Changes from cost are reported as part of net income for
a. available-for-sale securities.
b. held-to-maturity securities.
c. debt securities.
d. trading securities.
Answer:
Use the following information to calculate for the year ended December 31, 2015 (a)
net income, (b) ending retained earnings, and (c) total assets.
Answer:
On July 7, 2015, Hidden Camera Enterprises performed cash services of $1,700. The
entry to record this transaction would include
a. a debit to Service Revenue of $1,700.
b. a credit to Accounts Receivable of $1,700.
c. a debit to Cash of $1,700.
d. a credit to Accounts Payable of $1,700.
Answer:
At the end of the first year of operations, the total cost of the trading securities portfolio
is $245,000. Total fair value is $250,000. The financial statements should show
a. an addition to an asset of $5,000 and a realized gain of $5,000.
b. an addition to an asset of $5,000 and an unrealized gain of $5,000 in the stockholders’
equity section.
c. an addition to an asset of $5,000 in the current assets section and an unrealized gain
of $5,000 in ‘Other revenues and gains.’
d. an addition to an asset of $5,000 in the current assets section and a realized gain of
$5,000 in ‘Other revenues and gains.’
Answer:
From a liquidity standpoint, it is more desirable for a company to have current
a. assets equal current liabilities.
b. liabilities exceed current assets.
c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.
Answer:
To record estimated uncollectible accounts using the allowance method, the adjusting
entry would be a
a. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts.
b. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
d. debit to Loss on Credit Sales Revenue and a credit to Accounts Receivable.
Answer:
The debt to assets ratio measures
a. the company’s profitability.
b. whether interest can be paid on debt in the current year.
c. the proportion of interest paid relative to dividends paid.
d. the percentage of the total assets provided by creditors.
Answer:
On January 1, Health Corporation issues $3,000,000, 5-year, 8% bonds at 96 with
interest payable on July 1 and January 1. The entry on December 31 to record accrued
bond interest and the amortization of bond discount using the straight-line method will
include a
a. debit to Interest Expense, $120,000.
b. debit to Interest Expense, $240,000.
c. credit to Discount on Bonds Payable, $12,000.
d. credit to Discount on Bonds Payable, $24,000.
Answer:
A current liability is a debt that can reasonably be expected to be paid
a. within one year or the operating cycle, whichever is longer.
b. between 6 months and 18 months.
c. out of currently recognized revenues.
d. out of cash currently on hand.
Answer:
The account, Stock Investments, is
a. a subsidiary ledger account.
b. a long-term liability account.
c. a long-term investment account.
d. another name for Debt Investments.
Answer:
Goodwill
a. is only recorded when generated internally.
b. can be subdivided and sold in parts.
c. can only be identified with the business as a whole.
d. can be defined as normal earnings less accumulated amortization.
Answer:
Under the perpetual system, freight costs incurred by the buyer for the transporting of
goods is recorded in
a. Freight Expense.
b. Freight – In.
c. Inventory.
d Freight – Out.
Answer:
Which of the following is not a significant date with respect to dividends?
a. The declaration date
b. The incorporation date
c. The record date
d. The payment date
Answer:
Gross profit for a merchandiser is net sales minus
a. operating expenses.
b. cost of goods sold.
c. sales discounts.
d. cost of goods available for sale.
Answer:
With regard to the accounts used to record freight costs,
a. Freight-out is added to cost of goods sold.
b. Freight-out has a normal debit balance .
c. Freight-out is recorded when freight terms are FOB shipping point.
d. Freight-out is a contra account to Sales.
Answer:
In developing the cash flows from operating activities, most companies in the U. S.
a. use the direct method.
b. use the indirect method.
c. present both the indirect and direct methods in their financial reports.
d. prepare the operating activities section on the accrual basis.
Answer:
The reference column of the accounts in the accounts payable subsidiary ledger after
posting may show
a. only P references.
b. CP, P, or G references.
c. G, P, or S references.
d. only CP references.
Answer:
Instructions: Complete the requirements specified for each of the following
independent situations.
A. State the missing items identified by ‘?’.
1> Net purchases + ? = Cost of goods purchased
2> Net purchases + ? + ? = Purchases
3> ? + Purchases ‘“ Purchases discounts ‘“ Purchases returns and allowances
+ Freight-in = ?
B. Watts Company uses the lower-of-cost-or-market (LCM) basis for its inventory. The
following information relates to its December 31, 2015 inventory. Determine the
amount of the ending inventory applying LCM to individual items.
Answer:
Which of the following accounts has a normal credit balance?
a. Purchases
b. Sales Returns and Allowances
c. Freight-In
d. Purchase Discounts
Answer:
Each of the following accounts is closed to Income Summary except
a. Expenses.
b. Dividends.
c. Revenues.
d. All of these are closed to Income Summary.
Answer:
Fleming Company purchased a machine on January 1, 2015. In addition to the purchase
price paid, the following additional costs were incurred: (a) sales tax paid on the
purchase price, (b) transportation and insurance costs while the machinery was in transit
from the seller, (c) personnel training costs for initial operation of the machinery, (d)
annual city operating license, (e) major overhaul to extend the life of the machinery, (f)
lubrication of the machinery gearing before the machinery was placed into service, (g)
lubrication of the machinery gearing after the machinery was placed into service, and
(h) installation costs necessary to secure the machinery to the building flooring.
Instructions
Indicate whether the items (a) through (h) are capital or revenue expenditures in the
spaces provided: C = Capital, R = Revenue.
Answer:
In performing a vertical analysis, the base for cost of goods sold is
a. total selling expenses.
b. net sales.
c. total revenues.
d. total expenses.
Answer:
With respect to the income statement,
a. contra-revenue accounts do not appear on the income statement.
b. sales discounts increase the amount of sales.
c. contra-revenue accounts increase the amount of operating expenses.
d. sales discounts are included in the calculation of gross profit.
Answer:
Sue Garner is the daughter of Fred Garner, the founder and president of
Big Sky Enterprises. She has been working in various departments during
school vacations throughout high school. She burst into the accounting
department excitedly one morning. She said that the stock prices of several
of the firm’s available-for-sale securities are up, and that her father said that
the company had made over $10,000 because of this jump in stock prices.
She asks to see how the increase is recorded. It is a very busy time in the
accounting department, and so her question is deferred.
Prepare a brief note to answer Sue’s question.
Answer:
The decision to make long-term capital investments is best evaluated using discounting
techniques that recognize the time value of money.
Answer:
Chang Company earns 12% on an investment that will return $400,000 eleven years
from now. What is the amount Chang Company should invest now to earn this rate of
return?
Answer:
On September 1, Reid Supply had an inventory of 15 backpacks at a cost of $20 each.
The company uses a perpetual inventory system. During September, the following
transactions and events occurred.
Instructions
Journalize the September transactions for Reid Supply.
Answer:
An accounting record where transactions are initially recorded in chronological order is
called a ________________.
Answer:
Greene Corporation had the information listed below available in preparing an income
statement for the year ended December 31, 2015. All amounts are before income taxes.
Assume a 30% income tax rate for all items.
Instructions
Prepare a multiple-step income statement in good form which takes into account
intraperiod income tax allocation. Ignore EPS computations.
Answer:
If a transaction cannot be recorded in a special journal, it indicates that the company
should adopt an electronic accounting system.
Answer:
A percentage change can be computed only if the base amount is zero or positive.
Answer:
Ranier Company is authorized to issue 10,000 shares of 8%, $100 par value preferred
stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If
Ranier issues 5,000 shares of preferred stock for land with an asking price of $575,000
and a market value of $550,000, which of the following would be the journal entry for
Ranier to record?
Answer:
Compute the missing amount in each category of the accounting equation.
Answer: