The set of items below was identified in preparing a bank reconciliation for Heath Corp.
as of August 31, 2014. Bank statement balance $18,500
Heath’s book balance (before adjustments) ?
Outstanding checks 2,700
Customer’s NSF checks 350
Service Charges 100
Deposits in transit 1,000
Interest earned on checking account 60
Heath Corp.’s balance per books before the reconciliation is a. $16,410b. $16,900c.
$17,190d. $17,310
International accounting standards use the term provision for those contingent items
that must be recorded on the balance sheet.
a. True
b. False
Match the costs that might be included as part of the cost of inventory to the listed
accounting treatment. a. Add to inventory cost
b. Subtract from inventory cost
c. Not an inventory cost
Freight costs incurred by the seller to ship goods to its customers
If you plan to invest $10,000 and want to determine how much will be accumulated in
six years if you earn interest at 7% per year, you would calculate this using the future
value of an annuity.
a. True
b. False
Which one of the following statements is true?
a. When a company uses a subsidiary ledger, the balance in the control account,
Accounts Receivable, shows only the amount the company expects to collect from the
accounts receivable, net of any expected uncollectible accounts.
b. An accounts receivable subsidiary ledger represents amounts due to vendors and
suppliers.
c. The balance in the control account, Accounts Receivable, should be equal to the sum
of the balances in the subsidiary ledger for accounts receivable.
d. A subsidiary ledger takes the place of the control account for some companies.
Investing activities are needed to provide the funds to start a business.
a. True
b. False
If an investor has the right to retire the bonds, they are referred to as callable.
a. True
b. False
Materiality deals with the size of an error in accounting information.
a. True
b. False
Match the following bond and long-term liability related terms to the appropriate
definition.
a. Long-term liability
b. Face value
c. Debenture bonds
d. Serial bonds
e. Callable bonds
f. Face rate of interest
g. Market rate of interest
h. Bond issue price
i. Premium
j. Discount
k. Effective interest method of amortization
l. Carrying value
m. Gain or loss on redemption
The interest rate that bondholders could obtain by investing in other bonds that are
similar to the issuing firm’s bonds.
Three organizations important to accounting are listed below. Select the organization th
at most closely achieves the role described.
a. American Institute of Certified Public Accountants (AICPA)
b. Financial Accounting Standards Board (FASB)
c. Securities and Exchange Commission (SEC) Prepares and grades the Uniform CPA
Examination.
What effect does ‘œrecognizing revenue at the end of the accounting period for rent
previously received in advance’ have on the accounting equation for an insurance
company?
a. Stockholders’ equity increases and liabilities increase.
b. Assets increase and stockholders’ equity increases.
c. Assets decrease and liabilities decrease.
d. Liabilities decrease and stockholders’ equity increases.
Determining the cash flows from operating activities generally requires analyzing each
item on the income statement as well as the current asset (except cash) and current
liability accounts.
a. True
b. False
Select the term from the list below that matches each of the following six descriptions.
a. Interest
b. Maturity value
c. Principal
d. Payee
e. Discounting
f. Term
g. Recourse
h. Implicit
i. Maker
The party that receives payment due from a note
Long-term assets are $5,000, current liabilities are $700, and long-term liabilities are
$3,000. If the current ratio is 3 to 1, then current assets are
a. $9,000
b. $6,900
c. $4,300
d. $2,100
Funds raised from financing activities should be invested in assets that can be used to
carry on business operations.
a. True
b. False
A new company issues 2,000 shares of $5 par common stock in exchange for the
services of a lawyer during its first month of business. The lawyer’s normal fee is
$15,000 for similar work. Which of the following would be recorded if the stock is not
currently trading?
a. A debit to Common Stock for $10,000
b. A credit to Common Stock for $15,000
c. A debit to Additional PaidÂIn Capital-Common Stock of $5,000
d. A credit to Additional PaidÂIn Capital-Common Stock of $5,000
A pool cleaning service signs a contract with a new customer on May 1. The pool is
vacuumed and ‘œshocked’ for the customer on June 1, and the bill for the services is
paid on July 1. Under the accrual basis, the business should recognize revenue on:
a. December 31
b. July 1
c. June 1
d. May 1