Kill Corporation’s unadjusted trial balance includes the following balances (assume
normal balances):
Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt
expense will the company record?
a. $15,000
b. $36,000
c. $50,100
d. $51,000
Answer:
When a company retires bonds before maturity, the gain or loss on redemption is the
difference between the cash paid and the
a. carrying value of the bonds.
b. face value of the bonds.
c. original selling price of the bonds.
d. maturity value of the bonds.
Answer:
Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases and
sales during the month of January were as follows:
Partridge does not maintain perpetual inventory records. According to a physical count,
365 units were on hand at January 31.
The cost of the inventory at January 31, under the FIFO method is:
a. $3,285.
b. $3,650.
c. $3,900.
d. $4,015.
Answer:
Moreno Company purchased equipment for $900,000 on January 1, 2014, and will use
the double-declining-balance method of depreciation. It is estimated that the equipment
will have a 3-year life and a $40,000 salvage value at the end of its useful life. The
amount of depreciation expense recognized in the year 2016 will be
a. $100,000.
b. $60,000.
c. $108,880.
d. $68,880.
Answer:
The amortization of premium on bonds payable
a. will increase bond interest expense.
b. should take place over a period not to exceed 40 years.
c. will decrease bond interest expense.
d. will increase bond interest revenue.
Answer:
Misra Company compiled the following financial information as of December 31,
2015:
Misra’s stockholders’ equity on December 31, 2015 is
a. $90,000.
b. $140,000.
c. $210,000.
d. $250,000.
Answer:
A worksheet can be thought of as a(n)
a. permanent accounting record.
b. optional device used by accountants.
c. part of the general ledger.
d. part of the journal.
Answer:
All of the following are steps in analyzing ethics cases in financial reporting except
a. identify and analyze the principle elements in the situation.
b. contact law enforcement regarding any violations of corporate ethics codes
c. identify the alternatives and weigh the impact of each alternative on various
stakeholders.
d. recognize an ethical situation and the ethical issues involved.
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:
Physical controls to safeguard assets do not include
a. cashier department supervisors.
b. vaults.
c. employee identification badges.
d. security guards.
Answer:
In accounting for available-for-sale securities, the Unrealized Loss’”Equity account
should be classified as a
a. liability on the balance sheet.
b. loss on the income statement.
c. deduction in the stockholders’ equity section of the balance sheet.
d. contra asset on the balance sheet.
Answer:
Which of the following statements about a cash dividend is incorrect?
a. The legality of a cash dividend depends on state corporation laws.
b. The legality of a dividend does not indicate a company’s ability to pay a dividend.
c. Dividends are not a liability until declared.
d. Shareholders usually vote to determine the amount of income to be distributed in the
form of a dividend.
Answer:
In a perpetual inventory system, cost of goods sold is recorded
a. on a daily basis.
b. on a monthly basis.
c. on an annual basis.
d. with each sale.
Answer:
The net income (or loss) for the period
a. is found by computing the difference between the income statement credit column
and the balance sheet credit column on the worksheet.
b. cannot be found on the worksheet.
c. is found by computing the difference between the income statement columns of the
worksheet.
d. is found by computing the difference between the trial balance totals and the adjusted
trial balance totals.
Answer:
Current liabilities
a. are obligations that the company is to pay within the forthcoming year.
b. are listed in the balance sheet in order of their expected maturity.
c. are listed in the balance sheet, starting with accounts payable.
d. should not include long-term debt that is expected to be paid within the next year.
Answer:
The following selected amounts are available for Clark Company.
What is its ending retained earnings balance?
a. $750
b. $800
c. $550
d. $700
Answer:
A credit balance in Cash Over and Short is reported as a(n)
a. asset.
b. liability.
c. miscellaneous expense.
d. miscellaneous revenue.
Answer:
The time period assumption is also referred to as the
a. calendar assumption.
b. cyclicity assumption.
c. periodicity assumption.
d. fiscal assumption.
Answer:
If a corporation issued $4,000,000 in bonds which pay 10% annual interest, what is the
annual net cash cost of this borrowing if the income tax rate is 30%?
a. $4,000,000
b. $120,000
c. $400,000
d. $280,000
Answer:
Sawyer Company uses the perpetual inventory system and the moving-average method
to value inventories. On August 1, there were 10,000 units valued at $30,000 in the
beginning inventory. On August 10, 20,000 units were purchased for $6 per unit. On
August 15, 24,000 units were sold for $12 per unit. The amount charged to cost of
goods sold on August 15 was
a. $30,000.
b. $108,000.
c. $120,000.
d. $144,000.
Answer:
A successful corporation can have a continuous and perpetual life.
Answer:
Compute the maturity date and the maturity value associated with each of the following
notes receivables.
1> A $15,000, 6%, 3-month note dated April 20.
Maturity date ___________, Maturity value $____________.
2> A $25,000, 8%, 72-day note dated June 10.
Maturity date ___________, Maturity value $____________.
3> An $8,000, 9%, 30-day note dated September 20.
Maturity date ___________, Maturity value $____________.
Answer:
Answer:
The major difference between the balance sheets of a service company and a
merchandising company is inventory.
Answer:
The Stock Investments account is debited at acquisition under both the equity method
and cost method of accounting for investments in common stock.
Answer:
_______________ securities are bought and held primarily for sale in the near future.
Answer:
On January 1, 2015, Tape Enterprises issued 9%, 10-year bonds with a face amount of
$700,000 at 96. Interest is payable semiannually on June 30 and December 3 The bonds
were issued for an effective interest rate of 10%.
Instructions
Prepare the entries to record the issuance of the bonds and the first semiannual interest
payment assuming that the company uses effective-interest amortization.
Answer: