Accounting Final review

the stockholders' equity section of Deer Lakes Manor's balance sheet on January 1, 2017, appeared as follows: common stock, $30 par, 20,000 shares issued & outstanding - $600,000 additional paid-in capital--common - 240,000 retained earnings - 700,000 total stockholders' equity - $1,540,000 On March 1, 2017, Deer Lakes reacquired 4,000 shares of common stock at $50 per share. All common shares were originally sold for $42 each. How much should be reported in the treasury stock account on the March 31, 2017, balance sheet? a. $200,000 b. $168,000 c. $128,000 d. $32,000

a. $200,000

Dali Company has 15,000 shares of stock authorized at January 1. Dali issues 4,500 shares to the stockholders during the year and then the company repurchases 1,500 shares as treasury stock. Based on this information, how many shares are outstanding at December 31? a. 18,000 b. 4,500 c. 3,000 d. 15,000

a. 18,000 15,000 + 4,500 - 1,500 = 18,000

Weather Corp. issued ten-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which one of the following statements is true? a. Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year b. Wether's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year c. the cash paid to bondholders will be $520 each interest period d. weather will receive $94,800 as the issue price

a. Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year

a decreasing long-term liability account is presented on the statement of cash flows as... a. a decrease in cash in the financing activities category b. an increase in cash in the operating activities category c. a decrease in cash in the investing activities category d. an increase in cash in the financing activities category

a. a decrease in cash in the financing activities category

when using the direct method, how is the sale of long-term investments for cash reported on the statement of cash flows? a. as an investing activity b. as an operating activity c. as a financing activity d. as a noncash investing and financing activity

a. as an investing activity

which of the following statements regarding contingencies is true? a. contingencies that are probable and estimable must be recorded before the outcome of future events b. contingencies that are not estimable should not be disclosed even if probable c. contingent assets, if probable and estimable, are treated in much the same way as contingent liabilities d. the accounting principle that determines whether a contingent asset is recorded is that of materiality

a. contingencies that are probable and estimable must be recorded before the outcome of future events

Which of the following statements is true? a. if a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss b. if a company reports a net loss on its income statement, it should report a decrease in cash on its statement of cash flows c. if a company uses the accrual basis of accounting it will improve its cash position if its reports net income for the same period d. if a company reports net income on its income statement, it should report an increase in cash on its statement of cash flows

a. if a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss

On July 1, 2017, Falcon Company received a $20,000 promissory note from Jordyn Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2018. If Falcon's fiscal years ends September 30, 2017, an adjustment is needed to... a. increase interest receivable by $250 b. increase notes receivable by $1,000 c. increase notes receivable by $250 d. increase interest revenue by $1,000

a. increase interest receivable by $250

use the equation presented below to answer the question that follows: Cash = CL + LTL + CS + RE - NCCA - LTA where: CL = current liabilities LTL = long-term liabilities CS = common stock RE = retained earnings NCCA = noncash current assets LTA = long-term assets which of the following activities results in a cash inflow? a. increases in common stock (CS) b. decreases in retained earnings (RE) c. decreases in current liabilities (CL) d. increases in noncash current assets (NCCA)

a. increases in common stock (CS)

during 2017, the accounts payable balance of Andreas Corp. decreased. Which of the following statements is true? a. this decrease is deducted from net income in the operating activities section of a statement of cash flows prepared under the indirect method b. this decrease is considered only when the operating activities section of a statement of cash flows is prepared under the direct method c. this decrease indicates that Andreas paid less during the period than it recognized as expenses on the income statement d. this decrease is added to net income in the operating activities section of a statement of cash flows prepared under the indirect method

a. this decrease is deducted from net income in the operating activities section of a statement of cash flows prepared under the indirect method

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. Cory and Ginger want to buy an airplane. They find one that will cost $200,000. They must pay 10% down and can get the balance financed with a ten-year loan at 7% interest and annual payments. What is their annual payment? a. $26,826 b. $25,626 c. $24,457 d. $19,260

b. $25,626

below are several transaction for Louisville Company: proceeds from issuance of bonds payable $635,000 payment to purchase equipment 275,000 payment of wages 115,000 payment of dividends 155,000 payment to pay off notes payable 195,000 based on these transactions, what is the net cash flow from financing activities? a. $275,000 net cash used for financing activities b. $285,000 net cash provided by financing activities c. $440,000 net cash provided by financing activities d. $0, because cash inflows equal cash outflows from financing activities

b. $285,000 net cash provided by financing activities

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. Kingston inherited $140,000 from an aunt. If Kingston decides not to spend his inheritance but to leave the money in his savings account until he retires in 15 years, how much money will he have assuming an annual interest rate of 8%, compounded semiannually? a. $444,104 b. $454,076 c. $2,420,884 d. $3,801,295

b. $454,076

if a company issued $5 par value common stock,... a. the shareholders will receive $5 in dividends b. $5 per share is presented in the common stock account on the balance sheet c. liabilities are increased as a result of the transaction d. the minimum selling price is $5

b. $5 per share is presented in the common stock account on the balance sheet

NORWOOD INC. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. refer to the information for Norwood, Inc. if Norwood uses the straight-line depreciation method, what is the book value at December 31, 2019? a. $46,875 b. $51,875 c. $67,500 d. $62,500

b. $51,875 (80,000 - 5,000) / 8 = 9,375 9,375 * 3 = 28,125 80,000 - 28,125 = $51,875

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... a. 5.0 to 1 b. 1.2 to 1 c. 2.0 to 1 d. 2.6 to 1

b. 1.2 to 1 8,000 (cash) + 9,250 (accounts receivable) / 14350 (current liabilities) = 1.2 to 1

Shidan Apartments purchased an apartment building to rent to university students on November 18, 2017. The following costs were incurred during 2017, before the tenants moved in: purchase price of the building $220,000 purchase price of the land 100,000 transfer taxes 10,000 interest incurred on the mortgage loan to purchase 4,000 attorney and real estate agent's fees 15,000 repave the parking lot 6,000 How much will Shidan Apartments record as an asset? a. $320,000 b. $351,000 c. $345,000 d. $355,000

b. 351,000 all amounts except the interest are recorded as an asset

when using the direct method, how is the purchase of equipment for cash shown in the statement of cash flows? a. as an operating activity b. as an investing activity c. as a noncash investing and financing activity d. as a financing activity

b. as an investing activity

amortization of a bond discount results in a(n)... a. decrease in the cash account b. decrease in stockholders' equity c. decrease in the bonds payable account d. increase in stockholders' equity

b. decrease in stockholders' equity

there are some liabilities, such as income tax payable, for which the amounts must be estimated. Failure to estimate these amounts and record them would be a violation of the... a. practice of consistency b. matching principle c. concept of historical cost d. convention of conservation

b. matching principle

cash interest is computed annually when a bond is issued for other than its face value. For a bond issued at a premium, how will this component change under the effective interest method as the bond approaches maturity? a. increase b. remain constant c. decrease d. not enough information given to decide

b. remain constant

when a company declares a stock dividend, which of the following occurs? a. a liability is created b. retained earnings is reduced c. the financing section of the statement of cash flows is decreased d. stockholders' equity is decreased

b. retained earnings is reduced

all of the following statements are true EXCEPT... a. the criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under U.S. GAAP than IFRS b. the criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under IFRS than U.S. GAAP c. the lease criteria under IFRS are to be used as guidelines rather than rules d. IFRS require more accounting judgment than U.S. GAAP in the determination of whether a lease is classified as an operating lease or a capital lease

b. the criteria to determine whether a lease contract should be considered a capital lease are applied in a more rigid way under IFRS than U.S. GAAP

Pilot Company reported the following information for 2017 and 2018: prepaid insurance, Dec 31, 2017 $2,400 prepaid insurance, Dec 31, 2018 1,500 insurance expense - 2018 14,200 how much cash was paid for insurance during 2018? a. $14,200 b. $15,700 c. $13,300 d. $15,100

c. $13,300 1,500 - 2,400 + 14,200 = $13,300

Use the information below for Flora Inc. for 2017 and 2018 to answer the following question: equipment, Dec 31, 2017 $65,000 equipment, Dec 31, 2018 72,000 accumulated depreciation, Dec 31, 2017 39,000 accumulated depreciation, Dec 31, 2018 30,000 during 2018, Flora Inc. sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of $3,000 was recognized on the sale of the equipment. This was the only equipment sale during the years. What was depreciation expense for 2018? a. $9,000 b. $30,000 c. $16,000 d. $21,000

c. $16,000 $39,000 beginning of year - $25,000 removed with sale of equipment = $14,000 $30,000 at end of year - $14,000 = $16,000

Gaulle Company began the year with a balance of $6,000 in Accounts Receivable and ended the year with $9,000 in the account. Revenues for the period amounted to $38,000. Under the direct method, Gaulle will report cash collected from customers of... a. $47,000 b. $41,000 c. $35,000 d. $44,000

c. $35,000 6,000 - 9,000 + 38,000 = 35,000

on January 1, 2017, Sharpsburg, Inc. issued $400,000, ten-year, 10% bonds for $354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%. What is the carrying value of the bonds at the end of the ten years? a. $354,200 b. $380,000 c. $400,000 d. $480,000

c. $400,000

ANOLE COMPANY Anole Company was incorporated as a new business on January 1, 2017. The company is authorized to issue 20,000 shares of $5 par value common stock and 10,000 shares of 6%, $10 par value, cumulative, participating preferred stock. On January 1, 2017, the company issued 8,000 shares of common stock for $15 per share and 2,000 shares of preferred stock for $30 per shares. Net income for the year ended December 31, 2017, was $375,000. Refer to the information about Anole Company. Anole's tatal stockholders' equity reported on the balance sheet at December 31, 2017, is... a. $120,000 b. $60,000 c. $555,000 d. $180,000

c. $555,000 180,000 + 375,000 = 555,000

bonds in the amount of $100,000 with a life of ten years were issued by Focus Company. If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds? a. $120,000 b. $30,000 c. $60,000 d. $6,000

c. $60,000 100,000 * 0.06 or 6% = $6,000 (interest for 1 year) $6,000 * 10 yrs = $60,000 (interest over the life of the bonds)

Washington Corp. reported the following information for 2017 and 2018: 2017 2018 accounts receivable $101,000 $93,000 prepaid expenses 5,000 6,000 accounts payable 71,000 76,000 salaries payable 5,000 4,000 net income 80,000 depreciation expense 9,000 gain on sale of equipment 5,000 If Washington uses the indirect method to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2018? a. $73,000 b. $83,000 c. $95,000 d. $105,000

c. $95,000 80,000 + (101,000-93,000) - (6,000-5,000) + (76,000-71,000) - (5,000-4,000) + 9,000 - 5,000 = $95,000

Lasiter Corp. reported net credit sales of $2,000,000 and cost of goods sold of $1,400,000 for 2017. On January 1, 2017, accounts receivable was $250,000. Amounts owed by customers increased by $20,000 during 2017. Rounding to two decimal places, what is Lasiter's accounts receivable turnover ratio for 2017? a. 8.33 b. 7.41 c. 7.69 d. 8.00

c. 7.69 2,000,000 (sales) / [[250,000 (jan 1 balance) + 270,000 (dec 31 balance)] / 2] = 7.69

which of the following items is NOT a cash equivalent? a. commercial paper b. a three-year treasury note purchased two months before its maturity c. a corporate bond investment that has five years until maturity when it is purchased d. money market funds

c. a corporate bond investment that has five years until maturity when it is purchased

A mortgage incurred in exchange for an office building would be reported in the statement of cash flows in... a. the cash flows from financing activities section b. the cash flows from operating activities section c. a separate schedule d. the cash flows from investing activities section

c. a separate schedule

the book value per share for a corporation is... a. the cost of investments in stock of other corporations b. the amount stockholders would receive if they sold their shares back to the corporation c. based on the excess of total assets over total liabilities d. the market price of the stock

c. based on the excess of total assets over total liabilities

with regard to preferred stock... a. its issuance provides no flexibility to the issuing company because its terms always require mandatory dividend payments b. there is a legal requirement for a corporation to declare a dividend on preferred stock c. its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared d. no dividends are expected by the stockholders

c. its stockholders may have the right to participate, along with common stockholders, if an extra dividend is declared

depreciation is a process by which... a. replacement funds are accumulated for plant and equipment b. the difference between current market value and historical cost of plant and equipment is determined c. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset d. the decline in market value of plan and equipment is determined and recorded

c. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset

which of the following sets of factors is needed to calculate depreciation on plant and equipment? a. the asset's acquisition cost, replacement cost, and its estimated residual value b. the estimated residual value of the asset, its replacement cost, and its market value c. the estimated life of the asset, its acquisition cost, and its estimated residual value d. the asset's replacement cost, its estimated life, and its estimated residual value

c. the estimated life the the asset, its acquisition cost, and its estimated residual value

for a given single sum invested at 8% for four years, how will the future value be affected if the compounding period is changed from quarterly to annually? a. the future value will stay the same b. the future value in increase c. the future value will decrease d. there is not enough information to determine the impact

c. the future value will decrease

Carson City Saloon purchased a $25,000 truck for catering from its restaurant. It made a down payment of 1/4 of the price. What combination of amounts would affect the income statement and statement of cash flows for the purchase of the truck? income statement cash flow statement a. $0 $(25,000) b. $25,000 $0 c. $25,000 $(6,250) d. $0 $(6,250)

d. $0 $(6,250)

GROVE CITY CORP. On January 1, 2017, Grove City Corp. purchased a ship for $2,000,000. It has a ten-year useful life and a residual value of $50,000. The company uses the double-declining-balance method. What was the depreciation expense for Grove City Corp. for the year ended December 31, 2017? a. $0 b. $195,000 c. $390,000 d. $400,000

d. $400,000 [(1/10) * 2] * 2,000,000 = $400,000

Frank Crawford Corporation's balance sheet showed the following amounts: Current Liabilities, $15,000; Bonds Payable, $8,000; Lease Obligations, $9,000; and Notes Payable, $5,600. Total stockholders' equity was $17,000. The debt-to-equity ratio is... a. 0.88 b. 0.71 c. 1.18 d. 2.21

d. 2.21

if bonds are issued at 101.25, this means that... a. a $1,000 bond sold for $101.25 b. the bond is sold at a discount c. the bond rate of interest is 10.13% of the market rate of interest d. a $1,000 bond sold for $1012.50

d. a $1,000 bond sold for $1012.50 (101.25 / 100) * $1,000 = $1012.50

you are interested in accumulating $10,000 so that you can take a cruise in three years. If you try to solve for the amount that you need to invest each year, earning 6% interest compounded annually, the $10,000 represents... a. the amount to invest b. a present value c. an annuity d. a future value

d. a future value

where can the amounts needed to computer the accounts receivable turnover ratio be found? a. the balance sheet b. the statement of cash flows c. the income statement d. both the income statement and balance sheet

d. both the income statement and balance sheet

When a note receivable has been discounted by a company,... a. an account called discount on notes receivable is used b. it will be shown as an asset of the company c. it slows the collection process d. it may be shown as a contingent liability in the footnotes

d. it may be shown as a contingent liability in the footnotes

which of the following accounts is NOT classified as a current liability? a. accounts payable b. salaries payable c. taxes payable d. note payable, due in three years

d. note payable due in three years

which of the following is reported as a financing activity on the statement of cash flows? a. stock dividend b. declaration of cash dividends c. stock split d. payment of cash dividends

d. payment of cash dividends

when a company declares a 2-for-1 stock split, ... a. stockholders' equity is doubled b. a shareholder who previously held 100 shares will have 300 shares after the split c. the price of each share will be 1/3 of what it was before the stock split d. there is no effect on total stockholders' equity

d. there is no effect on total stockholders' equity