[a) What is the term used to describe the owner’s equity section of a corporation? [b)
Identify the two owners’ equity accounts in a corporation and indicate the purpose of
each.
Answer:
The entry to replenish a petty cash fund includes a credit to
a. Petty Cash.
b. Cash.
c. Freight-in.
d. Postage Expense.
Answer:
Revenue recognition under IFRS is
a. substantially different from revenue recognition under GAAP.
b. generally the same as revenue recognition under GAAP, but with more detailed
guidance.
c. generally the same as revenue recognition under GAAP, but with less detailed
guidance.
d. exactly the same as revenue recognition under GAAP.
Answer:
If the retained earnings account increases from the beginning of the year to the end of
the year, then
a. net income is less than dividends.
b. a net loss is less than dividends.
c. the company must have sold stock.
d. net income is greater than dividends.
Answer:
Moroni Industries has the following inventory information.
Assuming that a periodic inventory system is used, what is the amount allocated to
ending inventory on a FIFO basis?
a. $11,500
b. $11,520
c. $33,960
d. $33,980
Answer:
When a note is accepted to settle an open account, Notes Receivable is debited for the
note’s
a. net realizable value.
b. maturity value.
c. face value.
d. face value plus interest.
Answer:
The cost method of accounting for long-term investments in stock should be employed
when the
a. investor owns more than 50% of the investee’s stock.
b. investor has significant influence on the investee and the stock held by the investor
are marketable equity securities.
c. market value of the shares held is greater than their historical cost.
d. investor’s influence on the investee is insignificant.
Answer:
On January 1, 2014, Mudhoney Inc. purchased equipment for $45,000. The company is
depreciating the equipment at the rate of $750 per month. At January 31, 2015, the
balance in Accumulated Depreciation is
a. $750.
b. $9,000.
c. $9,750.
d. $35,250.
Answer:
The 2015 financial statements of Marker Co. contain the following selected data (in
millions).
The debt to assets ratio is
a. 64.3%.
b. 53.3%.
c. 28.6%.
d. 147.4%.
Answer:
A bond secured by specific assets set aside to redeem the bonds is called a
a. convertible bond.
b. sinking fund bond.
c. mortgage bond.
d. secured bond.
Answer:
For accounting purposes, the method used to account for long-term investments in
common stock is determined by
a. the amount paid for the stock by the investor.
b. the extent of an investor’s influence on the operating and financial affairs of the
investee.
c. whether the stock has paid dividends in past years.
d. whether the acquisition of the stock by the investor was ‘friendly’ or ‘hostile.’
Answer:
In a capital lease, the amount capitalized is the
a. sum of the lease payments over the life of the lease.
b. fair value of the leased asset on the date the lease is signed.
c. present value of the lease payments.
d. future value of the asset as of the lease termination date.
Answer:
The statement of cash flows
a. must be prepared on a daily basis.
b. summarizes the operating, financing, and investing activities of an entity.
c. is another name for the income statement.
d. is a special section of the income statement.
Answer:
Banner Company had the following payroll data for the year:
Assume the following:
Instructions
Compute Banner’s payroll tax expense for the year. Make a summary journal entry to
record the payroll tax expense.
Answer:
Bond interest paid is
a. higher when bonds sell at a discount.
b. lower when bonds sell at a premium.
c. the same whether bonds sell at a discount or a premium.
d. higher when bonds sell at a discount and lower when bonds sell at a premium.
Answer:
Which of the following would not be an adjustment to net income using the indirect
method?
a. Depreciation Expense
b. An increase in Prepaid Insurance
c. Amortization Expense
d. An increase in Land
Answer:
Sleep Corporation was organized on January 1, 2014. During its first year, the
corporation issued 40,000 shares of $5 par value preferred stock and 400,000 shares of
$1 par value common stock. At December 31, the company declared the following cash
dividends:
Instructions
(a) Show the allocation of dividends to each class of stock, assuming the preferred stock
dividend is 4% and not cumulative.
(b) Show the allocation of dividends to each class of stock, assuming the preferred
stock dividend is 6% and cumulative.
(c) Journalize the declaration of the cash dividend at December 31, 2016 using the
assumption of part (b).
Answer:
Which of the following is an optional step in the accounting cycle?
a. Adjusting entries
b. Closing entries
c. Correcting entries
d. Reversing entries
Answer:
The only acceptable cost flow assumptions under IFRS are
a. FIFO and LIFO.
b. FIFO and average.
c. LIFO and average.
d. FIFO, LIFO and average.
Answer:
A Discount on Bonds Payable account
a. is a contra account to Bonds Payable.
b. will cause interest expense to be less than cash interest payable.
c. is increased over the life of the bond until it equals the bond’s face value.
d. is an adjunct account to Bonds Payable.
Answer:
A Wage and Tax Statement shows gross earnings, FICA taxes withheld, and income
taxes withheld for the year.
Answer:
Cash provided by operations is generally equal to operating income.
Answer:
Profitability ratios measure the ability of the enterprise to survive over a long period of
time.
Answer:
Closing revenue and expense accounts to the Income Summary account is an optional
bookkeeping procedure.
Answer:
Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1.
Givens Brick Company signs a $600,000, 8%, 9-month note. The entry made by Givens
Brick Company on January 1 to record the proceeds and issuance of the note is
Answer:
Nolen Company is preparing the annual financial statements dated December 31, 2015.
Information about inventory stocked for regular sale follows:
Instructions
Compute the valuation for the December 31, 2015, inventory using the
lower-of-cost-or-market basis.
Answer:
The statement of cash flows classifies cash receipts and payments as operating,
nonoperating, financial, and extraordinary activities.
Answer: