Gains or losses from discontinued operations are reported on a separate line on the
income statement net of income tax effects.
The going-concern assumption is also known as the continuity assumption.
Common Stock is reported as an asset on the balance sheet.
Trademarks and goodwill are intangible assets that are not amortized.
A company owes $200,000 on a bank loan. It will be reported by the company as Notes
Payable.
A company reported the following information at December 31, Year 1:
Use the information above to answer the following question. What is the amount of
current liabilities on the classified balance sheet?
A) $9,450.
B) $6,950.
C) $113,540.
D) $4,500.
Your company has 100 units in inventory, purchased at $16 per unit. These units have a
current market value of $14. The entry to write-down the inventory will include a:
A) credit to Cost of Goods Sold for $200.
B) debit to Cost of Goods Sold for $1,400.
C) credit to Inventory for $200.
D) debit to Inventory for $1,400.
If you own 200,000 shares of stock in a company with 8 million shares outstanding and
the company issues an additional 2 million shares to its employees through a stock
purchase plan, your ownership percentage:
A) remains the same because the company now has more assets.
B) falls from 2.5% to 2%.
C) remains the same because the company now has fewer liabilities.
D) increases because the company now has more stock outstanding.
Which of the following statements about classification choices is correct?
A) GAAP classifies cash dividends paid as a financing activity, but IFRS allows them to
be classified as either an operating or financing activity.
B) GAAP allows interest paid to be classified as either an operating or financing
activity, but IFRS requires that it be classified as a financing activity.
C) GAAP classifies cash dividends received as an investing activity, but IFRS allows
them to be classified as either an operating or investing activity.
D) GAAP classifies interest received as either an operating or investing activity, but
IFRS requires it to be classified as an investing activity.
Which of the following statements about normal account balances is correct?
A) Assets have debit balances and liabilities have credit balances.
B) Assets and liabilities have credit balances.
C) Assets have credit balances and liabilities have debit balances.
D) Assets and liabilities have debit balances.
A company has outstanding 9 million shares of $2 par value common stock and 1
million shares of $4 par value preferred stock. The preferred stock has an 8% dividend
rate. The company declares $600,000 in total dividends for the year. Which of the
following is correct if dividends in arrears are $30,000?
A) Preferred stockholders will receive $350,000; common stockholders will receive
$250,000.
B) Preferred stockholders will receive $60,000; common stockholders will receive
$540,000.
C) Preferred stockholders will receive $320,000; common stockholders will receive
$280,000.
D) Preferred stockholders will receive $90,000; common stockholders will receive
$510,000.
McDermott Company’s bank statement for September 30 showed an ending cash
balance of $1,350. The company’s Cash account in its general ledger showed a $995
debit balance. The following information was also available as of September 30.
The bank deducted $125 for an NSF check from a customer deposited on September 15.
The September 30 cash receipts, $1,250, were placed in the bank’s night depository
after banking hours on that date and this amount did not appear on the September 30
bank statement.
A $15 debit memorandum for checks printed by the bank was included with the
canceled checks.
Outstanding checks amounted to $1,145.
Included with the bank statement was a credit memo in the amount of $875 for an EFT
in payment of a customer ‘s account.
Included with the canceled checks was a check for $275, drawn on the account of
another company.
Required:
Part a. Prepare a bank reconciliation as of September 30.
Part b. Prepare the journal entries for the items on the company ‘s bank reconciliation as
of September 30.
Which of the following is calculated by dividing net revenue by average net fixed
assets?
A) Net profit margin
B) Fixed asset turnover
C) Total asset turnover
D) Current ratio
For billing and collection purposes, a company will internally keep a separate accounts
receivable account for each customer called a:
A) customer record.
B) subsidiary account.
C) subsidiary ledger.
D) debit memorandum.
A company reported sales revenue, all of which arose from credit sales, of $40,000 on
the income statement. Balance sheet information includes the following:
How much cash was collected from customers during the year?
A) $11,450.
B) $51,450.
C) $43,700.
D) $38,200.
If a company achieves a small increase in its gross profit percentage from one year to
the next, the company:
A) will have a higher net income.
B) must be obtaining products at a lower cost per unit.
C) must have increased its sales revenue.
D) might not have had a sales volume increase.
The following activities took place during the month of November at a corporation that
operates a clothing store.
1> Salaries and wages in the amount of $33,000 are paid to employees.
2> On the last day of November, the company acquires equipment on account of
$55,000.
3> Payment of $375 made on account to a consulting firm for services received from
that firm during October.
4> Payment of $12,000 made at the beginning of November for six months of rent; the
period covered by the payment begins in November.
5> Utility bills in the amount of $125 arrive in the mail; the bills will not be paid until
December.
Required:
For each activity, indicate the amount of expense that would be recorded in November.
On January 1, 2016, a company issues 3-year bonds with a face value of $50,000 and a
stated interest rate of 7%. Because the market interest rate is 9%, the company receives
$47,469 for the bond.
Required:
Fill in the table assuming the company uses effective-interest bond amortization.
Define internal control and identify the objectives of internal control system.
Assume that sales discounts in the current year exceed sales discounts in the prior year.
Assume that nothing else changes.
Required:
Determine the impact of an increase in sales discounts on the company’s gross profit
percentage (that is, whether it will increase, decrease, or not be affected). Include a
simple example to prove your answer.
At September 30, Balance Corporation reported the following unadjusted amounts for
its accounts, each of which is considered to be a normal account balance. Prepare an
unadjusted trial balance.
Which inventory system (periodic or perpetual) inventory system provides the best
inventory control?
The table below describes the five adjustments that will be required and the accounts
that will appear in each adjusting entry.
Required:
Complete the table by indicating whether the related adjusting entry will include a debit
(Debit) or credit (Credit) to the accounts listed. Then, indicate whether the related
adjusting entry will increase
Bonds with a stated interest rate of 9% and a face value totaling $600,000 were issued
for $624,000 on January 1, 2016, when the market interest rate was 8%. The company
uses effective-interest bond amortization.
Required:
Determine the carrying value of the bonds at December 31, 2017.