When plant assets are reported, the current period’s depreciation expense is subtracted
from the original cost on the balance sheet.
a. True
b. False
United Airlines is an example of a
a. producer
b. supplier
c. retailer
d. service provider
Maxim Company sells auto parts. The company employs a periodic inventory system.
Identify all the effects on the accounting equation.
a. Increase in assets
b. Decrease in assets
c. Increase in liabilities
d. Decrease in liabilities
e. Increase on owners’ equity
f. Decrease in owners’ equity
g. Increase in assets and increase in owners’ equity
h. Decrease in assets and decrease in owners’ equity
i. Increase in liabilities and decrease in owners’ equity
j. Decrease in liabilities and increase in owners’ equity
Recorded cash sales for the day.
From the list of accounts below, determine whether the account would be a nominal
account or a real account.
a. nominal account
b. real account
Cash
At December 31, 2015, the accounting records of Wyndam Corporation contain the
following:
If capital stock is $260,000, what is the December 31, 2015 cash balance?a. $46,000
b. $506,000
c. $94,000
d. $86,000
Select the letter of the term each statement best describes.
a. authorized shares
b. issued shares
c. outstanding shares
d. par value
e. additional paid-in capital
f. retained earnings
g. cumulative feature
h. participating feature
i. callable stock
j. treasury stock
k. retirement of stock
l. dividend payout ratio
m. stock dividend
n. stock split
o. market value per share
p. convertible stock
q. book value per share
Stock that has a provision allowing the stockholders to share in the distribution of an
abnormally large dividend on a percentage basis.
Failure to record the supplies used during the year would result in which of the
following?
a. Net income being understated
b. An overstatement of liabilities
c. Stockholders’ equity being overstated
d. Total assets being understated
All of the following are characteristics of current liabilities except:
a. They may be replaced with a new short-term liability rather than being paid in cash.
b. They may involve estimated amounts.
c. They are due within one year or within the operating cycle, whichever is longer.
d. All three of the above are characteristic of current liabilities.
Fox Auto sold merchandise to a customer for $3,000 on credit on March 10. The
customer paid Fox Auto the amount due on March 31. Under the accrual basis of
accounting, which of the following statements is true?
a. Fox Auto will recognize the revenue on March 31.
b. The March 10th transaction increases revenue, but has no effect on assets because
cash has not been received.
c. Revenue is recognized after the cost of the merchandise sold has been paid by Fox
Auto.
d. The March 31st transaction has no effect on total assets under the accrual basis.
A bond issue price is the present value of the cash flows that the bond will produce.
a. True
b. False
Match the selected items from a classified balance sheet and multiple-step income state
ment to the section in which they would appear on the classified balance sheetor the inc
ome statement.
a. Current Assets (balance sheet)
b. Property, Plant, & Equipment (balance sheet)
c. Current Liabilities (balance sheet)
d. Long-term Liabilities (balance sheet)
e. Stockholders’ Equity (balance sheet)
f. Operating Revenue (income statement)
g. Operating Expenses (income statement)
h. Other Revenue & Expenses (income statement)
i. Income Taxes (income statement)
Land
At Forrest Industries, all sales are on account. Sienna Marcos is responsible for mailing
invoices to customers, recording the amount billed, opening mail, recording the
payment, and making deposits to the bank. Sienna is very devoted to the family
business and never takes off more than one or two days for a long weekend. The
customers know Sienna and sometimes send personal notes with their payments.
Another clerk handles all aspects of accounts payable. Sienna’s brother, who is
president of Forrest Industries, has hired an accountant to help with expansion.
REQUIRED:
1> List some problems with the current accounts receivable system.
2> What suggestions would you make to improve internal control?
3> How would you explain to Sienna that she personally is not the problem?
On January 1, 2014, Hart Company purchased an asset for $137,500. For financial
accounting purposes, the asset will be depreciated on a straight-line basis over five
years with no residual value at the end of that time. For tax purposes, the asset will be
depreciated as follows: 2014, $45,000; 2015, $35,000; 2016, $25,000; 2017, $20,000;
and 2018, $12,500. Assume that the company is subject to a 35% tax rate. REQUIRED:
1> What is the amount of deferred tax at December 31, 2014?
2> Does the deferred tax represent an asset or a liability?
3> What is the amount of deferred tax at December 31, 2018?
Identify two methods of accelerating cash from sales.
A company purchased an asset on January 1, 2014, for $10,000. The asset was expected
to have a ten-year life and a $1,000 salvage value. The company uses the straight-line
method of depreciation. On January 1, 2016, the company made a major repair to the
asset of $5,000, extending its life. The asset is expected to last ten years from January 1,
2016. Calculate the amount of depreciation for 2016
The three reasons why a company might choose an accelerated depreciation method are
__________________________________________________,
__________________________________________________, and
__________________________________________________.
are items which are readily convertible into a known amount of cash and have an
original maturity to the investor of three months or less.
Balance Sheet Accounts
(all accounts have normal balances)
(in millions)Refer to the account information for Auto Designs, Inc.
REQUIRED: Calculate the current and quick ratios for 2015 and 2014. Comment on
the direction and significance of the change in the ratios.
A departure from the cost basis of accounting may be necessary when the
_________________________ of the inventory is less than its cost to the company.
Changes in accounts and notes receivable are reported in theActivities section of a
statement of cash flows prepared using the indirect method.
A contra-asset account used to reduce accounts receivable to its net realizable value is
known as a(n)
____________________.