Horizontal analysis evaluates a series of financial statement data over a period of time
a. that has been arranged from the highest number to the lowest number.
b. that has been arranged from the lowest number to the highest number.
c. to determine which items are in error.
d. to determine the amount and/or percentage increase or decrease that has taken place.
Answer:
The Fair Value Adjustment account
a. is set up for each security in the company’s portfolio.
b. relates to the entire portfolio of securities held by the company.
c. is closed at the end of each accounting period.
d. appears on the income statement as Other Expenses and Losses.
Answer:
Unearned revenue is classified as
a. an asset account.
b. a revenue account.
c. a contra-revenue account.
d. a liability account.
Answer:
The factor which determines whether or not goods should be included in a physical
count of inventory is
a. physical possession.
b. legal title.
c. management’s judgment.
d. whether or not the purchase price has been paid.
Answer:
If the present value of lease payments equals or exceeds 90% of the fair value of the
leased property, the
a. conditions are met for the lease to be considered a capital lease.
b. lease is uneconomical and should not be entered into.
c. lease may be classified as an operating lease.
d. recording of a lease liability is optional’”that is, the off-balance sheet approach can be
elected.
Answer:
Korean Corporation issued $2 million, 10-year, 6% bonds on January 1, 2015.
Instructions
Prepare the entry to record the sale of these bonds, assuming they were issued
at
(a) 98.
(b) 103.
Answer:
Which of the following is the correct sequence of steps in the recording process?
a. Posting, journalizing, analyzing
b. Journalizing, analyzing, posting
c. Analyzing, posting, journalizing
d. Analyzing, journalizing, posting
Answer:
Sales taxes collected by the retailer are recorded as a(n)
a. revenue.
b. liability.
c. expense.
d. asset.
Answer:
Which of the following would not be considered a merchandising company?
a. Retailer
b. Wholesaler
c. Service firm
d. All of these are considered a merchandising company.
Answer:
Which of the following statements concerning bonds is not a true statement?
a. Bonds are generally sold through an investment company.
b. The bond indenture is prepared after the bonds are printed.
c. The bond indenture and bond certificate are separate documents.
d. The trustee keeps records of each bondholder.
Answer:
On January 1, Sway Corporation had 60,000 shares of $10 par value common stock
outstanding. On March 17, the company declared a 15% stock dividend to stockholders
of record on March 20. Market value of the stock was $13 on March 17. The stock was
distributed on March 30. The entry to record the transaction of March 30 would include
a
a. credit to Cash for $90,000.
b. debit to Common Stock Dividends Distributable for $90,000.
c. credit to Paid-in Capital in Excess of Par for $27,000.
d. debit to Stock Dividends for $27,000.
Answer:
Mather Company purchased equipment on January 1, 2015 at a total invoice cost of
$336,000; additional costs of $6,000 for freight and $30,000 for installation were
incurred. The equipment has an estimated salvage value of $12,000 and an estimated
useful life of five years. The amount of accumulated depreciation at December 31, 2016
if the straight-line method of depreciation is used is:
a. $129,600.
b. $132,000.
c. $144,000.
d. $148,800.
Answer:
During 2015, its first year of operations, Neko’s Bakery had revenues of $60,000 and
expenses of $35,000. The business paid dividends of $20,000. What is the amount of
stockholders’ equity at December 31, 2015?
a. $0
b. $5,000 credit
c. $25,000 credit
d. $20,000 debit
Answer:
Sam Wainwright is a new accountant with Ground Floor Company. Ground Floor
purchased merchandise on account for $18,000. The credit terms are 1/10, n/30. Sam
has talked with the company’s banker and knows that he could earn 4% on any money
invested in the company’s savings account.
Instructions
(a) Should Sam pay the invoice within the discount period or should he keep the
$18,000 in the money market account and pay at the end of the credit period? Support
your recommendation with a calculation showing which action would be best.
(b) If Sam forgoes the discount, it may be viewed as paying an interest rate of 1% for
the use of $18,000 for 20 days. Calculate the annual rate of interest that this is
equivalent to.
Answer:
The purpose of the post-closing trial balance is to
a. prove that no mistakes were made.
b. prove the equality of the balance sheet account balances that are carried forward into
the next accounting period.
c. prove the equality of the income statement account balances that are carried forward
into the next accounting period.
d. list all the balance sheet accounts in alphabetical order for easy reference.
Answer:
All of the following are intangible assets except
a. copyrights.
b. goodwill.
c. patents.
d. research and development costs.
Answer:
Inventoriable costs include all of the following except the
a. cost of the goods purchased.
b. freight in.
c. cost of the beginning inventory.
d. All of these answers are included.
Answer:
The following accounts were included on Aeroplane Consultants adjusted trial balance
at December 31, 2015:
(a) What are total current assets?
(b) What are total current liabilities?
Answer:
During August, 2015, Baxter’s Supply Store generated revenues of $60,000. The
company’s expenses were as follows: cost of goods sold of $36,000 and operating
expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the
sale of a delivery truck of $2,000.
Baxter’s gross profit for August, 2015 is
a. $20,000.
b. $21,000.
c. $23,000.
d. $24,000.
Answer:
If a corporation declares a dividend based upon paid-in capital, it is known as a
a. scrip dividend.
b. property dividend.
c. paid dividend.
d. liquidating dividend.
Answer:
On January 1, 2015, $3,000,000, 5-year, 10% bonds, were issued for $2,916,000.
Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the
straight-line method to amortize discount on bonds payable, the monthly amortization
amount is
a. $14,000.
b. $16,800.
c. $700.
d. $1,400.
Answer:
Under IFRS, income statement items are generally described as
a. administration, distribution, manufacturing, etc.
b. salaries, depreciation, utilities, etc.
c. administration, depreciation, manufacturing, etc.
d. salaries, distribution, utilities, etc.
Answer:
Times interest earned is also called the
a. money multiplier.
b. interest coverage ratio.
c. coupon coverage ratio.
d. premium ratio.
Answer:
Compute the lower-of-cost-or-market valuation for Gantner Company’s total inventory
based on the following:
Answer:
The operating activities section of the statement of cash flows may be prepared using
the ______________ method or the ______________ method.
Answer:
The rate of return on total assets will be greater than the rate of return on common
stockholders’ equity if the company has been successful in trading on the equity at a
gain.
Answer:
A mortgage note payable with a fixed interest rate requires the borrower to make
installment payments over the term of the loan. Each installment payment includes
interest on the unpaid balance of the loan and a payment on the principal. With each
installment payment, indicate the effect on the portion allocated to interest expense and
the portion allocated to principal.
Answer:
For the items listed below, fill in the appropriate code letter to indicate whether the item
is an asset, liability, or stockholders’ equity item.
Answer:
Compute the dollar amount of current assets based on the following account balances.
Answer:
In the first month of operations, Mordica Company made three
purchases of merchandise in the following sequence: (1) 200 units at
$6, (2) 300 units at $7, and (3) 400 units at $9. Assuming there are
300 units on hand, compute the cost of the ending inventory under
(1) the FIFO method and (2) the LIFO method. Mordica uses a periodic
inventory system.
Answer:
