Final Exam Review

On January 1, 2016, Chain, Inc. issued $400,000, 10-year, 10% bonds for $354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%. The interest expense on the bonds at June 30, 2016, is a. $17,710 b. $21,252 c. $20,000 d. $24,000

b. $21,252

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 Vito has $5,000 per year to invest for 10 years and wants to accumulate $87,745 at the end of that time, he must find an investment that is earning at a rate of a. 11% b. 12% c. 15% d. 6%

b. 12%

In 2016, Morton Co. sold 100 hot air balloons at $4,000 each. The balloons carry a 5-year warranty for defects. Morton estimates that repair costs will average 4% of the total selling price. The estimated warranty liability at the beginning of the year was $42,000. $11,000 in claims was actually incurred during the year to honor their warranty. What was the balance in the ending estimated warranty liability at the end of the year? a. $42,000 b. $37,000 c. $47,000 d. $ 5,000

c. $47,000

Current liabilities are defined as those liabilities which will be satisfied a. within one year or within the operating cycle, whichever is shorter. b. within one year. c. within one year or within the operating cycle, whichever is longer. d. by the end of the operating cycle.

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

Which of the following is an example of a credit memorandum? a. Company error in recording a $600 deposit as $500 b. Service charge notice c. Outstanding check d. Collection of a note receivable by the bank

d. Collection of a note receivable by the bank

Adjustments are recorded for all transactions involving outside entities. True False

False

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

False

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

False

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner. True False

False

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

False

The direct write-off method estimates the amount of bad debts before they occur. True False

False

The issuance of stock decreases a company's assets and increases its stockholders' equity. True False

False

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

False

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

False

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

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. True False

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. True False

False

When stock is issued for a non-cash asset, the par value of the stock is the best indicator of the value of the asset. True False

False

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

True

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

True

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

True

In an operating lease, the lessee acquires the right to use an asset for only a limited period of time. True False

True

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

True

The key to the classification of an amount as cash is that it be readily available to pay debts. True False

True

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

True

Frank Corporation purchased supplies at a cost of $15,000 during 2016. At January 1, 2016, supplies on hand were $2,000. At December 31, 2016, supplies on hand are $2,500. Calculate supplies expense for 2016. a. $ 14,500 b. $ 17,000 c. $ 15,500 d. $ 15,000

a. $ 14,500

Lynx Corp. The data presented below for Lynx Corp. is for the year ended December 31, 2016: Sales (100% on credit) $1,000,000 Sales returns $30,000 Accounts Receivable (December 31, 2016) $170,000 Allowance for Doubtful Accounts [Cr. Balance] (Before adjustment at December 31, 2016) $1,300 Estimated amount of uncollectible accounts based on aging analysis $14,000 See the data for Lynx Corp. If Lynx Corp.uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense? a. $156,000 b. $167,000 c. $184,000 d. $140,000

a. $156,000

On January 1, 2016, Sharpsburg, Inc. issued $400,000, 10-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 after the first interest payment is made on June 30, 2016? a. $355,452 b. $400,000 c. $354,200 d. $352,960

a. $355,452

Income taxes payable is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet? a. Current liability b. Expense c. Owners' equity d. Contra liability

a. Current liability

Abilene Western Shop began business on January 1, 2016. The corporate charter authorized issuance of 10,000 shares of $2 par value common stock and 4,000 shares of $8 par value, 6% cumulative preferred stock. Abilene issued 2,400 shares of common stock for cash at $20 per share on January 2, 2016. What effect does the entry to record the issuance of stock have on total stockholders' equity? a. Increase of $48,000 b. Increase of $4,800 c. Decrease of $48,000 d. Decrease of $4,800

a. Increase of $48,000

On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a 1-year, 6% note. If the company keeps its records on a calendar year, an entry is needed on December 31 to increase a. Interest Payable, $1,200. b. Interest Expense, $600. c. Interest Expense, $1,800. d. Interest Payable, $900.

a. Interest Payable, $1,200.

On July 1, 2016, Overlin Corp. purchased $100,000 of 8% bonds at face value. Interest is paid annually on June 30. If the accounting year for Overlin ends at December 31, 2016, what will be reported with respect to the bonds on that date? a. Interest income in the amount of $4,000 will be accrued. b. A loss on the bonds will be reported in the Other Income and Expense section of the 2016 income statement until the entire amount of interest is paid on June 30, 2017. c. The cash received in interest will be $8,000. d. The carrying value of the bonds will be $108,000.

a. Interest income in the amount of $4,000 will be accrued.

Which internal control procedure is followed when management authorizes the purchasing department to order goods and services for the company? a. Proper authorizations b. Independent verifications c. Safeguarding of assets and records d. Segregation of duties

a. Proper authorizations

When a company declares a stock dividend, which of the following occurs? a. Retained earnings is reduced. b. A liability is created. c. The financing section of the statement of cash flows is decreased. d. Stockholders' equity is decreased.

a. Retained earnings is reduced.

Vegan Company reported the following: Common stock, $5 par, 200,000 shares authorized, 50,000 shares issued and outstanding What is the effect of issuing 2,000 shares of common stock in exchange for land with valued by a realtor at $36,000 if the common stock sells for $12 per share and is regularly traded? a. The Land account increases by $24,000. b. Retained Earnings decreases by $10,000. c. Common Stock increases by $36,000. d. Additional Paid-in Capital - Common increases by $24,000.

a. The Land account increases by $24,000.

Which of the following is false regarding the issue of stock versus the issue of bonds to raise capital? a. The declaration of dividends reduces the amount of income taxes the corporation must pay. b. Interest accrues, whereas dividends do not accrue. c. The payment of interest on bonds payable is required by law. d. The payment of dividends is at the discretion of the board of directors.

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

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? a. The present value of an annuity. b. The present value of a single amount. c. The future value of a single amount. d. The future value of an annuity.

a. The present value of an annuity.

What is the effect of a stock dividend on stockholders' equity? a. Total stockholders' equity stays the same. b. Additional paid-in capital is decreased. c. Stockholders' equity is decreased. d. Retained earnings is increased.

a. Total stockholders' equity stays the same.

Which of the following items is not included as an element of net income on the multiple-step income statement? a. Unrealized holding gains or losses on investments b. Gain on the sale of fixed assets c. Loss on sale of investments d. Amortization of bond dscounts

a. Unrealized holding gains or losses on investments

The stockholders' equity section of Twilight Time's balance sheet on January 1, 2016, appeared as follows: Common stock, $2 par, 2,000 shares issued and outstanding $4,000 Additional paid-in capital—Common $1,600 Retained earnings $5,400 Total stockholders' equity $11,000 On March 1, 2016, Twilight reacquired 800 shares of common stock at $10 per share. Twilight sold 400 of the treasury shares on November 15 for $12 per share. The entry to record the sale on November 15 would show: a. a decrease in Treasury Stock, $4,000 b. a decrease in Cash, $4,800 c. an increase in Gain on Sale of Treasury Stock, $800 d. an increase in Common Stock, $4,800

a. a decrease in Treasury Stock, $4,000

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 a. an expense on the income statement b. a liability on the balance sheet c. an asset on the balance sheet d. income on the income statement

a. an expense on the income statement

One effect on the accounting equation when a firm borrows money is: a. assets increase. b. liabilities decrease. c. assets decrease. d. stockholders' equity decreases.

a. assets increase.

The documentation with the bank statement shows a debit memo for bank service charges. Based on this, what possible entry would be made in the company's accounts? a. debit Miscellaneous Administrative Expense; credit Cash b. debit Cash; credit Other Income c. debit Accounts Payable; credit Cash d. debit Cash; credit Accounts Payable

a. debit Miscellaneous Administrative Expense; credit Cash

Readers of the financial pages of the daily newspaper noticed the following information with regard to the Connor Company stock: Daily high, 45.50; Daily low, 42.25; Last, 43.50; Change, +0.75. This tells readers that the a. stock gained $.75 in value over the previous day. b. stock gained $3.00 in value over the previous day. c. company's stock is a popular investment. d. stock was selling at 43.50% of par at the close of the day.

a. stock gained $.75 in value over the previous day.

Charlie Company had $1,800 of supplies on hand at January 1. During the year, supplies with a cost of $4,000 were purchased. At December 31, the actual supplies on hand amount to $1,300. After the adjustments are recorded and posted at December 31, determine the balances in the Supplies and Supplies Expense accounts. Supplies ... Supplies Expense ​ a. ​$1,300 ... $4,500 b. ​$1,300 ... $5,800 c. ​$5,300 ... $5,800 d. ​$1,800 ... $4,000

a. ​$1,300 ... $4,500

Gyro's Shop reported a net loss of $15,000 and total expenses of $80,000. How much are total revenues? a. $ 15,000 b. $ 65,000 c. $ 95,000 d. The answer cannot be determined from the information given.

b. $ 65,000

Use the information provided in the time value of money tables (Tables 9-1 through 9-4) in the text to answer the question that follows. Global Company issued $1,000,000, 8%, 7 year bonds, interest payable semiannually. The market rate of interest was 6%. The issuance price of the bonds is a. $1,151,480 b. $1,112,840 c. $1,111,560 d. $1,000,000

b. $1,112,840

Bonds in the amount of $100,000 and a life of 10 years were issued by the 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. $30,000 b. $60,000 c. $6,000 d. $120,000

b. $60,000

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%. The proceeds from this bond issue were $107,732. Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually. a. Amortization of the premium for the first interest period will be $1,226. b. Amortization of the premium for the first interest period will be $613. c. Interest payments to bondholders each period will be $5,000. d. Interest payments to bondholders each period will be $6,464.

b. Amortization of the premium for the first interest period will be $613.

The second step in the ethical decision-making model is to a. Recognize an ethical dilemma b. Analyze the key elements in the situation c. List alternatives and evaluate the impact of each on those affected d. Select the best alternative

b. Analyze the key elements in the situation

Which pair of accounts has the same set of rules for debit and credit entries? a. Service Revenue and Rent Expense b. Equipment and Salaries Expense c. Dividends and Retained Earnings d. Accounts Receivable and Accounts Payable

b. Equipment and Salaries Expense

A bank loaned $62 million to Apex Corporation to finance the construction of a new distribution warehouse. In which section of Apex's statement of cash flows would you be able to determine whether the company repaid any portion of the debt during the year? a. Investing Activities b. Financing Activities c. Profit Activities d. Operating Activities

b. Financing Activities

Which of the following is reported as a financing activity? a. Stock dividend b. Payment of cash dividends c. Stock split d. Declaration of cash dividends

b. Payment of cash dividends

Which of the following statements is correct? a. The market rate of interest has no bearing on the selling price of the bonds. b. The actual issue price of a bond represents the present value of all future cash flows related to the bond. c. If the face rate of interest on a bond is not equal to the market rate of interest, then the company desiring to issue the bonds must reprint its bond certificates. d. Bonds are issued at a price that reflects the stated rate of interest on the day the bond is purchased.

b. 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 regarding serial bonds is true? a. They are strongly backed by the issuer's collateral. b. The bonds do not all mature on the same date. c. They are likely to be issued by food companies. d. They have shorter lives than term bonds.

b. The bonds do not all mature on the same date.

How would customer's NSF checks be dealt with in a bank reconciliation? a. added to bank statement balance b. deducted from company's book balance c. added to company's book balance d. deducted from bank statement balance

b. deducted from company's book balance

Because of changing market conditions, Friendly Corporation made the decision to redeem $300,000 of its bonds prior to maturity. The bonds had been issued at a discount and the balance in the discount account at the time of redemption was $15,000. The corporation's bond certificates indicated that the bonds could be retired early at 103. Friendly's retirement of the bonds would result in a(n) a. gain of $6,000. b. loss of $24,000. c. increase in assets of $15,000. d. decrease in owners' equity of $9,000.

b. loss of $24,000.

If a company has both common and preferred shares outstanding and wishes to calculate book value per share, a. stockholders' equity, less the cost of treasury shares held, must be divided by the number of common shares outstanding. b. net assets, less the redemption value of the preferred stock, must be divided by the number of shares of common stock outstanding. c. net assets must be divided by the total number of both classes of stock. d. stockholders' equity must be divided by the total number of both classes of stock.

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

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should a. be reported on the statement of retained earnings in the year in which acquired. b. not be amortized. c. increase an expense account entirely in the year in which acquired. d. be amortized over a reasonable period of time not to exceed 40 years.

b. not be amortized.

Cash 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? a. increase b. remain constant c. not enough information given to decide d. decrease

b. remain constant

If a company's bonds are callable, a. the investor or buyer of the bonds has the right to retire the bonds. b. 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%. c. the bonds are never allowed to remain outstanding until the maturity date. d. the investor never knows what the redemption price will be until the bonds are actually called.

b. 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%.

Basic Solutions Company reported net earnings of $60,000, declared and paid cash dividends on its common stock in the amount of $40,000 during the year, and sold 3,000 shares of $2 par value common stock for $15 per share during the year. What effects would these transactions have on the stockholders' equity accounts shown below? ​ Retained Earnings ... Common Stock a. ​decrease ... decrease ​ b. ​increase ... increase ​ c. ​decrease ... increase ​ d. ​increase ... decrease

b. ​increase ... increase

Royal Company purchased a dump truck at the beginning of 2014 at a cost of $60,000. The truck had an estimated life of 6 years and an estimated residual value of $24,000. On January 1, 2016, the company made major repairs of $20,000 to the truck that extended the life 1 year. Thus, starting with 2016, the truck has a remaining life of 5 years and a new salvage value of $8,000. Royal uses the straight-line depreciation method. What amount should be recorded as depreciation expense each year starting in 2016? a. $6,000 b. $13,600 c. $12,000 d. $14,400

c. $12,000

The Stockholders' Equity section of Deer Lakes Manor's balance sheet on January 1, 2016, appeared as follows: Common stock, $30 par, 20,000 shares issued and outstanding $600,000 Additional paid-in capital—Common $240,000 Retained earnings $700,000 Total stockholders' equity$1,540,000 On March 1, 2016, 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, 2016, balance sheet? a. $168,000 b. $32,000 c. $200,000 d. $128,000

c. $200,000

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. Denise wants to help pay for her niece's college tuition. Her niece will begin college in one year. How much would Denise need to put into a savings account today at 6% so that her niece can withdraw $10,000 per year for 4 years, and reduce the account balance to zero at the end of the 4 years? a. $31,680 b. $37,600 c. $34,650 d. $37,720

c. $34,650

Mendes Charters reported the following information at December 31, 2016: Preferred stock, $100 par, 500 shares authorized, and outstanding; cumulative; nonparticipating; callable at par value $ 50,000 Common stock, $12 par, 50,000 shares authorized and outstanding $600,000 Additional paid-in capital—Common $25,000 Retained earnings $825,000 Mendes' total contributed capital is a. $650,000 b. $1,500,000 c. $675,000 d. $625,000

c. $675,000

CarWorks Company has 100,000 authorized shares of $4 par common stock. The company issued 40,000 shares at $8. Subsequently, CarWorks declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend? a. $4,800 b. $6,400 c. $8,800 d. $3,200

c. $8,800

If current assets amount to $62,000, total assets $350,000, current liabilities $31,000, and total liabilities $125,000, then the current ratio is a. 2.8 to 1 b. 0.5 to 1 c. 2.0 to 1 d. 3.0 to 1

c. 2.0 to 1

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? a. Cash from note payable related to truck acquired b. Cost of plant assets acquired during the year c. Depreciation expense d. Accumulated depreciation

c. Depreciation expense

Delmont Fire Co. purchased identical equipment having an estimated useful life of ten years. Wind Chime uses the straight-line depreciation method and Fire Hut uses the double-declining-balance method of depreciation. Assuming the two entities are similar in all other respects, which of the following statements is correct? a. Wind Chime's depreciation expense will be greater in the second year than Fire Hut's depreciation expense. b. Fire Hut's book value will be greater than Wind Chime's book value at the end of year one. c. Fire Hut's book value will be less than Wind Chime's book value at the end of year two. d. Wind Chime's net income will be greater than Fire Hut's net income in year nine.

c. Fire Hut's book value will be less than Wind Chime's book value at the end of year two.

What effect does "recognizing an accrued liability for utilities at the end of the accounting period " have on the accounting equation? a. Assets decrease and liabilities decrease. b. Assets decrease and stockholders' equity decreases. c. Liabilities increase and stockholders' equity decreases. d. Liabilities increase and stockholders' equity increases.

c. Liabilities increase and stockholders' equity decreases.

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? a. Current asset b. Contra-liability c. Long-term liability d. Long-term asset

c. Long-term liability

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? a. There is not enough information to answer this question accurately. b. No. The interest rate is actually lower than 8 percent. c. No. The interest rate is actually higher than 8 percent. d. Yes.

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

Which of the following is true concerning a sole proprietorship? a. It is a separate legal entity. b. It may have more than one class of stock outstanding. c. The separate entity concept applies. d. It is owned by one or more persons.

c. The separate entity concept applies.

All of the following statements are true except: a. IFRS requires a liability to be recorded as a present value amount. b. Under U.S. GAAP, a contingent item should be recorded as a liability if the loss or outflow is probable and can be reasonably estimated. c. The threshold for recording items as liabilities is a lower under U.S. GAAP than under IFRS. d. The threshold for recording items as liabilities is a lower under IFRS than under U.S. GAAP.

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

The Premium on Bonds Payable account is shown on the balance sheet as a. a contra asset. b. a subtraction from a long-term liability. c. an addition to a long-term liability. d. a reduction of an expense.

c. an addition to a long-term liability.

In a periodic inventory system, the cost of purchases is recognized as a. an increase in an asset account. b. the only part of the calculation of cost of goods sold. c. an integral part of the calculation of cost of goods sold. d. an increase in the inventory account.

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

On January 1, 2016, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in the bonds payable account. On December 31, 2016, the balance in that same account was $20,000. This change would appear on the statement of cash flows as a. an inflow of cash of $15,000 in the financing activities category. b. an inflow of cash of $15,000 in the investing activities category. c. an outflow of cash of $15,000 in the financing activities category. d. an outflow of cash of $15,000 in the investing activities category.

c. an outflow of cash of $15,000 in the financing activities category.

Endeavor Company issued 20-year bonds with a coupon rate of 6% when the market rate of interest was 9%. This means that the bonds were issued a. with an additional 3 years of interest. b. at the face value. c. at a discount. d. at a premium.

c. at a discount.

The effect of recording depreciation for the year is a(n) a. decrease in net income and no change in assets. b. decrease in assets but no change in owners' equity. c. decrease in assets and a decrease in net income. d. increase in assets and an increase in net income.

c. decrease in assets and a decrease in net income.

Operating assets with no physical properties are called a. plant assets b. current assets c. intangible assets d. property, plant, and equipment

c. intangible assets

Expenses originate from: a. paying off liabilities. b. collecting cash from customers. c. incurring liabilities or providing services to customers. d. using an asset or recognizing liabilities.

d. using an asset or recognizing liabilities.

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. 2.0 to 1 c. 2.6 to 1 d. 1.2 to 1

d. 1.2 to 1

Which of the following statements regarding the inclusion of liabilities on the statement of cash flows is true? a. Long-term liabilities generally affect the investing activities section. b. A decrease in a current liability from the beginning to the end of the year is accompanied by an inflow of cash. c. All current liabilities affect the operating activities section. d. A decrease in a current liability from the beginning to the end of the year is accompanied by a decrease of cash.

d. A decrease in a current liability from the beginning to the end of the year is accompanied by a decrease of cash.

All of the following are characteristics of current liabilities except: 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.

d. All three of the above are characteristic of current liabilities.

If the amount assigned to ending inventory is incorrect, a. The balance sheet is affected, but the income statement is not. b. The income statement is affected, but the balance sheet is not. c. The balance sheet is affected, but cost of goods sold is not. d. Both the balance sheet and the income statement are affected.

d. Both the balance sheet and the income statement are affected.

Bluebird, Inc. issued a 9-month, 6 % non-interest bearing note for $49,000 to the bank. The issuance of this note would include a a. Debit to cash for $49,000 b. Debit to discount for $2,904 c. Debit to notes receivable for $49,000 d. Debit to discount for $2,205

d. Debit to discount for $2,205

What are the two subtotals that distinguish the multi-step income statement from the single-step income statement? a. Income before taxes and income taxes b. Total revenues and total expenses c. Total operating revenues and total operating expenses d. Income from operations and income before taxes

d. Income from operations and income before taxes

Factoring or negotiating a promissory note a. Is the process of lending money b. Slows the collection process c. Requires using an account called discount on notes receivable d. Is the process of selling or transferring ownership of a promissory note

d. Is the process of selling or transferring ownership of a promissory note

Grove City Corp. ​ On January 1, 2016, 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. ​ If Grove City Corp. continues to use the ship in its eleventh year, what is the correct accounting procedure? a. Take the asset off the books and record a gain on the disposal b. Continue to depreciate it c. The company may not use it any longer d. No longer depreciate it but leave it on the records at its book value at the end of its useful life

d. No longer depreciate it but leave it on the records at its book value at the end of its useful life

Which one of the following would not appear on a bank statement for a checking account? a. Interest earned b. Service charges c. Deposits d. Outstanding checks

d. Outstanding checks

Lawrenceville Co. reported the following: ​ Common stock, $3 par, 10,000 shares authorized, 5,000 shares issued and outstanding ​ What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the dividend is declared? a. Additional Paid-in Capital decreases $30,000. b. Cash decreases $30,000. c. A stock dividend has no effect on any stockholders' equity accounts. d. Retained earnings in the amount of $15,000 is transferred to the contributed capital accounts.

d. Retained earnings in the amount of $15,000 is transferred to the contributed capital accounts.

All of the following are intangible assets except a. goodwill b. franchises c. patents d. accounts receivable

d. accounts receivable

A voucher is usually supported by a. a supplier's invoice b. a purchase order c. a receiving report d. all of the above

d. all of the above

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must a. because part of the purchase involved land, record all of the cost in the Land account. b. record the $500,000 acquisition cost in an account called Land and Buildings. c. depreciate the $500,000 acquisition cost, less any residual value, over the expected useful life of the building. d. allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values.

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

Depreciation is a. the cash allocated each period to maintain a plant asset. b. the difference between the original cost and salvage value of an asset. c. an accumulation of funds to replace the related plant asset. d. an effort to achieve proper matching of the cost of operating assets.

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

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 a. future value of a single amount b. present value of an annuity c. present value of a single amount d. future value of an annuity

d. future value of an annuity

Interest is capitalized when incurred in connection with the construction of plant assets because: a. many plant assets last longer than 20 years. b. interest is considered an expense of the period. c. the decision to purchase a plant asset is a business decision separate from the financing decision. d. interest is considered a part of the acquisition cost of the related plant asset.

d. interest is considered a part of the acquisition cost of the related plant asset.

When selecting between the best alternatives regarding an ethical dilemma in accounting all of the following should be considered except: a. which alternative provides the most accurate information. b. which alternative provides the most neutral information. c. which alternative provides the most relevant information. d. which alternative provides the most profitable information.

d. which alternative provides the most profitable information.

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. True False

False

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

False

As part of good internal control, disbursements can be made either by check or cash. True False

False

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

False

GAAP stands for Generally Accepted Accounting Procedures. True False

False

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

False

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

False

Because of its objective nature, historical cost is the attribute used to measure many of the assets recognized on the balance sheet. True False

True

Bondholders are external users of company's accounting information. True False

True

Dividends declared and paid reduce a company's retained earnings balance. True False

True

Lynx Corp. The data presented below for Lynx Corp. is for the year ended December 31, 2016: Sales (100% on credit) $1,000,000 Sales returns $30,000 Accounts Receivable (December 31, 2016) $170,000 Allowance for Doubtful Accounts [Cr. Balance] (Before adjustment at December 31, 2016) $1,300 Estimated amount of uncollectible accounts based on aging analysis $14,000 See the data for Lynx Corp. If Lynx Corp. uses the aging of accounts receivable approach to estimate its bad debts, what amount will be reported as bad debt expense for 2016? a. $12,700 b. $14,000 c. $15,300 d. $13,700

a. $12,700

Sherman, Inc. counted its ending inventory as $178,000 at year-end, January 31, 2016. Upon review of the records, it was noted that the following items were in transit during the count: A) $2,000 of goods shipped by a supplier to Sherman sent FOB destination on January 31 were received February 5, and were not counted by Sherman. B) $5,000 of goods shipped by a supplier to Sherman sent FOB shipping point on January 30 were received February 2, and were not counted by Sherman. C) $6,000 of goods shipped by Sherman to a customer FOB shipping point on January 31 were received by the customer February 3, and were counted by Sherman. Determine the correct inventory balance at January 31. a. $177,000 b. $178,000 c. $174,000 d. $172,000

a. $177,000

Read the information below about Cobb Company: - Operating Revenues $6,000 - General & Administrative Expenses $2,200 - Selling Expenses $1,800 - Other Revenues (Expenses) $800 - Income Tax Expense $600 What is Cobb's net income? a. $2,200 b. $1,600 c. $2,800 d. $2,000

a. $2,200

The following set of items describes activities completed by a company in purchasing and paying for merchandise. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. Although the department supervisor can indicate a preferred supplier or vendor on purchase requisitions, the purchasing department has the responsibility for making the final decision on a vendor. a. Adheres to sound internal control procedures b. Violates sound internal control procedures c. Neither strengthens nor violates internal control

a. Adheres to sound internal control procedures

What effects on a retail store's accounting equation occur when merchandise returned by customers is recorded? a. Assets and stockholders' equity decrease. b. Assets and stockholders' equity increase. c. Assets decrease and liabilities increase. d. Stockholders' equity decreases and liabilities increase.

a. Assets and stockholders' equity decrease.

What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded? a. Assets decrease and liabilities decrease. b. Stockholders' equity increases and decreases by the same amount. c. Assets increase and stockholders' equity increases. d. Assets increase and liabilities increase.

a. Assets decrease and liabilities decrease.

Harvest Catering is a local catering service. Conceptually, when should Harvest recognize revenue from its catering service? a. At the date the meals are served b. At the date the invoice is mailed to the customer c. At the date the customer places the order d. At the date the customer's payment is received

a. At the date the meals are served

Which financial statement would you refer to in order to determine whether a company owed funds to creditors? a. Balance sheet b. Statement of Retained Earnings c. Statement of public accounting d. Income Statement

a. Balance sheet

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? a. Balance sheet as a credit b. Income statement as a debit c. Income statement as a credit d. Balance sheet as a debit

a. Balance sheet as a credit

Which one of the following documents is used in the control of cash receipts? a. Bank deposit slips b. Purchase requisitions c. Canceled checks from customers d. Receiving reports

a. Bank deposit slips

Which of the following journal entries is required to close the Income Summary account of a company with a net loss ? a. Credit Income Summary, debit Retained earnings. b. Debit Income Summary, credit Retained earnings. c. Credit Income Summary, debit Dividends. d. Debit Income Summary, credit Capital Stock.

a. Credit Income Summary, debit Retained earnings.

What is the correct method for calculating working capital? a. Current Assets minus Current Liabilities b. Total Assets minus Total Liabilities c. Current Assets minus Total Liabilities d. Current Assets plus Current Liabilities

a. Current Assets minus Current Liabilities

A debit memorandum appeared on Cinco Inc.'s May bank statement. How will Cinco treat this amount on its May bank reconciliation? a. Deduct from the book balance b. Add it the book balance c. Deduct from the bank balance d. Add it to the bank balance

a. Deduct from the book balance

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? a. Disclosure of accounting policies. b. Prospective cash receipts. c. Claims to resources. d. The average earnings per share for the quarter.

a. Disclosure of accounting policies.

The record in which transactions are initially recorded in chronological order as they occur is a(an) a. General journal b. Account of events c. Chart of Accounts d. General Ledger

a. General journal

Which one of the following ratios is a common analytical tool used by merchandise corporations, but not by service corporations? a. Gross profit ratio b. Earnings per share c. Profit margin d. Current ratio

a. Gross profit ratio

Most annual reports now include a report of management to the stockholders. In this report, which group has the primary responsibility for the preparation and integrity of the financial statements? a. Management b. The audit committee of the company's board of directors c. The company's internal audit staff d. The company's CPAs

a. Management

Which one of the following statements is true? a. Measurement is concerned with how economic effects should be quantified. b. The stability concept is concerned with identification of the specific entity for which economic effects are to be recognized and measured. c. Recognition is concerned with the dollar amount of each economic effect that should be reported in the financial statements. d. The monetary unit assumption is concerned with the valuation of economic effects in terms of current purchasing power.

a. Measurement is concerned with how economic effects should be quantified.

A credit means that: a. None of these choices. b. the event is unfavorable. c. the event has an effect on the left side of an account. d. the event is favorable.

a. None of these choices.

Business entities generally carry on: a. Operating, investing, and financing activities b. Operating activities, but only corporations engage in financing and investing activities c. Investing and operating activities, but only corporations engage in financing activities d. Either investing or financing activities, but not both

a. Operating, investing, and financing activities

Tavella Company applies the consistency convention. What does this mean? a. Tavella Co. applies the same accounting principles each accounting period. b. Tavella Co. applies the same accounting principles as it competitors. c. Tavella Co. has selected certain accounting principles that can never be changed. d. Tavella Co. uses the same names for all its expenses as its competitors.

a. Tavella Co. applies the same accounting principles each accounting period.

How are cash equivalents reported or disclosed in the financial statements? a. They are included with cash under current assets on the balance sheet. b. They are included with short-term investments under current assets on the balance sheet. c. They appear only on the statement of cash flows. d. They are disclosed only in a footnote to the balance sheet.

a. They are included with cash under current assets on the balance sheet.

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? a. Throughout the year as the revenue is earned b. November 1 of the current year when the cash is received from Harris c. At December 31 of the current year, and October 31 of the next year d. On October 31 of the next year when all services have been provided

a. Throughout the year as the revenue is earned

Using different depreciation methods for book purposes versus tax purposes for the same asset, if allowed, will result in a. the direct result of the differing goals of financial and tax accounting. b. not allowed since the amount can only be calculated one way or the other, not both. c. against the Internal Revenue Code, and as such, against the law. d. contrary to GAAP.

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

The following is from Goldman Inc.'s 2016 income statement. Purchases $172,000 Transportation-In $11,000 Inventory, January 1, 2016 $26,500 Inventory, December 31, 2016 $28,800 Purchase Returns and Allowances $8,400 ​ How much will Goldman report as cost of goods purchased in its 2016 income statement? a. $183,000 b. $174,600 c. $180,400 d. None of these choices

b. $174,600

Domenico Enterprises purchased land for $2,000,000 in 1999. In 2016, an independent appraiser assessed the value at $4,400,000. What amount should appear on the financial statements in 2016 with respect to the land? a. $2,400,000 b. $2,000,000 c. $4,400,000 d. Whatever amount the company believes is the best indicator of the true value of the land.

b. $2,000,000

Mellon CorporationThe data presented below is for Mellon Corporation for the year ended December 31, 2016: Sales (100% on credit) $1,500,000 Sales returns $60,000 Accounts Receivable (December 31, 2016) $250,000 Allowance for Doubtful Accounts [Credit Balance] (Before adjustment at December 31, 2016 $3,000 Estimated amount of uncollectible accounts based on an aging analysis $31,000 ​ ​Refer to the data for Mellon Corporation. ​ If Mellon uses the aging of accounts receivable approach to estimate its bad debts, what amount will be reported as bad debt expense for 2016? a. $34,000 b. $28,000 c. $31,000 d. $50,000

b. $28,000

Jobston, Inc.The balance sheet of Jobston Inc. includes the following items: Cash $ 22,400 Accounts receivable $11,700 Inventory $23,300 Prepaid insurance $1,040 Land $80,000 Accounts payable $47,500 Salaries payable $1,200 Capital stock $84,040 Retained earnings $5,700 Read the information about Jobston, Inc. What is Jobston's working capital? a. $89,740 b. $9,740 c. $58,440 d. $84,040

b. $9,740

Aggie Corporation began operations on January 1, 2017, with an investment of $25,000 by each of its two stockholders. Net income for its first year of business was $29,000. During 2018 and 2019, net income increased to $35,000 and to $46,000 respectively. Aggie paid $3,000 in dividends to each of the two stockholders in each of the three years. During 2019, the owners invested an additional $5,000 each into the business. Determine the amount of Aggie's retained earnings at December 31, 2019. a. $122,000 b. $92,000 c. $102,000 d. $152,000

b. $92,000

Hopper, Inc.Use the information from Hopper Inc. to answer the following question(s). 2017 Operating revenues $1,900,000 Operating expenses $1,400,000 Income taxes $200,000 2016 Operating revenues $1,600,000 Operating expenses $1,100,000 Income taxes $200,000 ​ Read the information about Hopper, Inc. Which ratio are you able to calculate given only the information provided by Hopper? a. Gross profit percentage b. Profit margin c. Current ratio d. Working capital

b. Profit margin

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2016. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2016. Park paid the amount due on June 13, 2016. ​ Park uses a perpetual inventory system. When will the cost of merchandise sold be recorded as an expense? a. The date the merchandise was purchased b. The date the merchandise is sold c. The end of the accounting period d. Cannot be determined without further information

b. The date the merchandise is sold

Wexford Co. Wexford Co. purchased a new delivery truck at the beginning of 2016. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2016. The truck was driven 20,000 miles during 2016 and 24,000 miles during 2017. The number of expected miles over five years is 100,000. ​ Refer to information about Wexford Co. ​ Wexford Co. wants to use the depreciation method that will result in the highest depreciation expense for 2016. Which method should be used? a. straight-line b. double-declining-balance c. units-of-production d. all methods create the same income in 2016

b. double-declining-balance

The 2016 income statement of Seikoson shows operating revenues of $130,800, selling expenses of $37,100, general and administrative expenses of $34,900, interest expense of $900, and income tax expense of $11,430. Seikoson's stockholders' equity was $280,000 at the beginning of the year and $320,000 at the end of the year. The company has 20,000 shares of stock outstanding at December 31, 2016. Read the information about Seikoson. What is Seikoson's net income? a. $92,190 b. $130,800 c. $46,470 d. $80,000

c. $46,470

Jenning Co. adjusts its books each month but closes its books at the end of the year. The trial balance at July 31 before adjustments is as follows: Debit Cash $12,920 Accounts Receivable $9,620 Supplies $1,400 Prepaid Insurance $3,120 Equipment $26,000 Credit Accumulated Depreciation—Equipment $10,400 Unearned Service Revenue $6,500 Capital Stock $7,190 Retained Earnings $23,500 Debit Dividends $1,560 Credit Service Revenue $16,510 Debit Wages and Salaries Expense $7,800 Utilities Expense $380 Rent Expense $1,300 Total Debit: $64,100 Total Credit: $64,100 Refer to the trial balance for Jenning Co. Employees are owed $750 for services since the last payday in July, to be paid the first week in August. The amount to be reported in the July income statement for salaries expense is: a. $750 b. $7,800 c. $8,550 d. $7,050

c. $8,550

Jenning Co. adjusts its books each month but closes its books at the end of the year. The trial balance at July 31 before adjustments is as follows: Debit Cash $12,920 Accounts Receivable $9,620 Supplies $1,400 Prepaid Insurance $3,120 Equipment $26,000 Credit Accumulated Depreciation—Equipment $10,400 Unearned Service Revenue $6,500 Capital Stock $7,190 Retained Earnings $23,500 Debit Dividends $1,560 Credit Service Revenue $16,510 Debit Wages and Salaries Expense $7,800 Utilities Expense $380 Rent Expense $1,300 Total Debit: $64,100 Total Credit: $64,100 Refer to the trial balance for Jenning Co. On July 31, the amount of supplies on hand is $520. What amount is reported in the July income statement for supplies expense? a. $1,920 b. $520 c. $880 d. $1,400

c. $880

Your bookkeeper is off for the day and you are trying to figure out what her last entry in the journal could be for. Unfortunately, she only recorded the debit side of the transaction as $4,400 to Accounts Payable. It is possible that this debit could correspond to: a. A purchase of equipment costing $4,400 on credit. b. A $4,400 issuance of the company's capital stock. c. A payment of $4,400 to a supplier to settle a balance due. d. A $4,400 sale to a customer.

c. A payment of $4,400 to a supplier to settle a balance due.

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? a. Liabilities decrease and stockholders' equity increases. b. Assets decrease and liabilities decrease. c. Assets increase and stockholders' equity increases. d. Stockholders' equity increases and liabilities increase.

c. Assets increase and stockholders' equity increases.

Oregon Company Adjusted Trial Balance For the Year ended December 31, 2016 Debit Cash $6,030 Accounts Receivable $2,100 Prepaid Expenses $700 Equipment $13,700 Accumulated Depreciation $$ 1,100 Credit Accounts Payable $1,900 Notes Payable $4,200 Capital Stock $12,940 Debit Dividends $790 Credit Fees Earned $8,750 Debit Wages Expense $2,500 Rent Expense $1,960 Utilities Expense $775 Depreciation Expense $250 Miscellaneous Expense $85 ______ Totals Total Debit: $28,890 Total Credit: $28,890 ​ Determine the net income (loss) for the period. a. Net Loss $790 b. Net Income $2,390 c. Net Income $3,180 d. Net Loss $5,570

c. Net Income $3,180

Items should be reported as part of the company's "inventory" at year end, if they are: a. Sold during the period. b. Held in anticipation of an increase in market value. c. Purchased from a creditor, available for sale, and paid for the following year. d. Determined to be part of cost of goods sold.

c. Purchased from a creditor, available for sale, and paid for the following year.

Which financial statement reports the sources and uses of an entity's cash resources? a. Balance sheet b. Income statement c. Statement of cash flows d. Statement of retained earnings

c. Statement of cash flows

If a company understates its ending inventory balance for 2016 by $15,500, what are the effects on its net income for 2017 and 2016? ​ Effect on 2017 Net Income ... Effect on 2016 Net Income a. Understated by $15,500 ... Overstated by $15,500 b. Overstated by $15,500 ... No effect c. Understated by $15,500 ... No effect d. Overstated by $15,500 ... Understated by $15,500

c. Understated by $15,500 ... No effect

Camp Consulting Services started business on January 1, 2016. Camp performed services for customers totaling $100,000 of which 40% remain uncollected at the end of December. Under the accrual basis, what amounts would appear on Camp Consulting's financial statements for 2016? Income Statement ... Statement of Cash Flows a. ​$60,000 ... $60,000 ​b. ​$60,000 ... $100,000 ​c. ​$100,000 ... $60,000 ​d. ​$100,000 ... $100,000

c. ​$100,000 ... $60,000

Hensley Painting Company painted four houses in June at $500 each. At the end of June, three homeowners had paid Hensley cash for the jobs. Under the accrual basis, what amounts will be reported on the income statement and the statement of cash flows for June? Income Statement ... Statement of Cash Flows a. ​$2,000 ... $2,000 b. ​$500 ... $500 c. ​$2,000 ... $1,500 d. ​$1,500 ... $1,500

c. ​$2,000 ... $1,500

Stockton Co. received advance payments from customers during 2016 of $6,000. At December 31, 2016, $1,300 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2016, what will the balances be in the Unearned Book Revenue and Book Revenue accounts? Unearned Book Revenue ... Book Revenue a. ​None of these choices b. $6,000 ... $1,300 c. $1,300 ... $6,000 d.​ $1,300 ... $4,700

d. $1,300 ... $4,700

The Dinho Corporation identified the following data when preparing their April bank reconciliation: Bank statement balance $45,000 Dinho's book balance (before adjustments) ????? Outstanding checks $4,500 NSF checks $1,400 Service charges $300 Deposits in transit $5,000 Interest earned on checking account $25 In addition, Dinho incorrectly recorded a deposit in its books in the amount of $1,000. The correct amount was recorded by the bank as $1,200.What is the net amount of the adjustment to Dinho's cash balance as a result of the bank reconciliation? a. $1,700 increase b. $1,675 decrease c. $1,675 increase d. $1,475 decrease

d. $1,475 decrease

Jenning Co. adjusts its books each month but closes its books at the end of the year. The trial balance at July 31 before adjustments is as follows: Debit Cash $12,920 Accounts Receivable $9,620 Supplies $1,400 Prepaid Insurance $3,120 Equipment $26,000 Credit Accumulated Depreciation—Equipment $10,400 Unearned Service Revenue $6,500 Capital Stock $7,190 Retained Earnings $23,500 Debit Dividends $1,560 Credit Service Revenue $16,510 Debit Wages and Salaries Expense $7,800 Utilities Expense $380 Rent Expense $1,300 Total Debit: $64,100 Total Credit: $64,100 Refer to the trial balance for Jenning Co. According to contracts, $4,810 of Unearned Service Revenue has been earned in July. Which of the following is the correct amount of Service Revenue to be reported in the July income statement? a. $11,700 b. $16,510 c. $20,410 d. $21,320

d. $21,320

Quan uses a periodic inventory system. At the end of April, Quan had 20 units on hand. April 1 On hand, 10 units @ $2 each $ 20 19 Purchased 90 units @ $3 each $270 Goods available for sale $290 ​ If Quan, Inc. uses the weighted average cost inventory method, how much is cost of goods sold for April? a. $240 b. $230 c. $250 d. $232

d. $232

The following transactions occurred during March, the first month of operations for Canyon Products, Inc.: 1. Issued 50,000 shares of capital stock in exchange for $600,000 cash 2. Purchased land for $400,000, using a $150,000 cash down payment and signing a note payable for the balance. 3. Made a $60,000 cash payment on the note payable from the purchase of land. 4. Purchased equipment on credit from Burton, Inc. for $63,000. What is the balance in the Cash account at the end of March? a. $210,000 b. $810,000 c. $600,000 d. $390,000

d. $390,000

If an investor can use accounting information for two different companies to evaluate the types and amounts of expenses, the information is said to have the quality of: a. Neutrality b. Consistency c. Understandability d. Comparability

d. Comparability

Which one of the following is a financing activity of a business? a. Purchasing a manufacturing plant b. Paying for purchases of inventory c. Paying salaries d. Issuing stock for cash

d. Issuing stock for cash

If a company uses the allowance method of accounting for bad debts, which one of the following statements is true? a. It will reduce the accounts receivable at the end of the accounting period for estimated uncollectible accounts. b. It violates the matching principle. c. It will record bad debts only when an account is determined to be uncollectible. d. It will report accounts receivable in the balance sheet at their net realizable value

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

When using the allowance method, what are the effects on the accounting equation when a company writes off a bad debt? a. Assets and stockholders' equity increase. b. Assets increase and stockholders' equity decreases. c. Assets and stockholders' equity decrease. d. No effect on overall assets or equity.

d. No effect on overall assets or equity.

Which one of the following adjustments will increase assets? a. Depreciation for the period is recorded. b. Interest incurred on money borrowed during the period but not yet paid to the bank is accrued. c. The use of supplies is recorded. d. Rent revenue is recorded for amounts owed by a tenant but not yet paid.

d. Rent revenue is recorded for amounts owed by a tenant but not yet paid.

Which internal control procedure is followed when storage areas are secured with limited access? a. Segregation duties b. Proper authorizations c. Independent verifications d. Safeguarding assets and records

d. Safeguarding assets and records

In preparing financial statements, accountants should consider all of the following except : a. The characteristics that make accounting information useful. b. The most useful way to display the information found on the financial statements. c. The objectives of financial reporting. d. The presentation of the value of a company.

d. The presentation of the value of a company.

Chamberlain Company buys designer clothing to sell in its retail stores. Since much of the merchandise comes from Dallas and Europe, Chamberlain Company must pay freight charges to get the merchandise shipped in. Which statement is true? a. Freight charges are only paid by a buyer in a periodic system. b. Transportation-in, paid by Chamberlain Company, is added to the inventory account under the periodic system. c. Transportation-in, paid by Chamberlain Company, is subtracted from purchases under the periodic system. d. Transportation-in is added to net purchases to determine cost of goods purchased in a periodic system.

d. Transportation-in is added to net purchases to determine cost of goods purchased in a periodic system.