Accounting Final Real

Ecker Company purchased a new machine on May 1, 2012 for $528,000. At the time of acquisition, the machine was estimated to have a useful life of ten years and an estimated salvage value of $24,000. The company has recorded monthly depreciation using the straight-line method. On March 1, 2021, the machine was sold for $72,000. What should be the loss recognized from the sale of the machine?

$10,800

During 2020, Kimmel Co. incurred weighted-average accumulated expenditures of $1,600,000 during construction of assets that qualified for capitalization of interest. The only debt outstanding during 2020 was a $2,000,000, 10%, 5-year note payable dated January 1, 2020. What is the amount of interest that should be capitalized by Kimmel during 2020?

$160,000

On January 1, 2020, Ellison Co. issued eight-year bonds with a face value of $6,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%...The present value of the interest is

$2,097,360

Sutherland Company purchased machinery for $1,120,000 on January 1, 2017. Straight-line depreciation has been recorded based on a $70,000 salvage value and a 5-year useful life. The machinery was sold on May 1, 2021 at a gain of $21,000. How much cash did Sutherland receive from the sale of the machinery? Group of answer choices

$231,000

On January 1, 2020, Ellison Co. issued eight-year bonds with a face value of $6,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31. The bonds were sold to yield 8%...The present value of the principal is

$3,204,000.

Fogelberg Company purchased equipment for $30,000. Sales tax on the purchase was $1,500. Other costs incurred were freight charges of $400, repairs of $700 for damage during installation, and installation costs of $450. What is the cost of the equipment?

$32,350

On January 2, 2020, Indian River Groves began construction of a new citrus processing plant. The automated plant was finished and ready for use on September 30, 2018. Expenditures for the construction were as follows:

$354,915

On September 1, Horton purchased $39,900 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were $840. Payment for the purchase was made on September 18. Assuming Horton uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as the liability from this purchase?

$39,501

Storm Corporation purchased a new machine on October 31, 2020. A $4,800 down payment was made and three monthly installments of $14,400 each are to be made beginning on November 30, 2020. The cash price would have been $46,400. Storm paid no installation charges under the monthly payment plan but an $800 installation charge would have been incurred with a cash purchase. The amount to be capitalized as the cost of the machine on October 31, 2020 would be

$47,200

On May 1, 2020, Goodman Company began construction of a building. Expenditures of $600,000 were incurred monthly for 5 months beginning on May 1. The building was completed and ready for occupancy on September 1, 2020. For the purpose of determining the amount of interest cost to be capitalized, the weighted-average accumulated expenditures on the building during 2020 were

$500,000

On January 2, 2020, Rapid Delivery Company traded in an old delivery truck for a newer model. The exchange lacked commercial substance. Data relative to the old and new trucks follow:

$68,000

Which one of the following items is not included in cash? 1) Bank Certificate 2) Savings Acc 3) Checking Acc 4) All

1) Bank Certificate

Which of the following does not allow a company to exclude a short term obligation from current liabilities? 1) Management indicated that they are going to refinance the obligation. 2) The liability is contractually due more than one year after the balance sheet date 3) Actually refinance the obligation. 4) Have a contractual right to defer settlement of the liability for at least one year after the balance sheet date.

1) Management indicated that they are going to refinance the obligation.

Which of the following items should not be included in the Cash caption on the balance sheet? 1) Postage stamps on hand 2)Amounts on deposit in checking account at the bank 3)Checks from other parties presently in the cash register 4)Coins and currency in the cash register

1) Postage stamps on hand

How would deposits in transit be dealt with in a bank reconciliation? 1) add to bank statement balance 2) deducted from book balance 3) be ignored 4)none

1) add to bank statement balance

How would interest earned on a checking account be dealt with in a bank reconciliation? 1) added to company book balance 2) deducted from company book balance 3) added to bank statement balance 4) deducted from bank statement balance

1) added to company book balance

A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should 1)be accrued during the period when earned. 2)be accrued during the period when the compensated time is expected to be used by employees. 3)be accrued during the period following vesting. 4)not be accrued unless a written contractual obligation exists.

1) be accrued during the period when earned.

When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be 1)increased by accrued interest from May 1 to June 1. 2)decreased by accrued interest from May 1 to June 1. 3)increased by accrued interest from June 1 to November 1. 4)decreased by accrued interest from June 1 to November 1.

1) increased by accrued interest from May 1 to June 1.

An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's 1) portion of FICA taxes and any union dues. 2) and employer's portion of FICA taxes, and unemployment taxes. 3) portion of FICA taxes, unemployment taxes, and any union dues. 4) portion of FICA taxes and unemployment taxes.

1) portion of FICA taxes and any union dues.

Rent owed to the landlord is a balance sheet item for Generic Products Company. How would it most likely be classified on the balance sheet? 1)Current Liability 2)Long term Liability 3)Current Asset 4)Owners Equity

1)Current Liability

Starr Corporation loaned $600,000 to another corporation on December 1, 2020 and received a 3-month, 8% interest-bearing note with a face value of $600,000. What adjusting entry should Starr make on December 31, 2020? 1)Debit Interest Receivable and credit Interest Revenue, $4,000. 2)Debit Cash and credit Interest Receivable, $12,000. 3)Debit Cash and credit Interest Revenue, $4,000. 4)Debit Interest Receivable and credit Interest Revenue, $12,000.

1)Debit Interest Receivable and credit Interest Revenue, $4,000.

What is imputed interest? 1)Interest based on the implicit interest rate 2)Interest based on the average interest rate 3)Interest based on the coupon rate 4)Interest based on the stated interest rate

1)Interest based on the implicit interest rate

When the market value of inventory items has declined below its cost, which method would be the most appropriate in complying with GAAP? 1)Lower of Cost or Market 2)Lifo 3)Retail 4)Gross profit

1)Lower of Cost or Market

What is the LIFO reserve? 1)The difference between the LIFO inventory and the amount used for internal reporting purposes 2)Change in the LIFO inventory during the year 3)The tax savings attributed to using the LIFO method 4)The current effect of using LIFO on net income

1)The difference between the LIFO inventory and the amount used for internal reporting purposes

Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles? 1)To match the costs of production with revenues as recognized 2)To adhere to the accounting constraint of conservatism 3)To aid management in cash-flow analysis 4)To reduce the federal income tax liability

1)To match the costs of production with revenues as recognized

In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows, 1)a new effective-interest rate must be computed. 2)a loss should be recognized by the debtor. 3)a gain should be recognized by the debtor. 4)no interest expense or revenue should be recognized in the future.

1)a new effective-interest rate must be computed.

The retail inventory method is based on the assumption that the 1)final inventory and the total of goods available for sale contain the same proportion of high-cost and low-cost ratio goods. 2)proportions of markups and markdowns to selling price are the same. 3)ratio of gross margin to sales is approximately the same each period. 4)ratio of cost to retail changes at a constant rate.

1)final inventory and the total of goods available for sale contain the same proportion of high-cost and low-cost ratio goods.

An accrued expense can best be described as an amount 1)not paid and currently matched with earnings. 2)paid and not currently matched with earnings. 3)not paid and not currently matched with earnings. 4)paid and currently matched with earnings.

1)not paid and currently matched with earnings.

Bank overdrafts, if material, should be 1)reported as a current liability. 2)reported as a deduction from cash. 3)netted against cash and a net cash amount reported. 4)reported as a deduction from the current asset section.

1)reported as a current liability.

Of the following items, the only one which should not be classified as a current liability is 1)short-term obligations expected to be refinanced on a long-term basis 2)current maturities of long-term debt 3) sales taxes payable 4) unearned revenues

1)short-term obligations expected to be refinanced on a long-term basis

Walsh Retailers purchased merchandise with a list price of $150,000, subject to trade discounts of 20% and 10%, with no cash discounts allowable. Walsh should record the cost of this merchandise as

108000 (150000x.8x.9)

On August 31, a hurricane destroyed a retail location of Vinny's Clothier including the entire inventory on hand at the location. The inventory on hand as of June 30 totaled $1,920,000. Since June 30 until the time of the hurricane, the company made purchases of $510,000 and had sales of $1,500,000. Assuming the rate of gross profit to selling price is 40%, what is the approximate value of the inventory that was destroyed?

1530000 ((1920000+510000-(1500000 x .6))

Bennington Corp. issued a $40,000, 10-year bond at the face rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period?

1600

At the close of its first year of operations, December 31, 2020, Ming Company had accounts receivable of $1,620,000, after deducting the related allowance for doubtful accounts. During 2020, the company had charges to bad debt expense of $270,000 and wrote off, as uncollectible, accounts receivable of $120,000. What should the company report on its balance sheet at December 31, 2020, as accounts receivable before the allowance for doubtful accounts?

1770000 ((270000-120000)+162000)

Consider the following: Cash in Bank — checking account of $18,500, Cash on hand of $500, Post-dated checks received totaling $3,500, and certificates of deposit totaling $124,000. How much should be reported as cash in the balance sheet?

19000

What is the relationship between present value and the concept of liability? 1) Present values are only used to measure long-term liabilities. 2) Present values are used to measure certain liabilities 3) Present values are not used to measure liabilities. 4) Present values are used to measure all liabilities.

2) Present values are used to measure certain liabilities

Which of the following statements is true regarding capitalization of interest? 1) Interest cost capitalized in connection with the purchase of land to be used as a building site should be debited to the land account and not to the building account. 2)The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred. 3)The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period. 4)When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be offset against interest cost incurred when determining the amount of interest cost to be capitalized.

2) The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.

Which of the following is included in the normal journal entry to record the collection of accounts receivable previously written off when using the allowance method? 1)Debit Allowance for Doubtful Accounts, credit Bad Debt Expense 2)Debit Accounts Receivable, credit Allowance for Doubtful Accounts 3)Debit Bad Debt Expense, credit Allowance for Doubtful Accounts 4)Debit Allowance for Doubtful Accounts, credit Accounts Receivable

2)Debit Accounts Receivable, credit Allowance for Doubtful Accounts

Deposits made by a company but not yet reflected in a bank statement are called 1)Debit memoranda 2)Deposits in transit 3)credit memoranda 4)none

2)Deposit in Transit

Which one of the following items would be added to the balance per bank statement in a bank reconciliation? 1)Outstanding checks 2)Deposit in Transit 3)Service Charge 4)Interest on Customer note

2)Deposit in Transit

Which method assigns the cost of the most recent items purchased to ending inventory? 1)Lifo 2)Fifo 3)Specific Identification 4)WA

2)Fifo

Which of the following statements is incorrect regarding the lower-of-cost-or-market rule? 1)It is inconsistent because losses are recognized but not gains. 2)It incorporates both gains and losses in value that occur during the course of business. 3) usually understates assets 4)It can increase future income if the expected reductions do not materialize.

2)It incorporates both gains and losses in value that occur during the course of business.

If a company uses the direct write-off method of accounting for bad debts, 1)It is applying the matching principle. 2)It will record bad debt expense only when an account is determined to be uncollectible. 3)It will reduce the accounts receivable account at the end of the accounting period for estimated uncollectible accounts. 4)It will report accounts receivable in the balance sheet at their net realizable value.

2)It will record bad debt expense only when an account is determined to be uncollectible.

What is a compensating balance? 1)Temporary investments serving as collateral for outstanding loans 2)Minimum deposits required to be maintained in connection with a borrowing arrangement 3)Savings account balances 4)Margin accounts held with brokers

2)Minimum deposits required to be maintained in connection with a borrowing arrangement

What is "recourse" as it relates to selling receivables? 1)The obligation of the purchaser of the receivables to pay the seller if all of the receivables are collected 2)The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay 3)The obligation of the purchaser of the receivables to pay the seller in case the debtor fails to pay 4)The obligation of the seller of the receivables to pay the purchaser in case the debtor returns the product related to the sale

2)The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay

The accounts receivable turnover is computed by dividing 1) net sales by ending net receivables. 2)net sales by average net receivables. 3)gross sales by average net receivables. 4)gross sales by ending net receivables.

2)net sales by average net receivables.

The accountant for the Lintz Sales Company is preparing the income statement for 2020 and the balance sheet at December 31, 2020. The January 1, 2020 merchandise inventory balance will appear 1)as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet. 2)only in the cost of goods sold section of the income statement. 3)only as an asset on the balance sheet. 4)as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

2)only in the cost of goods sold section of the income statement.

The failure to properly record an adjusting entry to accrue an expense will result in an 1)understatement of expenses and an overstatement of assets. 2)understatement of expenses and an understatement of liabilities. 3)overstatement of expenses and an understatement of assets. 4)understatement of expenses and an overstatement of liabilities.

2)understatement of expenses and an understatement of liabilities.

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue?

24750 (25000x(1-.01))

How do Rent and Supplies (prepaid expenses) expire? 1) passage of time and passage of time 2) use and consumption and use of consumption 3) passage of time and use of consumption 4) use and consumption and passage of time

3) passage of time and use of consumption

Which of the following is not true about the information provided in the income statement? 1)It provides a basis for predicting future performance. 2)It helps in evaluating the past performance of the enterprise. 3)It helps in evaluating working capital. 4)It helps assess the risk or uncertainty of achieving future cash flows.

3)It helps in evaluating working capital.

Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for 1)an accrued expense. 2)an unearned revenue. 3)a prepaid expense. 4)an accrued revenue.

3)a prepaid expense.

A check drawn by a company for $360 in payment of a liability was recorded in the journal as $630. What entry is required in the company's accounts? 1)debit Accounts Payable; credit Cash 2)debit Cash; credit Accounts Receivable 3)debit Cash; credit Accounts Payable 4)debit Accounts Receivable; credit Cash

3)debit Cash; credit Accounts Payable

Tate Company purchased equipment on November 1, 2020 and gave a 3-month, 9% note with a face value of $80,000. The December 31, 2020 adjusting entry is 1)debit Interest Expense and credit Interest Payable, $1,800. 2)debit Interest Expense and credit Cash, $1,200. 3)debit Interest Expense and credit Interest Payable, $1,200. 4)debit Interest Expense and credit Interest Payable, $7,200.

3)debit Interest Expense and credit Interest Payable, $1,200.

Net realizable value is 1)acquisition cost plus costs to complete and sell. 2)selling price. 3)selling price less costs to complete, sell, and transport. 4)selling price plus costs to complete and sell.

3)selling price less costs to complete, sell, and transport.

The major difference between the service life of an asset and its physical life is that 1)physical life is the life of an asset without consideration of salvage value and service life requires the use of salvage value. 2)physical life is always longer than service life. 3)service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last. 4)service life refers to the length of time an asset is of use to its original owner, while physical life refers to how long the asset will be used by all owners.

3)service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last.

During the year, Kiner Company made an entry to write off a $32,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $400,000 and the balance in the allowance account was $36,000. The accounts receivable amount expected to be collected after the write-off entry was

364000 ((400000-32000)-(36000-32000))

If ending accounts receivable exceeds the beginning accounts receivable, 1)net income for the period is less than the amount of cash-basis income. 2) cash collections during the period exceed the amount of revenue recognized. 3)no cash was collected during the period. 4) cash collections during the year are less than the amount of revenue recognized.

4) cash collections during the year are less than the amount of revenue recognized.

Among the short-term obligations of Larsen Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Dennison National Bank. These are 90-day notes, renewable for another 90-day period. These notes should be classified on the balance sheet of Larsen Company as 1) deferred charges 2) intermediate debt 3) long term liabilities 4) current liabilities

4) current liabilities

An inventory costing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is 1)LIFO. 2)base stock 3) weighted average 4)fifo

4) fifo

Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to 1)the stated rate multiplied by the beginning-of-period carrying amount of the bonds. 2)the market rate of interest multiplied by the face value of the bonds. 3)the stated (nominal) rate of interest multiplied by the face value of the bonds. 4)the market rate multiplied by the beginning-of-period carrying amount of the bonds.

4) the market rate multiplied by the beginning-of-period carrying amount of the bonds

Which of the following assets do not qualify for capitalization of interest costs incurred during construction of the assets? 1)Assets under construction for an enterprise's own use. 2)Assets financed through the issuance of long-term debt. 3)Assets intended for sale or lease that are produced as discrete projects. 4)Assets not currently undergoing the activities necessary to get them ready for use.

4)Assets not currently undergoing the activities necessary to get them ready for use.

Hawk Store counted some of its inventory twice. As a result, its operating expenses will be 1) Understated 2)Correct only if Hawk Store calculates it cost of goods sold correctly 3)Overstated 4)Correct since operating expenses are not affected by inventory costs

4)Correct since operating expenses are not affected by inventory costs

What is the effect of net markups on the cost-retail ratio when using the conventional retail method? 1)Depends on the amount of the net markdowns 2)No effect on the cost-to-retail ratio 3)Increases the cost-to-retail ratio 4)Decreases the cost-to-retail ratio

4)Decreases the cost-to-retail ratio

Which of the following should be recorded in Accounts Receivable? 1)Receivables from subsidiaries 2)Dividends receivable 3)Receivables from officers 4)Oral promises from customers to pay for good or services sold

4)Oral promises from customers to pay for good or services sold

If the balance on the bank statement does not equal the balance in the cash account, then it can be assumed that: 1)The company has no errors in its records concerning the cash account. 2)The bank has made errors in preparing the statement. 3)The company has made errors in is records concerning the cash account. 4)There will be items reconciling the difference.

4)There will be items reconciling the difference.

During an accounting period, if an expense has been incurred and consumed but not yet paid for or recorded, then the end-of-period adjusting entry would involve 1)a liability account and an asset account. 2)an asset or contra asset account and an expense account. 3)a receivable account and a revenue account. 4)a liability account and an expense account.

4)a liability account and an expense account.

If receipts from cash sales of $7,500 were recorded incorrectly as $5,700 in the company's books, then this item would be included on the bank reconciliation as a(n) 1)deduction from company records 2)addition to bank statement 3)deduction from bank statement 4)addition to company record

4)addition to company record

The effect of recording depreciation for the year is a(n) 1)decrease in net income and no change in assets. 2)decrease in assets but no change in owners' equity. 3)increase in assets and an increase in net income. 4)decrease in assets and a decrease in net income.

4)decrease in assets and a decrease in net income.

If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be... 1)greater than the amount of the interest payments. 2)less than if the straight-line method were used. 3)the same as if the straight-line method were used. 4)greater than if the straight-line method were used.

4)greater than if the straight-line method were used.

At the time a company prepays a cost, 1)it debits an expense account to match the expense against revenues recognized. 2)it credits an asset account and debits an expense account. 3)it credits a liability account to show the obligation to pay for the service in the future. 4)it debits an asset account to show the service or benefit it will receive in the future.

4)it debits an asset account to show the service or benefit it will receive in the future.

Feine Co. accepted delivery of merchandise which it purchased on account. As of December 31, Feine had recorded the transaction, but did not include the merchandise in its inventory. The effect of this on its financial statements for December 31 would be 1)net income was correct and current assets were understated. 2)net income was understated and current liabilities were overstated. 3)net income was overstated and current assets were understated. 4)net income, current assets, and retained earnings were understated.

4)net income, current assets, and retained earnings were understated.

The original cost of an inventory item is above the replacement cost and the net realizable value. The replacement cost is below the net realizable value less the normal profit margin. As a result, under the lower-of-cost-or-market method, the inventory item should be reported at the 1)replacement cost 2)original cost 3)net realizable value 4)net realizable value less the normal profit margin

4)net realizable value less the normal profit margin

Many companies use MACRS (Modified Accelerated Cost Recovery System) depreciation for 1)financial reporting purposes and a different method for tax purposes. 2)financial reporting purposes because depreciation is not allowed for tax purposes. 3)tax purposes because it results in a larger net income in the early years of a plant asset's life 4)tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes.

4)tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes.

On January 2, 2016, Roof Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. At the maturity date, besides an interest payment, Roof Master would repay the bondholders

500000

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2016, for $9,000, and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What amount should Utah recognize as interest revenue on December 31, 2016 (if a 360 day year is assumed)?

60

On January 15, 2016, the accounts receivable balance was $7,000 and the balance in the allowance for doubtful accounts was $700. On January 16, 2016, a $200 uncollectible account was written-off. The net realizable value of accounts receivable on January 16 immediately after the write-off is:

6300

Which of the following is true of depreciation accounting? 1)It is the process of cost allocation. 2)It is part of the matching of revenues and expenses. 3)It is not a matter of valuation. 4)All of these answers are correct.

ALL

Year-end net assets would be overstated and current expenses would be understated as a result of failure to record which of the following adjusting entries? 1)Depreciation of fixed assets 2)Expiration of prepaid insurance 3)Use of supplies 4)ALL

ALL

Which of the following is a real (permanent) account? A/R Service Revenue Goodwill Both Goodwill and A/R

Both Goodwill and A/R

Checks presented for payment and paid by the bank are known as

Canceled Checks

The ratio of current assets to current liabilities is called the

Current Ratio

Mune Company recorded journal entries for the declaration of $250,000 of dividends, the $160,000 increase in accounts receivable for services rendered, and the purchase of equipment for $105,000. What net effect do these entries have on stockholders' equity?

Decrease 90,000

Wexford Co. purchased a new delivery truck at the beginning of 2016. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2016. The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017. The number of expected miles over five years is 100,000. ​ Refer to information for Wexford Co. ​ By what amount would double-declining-balance depreciation exceed straight-line depreciation over the 5-year life of the truck?

Equal

T/F A LIFO liquidation occurs when a company sells fewer units than it buys during the period.

False

T/F A LIFO reserve represents the amount by which cost of goods sold on a FIFO basis exceeds the cost of goods sold on a LIFO basis for the current year.

False

T/F A change in estimate of an asset's residual value involves restating the income statements of past periods for the estimate change.

False

T/F A company using the periodic inventory system must total the selling prices of the units on hand at the end of the period to value the ending inventory.

False

T/F A disadvantage of LIFO is that it does not match more recent costs against current revenues as well as FIFO.

False

T/F A ledger is where a company first records transactions and other selected events.

False

T/F A zero-interest-bearing note payable that is issued at a discount will not result in any interest expense being recognized.

False

T/F Acquisition costs are also known as replacement costs.

False

T/F Assets classified as Property, Plant, and Equipment can be either acquired for use in operations, or acquired for resale.

False

T/F Bad Debts expense is debited and Accounts Receivable is credited at the end of the period to recognize bad debts under the allowance method.

False

T/F Bank overdrafts are always offset against the cash account in the balance sheet.

False

T/F Companies include postdated checks and petty cash funds as cash.

False

T/F Cost of goods available for sale is equal to beginning inventory less cost of goods sold.

False

T/F Depreciation has no effect on income taxes, since it only reduces a plant asset's book value.

False

T/F Dividends in arrears on cumulative preferred stock should be recorded as a current liability.

False

T/F If a company fails to post one of its journal entries to its general ledger, the trial balance will not show an equal amount of debit and credit balance accounts.

False

T/F If an investor has the right to retire the bonds, they are referred to as callable.

False

T/F If the market rate is greater than the coupon rate, bonds will be sold at a premium.

False

T/F In general, debits refer to increases in account balances, and credits refer to decreases.

False

T/F Interest is capitalized on all purchased assets.

False

T/F It is not necessary to post the closing entries to the ledger accounts because new revenue and expense accounts will be opened in the subsequent accounting period.

False

T/F Paying a current liability with cash will always reduce the current ratio.

False

T/F Research and development costs should be presented as intangible assets.

False

T/F Some cash equivalents appear in the long term investment section of a balance sheet.

False

T/F The post-closing trial balance consists of asset, liability, stockholders' equity, revenue and expense accounts.

False

T/F The three forms or states in the development of inventory for a manufacturer are direct materials, direct labor, and finished goods.

False

T/F The units-of-production approach to depreciation is appropriate when depreciation is a function of time instead of activity.

False

T/F Trade receivables include notes receivable and advances to officers and employees.

False

T/F When Company X buys stock in Company Y, Company X is referred to as the investee.

False

T/F When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.

False

T/F When a company exchanges non-monetary assets and a loss results, the company recognizes the loss only if the exchange has commercial substance.

False

T/F When capitalizing interest during construction of an asset, an imputed interest cost on stock financing must be included.

False

T/F When plant assets are purchased in a group, each asset increases the respective plant asset account for its fair market value at the time of acquisition.

False

T/F When the market rate of interest is less than the face rate, then the bond issue will be sold at a discount.

False

Each of the following are included in both the current ratio and the acid-test ratio except

Inventory

Fox Co. issued $100,000 of ten-year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%.One step in calculating the issue price of the bonds is to 1)multiply $10,000 by the table value for 10 periods and 10% from the present value of an annuity table. 2)multiply $10,000 by the table value for 20 periods and 4% from the present value of an annuity table. 3)multiply $10,000 by the table value for 20 periods and 5% from the present value of an annuity table. 4)None

None

Which of the following is a capital expenditure? 1) Payment of an account payable 2) Payment of Federal income taxes 3) Retirement of bonds payable 4) None

None

Which of the following items should be included in a company's inventory at the balance sheet date? 1)Goods received from another company for sale on consignment 2)Goods in transit which were purchased f.o.b. destination 3)Goods sold to a customer which are being held for the customer to call for at his or her convenience 4) None

None

In which account are post-dated checks received classified?

Receivables

Which type of account is always debited during the closing process?

Revenue

Which of the following is a nominal (temporary) account? Inventory Unearned Service Revenue Salaries and Wages Expense Retained Earnings

Salaries and Wages Expense

T/F A short-term obligation can be excluded from current liabilities if the company intends to refinance it on a long-term basis and demonstrates the ability to consummate the refinancing.

True

T/F Adjusting entries for prepayments record the portion of the prepayment that represents the expense incurred or the revenue recognized in the current accounting period.

True

T/F Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset.

True

T/F Because the allowance method results in better matching, accounting standards require its use rather than the direct write-off method, unless bad debts are immaterial.

True

T/F Bond issues that mature in installments are called serial bonds.

True

T/F Companies record and report long-term notes receivable at the present value of the cash they expect to collect.

True

T/F Companies report bond discounts as a direct deduction from the face amount of the bond.

True

T/F Companies report the amount of social security taxes withheld from employees as well as the companies' matching portion as current liabilities until the company remits the taxes.

True

T/F Companies report the results of operations of a component of a business that will be disposed of separately from continuing operations.

True

T/F Companies value and report short-term receivables at the net amount expected to be collected.

True

T/F Credit terms of n/30 mean that the net amount of the invoice, less any returns or allowances, is due within 30 days of the date of the invoice.

True

T/F Depreciation does not describe the increase or decrease in the market value of the asset.

True

T/F Depreciation is a means of cost allocation, not a matter of valuation.

True

T/F Depreciation, depletion, and amortization all involve the allocation of the cost of a long-lived asset to expense.

True

T/F For receivables sold with recourse, the seller guarantees payment to the purchaser if the debtor fails to pay.

True

T/F If a company has a number of day's sales in inventory equal to 60, that means that it takes about two months on average to sell its inventory.

True

T/F If a company scraps an asset without any cash recovery, it recognizes a loss equal to the asset's book value.

True

T/F If ending inventory is overstated, then net income is overstated as well.

True

T/F In all cases when FIFO is used, the cost of goods sold would be the same whether a perpetual or periodic system is used.

True

T/F In the gross method, sales discounts are reported as a deduction from sales.

True

T/F Noncontrolling interest is the portion of equity (net assets) interest in a subsidiary not attributable to the parent company.

True

T/F Off-balance-sheet financing is an attempt to borrow monies in such a way to minimize the reporting of debt on the balance sheet.

True

T/F Purchase discounts decrease the total cost of merchandise acquired.

True

T/F Savings accounts are usually classified as cash on the balance sheet.

True

T/F The buyer must include goods purchased FOB shipping point in its inventory account if the goods are still in transit.

True

T/F The components of other comprehensive income can be reported in the statement of comprehensive income.

True

T/F The establishment of a petty cash fund has no effect on the company's total cash balance.

True

T/F The face rate is also called the nominal or stated rate.

True

T/F The interest rate of variable-rate mortgages is tied to changes in the fluctuating market rate.

True

T/F The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.

True

T/F The issue price of a bond is always present valued using the market rate of interest.

True

T/F The stated rate is the same as the coupon rate

True

T/F The three distinct types of cost to a manufacturer are direct materials, direct labor, and manufacturing overhead

True

T/F Under the indirect method, an increase in accounts payable is added to net income to determine cash flow from operating activities.

True

Stockholders' equity is not affected by all revenues expenses cash receipts dividends

cash dividends

Big-Mouth Frog Corporation had revenues of $330,000, expenses of $200,000, and dividends of $45,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a

credit 130,000

A journal entry to record a payment on account will include a credit to a/r debit to a/p debit to a/r credit to a/p

debit to a/p

Tanner Corporation's inventory on its balance sheet was lower using first-in, first-out than it would have been using last-in, first-out. Assuming no beginning inventory, in what direction did the cost of purchases move during the period?

down

The rate of interest actually earned by bondholders is called the

effective rate

Fences and parking lots are reported on the balance sheet as

land improvements

Which of the following is a recordable event or item? Payment of monthly payroll value of human resources changes in personnel changes in managerial policy

payment of monthly payroll