The use of fair value to report assets
a. is not allowed under GAAP or IFRS.
b. is required by GAAP and IFRS.
c. is increasing under GAAP and IFRS, but GAAP has adopted it more broadly.
d. is increasing under GAAP and IFRS, but IFRS has adopted it more broadly.
Answer:
From a liquidity standpoint, it is more desirable for a company to have current
a. assets equal current liabilities.
b. liabilities exceed current assets.
c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.
Answer:
Correcting entries are journalized in
a. a special journal.
b. the general journal.
c. the general ledger.
d. a correcting journal.
Answer:
Prepare the necessary correcting entry for each of the following.
a. A payment on account of $840 was debited to Accounts Payable $480 and credited to
Cash $480.
b. The collection of Accounts Receivable of $680 was recorded as a debit to Cash $680
and a credit to Service Revenue $680.
Answer:
In the month of May, Kijak Company Inc. wrote checks in the amount of $56,000. In
June, checks in the amount of $76,000 were written. In May, $50,000 of these checks
were presented to the bank for payment, and $66,000 in June. What is the amount of
outstanding checks at the end of June?
a. $6,000
b. $10,000
c. $16,000
d. $20,000
Answer:
Which of the following investment classifications are the same for GAAP
and IFRS?
a. Available-for-sale
b. Held-to-maturity
c. Non-trading
d. Trading.
Answer:
Paden Company purchased merchandise from Emmett Company with freight terms of
FOB shipping point. The freight costs will be paid by the
a. seller.
b. buyer.
c. transportation company.
d. buyer and the seller.
Answer:
Having one person post entries to accounts receivable subsidiary ledger and a different
person post to the Accounts Receivable Control account in the general ledger is an
example of
a. inadequate internal control.
b. duplication of effort.
c. external verification.
d. segregation of duties.
Answer:
In periods of inflation, phantom or paper profits may be reported as a result of using the
a. perpetual inventory method.
b. FIFO costing assumption.
c. LIFO costing assumption.
d. periodic inventory method.
Answer:
The subtotal net assets is used in
a. both GAAP and IFRS.
b. GAAP but not IFRS.
c. IFRS but not GAAP.
d. neither IFRS nor GAAP.
Answer:
For each entry below make a correcting entry if necessary. If the entry given is correct,
then state “No entry required.”
(a) The $60 cost of repairing a printer was charged to Equipment.
(b) The $5,000 cost of a major engine overhaul was debited to Maintenance and Repairs
Expense. The overhaul is expected to increase the operating efficiency of the truck.
(c) The $6,000 closing costs associated with the acquisition of land were debited to
Miscellaneous Expense.
(d) A $500 charge for transportation expenses on new equipment purchased was debited
to Freight-In.
Answer:
The economic entity assumption requires that the activities
a. of different entities can be combined if all the entities are corporations.
b. must be reported to the Securities and Exchange Commission.
c. of a sole proprietorship cannot be distinguished from the personal economic events of
its owners.
d. of an entity be kept separate from the activities of its owner.
Answer:
When two accounts are required in one journal entry, the entry is referred to as a
a. balanced entry.
b. simple entry.
c. posting.
d. nominal entry.
Answer:
Book value per share is computed by dividing total
a. paid-in capital by the number of common shares outstanding.
b. paid-in capital by the number of common shares issued.
c. stockholders’ equity by the number of common shares outstanding.
d. stockholders’ equity by the number of common shares issued.
Answer:
Under IFRS
a. comparative prior-period information must be presented, but financial statements
need not be provided annually.
b. comparative prior-period informaton must be presented, and financial statements
must be provided annually.
c. comparative prior-period information is not required, and financial statements need
not be provided annually.
d. comparative prior-period information is not required, but financial statements must
be provided annually.
Answer:
Which of the following is the correct sequence of steps in the recording process?
a. Posting, journalizing, analyzing
b. Journalizing, analyzing, posting
c. Analyzing, posting, journalizing
d. Analyzing, journalizing, posting
Answer:
The purchase of an office building by issuing long-term notes payable should be
reported as a
a. cash outflow in the financing section of the statement of cash flows.
b. cash outflow in the investing section of the statement of cash flows.
c. cash outflow in the operating section of the statement of cash flows.
d. noncash investing and financing activity.
Answer:
Relevant accounting information
a. is information that has been audited.
b. must be reported within the operating cycle or one year, whichever is longer.
c. has been objectively determined.
d. is information that is capable of making a difference in a business decision.
Answer:
Which of the following are also called trade receivables?
a. Accounts receivable
b. Other receivables
c. Advances to employees
d. Income taxes refundable
Answer:
Inventories are defined by IFRS as
a. held-for-sale in the ordinary course of business.
b. in the process of production for sale in the ordinary course of business.
c. in the form of materials or supplies to be consumed in the production process or in
the providing of services.
d. All of these answers are correct.
Answer:
Which of the following practices by a credit card company results in lower interest
charges to the cardholder?
a. The card company states interest as a monthly percentage rather than an annual
percentage.
b. The card company allows a grace period before interest is accrued.
c. The card company allows cardholders to skip payments on their cards.
d. The card company calculates finance charges from the date of purchase to the date
the amount is paid.
Answer:
The stockholders’ equity section of Barrel Corporation’s balance sheet at December 31,
2014, appears below:
During 2015, the following stock transactions occurred:
Instructions
(a) Prepare the journal entries to record the above stock transactions.
(b) Prepare the stockholders’ equity section of the balance sheet for Barrel Corporation
at December 31, 2015. Assume that net income for the year was $150,000 and that no
dividends were declared.
Answer:
Which of the following is not a profitability ratio?
a. Payout ratio
b. Profit margin
c. Times interest earned
d. Return on common stockholders’ equity
Answer:
Which of the following is not a reason one set of international accounting standards are
needed?
a. multinational corporations.
b. mergers and acquisitions.
c. information technology.
d. all of these answer choices are correct.
IFRS.
Answer:
In a period of rising prices, the inventory reported in Crawford Company’s balance
sheet is close to the current cost of the inventory. Breland Company’s inventory is
considerably below its current cost. Identify the inventory cost flow method being used
by each company. Which company has probably been reporting the higher gross profit?
Answer:
On January 1, 2014, Brenner Company purchased at face value, a $1,000, 6% bond that
pays interest on January 1 and July 1. Brenner Company has a calendar year end.
The entry for the receipt of interest on July 1, 2014, is
Answer:
Post the following transactions to T-accounts and determine each account’s ending
balance.
Answer:
On March 1, 2015, Landon Company acquired real estate on which it planned to
construct a small office building. The company paid $90,000 in cash. An old warehouse
on the property was razed at a cost of $7,600; the salvaged materials were sold for
$1,700. Additional expenditures before construction began included $1,100 attorney’s
fee for work concerning the land purchase, $4,000 real estate broker’s fee, $7,800
architect’s fee, and $14,000 to put in driveways and a parking lot.
Instructions
Determine the amount to be reported as the cost of the land.
Answer:
Garrison Company was organized on January 1. During the first year of operations, the
following expenditures and receipts were recorded in random order in the account,
Land.
Instructions
Analyze the foregoing transactions using the following tabular arrangement. Insert the
number of each transaction in the Item space and insert the amounts in the appropriate
columns.
Answer:
The three primary accounting problems with accounts receivable are: (1) recognizing,
(2) depreciating, and (3) disposing.
Answer:
Consistency in accounting means that a company uses the same accounting principles
from one accounting period to the next accounting period.
Answer:
The transactions of the Liberty Belle Store are recorded in the general journal below.
You are to post the journal entries to T-accounts.
General Ledger
Answer:
Wakefield Company discovered the following errors made in January 2015.
1> A payment of salaries expense of $900 was debited to Equipment and credited to
Cash, both for $900.
2> A collection of $2,000 from a client on account was debited to Cash $200 and
credited to Service Revenue $200.
3> The purchase of equipment on account for $680 was debited to Equipment $860 and
credited to Accounts Payable $860.
Instructions
Correct the errors by reversing the incorrect entry and preparing the correct entry.
Answer:
An advantage of using a subsidiary ledger is that one employee must post to both the
subsidiary ledger and the general ledger.
Answer: