Of the items below, the one that appears first on the statement of cash flows is
a. noncash investing and financing activities.
b. net increase (decrease) in cash.
c. cash at the end of the period.
d. cash at the beginning of the period.
Answer:
On January 1, Runner Corporation issued $2,000,000, 13%, 5-year bonds with interest
payable on July 1 and January 1. The bonds sold for $2,197,080. The market rate of
interest for these bonds was 11%. On the first interest date, using the effective-interest
method, the debit entry to Interest Expense is for:
a. $130,000.
b. $142,810.
c. $120,839.
d. $241,679.
Answer:
Sales taxes collected by a retailer are recorded by
a. crediting Sales Taxes Revenue.
b. debiting Sales Tax Expense.
c. crediting Sales Taxes Payable.
d. debiting Sales Taxes Payable.
Answer:
Hoppmann Company wrote checks totaling $25,620 during October and $27,975 during
November. $24,360 of these checks cleared the bank in October, and $27,330 cleared
the bank in November. What was the amount of outstanding checks on November 30?
a. $645
b. $1,260
c. $1,905
d. $2,355
Answer:
The cost of a new asset acquired in an exchange that has commercial substance is the
cash paid plus the
a. book value of the old asset.
b. fair value of the old asset.
c. book value of the asset acquired.
d. fair value of the new asset.
Answer:
The best interpretation of the word credit is the
a. offset side of an account.
b. increase side of an account.
c. right side of an account.
d. decrease side of an account.
Answer:
Which list below best describes the major services performed by public accountants?
a. Bookkeeping, mergers, budgets.
b. Employee training, auditing, bookkeeping.
c. Auditing, taxation, management consulting.
d. Cost accounting, production scheduling, recruiting.
Answer:
A note payable is in the form of
a. a contingency that is reasonably likely to occur.
b. a written promissory note.
c. an oral agreement.
d. a standing agreement.
Answer:
At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March,
the company purchased supplies for $750 and consumed supplies of $800. If no
adjusting entry is made for supplies
a. stockholders’ equity will be overstated by $800.
b. expenses will be understated by $750.
c. assets will be understated by $250.
d. net income will be understated by $800.
Answer:
An accounts payable clerk also has access to the approved supplier master file for
purchases. The control principle of
a. establishment of responsibility is violated.
b. independent internal verification is violated.
c. documentation procedures is violated.
d. segregation of duties is violated.
Answer:
A private accountant can perform many activities in a business organization but would
not work in
a. budgeting.
b. accounting information systems.
c. external auditing.
d. tax accounting.
Answer:
The following information is available for Zip Corporation:
The company accountant, in preparing financial statements for the year ending
December 31, 2015, has discovered the following information:
The company’s previous bookkeeper, who has been fired, had recorded depreciation
expense on equipment in 2013 and 2014 using the double-declining-balance method of
depreciation. The bookkeeper neglected to use the straight-line method of depreciation
which is the company’s policy. The cumulative effects of the error on prior years was
$35,000, ignoring income taxes. Depreciation was computed by the straight-line
method in 2015.
Instructions
(a) Prepare the entry for the prior period adjustment.
(b) Prepare the retained earnings statement for 2015.
Answer:
The following information pertains to Ortiz Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
What is the price-earnings ratio for Ortiz?
a. 6.0 times
b. 1.1 times
c. 5 times
d. 5.5 times
Answer:
Aim, Inc., has 10,000 shares of 4%, $100 par value, noncumulative preferred stock and
40,000 shares of $1 par value common stock outstanding at December 31, 2015. There
were no dividends declared in 2014. The board of directors declares and pays a
$120,000 dividend in 2015. What is the amount of dividends received by the common
stockholders in 2015?
a. $0
b. $40,000
c. $60,000
d. $80,000
Answer:
If equal amounts are added to the numerator and the denominator of the current ratio,
the ratio will always
a. increase.
b. decrease.
c. stay the same.
d. equal zero.
Answer:
On January 1, 2015, $2,000,000, 10-year, 10% bonds, were issued for $1,946,000.
Interest is paid annually on January 1. If the issuing corporation uses the straight-line
method to amortize discount on bonds payable, the monthly amortization amount is
a. $19,460.
b. $5,400.
c. $1,454.
d. $450.
Answer:
State the effect of the following transactions on the current ratio. Use increase,
decrease, or no effect for your answer.
(a) Collection of an accounts receivable.
(b) Declaration of cash dividends.
(c) Additional stock is sold for cash.
(d) Short-term investments are purchased for cash.
(e) Equipment is purchased for cash.
(f) Inventory purchases are made for cash.
(g) Accounts payable are paid.
Answer:
A machine with a cost of $480,000 has an estimated salvage value of $30,000 and an
estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the
units-of-activity method of depreciation. What is the amount of depreciation for the
second full year, during which the machine was used 5,000 hours?
a. $150,000
b. $90,000
c. $130,000
d. $160,000
Answer:
Adams Corporation issues a $9,000,000, 5%, 20-year mortgage note payable on
December 31, 2015, to obtain needed financing for the construction of a building
addition. The terms provide for semiannual installment payments of $289,409 on June
30 and December 3
Instructions
(a) Prepare the journal entries to record the mortgage loan on December 31, 2015, and
the first installment payment.
(b) Will the amount of principal reduction in the second installment payment be more or
less than with the first installment payment?
Answer:
Which of the following would not be reported under ‘Other Revenues and Gains’ on the
income statement?
a. Unrealized gain on available-for-sale securities
b. Dividend revenue
c. Interest revenue
d. Gain on sale of short-term debt investments
Answer:
Which of the following pairs of terms in the area of financial statement analysis are
synonymous?
a. Ratio ‘” Trend
b. Horizontal ‘” Trend
c. Vertical ‘” Ratio
d. Horizontal ‘” Ratio
Answer:
The current ratio is
a. calculated by dividing current liabilities by current assets.
b. used to evaluate a company’s liquidity and short-term debt paying ability.
c. used to evaluate a company’s solvency and long-term debt paying ability.
d. calculated by subtracting current liabilities from current assets.
Answer:
A company maintains the asset account, Cash in Bank, on its books, while the bank
maintains a reciprocal account which is
a. a contra-asset account.
b. a liability account.
c. also an asset account.
d. a stockholders’ equity account.
Answer:
When equipment is sold for cash, the amount received is reflected as a cash
a. inflow in the operating section.
b. inflow in the financing section.
c. inflow in the investing section.
d. outflow in the operating section.
Answer:
Conrad Company reported the following balances at June 30, 2015:
Sales Revenue $16,200
Sales Returns and Allowances 600
Sales Discounts 300
Cost of Goods Sold 7,500
Net sales for the month is
a. $7,800
b. $15,300.
c. $15,600.
d. $16,200.
Answer:
Distinguish between the cost and equity methods of accounting for investments in
stocks.
Answer:
Dolan Company exchanges equipment with Eaton Company and Pawnee Company
exchanges equipment with Fiero Company. The following information pertains to the
exchanges:
Instructions
Prepare the journal entries to record the exchanges on the books of Dolan Company and
Pawnee Company. The transaction has commercial substance.
Answer:
Management of a business enterprise is the major external user of information.
Answer:
Collusion may result when one individual circumvents prescribed controls and may
significantly impair the effectiveness of a system.
Answer:
Revenues are a subdivision of retained earnings.
Answer:
Iverson Company purchased a delivery truck for $45,000 on January 1, 2015. The truck
was assigned an estimated useful life of 5 years and has a residual value of $10,000.
Compute depreciation expense using the double-declining-balance method for the years
2015 and 2016.
Answer:
The adjusted trial balance of Nick Company contained the following information:
Instructions
1> Use the above information to prepare a multiple-step income statement for the year
ended December 31, 2015.
2> Prepare a single-step income statement for the year ended December 31, 2015.
Answer:
The chart of accounts used by Notwist Copy Company is listed below. You are to
indicate the proper accounts to be debited and credited for the following transactions by
writing the account number(s) in the appropriate boxes.
‘”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”’”
Answer:
The _____________ basis of estimating uncollectibles provides a better
_____________ of bad debt expense with sales revenue and therefore emphasizes
income statement relationships.
Answer: