A bond with a face value of $1,000 has a current price quote of 89.00. This bond is
selling for
A. $1090.00.
B. $1040.00.
C. $990.00.
D. $890.00.
Improperly classifying large expenditures as assets rather than expenses
A. could constitute fraud.
B. understates income for the period.
C. understates equity on the balance sheet.
D. results in none of these options.
Which of the following is a contingent liability?
A. Note payable with interest included in face amount
B. Excise tax payable
C. Property tax liability
D. Disputed additional tax assessment
Use this information to answer the following question.
A single deposit of $7,000 made at the beginning of period 1 and earning 12 percent
interest compounded annually would grow to how much at the end of three years?
A. $7,840
B. $9,835
C. $8,778
D. $23,618
When bonds are intended to be held to maturity, they are accounted for at
A. fair value
B. cost
C. fair value adjusted for the amortization of their discount or premium
D. cost adjusted for the amortization of their discount or premium
When bonds are issued at a discount, the total interest cost of the bonds over the life of
the bonds is equal to the amount of
A. interest payments made over the life of the bonds minus the amount of issuance
discount.
B. issuance discount.
C. interest payments made over the life of the bonds plus the amount of issuance
discount.
D. interest payments made over the life of the bonds.
The purchases journal
A. must have several columns, it cannot be a single-column journal.
B. will include all purchases of merchandise for resale.
C. has Accounts Receivable as its controlling account.
D. requires that individual transactions in the Accounts Payable column be posted daily.
Which of the following transactions is most likely not to result in an adjusting entry at
the end of the period?
A. Performance of a service for which payment was not received in advance.
B. Purchase of inventory for sale in the subsequent period.
C. Purchase of office equipment.
D. Purchase of a two-year insurance policy.
The trial balance for Parker Company is as follows:
On the trial balance, total assets equal
A. $108,000
B. $104,000
C. $88,000
D. $68,000
Which costing method is used based on the reasoning that the fairest determination of
income occurs if the current costs are matched against current sales prices?
A. Specific identification
B. FIFO
C. Average-cost
D. LIFO
All of the following are inventory costing methods except
A. first-in, first-out.
B. average-cost.
C. periodic.
D. specific identification.
When a company makes payment for goods or services, the check is prepared by the
company’s
A. requesting department.
B. treasurer.
C. accounting department.
D. receiving department.
Using the following transactions, calculate the ending balance of (A) total assets, (B)
total liabilities, (C) Cash, and (D) Owner’s Equity. Indicate whether each balance is
debit or credit.
a. Opened business by investing $72,000 in cash.
b. Paid one year’s insurance in advance, $4,800.
c. Billed customers for services rendered, $12,000.
d. Received utility bill, to be paid next month, $800.
e. Received $1,600 in advance of performing a service.
f. Received $8,800 from customers billed in c.
g. Paid $600 on the utility bill of d.
h. Withdrawals of $4,000 were made by the owner.
The collection of a $800 account within the 2 percent discount period would result in
a(n)
A. increase to Accounts Receivable for $784.
B. decrease to Cash for $784.
C. increase to Sales Discounts for $16.
D. decrease to Accounts Receivable for $784.
Which of the following goods would not be included in merchandise inventory for a
purchasing company?
A. Goods in transit shipped FOB shipping point
B. Goods on hand in the showroom
C. Goods in transit shipped FOB destination
D. Goods ordered and received from the supplier
If the amount of uncollectible accounts expense is overstated at year end,
A. Allowance for Uncollectible Accounts will be understated.
B. net income will be overstated.
C. net Accounts Receivable will be understated.
D. total liabilities and stockholders’ equity will be overstated.
Use this information to answer the following question.
A periodic inventory system is used.
Ending inventory under LIFO is
A. $452.
B. $429.
C. $214.
D. $237.
Which of the following accounts would be found on the debit side of the adjusted trial
balance?
A. Accumulated Depreciation–Equipment
B. Owner’s Capital
C. Owner’s Withdrawals
D. Wages Payable
A liquidation differs from a dissolution in that in a liquidation
A. the business will not continue
B. assets may be revalued
C. gains and losses are distributed according to the partnership agreement
D. there may be an adjustment of partners’ Capital accounts
Red Company created advertising copy for a client. Which of the following does not
indicate that the transaction meets the SEC’s four criteria for revenue recognition?
A. The company and the customer agree that the customer owes for the service.
B. Both parties understand the price.
C. The goods or services have been used to produce revenue.
D. There is a reasonable expectation that the customer will pay the bill.
Using the following information and the trial balance accounts and balances in the work
sheet provided, complete the work sheet.
a. Expired insurance totals $8.
b. Of the unearned revenue, all has been earned by the balance sheet date.
c. Estimated depreciation of equipment is $6.
d. Accrued wages equal $6.
e. Unused supplies on hand are $4.
The following selected amounts were extracted from the financial statements of Alfonso
Corporation.
a. Prepare a trend analysis for net sales, gross margin, and net income using Year 1 as the
base year.
b. For net sales, gross margin, and net income:
1. Calculate the percentage change from Year 1 to Year 2.
2. Calculate the percentage change from Year 2 to Year 3.
c. For each of the four years, compute the percentage relationship of gross margin to net
sales and the relationship of net income to net sales.
d. Identify which requirement(s) above involve(s):
1. Horizontal analysis
2. Vertical analysis
Round all answers to the nearest tenth of 1 percent.
Partners B and I receive a salary allowance of $6,000 and $14,000, respectively, and
share the remainder equally. If the company earned $8,000 during the period, the entry
to close the income or loss into their capital accounts is:
Calculate answers to the following using future value and/or present value tables:
a. What is the present value of receiving $1,000 at the end of each year for 6 years,
assuming 7 percent interest compounded annually?
b. What amount must be deposited at the bank today to grow to $300 in five years,
assuming 14 percent interest compounded semiannually?
Areas that require accounting estimates include all of the following except
A. executive compensation.
B. residual value of assets.
C. amortization periods.
D. environmental cleanup costs.
A note receivable dated May 23 and due in 90 days would be due on
A. August 20.
B. August 21.
C. August 23.
D. August 22.
Using the following information from an annual report, prepare a horizontal analysis of
the consolidated statements of earnings. (Round percentage answers to one decimal
place.)
A $200,000 bond issue with a carrying value of $194,000 is called at 101 and retired.
The entry to record the retirement of bonds is:
A. Bonds Payable 200,000
Gain on Retirement
of Bonds 6,000
Cash 194,000
B. Bonds Payable 200,000
Cash 200,000
C. Bonds Payable 200,000
Loss on Retirement
of Bonds 8,000
Unamortized Bond
Discount 6,000
Cash 202,000
D. Bonds Payable 194,000
Bonds that mature in installments are called
A. term bonds.
B. debenture bonds.
C. zero coupon bonds.
D. serial bonds.
Discuss a worksheet by answering the following questions:
a. Why is the preparation of a worksheet not required?
b. When a worksheet is used, does a trial balance have to be prepared? Why or why
not?
c. If the Income Statement and Balance Sheet columns balance, is this proof that the
financial statements are correct? Why or why not?