accounting final

The entry to record a bond retirement at maturity usually involves:

no gain or loss

Which of the following items is considered to be a cash equivalent?

A one-month Treasury bill due in two weeks.

Which of the following would be properly classified as a long-lived asset?

A warehouse used to store inventory

Which of the following is the best measure of a company's profitability?

Accrual-based net income

Which of the following statements about bonds and notes is not correct?

Bonds Payable and Notes Payable are always classified as noncurrent liability accounts.

The three key pieces of information that are stated on a bond certificate are the:

stated interest rate, the face value of the bond, and the maturity date.

Advantages of debt financing over equity financing include that:

stockholders' control will not be diluted.

Avalon Industries buys equipment for $24,000, expects to use it for ten years, and then sell it for $3,000. Using the straight-line method, the company should report annual depreciation for the equipment of:

$2,100. (24,000-3,000)/10

A one-year, $15,000, 6% note is signed on April 1. If the note is repaid on September 1 of the same year, how much interest expense is incurred?

375 15,000x0.06x5/12

A stock dividend transfers:

Retained Earnings to contributed capital.

Sales tax collected by a company is normally reported as:

a current liability.

King Corporation has one million shares outstanding with a par value of $5. On August 24 of this year, it issued a 10% stock dividend when its stock price was $25. As a result of this stock dividend, retained earnings:

decreased by $2,500,000.

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n):

increase in liabilities.

Preferred stock differs from common stock in that:

preferred stockholders are paid dividends before common stockholders.

Which of the following statements about a corporation is not correct?

A corporation's owners have unlimited liability.

Which of the following would be classified as a financing activity on the statement of cash flows?

Cash paid to purchase treasury stock.

Which of the following would be included in cash flows from investing activities?

Cash used to purchase equipment.

A major advantage of debt financing is that interest expense is tax deductible.

True

Current liabilities could include all of the following except:

a bank loan due in 18 months.

A contingent liability is:

a potential obligation that depends on a future event.

Which account is credited in a journal entry to record depreciation on machinery?

accumulated depreciation

Recording depreciation is an application of the:

expense recognition principle ("matching").

Accruing a liability always involves ________ expenses and ________ liabilities.

increasing, increasing

Cash flows from financing activities can include:

issuing long-term debt.

For a business to be considered a corporation:

it must be organized as a separate legal entity.

Advantages of the corporate form include all of the following except:

legal liability of its owners is unlimited.

What kind of account is Deferred Revenue?

liability

Intangible assets are:

long-lived assets with no physical substance.

Depreciation is added back to net income in a statement of cash flows prepared using the indirect method because it:

reduces net income but not cash.

Columbia Clay, Incorporated issues 2 million shares of preferred stock with a par value of $2 at its market price of $26 per share. The issuance should be recorded with a debit to Cash for:

$52 million, a credit to Preferred Stock for $4 million, and a credit to Additional Paid-in Capital for $48 million.

Netpass Company has 250,000 shares of common stock authorized, 212,500 shares issued, and 112,500 shares of treasury stock. The company's board of directors declares a dividend of $2.60 per share of common stock. What is the total amount of the dividend that will be paid?

260,000 212,500-112,500x2.60

Face 2 Face Corporation reports 260 outstanding shares, 1,300 authorized shares, and 130 shares of treasury stock. How many shares are issued?

390

In calculating the net cash provided by or used in operations using the indirect method, which of the following items would be added to net income?

A decrease in Prepaid Rent.

Which of the following would be classified as an investing activity on the statement of cash flows?

Cash received from sale of land.

The entry to record the initial borrowing of cash by issuing a promissory note will include a debit to ________ and a credit to ________.

Cash; Notes Payable

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life. Which of the following statements is correct?

Company A will have higher depreciation expense in the early years, but Company B will have the higher depreciation expense towards the end of the asset's useful life.

Which of the following is not a characteristic of corporate ownership?

Corporate earnings are distributed as interest payments.

Payroll taxes paid by employees include which of the following?

Federal income tax withheld, state income tax withheld, and Medicare

Which of the following statements about the benefits enjoyed by the owners of common stock is not correct?

If the company ceases operations, stockholders share in any assets remaining before creditors have been paid.

The Viviana Company uses the indirect method to determine its cash flow from operations. Which of the following items will be subtracted from net income to find its cash flow from operations?

Increase in Accounts Receivable.

When interest is accrued on a note payable, but not paid, the

Interest Expense account is increased; the Interest Payable account is increased.

What is the purpose of the statement of cash flows?

It is intended to provide a cash-based view of a company.

Which of the following statements about the statement of cash flows is not correct?

It measures profitability.

On November 1, 2021, Sky Mountain Company borrowed $200,000 cash on a 1-year note payable with a 6% annual rate that requires Sky Mountain to pay all the interest as well as the principal on October 31, 2022. Assuming the November 1 transaction was properly recorded, how would the December 31, 2021, year-end adjusting entry affect the accounting equation?

Liabilities increase and stockholders' equity decreases.

In determining cash flows related to investing activities, which accounts are analyzed?

Long-lived tangible and intangible assets.

Patterson Company's Depreciation Expense is $21,000 and the beginning and ending Accumulated Depreciation balances are $150,500 and $155,500, respectively. What is the cash paid for depreciation?

Patterson Company's Depreciation Expense is $21,000 and the beginning and ending Accumulated Depreciation balances are $150,500 and $155,500, respectively. What is the cash paid for depreciation?

A company has 10 million shares of $2 par common stock and 1 million shares of $4 par preferred stock outstanding. The preferred stock has an 8% dividend rate. The board of directors declares $300,000 in total dividends for the year. Which of the following is correct if the preferred stockholders have a cumulative dividend preference?

Preferred stockholders will receive the entire $300,000 and they must also be paid the remaining $20,000 sometime in the future before common stockholders will receive any dividends.

Which of the following events does not create a liability

Remitting sales tax to the government

Superior, Incorporated just bought a new machine to be used on its production line. Which of these costs should not be capitalized?

The $520 increase in annual insurance costs for the machine.

Which of the following circumstances would require a contingent liability to be recorded under generally accepted accounting principles?

The liability is probable and estimable.

Which of the following statements about bond terminology is correct?

The stated interest rate is expressed as an annual interest rate even if the bonds pay semiannual interest payments.

Which of the following is the best measure of a company's profitability?

accural-based net income

When the indirect method is used, if accounts payable increases during the accounting period, the change in accounts payable is:

added to net income.

Tangible assets are initially recorded at:

all costs to acquire them and prepare them for use.

The discount on a bond is ________ and ________ the discount each period

amortized, decreases

The premium on a bond is ________ and ________ each period.

amortized, decreases

Accumulated Depreciation:

appears in the asset section of a balance sheet.

Repayments of loans will be reported as a:

cash outflow under financing activities.

Ownership structure can vary from one company to another, but the most basic form of corporation offers:

common stock

As an installment loan approaches maturity, the portion of each cash payment that is applied to the repayment (principal) of the loan:

gets larger

Preferred stockholders:

have the right to receive dividends only in the years the board of directors declares dividends.

Stockit Incorporated has 1,000 shares of 5%, $100 par value, cumulative preferred stock outstanding. In its first two years of business, Stockit did not declare a dividend. As a result, Stockit's balance sheets at the end of its first two years of business should:

not report any Dividends Payable.

The straight-line depreciation method and the double-declining-balance depreciation method:

produce the same amount of depreciation expense each year

The statement of cash flows cannot be used to determine:

profitability as measured by specific revenues and expenses.

Liabilities are classified as current if they:

will be paid within the company's operating cycle or within 1 year, whichever is longer.

A stock dividend:

will reduce Retained Earnings similar to a cash dividend.

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. The journal entry to record wages paid includes a:

$100,000 debit to Salaries and Wages Expense.

Hermosa Vista Company issued $200,000 5-year, 7% bonds and received $204,155 in cash. The market rate of interest when the bonds were issued was 6.5%. What is the amount of interest expense to be recorded for the first annual interest period if the company uses simplified effective-interest amortization?

$13,270.08 204,155x0.065

Pebble Beach Company buys a piece of equipment for $24,000. The equipment has a useful life of ten years. No residual value is expected at the end of the useful life. Using the double-declining-balance method, what is the company's depreciation expense in the first year of the equipment's useful life?

$4,800 (24,000-0)x2/10