Readers.com uses a perpetual inventory system.
If Readers.com uses the moving average method, how much is cost of goods sold for
the units sold on February 15?
a. $245
b. $255
c. $260
d. $270
Convertible bonds are attractive to investors because
a. they usually carry a higher rate of interest than non-convertible bonds.
b. they carry a convertible interest rate that can be increased when the prime rate of
interest increases.
c. they can be converted into stock at the issuer’s option.
d. the issuing company cannot retire the bonds before maturity.
Identify whether the following investor questions are associated with (a) primary or sec
ondary financial reporting objectives.
a. Consistency
b. Materiality
c. Conservatism
d. Comparability
e. Reliability
f. Relevance
g. Understandability
Those willing to spend the time should be provided with comprehensible accounting
information.
The following data concerns Wang Corporation for 2015:
What amount will Wang show on its year-end balance sheet for the net realizable value
of its accounts receivable?
a. $253,000
b. $235,000
c. $224,000
d. $217,000
An independent auditor’s (CPA’s) report is a guarantee that the financial statements are
free from fraud or material error
a. True
b. False
Identify the classifications of the following accounts as either current or long-term
liabilities for the December 31, 2014 balance sheet.
a. Current liability
b. Long-term liability
An amount of money owed in 2015 to a creditor as an annual installment payment on a
ten-year note, due June 30, 2020.
Which of the following statements is true with regard to early retirement of bonds?
a. If the carrying value of the bonds is higher than the redemption price, the issuing firm
must record a loss.
b. Firms always find it advantageous to retire bonds issued at lower rates with bonds
issued at higher rates.
c. It is always advantageous to carry out early retirement for bonds issued at a premium
but not for bonds issued at a discount.
d. Any gain or loss resulting from early retirement of bonds would appear on the
income statement of the issuing company.
Summer, Inc. has been in business for 20 years. During that time the company has
consistently used the LIFO inventory costing method. Because of inflation, prices for
merchandise have increased consistently over the 20 years. The company has
maintained the same inventory quantities over the 20-year period. Which one of the
following statements is true?
a. Summer, Inc.’s total net income for the past 20 years is greater than it would have
reported using another inventory method.
b. Summer, Inc. will have paid more income taxes over the past 20 years than it would
have if it had used the FIFO method.
c. Summer will have to continue using the LIFO method indefinitely because of
generally accepted accounting principles and federal income tax rules.
d. The ending inventory figure reported on the balance sheet may be significantly lower
than its current value.
Fall Corp. uses plant assets that are subject to rapid decreases in value due to
obsolescence and physical deterioration. Which of the following depreciation methods
is most appropriate to measure the decline in the usefulness of the company’s assets?
a. Double-declining-balance
b. Revenue expenditure method
c. Straight-line
d. Units-of-production
Which of the following represents the proper order of the financial decision
framework?
a. Analyze the information, formulate the question, gather information from financial
statements, monitor your decision, make the decision.
b. Formulate the question, Analyze the information, gather information from financial
statements, monitor your decision, make the decision.
c. Formulate the question, Gather information from financial statements, Analyze the
information, Make the decision, Monitor your decision
d. Analyze the information, monitor your decision, make the decision, formulate the
question, gather information from financial statements.