Which of the following would not be an adjustment to net income using the indirect
method?
a. Depreciation Expense
b. An increase in Prepaid Insurance
c. Amortization Expense
d. An increase in Land
Answer:
Lager Company has other operating expenses of $260,000. There has been an increase
in prepaid expenses of $20,000 during the year, and accrued liabilities are $15,000
lower than in the prior period. Using the direct method of reporting cash flows from
operating activities, what were Lager’s cash payments for operating expenses?
a. $255,000
b. $265,000
c. $225,000
d. $295,000
Answer:
On a classified balance sheet, current assets are customarily listed
a. in alphabetical order.
b. with the largest dollar amounts first.
c. in the order of liquidity.
d. in the order of acquisition.
Answer:
If a company fails to record estimated bad debts expense,
a. cash realizable value is understated.
b. expenses are understated.
c. revenues are understated.
d. receivables are understated.
Answer:
When a note receivable is honored, Cash is debited for the note’s
a. net realizable value.
b. maturity value.
c. gross realizable value.
d. face value.
Answer:
The body of theory underlying accounting is not based on
a. physical laws of nature.
b. concepts.
c. principles.
d. definitions.
Answer:
Which one of the following payroll taxes does not result in a payroll tax expense for the
employer?
a. FICA tax
b. Federal income tax
c. Federal unemployment tax
d. State unemployment tax
Answer:
The requirements for accounting for and reporting of inventories under IFRS, compared
to GAAP, tend to be more
a. detailed.
b. rules-based.
c. principles-based.
d. full of disclosure requirements.
Answer:
If 10% of the common stock of an investee company is purchased as a long-term
investment, the appropriate method of accounting for the investment is
a. the cost method.
b. the equity method.
c. the preparation of consolidated financial statements.
d. determined by agreement with whomever owns the remaining 90% of the stock.
Answer:
Riley Company received a notice with its bank statement that the bank had collected a
note receivable for $5,000 plus $150 of interest. The bank had credited these amounts to
Riley ‘s account less a collection fee of $10. Riley Company had already accrued the
interest for this note on its books.
(a) How will these items affect Riley Company’s bank reconciliation?
(b) Prepare the journal entry that Riley Company will make to record this information
on its books.
Answer:
When calculating interest on a promissory note with the maturity date stated in terms of
days, the
a. maker pays more interest if 365 days are used instead of 360.
b. maker pays the same interest regardless if 365 or 360 days are used.
c. payee receives more interest if 360 days are used instead of 365.
d. payee receives less interest if 360 days are used instead of 365.
Answer:
Silk Company issued $500,000 of 7%, 10-year bonds on one of its interest dates for
$431,850 to yield an effective annual rate of 9%. The effective-interest method of
amortization is to be used.
How much bond interest expense (to the nearest dollar) should be reported on the
income statement for the end of the first year?
a. $30,229
b. $38,867
c. $45,000
d. $35,000
Answer:
A company just starting business purchased three merchandise inventory items at the
following prices: first purchase $920; second purchase $880; third purchase $830. If
two items were sold during the period and the company used the LIFO costing method,
the gross profit for the period would be how much greater or less than if the FIFO
costing method had been used?
a. Gross profit would be $90 greater.
b. Gross profit would be $90 less.
c. Gross profit would be the same.
d. Gross profit would be $40 greater.
Answer:
The factor which determines whether or not goods should be included in a physical
count of inventory is
a. physical possession.
b. legal title.
c. management’s judgment.
d. whether or not the purchase price has been paid.
Answer:
Colaw Company reported net income of $80,000 for the year ended December 31, 201
During the year, inventories decreased by $28,000, accounts payable decreased by
$32,000, depreciation expense was $40,000, and a gain on disposal of equipment of
$26,000 was recorded. Net cash provided by operations in 2015 using the indirect
method was
a. $206,000.
b. $42,000.
c. $154,000.
d. $90,000.
Answer:
Sargent Corporation bought equipment on January 1, 2015. The equipment cost
$360,000 and had an expected salvage value of $60,000. The life of the equipment was
estimated to be 6 years. The depreciation expense using the straight-line method of
depreciation is
a. $70,000.
b. $72,000.
c. $50,000.
d. None of these answer choices are correct.
Answer:
The statement of cash flows is a required statement that must be prepared along with an
income statement, balance sheet, and retained earnings statement.
Answer:
The sale of land for cash would be classified as a cash inflow from an investing activity.
Answer:
Township, Inc. has 10,000 shares of 5%, $100 par value, noncumulative preferred stock
and 100,000 shares of $1 par value common stock outstanding at December 31, 2014,
and December 31, 2015. The board of directors declared and paid a $50,000 dividend in
2014. In 2015, $110,000 of dividends are declared and paid. What are the dividends
received by the preferred and common shareholders in 2015?
Answer:
Identify the internal control procedures applicable to cash receipts for Ferguson
Company in each of the following cases.
1> All cashiers are bonded.
2> The treasurer compares the total cash receipts to the bank deposit daily.
3> The bookkeeper records cash receipts which are held by the treasurer.
4> Only the treasurer holds cash receipts.
5> Deposit slips are completed for each deposit.
Answer:
At December 31, 2014, the trading securities for Eddy Company are as follows:
Prepare the adjusting entry at December 31, 2014, to report the securities at fair value.
Answer:
A company’s calendar year and fiscal year are always the same.
Answer:
Indicate whether the following items would appear on the balance sheet (BS), income
statement (IS), or retained earnings statement (RE).
1> Advertising expense
2> Accounts receivable
3> Dividends
4> Rent revenue
5> Salaries and wages payable
6> Supplies
Answer: