Significant differences exist in terms on financial statements around the world. For
example, another name for what we know as Additional Paid-In Capital in the U.S. is:
a. Share Capital
b. Capital Reserves
c. Provisions for Other Risks
d. Deferred Income
A convertible bond is one where
a. the issuer can convert from a fixed interest rate to a floating one.
b. the issuer can convert it from long-term to short-term.
c. the issuer can retire the bond before its specified due date.
d. the holder can convert the bond into common stock at a future time.
Brock Corporation’s endÂofÂyear balance sheet consisted of the following amounts:
What is Brock’s total liabilities balance at the end of the current year?
a. $8,000
b. $65,000
c. $108,000
d. $173,000
Current accounting standards indicate that the costs of intangible assets with an
indefinite life, such as goodwill, should
a. not be amortized.
b. be reported on the statement of retained earnings in the year in which acquired.
c. be amortized over a reasonable period of time not to exceed 40 years.
d. increase an expense account entirely in the year in which acquired.
Match the inventory-related accounts to costs that may be included in inventories for
retailers and manufacturers.
a. Merchandise Inventory
b. Raw Materials
c. Work in Process
d. Finished Goods
e. Cost of Goods Sold
Costs to purchase goods ready to sell.
A company issued 10-year bonds with a par value of $20,000,000 and an 8% annual
face on January 2, 2015. The issue price of the bond issue was $19,866,397 which
reflected an 8.1% effective interest rate. REQUIRED: a) Determine the effect on the
accounting equation upon recording the issuance of the bonds. b) Determine the effect
on the accounting equation upon recording the recognition of interest expense at
December 31, 2015. Any premium or discount should be amortized using the effective
interest rate method. c) Determine the effect on the accounting equation upon recording
the interest paid to the bondholders on January 2, 2016. d) Determine the effect on the
accounting equation upon recognizing the interest expense at December 31, 2016. Any
premium or discount should be amortized using the effective interest rate method.
How are cash equivalents reported or disclosed in the financial statements?
a. They appear only on the statement of cash flows.
b. They are included with short-term investments under current assets on the balance
sheet.
c. They are included with cash under current assets on the balance sheet.
d. They are disclosed only in a footnote to the balance sheet.
Which set of items below are current assets?
a. Accounts receivable, net income, inventory, and dividends
b. Cash, accounts receivable, capital stock, and sales
c. Net income, cash, office supplies, and inventory
d. Cash, accounts receivable, inventory, and office supplies
Why is depreciation added to net income in the Operating Activities category of the
statement of cash flows when the indirect method is used?
a. Depreciation expense is a negative amount in the Investing Activities section and
therefore is a positive amount in the Operating Activities section.
b. Depreciation provides cash and therefore must be added to net income.
c. Depreciation was deducted in arriving at net income on the accrual basis of
accounting; however, it did not require the use of cash.
d. Depreciation reduced the book value of plant assets and, therefore, must be reported
as an investing activity.
Net income was $ 61,000 for the year. The accumulated depreciation balance increased
by $14,000 over the year. There were no sales of fixed assets or changes in noncash
current assets or liabilities. Under the indirect method, the cash flow from operations is
$47,000.
a. True
b. False
The concept of leverage is
a. it is appropriate to borrow if the return on the assets is greater than the cost of the
financing.
b. it is appropriate to borrow as long as the lender approves the loan.
c. it is unfavorable to borrow funds rather than raise the capital from stockholders.
d. that a high debt-to-equity ratio is favorable.
Crystal, Inc. issued $41,000,000 of bonds. Assuming the most common denomination
of bonds, the number of bonds sold was
a. 41,000.
b. 410,000.
c. 4,100,000.
d. 41,000,000.
A decline in purchasing power is evidenced by all of the following except :
a. inflation.
b. a continuing rise in the general level of prices in an economy.
c. buying the same amount of goods or services for a higher price a year later.
d. current value is equal to historical cost.
Maxim Company sells auto parts. The company employs a periodic inventory system.
Identify all the effects on the accounting equation.
a. Increase in assets
b. Decrease in assets
c. Increase in liabilities
d. Decrease in liabilities
e. Increase on owners’ equity
f. Decrease in owners’ equity
g. Increase in assets and increase in owners’ equity
h. Decrease in assets and decrease in owners’ equity
i. Increase in liabilities and decrease in owners’ equity
j. Decrease in liabilities and increase in owners’ equity
Sold merchandise on credit to customers.
Identify which of the following would be recorded as external events, recorded as
internal events, or not recorded.
a. Internal event
b. External event
c. Not recorded The company signs a contract with the marketing firm and pays a
retainer.
Hawthorne Industries’ comparative balance sheets included accounts receivable of
$221,400 at December 31, 2013, and $205,900 at December 31, 2014. Sales reported on
Hawthorne’s 2014 income statement amounted to $2,550,000. What is the amount of
cash collections that Hawthorne will report in the Operating Activities category of its
2014 statement of cash flows assuming that the direct method is used? Show your
calculations.
What rational is used in order to determine if an amount is “cash”?
A(n)is a written promise to repay a definite sum of money either upon demand, or at a
fixed or determinable date in the future.
The Stockholders’ Equity section of the balance sheet for Calhoun Industries at the end
of 2016 is as follows:
The lower portion of the 2016 income statement indicates the following:
Assume that the number of shares outstanding did not change during the
year.REQUIRED:1> Compute earnings per share before extraordinary items.
2> Compute earnings per share after the extraordinary loss.
3> Which of the two EPS ratios is more useful to management? Explain your answer.
Would your answer be different if the ratios were to be used by an outsider, like a
potential stockholder? Why or why not?
Bonds were issued at a(n)when the issue price exceeds the face value.
The Diva Design Group was organized on July 1, 2014 when the two principal owners
each contributed $50,000 and received shares of stock in exchange. Their year-end is
December 31. The following events occurred during Diva Design Group’s first year of
operations. 1> On July 1, acquired a building by paying $50,000 in cash and borrowing
$250,000 from the Flores Bank. Information regarding the building: The building has a
useful life of 30 years and no salvage value. Diva Design uses straight line depreciation.
Information regarding the note payable: The note payable will be due in full in five
years. Interest is payable annually. The interest rate on the note is 5%. 2> On July 1,
paid cash in the amount of $1,200 for a one-year property insurance policy. 3> On
August 1, purchased two computers for $4,000 cash each. The computers have a useful
life of 5 years and a $100 salvage value. The computers will be depreciated using the
straight line method. 4> On October 1, receives $120,000 in cash for services to be
provided evenly during the next six months.
The purchase of merchandise is an importantactivity for a retailer.
How would you describe the current role of the IASB in setting accounting standards?