Accounting Final Exam

when straight-line depreciation is in use, the depreciation rate of an asset is equal to

1 divided by the life of the asset

the legal life of most patents is

20 years

Which of the following would not be considered as part of the cost of equipment recently purchased?

The cost to repair damage incurred after dropping the equipment

with respect to depreciation policies, the principle of consistency means

a company should use the same depreciation method from year to year for a given plant asset

the entry to record the issuance of common stock at a price above its par value includes

a credit to additional paid-in capital: common stock

a bond that is not secured is also known as

a debenture

the entry to record amortization on a copyright would include

a debit to amortization expense

when a depreciable asset is sold at a price equal to its book value, a journal entry would include

a debt to accumulated depreciation

which of the following would be classified as an extraordinary item

a loss form an enacted law that made inventory unsalable

if a bond is selling at 103, it is selling at

a premium

the cost of a new windshield wiper on a delivery vehicle would be classified as

a revenue expenditure

coca-colas famous name printed in distinctive typeface is an example of

a trademark

the advantages of corporations going public include all of the following except

ability to remove assets

all of the following may be considered intangible assets except

accounts receivable

which of the following is not a capital expenditure

advertising expenditures to introduce a new product line

extraordinary items are found on the income statement

after discounted operations

the term net identifiable assets means

all assets minus all liabilities

stock splits

allow management to conserve cash, give stockholders more shares, and cause no change in total assets, liabilities, or stockholders' equity

the present value of an amount is

always less than the future value

when a company sells bonds between interest dates they will pay which of the following at the first interest payment date

an amount equal to the stated interest rate times the principal

capital expenditures are recorded as

an asset

treasure stock appears as

an equity account

revenue expenditures are recorded as

an expense

which of the following statistics is generally computed for both common and preferred stock

annual dividend per share

assets that have been pledged as security for a loan

are disclosed in the notes to the financial statements

commitments, such as contracts for future transactions

are footnoted in financial statements, if material

interest payable on a loan becomes a liability

as it accrues

in a statement of cash flows, the term cash includes

bank accounts, cash on hand, and cash equivalents

international standards require that goodwill

be capitalized and reviewed annually and its value should be adjusted if impaired

which method will yield the higher cash flows from financing activities

both direct and indirect methods will yield the same amount

the ownership of common stock in a corporation usually carries the following rights

both to vote for directors and share in distribution of assets if the corporation is to be liquidated.

when a corporation has a right to redeem bonds in advance of the maturity date, the bond is considered a

callable bond

responsibility for selection of the depreciation methods used in financial reporting rests with

company management

bonds which may be exchanged for a specified number of shares of capital stock are called

convertible bonds

a primary disadvantage of the corporate form of organization is

corporate earnings are subject to double taxation

which of the following ratios and rates that measure debt-paying ability focuses on the long-term position of a company

debt ratio

the book value of equipment

decreases with the passage of time

which of the following should not be treated as a revenue expenditure?

delivery costs on newly purchased equipment

deferred taxes are classified as

either an asset or liability, depending upon the situation

the social security tax paid by an employer is

equal to the amount paid by the employee

to receive the next cash dividend, an investor must purchase the stock before the

ex-dividend date

of the items listed, which would appear closest to the bottom of the income statement

extraordinary items

in a statement of cash flows, payments of dividends are classified as

financing activities

a cash dividend paid to shareholders is reported on the

financing activities section of the statement of cash flows

which of the following does not appear in a corporate income statement

gains and losses from treasury stock transactions

which of the following should not be amortized

goodwill

the term "junk bonds" describes bonds with

high risk

the current portion of a long-term debt should be reported

in the current liabilities section of the balance sheet

accelerated depreciation methods are used primarily in

income tax returns

when using the indirect method depreciation expense

increases net cash flow from operations

one advantage of issuing bonds instead of stock is that

interest is tax deductible, whereas dividends are not

which of the following is not classified among the investing activities in a statement of cash flows

investment of cash made in the business by the owners

an operating lease

is a form of off-balance sheet financing.

for the financial statements of publicly traded companies, MACRS

is not considered to be in conformity with GAAP.

the two basic characteristics of estimated liabilities are

known to exist and amount unable to be determined until a later date

intangible assets are assets used in business operations but which

lack physical substance

which of the following assets is not subject to depreciation and whose usefulness does not decline over time?

land

all of the following are financing activities except

lending money

sinking funds usually appear on the balance sheet as

long-term investment

execucomp corporations financial statements in the current year show a loss from discounted operations, a prior period adjustment, and an extraordinary gain. If execucomp's income statement is prepared according to generally accepted accounting principles (as illustrated in your text), which of the following four items would appear second in sequence in the income statement?

loss form discontinued operations

in a statement of cash flows, cash transactions are classified into three major categories. which of the following is not one of these three categories

managing activities

the price-earnings ratio is the

market price of a share of common stock divided by the EPS.

when shares of stock are sold from one investor to another, they will trade at

market value

all of the following are considered cash equivalents except

marketable securities

the statement of stockholders' equity

may be issued as a substitute for the statement of retained earnings

dividends become a liability of a corporation:

on the date the board of directors declares the dividend

in a statement of cash flows, collections of accounts receivable are classified as

operating activities

in the statement of cash flows, the purchase of supplies is classified as

operating activities

the interest coverage ratio is computed by dividing

operating expense by interest expense

shares that have been sold and are in the hands of stockholders are called

outstanding

which of the following does not create a difference between net income and the net cash flow from operations

payment of a cash dividend

which of the following is a financing activity

payment of dividends

which of the following is not classified among the financing activities in a statement of cash flows

payment of interest to creditors

which of the following is not classified among the operating activities in a statement of cash flows

payment of the principal amount owed on a bank loan

all of the following are examples of current liabilities except

pledged assets

which of the following is an investing activity

purchase of equipment

the amounts that a business withholds as taxes from an employees earnings

represent current liabilities to the employer

a prior period adjustment is a correction made to

retained earnings of the beginning of the period

for financial reporting purposes, the gain or loss on the sale of a plant asset is determined by comparing the asset's

sales price with its book value

which of the following is a capital expenditure?

sales tax paid in conjunction with the purchase of office equipment

which of the following payroll costs are shared equally by the employer and the employee

social security

in a corporation's organization chart, who has/have the highest position

stockholders

which depreciation method is most commonly used among publicly owned corporations?

straight-line

which statement is true as to the FASB's position on the presentation of the statement of cash flows

the FASB recommends the use of the direct method, but most companies use the indirect method

the amount of the present value of a future cash receipt will depend upon

the amount of money to be received, the length of time until the money is received, and the required rate of return

the "bottom line" in a statement of cash flows shows

the cash (including cash equivalents) on the balance sheet at the end of the period

a measure of a company's liquidity is

the current ratio

dividends are first recorded and retained earnings are reduced on

the date of declaration

for depreciable property other than real estate, MACRS is based upon

the declining-balance method

which of the following would usually be the greatest amount

the number of shares authorized

the term accumulated depreciation, as used in accounting, is best defined as

the portion of a plant asset recognized as expense since the asset was acquired

the book value of an asset in the plant and equipment category is

the undepreciated cost of the asset

in computing earnings per share, the number of shares used is

the weighted average of shares outstanding for the year

which of the following apply to closely held corporations

there is no organized market for buying and selling the company's shares

the rights of a common stockholders do not include the right

to withdraw a share of corporate net assets proportionate to the person's stockholdings

the net assets of a corporation are equal to

total assets minus total liabilities

stock that had been issued by a corporation, and later reacquired, is classified as

treasury stock

most preferred stocks have one or more of the following characteristics, except

voting rights

if an asset is determined to be impaired, it should be

written down to its fair market value

a $1,000 bond that sells for 104 has a selling price of

$1,040