Acc 2101
ABC has a $5 million liability at December 31, 2018, of which $1 million is payable in each of the next five years. ABC reports the liability on the balance sheet as a:
$1 million current liability and a $4 million long-term liability.
ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line method, depreciation expense for 2019 and the book value at December 31, 2019 would be:
$11,000 and $38,000
On January 1, 2018, ABC purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. Assume the truck was totaled in an accident on December 31, 2019. What amount of gain or loss should ABC record on December 31, 2019 (If a loss, put a minus number in front) ?
-38000
What are the two most common Inventory Flow assumptions?
1. LIFO 2. FIFO
Which type of inventory is in a factory?
1. Work in process 2. raw material
Which of the following is a negative sign that a company is not selling its inventory quickly (may have more than one answer)?
1.A high average days in inventory 2.A low inventory turnover ratio.
At the end of a reporting period, ABC determines that its ending inventory has a cost of $300,000 and a net realizable value of $230,000. What would be the effect(s) of the adjustment to write down inventory to net realizable value (may have more than one answer)?
1.Decrease total assets 2.Decrease net income 3.Decrease Retained Earnings
Uncontrolled Liquidations
1.Increase Income for LIFO companies 2.Increase Taxes for LIFO companies
What is included in Work in Process inventory?
1.Raw Materials 2. Direct labor 3.Overhead
Which type of inventory is in a factory (may have more than one answer)?
1.Raw Materials 2.Work in Process
Calculation of Ending Inventory has an effect on which statements (ignore taxes) (may have more than one answer)
1.Statement of Changes in Equity 2.Income Statement 3.Balance Sheet
In a natural resource, the quantity (for instance barrels of oil) reported on the financial statements depends on
1.geological estimates 2.Market Value of oil 3.Extraction costs of the oil
ABC's sales equal $60,000 and cost of goods sold equals $20,000. Its beginning inventory was $1,600 and its ending inventory is $2,400. ABC's inventory turnover ratio equals how many times?
10
Parent Co. purchased the entire business of Subsidiary Co. including all its assets and liabilities for $600,000. Below is information related to the two companies: Parent Subsidiary Fair value of assets $1,050,000 $800,000 Fair value of liabilities 575,000 300,000 Reported assets 800,000 650,000 Reported liabilities 500,000 250,000 Net Income for the year 60,000 50,000 How much goodwill did Parent pay for acquiring Subsidiary?
100,000
On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC should report interest payable at December 31, 2018, in the amount of:
1000
Sales revenue $350,000 Accounts receivable $280,000 Ending inventory $230,000 Cost of goods sold $180,000 Sales returns $50,000 Sales Discount $20,000 Given the information in the above table, what is the company's gross profit?
100000
Sales revenue $350,000 Accounts receivable $280,000 Ending inventory $230,000 Cost of goods sold $180,000 Sales returns $50,000 Sales discount $20,000 What is the gross profit?
100000
On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would
1090
The following information pertains to ABC: March 1 Beginning inventory = 30 units @ $5 March 3 Purchased 15 units @ $4 March 9 Sold 25 units @ $8 What is the cost of goods sold for ABC assuming it uses LIFO?
110
ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line method, depreciation expense for 2018 would be: (Just write the number)
11000
During the first two years, ABC drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of depreciation expense should ABC record in the second year using the activity-based method?
11000
Net sales $296,000 Cost of goods sold 138,000 Average inventory 50,000 What is the average days in inventory (round to the nearest whole day)?
132
ABC has beginning inventory for the year of $12,000. During the year, ABC purchases inventory for $150,000 and ends the year with $20,000 of inventory. ABC will report cost of goods sold equal to:
142000
ABC has beginning inventory for the year of $18,000. During the year, ABC purchases inventory for $230,000 and has cost of goods sold equal to $233,000. ABC's ending inventory equals:
15000
The balance sheet of ABC' reports total assets of $800,000 and $900,000 at the beginning and end of the year, respectively. The return on assets for the year is 20%. What is ABC's net income for the year?
170000
Accounts Payable $55,000 Land $90,000 Inventory $10,500 Accounts Receivable $7,500 Equipment $8,000 Deferred Revenue $58,500 Short-term Investments $20,000 Notes Receivable (due in 8 months) $45,500 Interest Payable $2,000 Patents $75,000 What is the amount of long-term assets assuming the accounts above reflect normal activity?
173000
ABC has the following current assets: cash, $102 million; receivables, $94 million; inventory, $182 million; other current assets, $18 million. ABC also has the following liabilities: accounts payable, $98 million; long-term debt, $23 million. Based on these amounts, what is the acid-test ratio ?
2
How many types of inventory are in the factory
2
On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would Debit Interest Expense
2000
The balance sheet of Subsidiary Co. shows assets of $86,400 and liabilities of $15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000. Parent Co. paid Subsidiary $95,000 to acquire it. Parent should record goodwill on this purchase of:
20000
The balance sheet of Subsidiary shows assets of $86,400 and liabilities of $15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000. Parent paid $95,000 to acquire Subsidiary. Parent should record goodwill on this purchase of:
20000
Cost of goods sold $420,000 Sales revenue 800,000 Nonoperating expenses 10,000 Operating expenses 170,000 Income tax expense 80,000 What is operating income?
210000
ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the double-declining balance method, depreciation expense for 2018 would be:
24000
Sales revenue $440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000 What is the gross profit?
260000
On September 1, 2018, ABC signed a $100,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. ABC should report interest payable at December 31, 2018, in the amount of:
3000
On December 1, 2018, ABC signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1, 2019?
307500
ABC issued callable bonds on January 1, 2018. ABC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 1/1/2018 $194,758 6/30/2018 $7,000 $7,790 $790 195,548 12/31/2018 7,000 7,822 822 196,370 6/30/2019 7,000 7,855 855 197,225 12/31/2019 7,000 7,889 889 198,114 6/30/2020 7,000 7,925 925 199,039 12/31/2020 7,000 7,961 961 200,000 ABC buys back the bonds for $196,000 immediately after the interest payment on 12/31/2018 and retires them. What gain or loss, if any, would ABC record on this date (use a minus sign in front of the number if it is a loss)?
370
ABC reported the following data for its first year of operations: Net sales $2,800 Cost of goods sold 1,680 Operating expenses 880 Ending inventories 820 What is ABC's gross profit ratio (round to nearest whole percentage, just put in the number with no %)?
40
Net sales $2,800 Cost of goods sold 1,680 Operating expenses 880 Ending inventories 820 What is the gross profit ratio (put in the number without %) ?
40
ABC borrowed $100,000 on November 1, 2018, and signed a six-month note bearing interest at 12%. Principal and interest are payable in full at maturity on May 1, 2019. In connection with this note, ABC should report interest expense in 2019 for the amount of:
4000
ABC purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assuming the company uses the straight-line method, what is the carrying value at the end of the first year?
40000
The balance sheet of ABC reports total assets of $400,000 and $450,000 at the beginning and end of the year, respectively. The return on assets for the year is 10%. What is ABC's net income for the year?
42500
Inventory records for ABC revealed the following: Apr. 1 Beginning inventory 500 $2.40 Apr. 20 Purchase 400 2.50 ABC sold 700 units of inventory during the month. Ending inventory assuming LIFO would be:
480
ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line method, the book value at December 31, 2018 would be:
49000
Date Transaction Number of Units Unit Cost Apr. 1 Beginning inventory 500 $2.40 Apr. 20 Purchase 400 2.50 700 units of inventory were sold during the month. Ending inventory assuming FIFO would be:
500
The balance sheet of ABC reports total assets of $450,000 and $550,000 at the beginning and end of the year, respectively. The return on assets for the year is 10%. What is ABC's net income for the year?
50000
ABC purchased a piece of equipment by paying $5,000 cash. They also incurred a shipping cost of $400 to get the equipment to its factory. The fair value of this equipment is $7,000. For what amount should ABC record the equipment?
5400
ABC issues $10 million in bonds on January 1, 2018. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six month rate. (round to nearest whole percentage, just put in the number with no %)
6
A machine has a cost of $15,000, an estimated residual value of $3,000, and an estimated useful life of four years. The machine is being depreciated on a straight-line basis. At the end of the second year, what amount will be reported for accumulated depreciation?
6000
ABC issued callable bonds on January 1, 2018. ABC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 1/1/2018 $194,758 6/30/2018 $7,000 $7,790 $790 195,548 12/31/2018 7,000 7,822 822 196,370 6/30/2019 7,000 7,855 855 197,225 12/31/2019 7,000 7,889 889 198,114 6/30/2020 7,000 7,925 925 199,039 12/31/2020 7,000 7,961 961 200,000 What is the annual stated interest rate on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate. (Round to nearest whole percentage and just put in the number without %)
7
Accounts Payable $55,000 Land $90,000 Inventory $10,500 Accounts Receivable $7,500 Equipment $8,000 Deferred Revenue $58,500 Short-term Investments $20,000 Notes Receivable (due in 8 months) $45,500 Interest Payable $2,000 Patents $75,000 What is the amount of intangible assets assuming the accounts above reflect normal activity?
75000
2018 2017 Accounts receivable $40,000 $36,000 Inventory 28,000 35,000 Net sales 190,000 186,000 Cost of goods sold 114,000 108,000 Total assets 425,000 405,000 Total stockholders' equity 240,000 225,000 Net income 32,500 28,000
77.1
ABC reports income tax expense of $800,000. Income tax payable at the beginning and end of the year are $50,000 and $70,000, respectively. What is the amount of cash paid for income taxes?
780000
Date Quantity Price March 1 Beginning Inventory 20 $2 March 7 Purchase 15 3 March 11 Sale 25 7 March 12 Purchase 20 4 What is gross profit using LIFO cost flow assumptions?
80
March 1 Beginning Inventory 20 $2 March 7 Purchase 15 3 March 11 Sale 25 7 March 12 Purchase 20 4 What is gross profit using LIFO cost flow assumptions?
80
ABC has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?
80,000
The balance sheet of ABC reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is ABC's stockholders' equity?
800000
ABC's beginning inventory is $2,000 and its ending inventory is $1,000. The inventory turnover is 6 times. Cost of goods sold for the year must equal:
9000
Accounts Payable $55,000 Land $90,000 Inventory $10,500 Accounts Receivable $7,500 Equipment $8,000 Deferred Revenue $58,500 Short-term Investments $20,000 Notes Receivable (due in 8 months) $45,500 Interest Payable $2,000 Patents $75,000 What is the total amount of property, plant, and equipment assuming the accounts above reflect normal activity?
98000
When we collect Sales tax we DR Cash and Credit
A Liability
ABC retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. The entry to record the retirement will include:
A credit of $6 million to a gain account.
Which of the following statements regarding liquidity ratios is true?
A high working capital generally indicates the ability to pay current liabilities on a timely basis.
ABC purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use for $25,000 cash. ABC should record:
A loss of $5,000.
Define Liquidity:
Ability to pay Current Debt
Choose one
Accountants prefer to report harder numbers rather than softer numbers
The contra asset account associated with Building and Equipment is called (2 words)
Accumulated Depreciation
When a company has a Defined Benefit Pension they have to hire a(n) (1 word)
Actuary
Calculating Ending Inventory and Cost of Goods Sold is what kind of problem (1 word)
Allocation
When intangible assets, like franchises or patents, die, it is called (2 words)
Amortization Expense
Is goodwill an
Asset
ABC developed a new horse transport device and incurred research and development costs of $250,000. Rather than continue with their own research, ABC decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments?
Assets $350,000; Expenses $250,000.
Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 7% interest. The current market rate of interest is 7%. Which of the following is correct?
Bond X will sell for more than Bond Y.
Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 9% interest. The current market rate of interest is 8%. Which of the following is correct?
Bond Y will sell for more than Bond X.
Which is riskier when raising money for a business
Borrowing is always riskier than issuing shares
Which of the following is a positive sign that a company is selling its inventory quickly?
Both a high inventory turnover ratio and a low average days in inventory.
THIS year a company made an error in its ending inventory
Both this year's Balance Sheet and Income Statement will be wrong
Define Business
Buy Low Sell High
Freight on FOB Shipping Point is paid by the
Buyer
Air conditioning cost in a company
Can be an Asset or an Expense
The term when we treat something as an asset is: we (1 word) it
Capitalize
Specific Identification is used by:
Car dealers
Over the last 50 years, which company had a higher ROA
Cola Cola
LCM is based on which accounting principle (1 word)
Conservatism
Lower of Cost or Market is based on which accounting principle(s)?
Conservatism
Goods Available for Sale minus Ending Inventory Equals (4 words)
Cost of Goods Sold
Finished Goods eventually turn into ________ of ________ _______ ________
Cost of goods sold expense
Days in Inventory + Days in Receivables - Days in Payables = (4 words)
Days in Operating Cycle
Under the principle of lower of cost and net realizable value, when a company has 10 units of inventory A with net realizable value of $50 and a cost of $60, what is the adjustment?
Debit Cost of Goods Sold $100; credit Inventory $100.
ABC sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a perpetual inventory system?
Debit Cost of Goods Sold $700; credit Inventory $700.
ABC, sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a perpetual inventory system?
Debit Cost of Goods Sold $700; credit Inventory $700.
On December 1, 2018, ABC signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2019. ABC should record which of the following adjusting entries at December 31, 2018?
Debit Interest Expense and credit Interest Payable, $1,250.
On September 1, 2018, ABC signed a $100,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on March 1, 2019, ABC would
Debit Interest Expense, $1,500.
On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would
Debit Interest Expense, $2,000.
In a perpetual inventory system, the entry at the time of a sale to record the cost of the inventory sold includes a:
Debit to Cost of Goods Sold.
Government pension plans are usually
Defined Benefit
If your employer declares bankruptcy, this can have a major effect on your pension if you are in a:
Defined Benefit Plan
Which pension plan has more complicated Accounting
Defined Benefit Plan
State and city politicians generally prefer giving their workers
Defined Benefit Plans
The expense when a natural resource is being used up is called (1 word)
Depletion
If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is probable, a contingent liability should be
Disclosed and reported as a liability.
If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be
Disclosed, but not reported as a liability.
When a bond with a face value of $100,000 is sold for $90,000, the bond is being issued at a (1 word)
Discount
What is expensed in Sales Office
Everything
When Prices are Rising, which will generally lead to Higher Net Income?
FIFO
When Prices are Rising, which will generally lead to Higher Tax Payments?
FIFO
A company can use LIFO for taxes and FIFO for Financial reporting
False
A contingent gain can sometimes be disclosed in a footnote
False
Current Liabilities are only amounts we owe to suppliers (of merchandise or services) bought on credit
False
In an Operating Lease the Lessee records an Asset and a Liability
False
Of the following inventories turn into Cost of Goods Sold directly (may have more than one answer)?
Finished Goods Inventory
Freight on FOB Shipping point is called
Freight In
Freight on FOB Destination is called
Freight Out
The assumption that a business will continue to operate into the future is the:
Going concern assumption.
Opening Inventory Plus Purchases Equals (4 words)
Goods Available for sale
Opening Inventory Plus Purchases Equals
Goods available for sale
When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:
Greater than the interest expense.
ABC correct ending balance for the inventory account at the end of 2018 should be $5,000, but the company incorrectly stated it as $3,000. In 2019, ABC correctly recorded its ending balance of the inventory account. Which one of the following is true?
Gross profit is overstated by $2,000 in 2019.
ABC's correct ending balance for the inventory account at the end of 2018 should be $5,000, but the company incorrectly stated it as $3,000. In 2019, ABC correctly recorded its ending balance of the inventory account. Which one of the following is true?
Gross profit is overstated by $2,000 in 2019.
When goodwill dies, this is called (1 word)
Impairment
Which of the following is true regarding LIFO and FIFO?
In a period of rising costs, LIFO results in lower net income than FIFO.
ABC spends $50,000 this year in research and development for a new drug to cure liver damage. By the end of the year, management feels confident that the new drug will gain FDA approval and lead to higher future sales. What impact will the $50,000 spending have on this year's financial statements?
Increase Expenses
ABC issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements?
Increase assets and liabilities.
Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will an increase in accounts receivable affect each ratio?
Increase the current ratio and increase the acid-test ratio.
In a perpetual inventory system, the purchase of inventory is debited to:
Inventory
Social Security
Is a Defined Benefit Pension Plan
When I raise money for my business, I will be better off
It depends how well the business does
When Prices are Falling, which will generally lead to Higher Net Income?
LIFO
When Prices are Falling, which will generally lead to Higher Tax Payments?
LIFO
If over the year the selling price of inventory increases, but the cost of the inventory remains constant
LIFO net income will be identical to FIFO net income
If the benefit value of inventory changes, but the sacrifice value of the inventory remains constant
LIFO net income will be identical to FIFO net income
What collateral is the safest because it can't disappear (1 word)?
Land
A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is:
Less than $500,000.
When bonds are issued at a discount and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:
Less than the interest expense.
Unearned Revenue is what kind of account
Liability
LCM stands for (5 words)
Lower of Cost or Market
In accounting, goodwill:
May be recorded when a company purchases another business.
A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 6%. These bonds will sell at a price that is:
More than $500,000.
Land is depreciated
Never
When we get a line of credit from the bank:
No change to the Balance Sheet and no change to the Income Statement
Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will the purchase of inventory with cash affect each ratio?
No change to the current ratio and decrease the acid-test ratio.
ABC sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a periodic inventory system?
No entry is required for cost of goods sold and inventory.
In a periodic inventory system, the entry at the time of a sale to record the cost of inventory sold includes a:
Not recorded at this time of the sale.
What is expensed in a factory?
Nothing
Managers prefer that a lease be:
Operating
What does OPM stand for (3 words)
Other people's money
When company A acquires company B, company A is called the (1 word)
Parent
Choose one:
Periodic Inventory Accounting is less expensive to maintain than Perpetual Inventory Accounting
Periodic vs.Perpetual Inventory Accounting
Periodic and Perpetual Inventory Accounting result in the same Cost of Goods Sold
When a bond with a face value of $100,000 is sold for $115,000, the bond is being issued at a (1 word)
Premium
Return on assets equals:
Profit margin × Asset turnover.
Which ratio is strongly influenced by the long-term Debt of a company
ROE
After evaluating the lower of cost and net realizable value of inventory, the accountant prepares a year-end adjustment. That adjustment would:
Reduce the company's stockholders' equity.
An Operating Lease will have which of these expenses(may have more than one answer)?
Rental Expense
If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true?
Retained earnings is overstated in year 1.
Unearned Revenue usually turns into
Revenue
When we collect Sales Tax, we Credit which account (3 words)
Sales Tax Payable
When we pay Sales Tax, we Debit which account (3 words)
Sales Tax Payable
The gross profit ratio will typically be higher for companies that:
Sell products that are more highly specialized.
Freight on FOB Destination is paid by the
Seller
The Debt to Equity Ratio is a measure of
Solvency
When company A acquires company B, company B is called the (1 word)
Subsidiary
A contingent liability can sometimes be ignored
TRUE
Which statement is true
The accounting for a Defined Benefit Pension Plan usually requires an actuary.
If a company understates its count of ending inventory in Year 1, which of the following is true?
The balance of retained earnings is correct at the end of Year 2.
Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?
The current ratio will always be equal to or larger than the acid-test ratio for a specific company
A company in NY is buying goods from a Japanese company. The goods are sold FOB San Francisco port
The freight from Japan to San Francisco is an expense, the freight from San Francisco to New York is an Asset
Gain contingencies usually are recognized in a company's income statement when:
The gain is certain
Which of the following would increase the gross profit ratio?
The sales price of a product increases by a higher percentage than does its cost of goods sold.
Goodwill is:
The value of a business as a whole, over and above the value of its net identifiable assets.
The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when:
The value of inventory declines below cost.
LAST year a company made an error in its ending inventory. For THIS year
This year's Balance Sheet will be correct but the Income Statement will be wrong
Window Dressing causes which kind of entry (may have more than one answer)?
Transaction
A company overstates its ending inventory for 2018. What effect will this have on the reported amount of cost of goods sold for 2018?
Understate cost of goods sold.
Suppose that ABC overstates its ending inventory for 2018. What effect will this have on the reported amount of cost of goods sold for 2018?
Understate cost of goods sold.
In doing an allocation for a basket purchase
Use the total cost and the individual market values
Can a contingent Liability require a journal entry?
Yes
In which plan(s) does an employer often match what an employee pays to a pension fund?
a Defined Contribution Pension Plan
ABC purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. ABC should record:
a gain of $1,000.
When a company spends money to fix an appliance under warranty, they Credit Cash and Debit:
a liability
The year end adjusting entry for warranties credits
a liability account
ABC purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. ABC should record:
a loss of $1,000
Window Dressing is done by (may have more than one answer)?
accountants, manager
On the cost of Goods Sold Statement
all numbers are Sacrifice numbers
When you see an interest rate, it is
always an annual rate
When applying Lower of Cost or Market (LCM,) the Net Income of a firm:
always goes down
when applying LCM, the Net Income of a firm
always goes down
When prices are rising, a LIFO liquidation will
always increase income
The year end adjusting entry for warranties debits
an expense account
Periodic Inventory Accounting and Perpetual Inventory Accounting
are two different bookkeeping systems
Payroll expense will usually
be more than the cash amount paid to an employee
A bond which the company may repay whenever they want is a called a (2 words)
callable bond
What is the accounting principle that doesn't allow companies to switch between LIFO and FIFO every year (1 word)
consistency
A bond which allows the bondholder to trade in his/her bond for stock is called a (2 words)
convertible bond
The current portion of long term debt is a (2 words)
current liability
In an Operating Lease the Lessee records an Asset and a Liability
false
Someone who sells gasoline must report their inventory using Weighted Average
false
When a business pays dividends to its shareholders, the dividends are tax deductible
false
A physical inventory count is necessary to calculate Cost of Goods Sold
in Periodic Inventory Accounting but not in Perpetual Inventory Accounting
It is possible to calculate shrinkage
in Perpetual Inventory Accounting but not in Periodic Inventory Accounting
A Capital (Financing) Lease will have which of these expenses (may have more than one answer)?
interest expense, depreciation expense
The account "Warranty Liability":
is adjusted at the end of the year.
Freight on FOB Shipping point
is an asset
Freight on FOB Destination
is an expense
When a firm takes a big bath (may have more than one answer):
it increases expenses
Window Dressing is
legal
In the USA Goodwill on a financial statement
must be bought, not internally developed
Liquidity is the ability to (3 words)
pay current debt
Solvency is the ability to (4 words)
pay long term debt
Managers generally prefer
recording an Operating Lease rather than a Financing (or Capital) Lease.
If a bond limits the ability of the business to issue dividends, this is called a (2 words)
restrictive covenant
A creditor who has collateral is called a _____________ (1 word) creditor
secured
Interest is usually paid on a bond how often (1 word)
semiannually
A bond in which the payment of principal is done continuously through the life of the bond is called a (2 words)
serial bond
Freight is
sometimes an asset, sometimes an expense
At year end, by paying off debt or purchasing inventory on account a manager can manipulate
the Current Ratio
Which is always the larger ratio
the Current ratio
In a defined Contribution Plan who has the investment risk?
the employee
In a Defined Benefit Plan who has the investment risk?
the employer
When a firm gets less risky what will happen to its bonds
the market interest rate of the bonds will go down and the price of the bonds will go up
When a firm gets riskier what will happen to its bonds
the market interest rate of the bonds will go up and the price of the bonds will go down
The difference between a Defined Contribution Plan and a Defined Benefit Plan
the plans are totally different
When a firm gets riskier what will happen to its bonds
the stated interest rate of the bonds will not change
When a firm gets riskier what will happen to its bonds
the stated interest rate of the bonds will not changeCorrect
Managers use controlled liquidations
to increase income when they are are measuring inventory using LIFO.
A company can use FIFO for taxes and LIFO for Financial reporting
true
A contingent liability be disclosed in a footnote
true
For financial reporting a company can have some inventory on FIFO and some on LIFO
true
Historical cost numbers are usually harder than market value numbers
true
In a Financing Lease the Lessee records an Asset and a Liability
true
Someone who sells coal can report their inventory using FIFO
true
Someone who sells milk can report their inventory using LIFO
true
When a business pays interest to its bondholders, some (or all) the interest is tax deductible
true
It is easier for a company to cheat on its taxes
under periodic inventory accounting than under perpetual inventory accounting
Collateral is useful
when there are multiple creditors
The Going Concern Assumption means we assume that a company
will collect all its liabilities