Archives: Quiz

1) for an accounting equation to balance, a transaction must affect both sides of the equation. 2) a company, reporting a discontinued operation or an extraordinary item, must report earnings per share also for each of these line items. Answer: […]

1) under the sarbanes-oxley act, accounting firms are allowed to audit a public company and provide certain consulting services for the same client. 2) when a seller grants a sales allowance, the customer does not return any goods to the […]

1) most public companies use the indirect method to prepare their statement of cash flows because the fasb prefers this method. 2) a 3-for-1 stock split of a $3 par value share will result in three shares of $1 par […]

1) the cash balance in a company’s general ledger and the bank’s balance on the bank statement will always be the same. 2) in the case of unearned revenue, the cash is received first, and the revenue is earned later. […]

1) the statement of retained earnings informs users about how much of the earnings were kept and reinvested in the company. 2) ifrs are comparatively more specific and more rule based than u.s. gaap. Answer: false 3) when a business […]

1) a contra account’s normal balance (debit or credit) is the opposite of the normal balance of the related account. 2) the net cash flow from operating activities is calculated in the same way, whether the company uses the direct […]

1) permanent accounts are not closed at the end of the accounting period. 2) an equity security represents a credit relationship with another company or governmental entity. Answer: false 3) in the journal entry for the dividends received for available-for-sale […]

1) when a company uses the first-in, first-out (fifo) method, the cost of goods sold correlates to the most recently purchased goods, and the value of ending inventory correlates to the oldest goods in stock. 2) treasury stock is recorded […]

1) a company purchased machinery by issuing a long-term note payable. this is an example of a non-cash investing and financing activity for the statement of cash flows. 2) all asset accounts and equity accounts increase with a debit. Answer: […]

1) simple interest means that interest is calculated on the principal and on all previously earned interest. 2) if an investor wants to know how much cash a company can free up for new opportunities, such as expanding into a […]

1) in 2012, esther corporation reported net income of $600,000. it declared and paid preferred stock dividends of $150,000 and common stock dividends of $60,000. during 2012, esther had a weighted average of 200,000 common shares outstanding. compute esther’s 2012 […]

1) which of the following methods of determining bad debt expense does not properly match expense and revenue? a.charging bad debts with a percentage of sales under the allowance method b.charging bad debts with an amount derived from a percentage […]

1) daily, inc. appropriately used the installment method of accounting to recognize income in its financial statement. some pertinent data relating to this method of accounting include: what amount to be realized gross profit should be reported on dailys income […]

1) on january 1, 2012, sharp corp. granted an employee an option to purchase 9,000 shares of sharp’s $5 par value common stock at $20 per share. the black-scholes option pricing model determines total compensation expense to be $210,000. the […]

1) farr co. adopted the dollar-value lifo inventory method on december 31, 2012. farr’s entire inventory constitutes a single pool. on december 31, 2012, the inventory was $480,000 under the dollar-value lifo method. inventory data for 2013 are as follows: […]

1) on january 3, 2011, munoz co. purchased machinery. the machinery has an estimated useful life of eight years and an estimated salvage value of $60,000. the depreciation applicable to this machinery was $130,000 for 2013, computed by the sum-of-the-years’-digits […]

1) colaw co. pays all salaried employees on a biweekly basis. overtime pay, however, is paid in the next biweekly period. colaw accrues salaries expense only at its december 31 year end. data relating to salaries earned in december 2012 […]

1) what is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? a.as offsets to capital b.by means of footnotes only c.as assets but separately from other receivables d.as trade notes and accounts […]

1) factors that shape an accounting information system include the a.nature of the business b.size of the firm c.volume of data to be handled d.all of these 2) oslo corporation has two products in its ending inventory, each accounted for […]

1) which table would show the largest factor for an interest rate of 8% for five periods? a.future value of an ordinary annuity of 1 b.present value of an ordinary annuity of 1 c.future value of an annuity due of […]

1) when developing computer software to be sold, which of the following costs should be capitalized? a.designing b.coding c.testing d.none of the above 2) of the following costs related to the development of natural resources, which one is not a […]

1) kern company purchased bonds with a face amount of $600,000 between interest payment dates. kern purchased the bonds at 102, paid brokerage costs of $9,000, and paid accrued interest for three months of $15,000. the amount to record as […]

1) the acquisition cost of a certain raw material changes frequently. the book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory […]

1) at a recent executive committee meeting, the controller for marino company remarked, with only a single key difference between u.s. gaap and ifrs for property, plant, and equipment, it should be smooth sailing for the fasb and iasb to […]

1) jim yount, m.d., keeps his accounting records on the cash basis. during 2013, dr. yount collected $300,000 from his patients. at december 31, 2012, dr. yount had accounts receivable of $40,000. at december 31, 2013, dr. yount had accounts […]

1) when preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because a.cash was increased while cost of goods sold was decreased b.cost of […]

1) techtronics, a technology company that uses ifrs for its financial reporting, has been found to have polluted the property surrounding its plant. the property is leaded for 12 years and techtronics has agreed that when the lease expires, the […]

1) on january 1, 2006, forbes company purchased equipment at a cost of $100,000. the equipment was estimated to have a salvage value of $10,000 and it is being depreciated over eight years under the sum-of-the-years’-digits method. what should be […]

1) if management wishes to “capitalize” part of the earnings, it may issue a a.cash dividend b.stock dividend c.property dividend d.liquidating dividend 2) equipment that cost $240,000 and has accumulated depreciation of $189,000 is exchanged for equipment with a fair […]

1) ebert inc. owns the following assets: what is the composite depreciation rate of ebert’s assets? a.14.0% b.10.3% c.12.9% d.11.1% 2) on march 1, 2012, newton company purchased land for an office site by paying $900,000 cash. newton began construction […]

1) among the short-term obligations of lance company as of december 31, the balance sheet date, are notes payable totaling $250,000 with the madison national bank. these are 90-day notes, renewable for another 90-day period. these notes should be classified […]

1) lerner co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,500,000 of 10% convertible bonds outstanding during 2013. the preferred stock is convertible into 40,000 shares of common stock. during 2013, lerner paid dividends […]

1) a machine which cost $300,000 is acquired on october 1, 2012. its estimated salvage value is $30,000 and its expected life is eight years. instructions calculate depreciation expense for 2012 and 2013 by each of the following methods, showing […]

1) bella requires $120,000 in four years to purchase a new home. what amount must be invested today in an investment that earns 6% interest, compounded annually? a.$95,051 b.$98,724 c.$145,337 d.$151,497 2) in computations of weighted average of shares outstanding, […]

1) stemway requires a new manufacturing facility. management found three locations; all of which would provide needed capacity, the only difference is the price. location a may be purchased for $500,000. location b may be acquired with a down payment […]

1) underwood company maintains its accounting records using ifrs. the company recently signed a lease for a new office building, for a lease period of 10 years. under the lease agreement, a security deposit of $20,000 is made, with the […]

1) glen inc. and armstrong co. have an exchange with no commercial substance. the asset given up by glen inc. has a book value of $48,000 and a fair value of $60,000. the asset given up by armstrong co. has […]

1) on march 15, a fire destroyed interlock company’s entire retail inventory. the inventory on hand as of january 1 totaled $3,300,000. from january 1 through the time of the fire, the company made purchases of $1,366,000, incurred freight-in of […]

1) the balance in retained earnings at december 31, 2012 was $720,000 and at december 31, 2013 was $582,000. net income for 2013 was $500,000. a stock dividend was declared and distributed which increased common stock $250,000 and paid-in capital […]

1) financial information exhibits the characteristic of consistency when a.expenses are reported as charges against revenue in the period in which they are paid b.companies apply the same accounting treatment to similar events, from period to period c.extraordinary gains and […]

1) types of franchising arrangements include all of the following except a.service sponsor-retailer b.wholesaler-service sponsor c.manufacturer-wholesaler d.wholesaler-retailer 2) if kiner uses the completed-contract method, the gross profit to be recognized in 2013 is a.$2,040,000 b.$4,200,000 c.$2,100,000 d.$8,400,000 Answer: b 3) […]

1) each of the statements appearing below is descriptive of one or more of the following depreciation methods. in the spaces below, place the letter(s) belonging to the method(s) to which the statement best applies. a.declining-balancee.sum-of-the-years’-digits b.groupf.units of output c.compositeg.working […]

1) john won a lottery that will pay him $150,000 at the end of each of the next twenty years. assuming an appropriate interest rate is 8% compounded annually, what is the present value of this amount? a.$1,590,540 b.$32,183 c.$1,472,723 […]

1) during 2012, gordon company issued at 104 five hundred, $1,000 bonds due in ten years. one detachable stock warrant entitling the holder to purchase 15 shares of gordons common stock was attached to each bond. at the date of […]

1) which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income? a.subscriptions received in advance b.prepaid royalty received in advance c.an installment sale accounted for on […]

1) coaster manufactures and sells logging equipment. due to the nature of its business, coaster is unable to reliably predict bad debts. during 2012, coaster sold equipment costing $3,600,000 for $5,400,000. the terms of the sale were 20% down, with […]

1) june corp. sells one product and uses a perpetual inventory system. the beginning inventory consisted of 20 units that cost $20 per unit. during the current month, the company purchased 120 units at $20 each. sales during the month […]

1) terry corporation had 400,000 shares of common stock outstanding at december 31, 2012. in addition, it had 90,000 stock options outstanding, which had been granted to certain executives, and which gave them the right to purchase shares of terry’s […]

1) vannoy corporation will invest $30,000 every january 1st for the next six years (2012 2017). if wagner will earn 12% on the investment, what amount will be in the investment fund on december 31, 2017? a.$123,342 b.$138,144 c.$243,456 d.$272,670 […]

1) on january 2, 2012, indian river groves began construction of a new citrus processing plant. the automated plant was finished and ready for use on september 30, 2013. expenditures for the construction were as follows: indian river groves borrowed […]