Mary needs to have $20,000 one year from today. The formula to compute the amount
of money that must be invested today is future value/(1 – interest rate).
Equity represents the future obligations of a business entity.
The four Standards of Ethical Conduct for Management Accountants relate to
competence, confidentiality, integrity, and objectivity.
An asset exchange transaction does not affect the total amount of claims to a company’s
assets.
Revenues and liabilities are temporary accounts.
Distinguishing between product and period costs is sometimes guided by the
value-added principle.
During its first year of operations, Silverman Company paid $14,000 for direct
materials and $19,000 for production workers’ wages. Lease payments and utilities on
the production facilities amounted to $17,000 while general, selling, and administrative
expenses totaled $8,000. The company produced 5,000 units and sold 3,000 units at a
price of $15.00 a unit.
What is the amount of gross margin for the first year?
A.$15,000
B.$24,000
C.$20,000
D.$45,000
Which of the following statements regarding cash transactions is true?
A.Purchasing land for cash results in no net change in assets.
B.Issuance of stock to owners increases assets.
C.Expense transactions increase assets.
D.Purchasing land for cash results in no net change in assets and Issuance of stock to
owners increases assets.
Which of the following is an asset exchange transaction?
A.Issued common stock.
B.Accrued salary expense at the end of the accounting period.
C.Recognized revenue earned on a contract where the cash had been collected at an
earlier date.
D.Collected cash on accounts receivable
Select the correct statement regarding managerial and financial accounting.
A.Users of managerial accounting information desire greater aggregation than do users
of financial accounting information.
B.Both managerial and financial accounting use economic and physical data in addition
to financial data.
C.Financial accounting is more highly regulated than managerial accounting.
D.Timeliness is more important in financial accounting than in managerial accounting.
Which one of the following requires the audit committee to be responsible for the
appointment and compensation of the external auditor?
A.The Securities Act of 1933
B.The Securities Exchange Act of 1934
C.The Investment Company Act of 1940
D.The Foreign Corrupt Practices Act of 1977
E.The Sarbanes-Oxley Act of 2002
The SEC has usually restricted its role in establishing accounting principles to
A.specifying the information that should be included in interim financial statements.
B.developing definitions of key accounting terms.
C.developing accounting standards for particular industries.
D.determining required disclosures.
E.the promulgation and issuance of SASs (Securities Accounting Standards).
Which of the following describes the effects of an asset use transaction on a company’s
financial statements?
A.
B.
C.
D.
Connor has $300,000 to invest in a 5 year annuity. Assuming the time value of money is
10%, what amount will Connor receive in cash each year? (Do not round your PV
factors. Round your answer to the nearest dollar.)
A.$79,139
B.$60,000
C.$96,631
D.None of these answers is correct.
Sandusky Company borrowed $10,000 from the Lakeside Bank by issuing a 10%
three-year installment note. Sandusky agreed to repay the principal and interest by
making annual payments in the amount of $4,021.15. Based on this information, the
amount of the interest expense associated with the second payment would be: (round
your answer to the nearest dollar)
A.$365.
B.$698.
C.$1,000.
D.$821.
Ramon Company experienced the following events during 2012:
1) Acquired $50,000 cash by issuing common stock
2) Borrowed $15,000 cash from a creditor
3) Provided services to customers for $33,000 cash
4) Paid $27,000 cash for operating expenses
5) Paid a cash dividend of $1,500 to stockholders
6) Purchased land with cash, $25,000
Required:
a) Show how each of these events affects the accounting equation. Show amounts and
increases or decreases, using + for increases and – for decreases and NA for no effect.
The first event is done as an example.
b) Calculate the total amount of assets, liabilities, common stock, and retained earnings
at the end of the period.
Which of the following is not a provision of the Sarbanes-Oxley Act of 2002?
A.The chief executive officer and the chief financial officer are jointly responsible for
establishment and enforcement of internal controls.
B.Companies are required to report on the effectiveness of their internal controls.
C.The company’s external auditor is charged with the ultimate responsibility for the
accuracy of the company’s financial statements and accompanying footnotes.
D.The company’s external auditors are required to attest to the accuracy of the internal
controls report.
Max, Jones and Waters shared profits and losses 20%, 40%, and 40% respectively and
their partnership capital balance is $10,000, $30,000 and $50,000 respectively. Max has
decided to withdraw from the partnership. An appraisal of the business and its property
estimates the fair value to be $200,000. Land with a book value of $30,000 has a fair
value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership
interest after revaluation. At what amount should land be recorded on the partnership
books?
A.$20,000.
B.$30,000.
C.$45,000.
D.$50,000.
E.$200,000.
Which of the following accounts would not appear on a balance sheet?
A.Unearned Revenue.
B.Salaries Payable.
C.Interest Revenue.
D.Retained Earnings.
Which of the following correctly states the proper order of the accounting cycle?
A.Record transactions, adjust accounts, prepare statements, close temporary accounts.
B.Adjust accounts, record transactions, close temporary accounts, prepare statements.
C.Prepare statements, record transactions, close temporary accounts, adjust accounts.
D.Adjust accounts, prepare statements, record transactions, close temporary accounts.
What is the effect on the balance sheet of recording a $200 cash purchase of raw
materials?
A.Assets decrease by $200 and equity decreases by $200.
B.Assets and equity do not change.
C.Assets increase by $200 and equity increases by $200.
D.Assets increase by $200 and equity does not change.
Which statement is false regarding a plan for reorganization?
A.The plan is the heart of every Chapter 7 bankruptcy.
B.The provisions of the plan specify the treatment of all creditors and equity holders
upon approval by the Court.
C.The plan shapes the financial structure of the entity that emerges.
D.The plan may contain numerous provisions as solutions to financial difficulties.
E.The plan may contain provisions for changes in the management of the company.
Levin Company is considering two new machines that should produce considerable cost
savings in its assembly operations. The cost of each machine is $14,000 and neither is
expected to have a salvage value at the end of a 4-year useful life. Levin’s required rate
of return is 12% and the company prefers that a project return its initial outlay within
the first half of the project’s life. The annual after-tax cash savings for each machine are
provided in the following table:
Required:
1) Compute the payback period for each machine using the incremental approach and
comment on the results.
2) Compute the unadjusted rate of return based on average investment for each
machine. The machines will be depreciated on a straight-line basis.
3) Compute the net present value for each machine.
4) Which machine would you recommend? Explain your reasoning.
5) Use the present value table to compute the approximate internal rate of return for
Machine.
What term is used for a bankruptcy forced upon a debtor by its creditors?
What Federal agency has Congressional responsibility to create auditing and accounting
standards?
What is a proxy? Briefly explain the importance of a proxy solicitation.
Who has the responsibility for the evaluation of the quality of an investment?
When is the SEC’s Registration Form S-4 used?
How is the presentation of a balance sheet during a reorganization different from a
normal balance sheet?
Bazley Co. had severe financial difficulties and was considering the possibility of filing
a bankruptcy petition. At that time, the company had the following assets (stated at net
realizable value) and liabilities.
Assets that are available for unsecured creditors after payment of liabilities with priority
are calculated to be what amount?
What are the three authoritative pronouncements that make up the International
Financial Reporting Standards (IFRS)?
A company that was to be liquidated had the following liabilities:
The company had the following assets:
Required:
Assets available for unsecured creditors after payment of liabilities with priority are
calculated to be what amount?