Shipping terms of FOB destination mean that the
a. purchaser is responsible for the shipping charges.
b. shipping charges are debited to Freight-Out.
c. items should be in the purchaser’s inventory account at year-end if the items are in
transit.
d. both (a) and (c) above.
Answer:
On January 1, Collins Corporation had 800,000 shares of $10 par value common stock
outstanding. On March 31, the company declared a 10% stock dividend. Market value
of the stock was $15/share. As a result of this event,
a. Collins’ Paid-in Capital in Excess of Par account increased $400,000.
b. Collins’ total stockholders’ equity was unaffected.
c. Collins’ Stock Dividends account increased $1,200,000.
d. All of these answers are correct.
Answer:
Cash includes all of the following items except
a. checks.
b. currency.
c. money orders.
d. all of these answers are included.
Answer:
Barkley Company uses a periodic inventory system and has the following account
balances: Beginning Inventory $50,000, Ending Inventory $80,000, Freight-in $12,000,
Purchases $330,000, Purchase Returns and Allowances $8,000 and Purchase Discounts
$6,000.
Instructions
Compute each of the following:
(a) Net purchases
(b) Cost of goods available for sale
(c) Cost of goods sold
Answer:
The factor that is not relevant in computing depreciation is
a. replacement value.
b. cost.
c. salvage value.
d. useful life.
Answer:
If one company owns more than 50% of the common stock of another company,
a. the cost method should be used to account for the investment.
b. a partnership exists.
c. a parent-subsidiary relationship exists.
d. the company whose stock is owned must be liquidated.
Answer:
The following information is for Sunny Day Real Estate:
The total dollar amount of assets to be classified as investments is
a. $0.
b. $70,000.
c. $85,000.
d. $155,000.
Answer:
In analyzing financial statements, horizontal analysis is a
a. requirement.
b. tool.
c. principle.
d. theory.
Answer:
Controls that enhance the accuracy and reliability of the accounting records are
a. automated controls.
b. external controls.
c. mechanical and electronic controls.
d. physical controls.
Answer:
Adjusting entries are required
a. because some costs expire with the passage of time and have not yet been
journalized.
b. when the company’s profits are below the budget.
c. when expenses are recorded in the period in which they are incurred.
d. when revenues are recorded in the period in which services are performed.
Answer:
In preparing its bank reconciliation for the month of April 2015, Haskins, Inc. has
available the following information.
What should be the adjusted cash balance at April 30, 2015?
a. $34,410.
b. $34,470.
c. $35,760.
d. $35,820.
Answer:
Oakley Company does not ring up sales taxes separately on the cash register. Total
receipts for February amounted to $42,800. If the sales tax rate is 7%, what amount
must be remitted to the state for February’s sales taxes?
a. $2,996
b. $2,800
c. $4,280
d. It cannot be determined.
Answer:
The balance sheet for Tyde Corporation at the end of the current year
indicates the following:
Income before income taxes was $480,000 and income taxes expense for
the current year amounted to $144,000. Cash dividends paid on common
stock were $300,000, and the common stock was selling for $22.88 per
share at the end of the year. There were no ownership changes during the
year.
Instructions
Determine each of the following:
(a) Times that bond interest was earned.
(b) Earnings per share for common stock.
(c) Price-earnings ratio.
Answer:
Moreno Company purchased equipment for $900,000 on January 1, 2014, and will use
the double-declining-balance method of depreciation. It is estimated that the equipment
will have a 3-year life and a $40,000 salvage value at the end of its useful life. The
amount of depreciation expense recognized in the year 2016 will be
a. $100,000.
b. $60,000.
c. $108,880.
d. $68,880.
Answer:
Patton Company bought real estate, on which there was an old office building, for
$500,000. It paid $50,000 in cash as a down payment and signed a 10% mortgage for
the remainder. It immediately had the old building razed at a net cost of $35,000.
Attorneys were paid $6,000 in connection with the land purchase and an additional
$3,000 in connection with permits and zoning variances necessary for Patton’s new
office building. $20,000 was paid for excavation for the basement of the new building,
$1,500,000 was paid for construction of the new building, and $75,000 was paid for a
parking lot and necessary walkways and driveways.
The new office building should be recorded at
a. $1,500,000.
b. $1,523,000.
c. $1,520,000.
d. $1,558,000.
Answer:
The two methods of accounting for uncollectible accounts are (a) percentage of sales
and (b) percentage of receivables.
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:
Bay Company acquires 60, 8%, 5 year, $1,000 Community bonds on January 1, 2014
for $60,000.
If Bay sells all of its Community bonds for $64,500, what gain or loss is recognized?
a. Loss of $9,300
b. Loss of $4,500
c. Gain of $9,300
d. Gain of $4,500
Answer:
At January 1, 2014, the trading securities portfolio held by the Darren Corporation
consisted of the following investments:
1> 2,000 shares of Temper common stock purchased for $42 per share.
2> 1,500 shares of Logan common stock purchased for $50 per share.
At December 31, 2014, the fair values per share were Temper $38 and Logan $54.
Instructions
(a) Prepare a schedule showing the cost and fair value of the portfolio at December 31,
2014.
(b) Prepare the adjusting entry to report the portfolio at fair value at December 31,
2014.
Answer:
When a company retires bonds before maturity, the gain or loss on redemption is the
difference between the cash paid and the
a. carrying value of the bonds.
b. face value of the bonds.
c. original selling price of the bonds.
d. maturity value of the bonds.
Answer:
The company whose stock is owned by the parent company is called the
a. controlled company.
b. subsidiary company.
c. investee company.
d. sibling company.
Answer:
Compound interest is the return on principal
a. only.
b. for one or more periods.
c. plus interest for two or more periods.
d. for one period.
Answer:
Patton Company bought real estate, on which there was an old office building, for
$500,000. It paid $50,000 in cash as a down payment and signed a 10% mortgage for
the remainder. It immediately had the old building razed at a net cost of $35,000.
Attorneys were paid $6,000 in connection with the land purchase and an additional
$3,000 in connection with permits and zoning variances necessary for Patton’s new
office building. $20,000 was paid for excavation for the basement of the new building,
$1,500,000 was paid for construction of the new building, and $75,000 was paid for a
parking lot and necessary walkways and driveways.
Land should be recorded at a cost of
a. $535,000.
b. $541,000.
c. $564,000.
d. $561,000.
Answer:
Identify which of the following accounts would have balances on a post-closing trial
balance.
(1) Service Revenue
(2) Income Summary
(3) Notes Payable
(4) Interest Expense
(5) Cash
Answer:
FICA taxes withheld and federal income taxes withheld are mandatory payroll
deductions.
Answer:
A balance sheet reports the assets and liabilities of a company for a specific period of
time.
Answer:
Zimmer Company sold the following two machines in 2015:
Instructions
Journalize all entries required to update depreciation and record the sales of the two
assets in 2015. The company has recorded depreciation on the machines through
December 31, 2014.
Answer:
A business entity has only one accounting cycle over its economic existence.
Answer:
The operating cycle of a company is the average time required to collect the receivables
resulting from producing revenues.
Answer:
If a company has no beginning inventory and the unit price of inventory is increasing
during a period, the cost of goods available for sale during the period will be the same
under the LIFO and FIFO inventory methods.
Answer:
A successful corporation can have a continuous and perpetual life.
Answer: