Paulson Transport Company On January 1, 2015, Paulson Transport Company
purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of
$50,000. The company uses the double-declining-balance method.
What was the book value of the ship for Paulson Transport at the end of the useful life?
a. $ -0-
b. $ 50,000
c. $214,400
d. Need more information to determine this answer.
Forman, Inc. earned $600,000 profit during 2015. On which financial statement(s) will
you find the dollar amount of the profit earned by the company?
a. Balance sheet and income statement
b. Income statement only
c. Statement of retained earnings only
d. Income statement and statement of retained earnings
If the December 31, 2016, balance of accounts receivable is higher than the January 1,
2016, balance, then the amount of cash collections will be less than the sales on account
for the year.
a. True
b. False
Marvel Shoes Marvel Shoes reported the following items on its statement of cash flows
for the current year:
Read the information about Marvel Shoes. What was the cash balance for Marvel Shoes
at the end of the current year?
a. $ 10,000
b. $ 30,000
c. $ 40,000
d. $ 70,000
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Mackie’s
individual retirement account (IRA) currently has a balance of $100,000 and is earning
6%. Beginning one year from today, what equal annual amounts can be withdrawn from
the IRA for 10 years so that the balance after the tenth withdrawal is zero?
a. $10,000
b. $12,950
c. $13,587
d. $14,237
Which of the following accounts is increased by a debit entry?
a. Common Stock (Capital Stock)
b. Equipment
c. Unearned Subscription Revenue
d. Notes Payable
All intangible assets should be amortized.
a. True
b. False
The normal balance of the Dividends account is a credit.
a. True
b. False
Match the selected items from a classified balance sheet and multiple-step income state
ment to the section in which they would appear on the classified balance sheetor the inc
ome statement.
a. Current Assets (balance sheet)
b. Property, Plant, & Equipment (balance sheet)
c. Current Liabilities (balance sheet)
d. Long-term Liabilities (balance sheet)
e. Stockholders’ Equity (balance sheet)
f. Operating Revenue (income statement)
g. Operating Expenses (income statement)
h. Other Revenue & Expenses (income statement)
i. Income Taxes (income statement)
Accounts receivable
Use the equation presented below to answer the question that follows: Cash = CL + LTL
+ CS + RE -NCCA -LTA where: CL = Current liabilities
LTL = Long-term liabilities
CS = Common stock
RE = Retained earnings
NCCA = Noncash current assets
LTA = Long-term assets Which of the following activities results in a cash outflow?
a. Decreases in noncash current assets (NCCA)
b. Decreases in long-term assets (LTA)
c. Increases in long-term liabilities (LTL)
d. Decreases in retained earnings (RE)
The statement of stockholders’ equity is useful in evaluating a company’s liquidity.
a. True
b. False
A lease is accounted for as a capital lease if the lease term is 75% or more of the
property’s economic life.
a. True
b. False
Under the indirect method, an increase in accounts payable is added to net income to
determine cash flow from operating activities.
a. True
b. False
Bennington Corp. issued a $40,000, 10-year bond at the face rate of 8%, paid
semiannually. How much cash will the bond investors receive at the end of the first
interest period?
a. $ 800
b. $1,600
c. $3,200
d. $4,000
The asset leased under an operating lease requires the lessee to record depreciation
expense.
a. True
b. False
At the end of 2013, Clock Products, Inc. determined that one of its patents was
worthless. The patent had a cost of $300,000. The patent had been amortized for 5 years
of its estimated 15-year legal life. Which of the following statements is correct?
a. Clock Products must continue to amortize the patent over its remaining 10 years of
life.
b. The patent must be reduced to 5/15, or 33.3% of its original cost and amortized over
the remaining 10 years.
c. The remaining unamortized cost must be removed from the accounting records and
treated as a loss on the income statement.
d. Clock Products must correct its financial statements for the past five years, so that the
entire cost is allocated to that five-year period.
Accounts receivable
Refer to the information for Carlton, Inc. What amount is cost of goods available for
sale for 2015?
Ranier Parts Company has a return on assets of 12% and a return on common
stockholders’ equity of 15%. What causes the difference in the two returns?
Bonds payable are dated January 1, 2016, and are issued on that date. The face value of
the bonds is $200,000, and the face rate of interest is 8%. The bonds pay interest
semiannually. The bonds will mature in five years. The market rate of interest at the
time of issuance was 6%. REQUIRED: 1> What is the bond issuance price? 2> Using
the effective interest amortization method, what amount should be amortized for the
first six-month period? What amount of interest expense should be reported for the first
six-month period? 3> Using the effective interest amortization method, what amount
should be amortized for the period from July 1 to December 31, 2016? What amount of
interest expense should be reported for the period from July 1 to December 31, 2016?
The two items that must be estimated with respect to a plant asset in order to properly
allocate cost to the affected accounting periods are
______________________________ and ______________________________.
Use the comparative financial statements of Penny Company for the year ended
December 31, 2015 to answer the following question(s). Penny Company
Statement of Stockholder’s Equity
for the Year Ended December 31, 2015
REQUIRED: (1) What is the primary cause of the change in Penny’s stockholders’
equity from January 1, 2015 to December 31, 2015? (2) Did Penny declare dividends
during 2015? How do you know? Which items would be included as part of
comprehensive income, if any?
A(n)is a form used by the receiving department to account for the quantity and
condition of merchandise received from a supplier.
From an accounting perspective, explain how an external event differs from an internal
event and give an example of each.
If a company overstates its ending inventory for the current year, what are the effects on
cost of goods sold and net income for the current year?
Presented below are condensed data from the financial statements of Toro Factory for
2015 and 2014. The figures are expressed in thousands. Use this information to answer
the questions that follow.
Which statement indicates the financial position of the company? What information is
provided on that statement that indicates the “financial position” of the company?
Explain.