ACCT 209 Final Review

1.2 to 1

A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in inventory. If current liabilities are $14,350, then the quick ratio would be

True

Book value indicates the rights that stockholders have, based on recorded values, to the net assets in the event of liquidation.

False

Depreciation has no effect on income taxes, since it only reduces a plant asset's book value.

an effort to achieve proper matching of the cost of operating assets.

Depreciation is

2

Exam 2

3

Exam 3

False

Funds raised from operating activities should be invested in assets that can be used to carry on business operations.

deducted from company's book balance

How would customer's NSF checks be dealt with in a bank reconciliation?

net assets, less the redemption value of the preferred stock, must be divided by the number of shares of common stock outstanding.

If a company has both common and preferred shares outstanding and wishes to calculate book value per share,

False

If a company has internal auditors, it does not need to have external auditors.

It will report accounts receivable in the balance sheet at their net realizable value

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true?

False

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

No. The interest rate is actually higher than 8 percent.

If your bank gives you a $2,000 loan at 8% per year, but deducts the interest in advance, is 8% the "real" rate of interest that you will pay?

an integral part of the calculation of cost of goods sold.

In a periodic inventory system, the cost of purchases is recognized as

The presentation of the value of a company.

In preparing financial statements, accountants should consider all of the following except :

allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values.

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must

Throughout the year as the revenue is earned

On October 31, Michael Corporation signed a one-year contract to provide services to Love Company for $80,000. Love will pay for the services on November 1. Using the accrual basis of accounting, when should Michael Corporation recognize revenue?

False

On a bank reconciliation, bank charges for the month are added to the cash balance per the books.

False

Stockholders' equity is composed of three parts: contributed capital, earnings retained in the business, and dividends paid.

an addition to a long-term liability.

The Premium on Bonds Payable account is shown on the balance sheet as

Balance sheet as a credit

The amount in the Subscriptions Sold in Advance account should be carried over from the adjusted trial balance of the 10-column work sheet to which of the following columns?

True

The current maturity of long-term debt is a current liability.

an expense on the income statement

The debit balance in Cash Short and Over temporary accounts at the end of an accounting period will result in AJE and is reported as

decrease in assets and a decrease in net income.

The effect of recording depreciation for the year is a(n)

Analyze the key elements in the situation

The second step in the ethical decision-making model is to

future value of an annuity

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.If a company wishes to accumulate $500,000 in 20 years at 5% by making equal yearly deposits into an account, calculation of the deposits is an application of the

False

There is a standard threshold for materiality set by the Financial Accounting Standards Board for all companies.

The present value of an annuity.

To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use which type of time value of money calculation?

False

U.S. standards require a classified balance sheet with liabilities classified as either current or long term.

False

Under the accrual method, expenses are recognized when revenue is earned.

The actual issue price of a bond represents the present value of all future cash flows related to the bond.

Which of the following statements is correct?

remain constant

ash interest is computed at the coupon interest rate when a bond is issued for par. For a bond issued for a premium, how will the cash interest component change?

the issuing company is likely to retire the bonds before maturity if the bonds are paying 9% interest while the market rate of interest is 6%.

f a company's bonds are callable,

within one year or within the operating cycle, whichever is longer.

urrent liabilities are defined as those liabilities which will be satisfied

Long-term liability

A ten-year lease obligation appears on the balance sheet of Generic Products Company. How would it most likely be classified on the balance sheet?

False

Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

False

Adjustments are recorded for all transactions involving outside entities.

a. They may be replaced with a new short-term liability rather than being paid in cash. b. They may involve estimated amounts. c. They are due within one year or within the operating cycle, whichever is longer. d. All three of the above are characteristic of current liabilities.

All of the following are characteristics of current liabilities except:

he threshold for recording items as liabilities is a lower under U.S. GAAP than under IFRS.

All of the following statements are true except:

Total stockholders' equity stays the same.

What is the effect of a stock dividend on stockholders' equity?

Retained earnings is reduced.

When a company declares a stock dividend, which of the following occurs?

False

When a company uses coupon or premium offers in conjunction with the sale of its products, there is no need to record any contingent liability.

False

When inventory is sold by a wholesaler or retailer, it is recorded in a different account on the income statement than a manufacturer would use.

Collection of a note receivable by the bank

Which of the following is an example of a credit memorandum?

Deduct from the book balance

A debit memorandum appeared on Cinco Inc.'s May bank statement. How will Cinco treat this amount on its May bank reconciliation?

True

A high accounts receivable turnover ratio could mean that the company's credit policies may be too stringent.

False

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.

None of these choices. (X favorable, unfavorable, effect on side)

A credit means that

True

A debit entry increases assets, decreases liabilities, or decreases stockholders' equity.

Liabilities decrease and stockholders' equity increases.

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance " have on the accounting equation for an insurance company?

the direct result of the differing goals of financial and tax accounting.

Using different depreciation methods for book purposes versus tax purposes for the same asset, if allowed, will result in

Income from operations and income before taxes

What are the two subtotals that distinguish the multi-step income statement from the single-step income statement?

Assets and stockholders' equity decrease.

What effects on a retail store's accounting equation occur when merchandise returned by customers is recorded?

False

When stock is issued for a noncash asset, the par value of the stock is the best indicator of the value of the asset.

True

When treasury stock is reissued and the cost is less than the reissue price, the difference increases additional paid-in capital.

The declaration of dividends reduces the amount of income taxes the corporation must pay.

Which of the following is false regarding the issue of stock versus the issue of bonds to raise capital?

Payment of cash dividends

Which of the following is reported as a financing activity?

The separate entity concept applies.

Which of the following is true concerning a sole proprietorship?

Depreciation expense

Which of the following items is added to net income to determine cash flows from operating activities when the indirect method is used to prepare the Operating Activities category of the statement of cash flows?

Unrealized holding gains or losses on investments

Which of the following items is not included as an element of net income on the multiple-step income statement?

Credit Income Summary, debit Retained earnings.

Which of the following journal entries is required to close the Income Summary account of a company with a net loss ?

Gross profit ratio

Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations?

Equipment and Salaries Expense

Which pair of accounts has the same set of rules for debit and credit entries?

Disclosure of accounting policies.

You are comparing three companies that use different depreciation methods. Which of the following would help you the most in making a comparison of the companies?