is 3 to 1. Estimating the warranties expense on the period’s
sales would cause the current ratio to
a. increase
b. decrease
c. be unchanged since the effects offset one another
d. be unchanged since it has no effect on any current accounts
How would outstanding checks be dealt with in a bank reconciliation?
a. added to company’s book balance
b. deducted from company’s book balance
c. added to bank statement balance
d. deducted from bank statement balance
Match each of the following terms related to interest and time value of money
calculations to their appropriate definition.
a. Time value of money
b. Simple interest
c. Compound interest
d. Future value of a single amount
e. Present value of a single amount
f. Annuity
g. Future value of an annuity
h. Present value of an annuity
The present amount that is equivalent to an amount at a future time.
Morton & Associates Use the following five transactions for Morton & Associates, Inc.
to answer the question(s)
See the transactions for Morton & Associates. Based only on these transactions, what is
the total amount of expenses that should appear on the income statement for the month
of May?
a. $ 430
b. $ 850
c. $ 1,280
d. $ 1,440
For a given contingent liability, the company has the choice of either recording it on the
balance sheet or disclosing it in the notes.
a. True
b. False
Use the information provided in the time value of money tables (Tables 9-1 through
9-4) in the text to answer the question that follows. Global Company issued $1,000,000,
8%, 7 year bonds, interest payable semiannually. The market rate of interest was 6%.
The issuance price of the bonds is
a. $1,111,560
b. $1,000,000
c. $1,151,480
d. $1,112,840
Textbooks.com accepts VISA for payments of purchases made by students. The credit
card drafts are deposited directly in a bank account. VISA charges a 2% collection fee.
Credit card drafts totaling $12,000 are deposited during September. The effect on the
accounting equation to record the sales and deposits will include
a. An increase in Cash for $12,000
b. An increase to Sales for $11,760
c. An increase to Accounts Receivable for $11,760
d. An increase in Collection Fee Expense for $240
All of the following are among the most important reasons why accounting standards
differ around the world except:
a. differences in the state of economic development
b. differences in taxation
c. differences in inflation
d. differences in code law in all countries around the world
Every adjustment involves at least one income statement and one balance sheet account.
a. True
b. False
Plant assets are depreciated because
a. the accrual basis of accounting requires matching of costs to revenues.
b. some plant assets last longer than others.
c. useful lives cannot be reasonably estimated.
d. the replacement cost of plant assets may fluctuate over time.