Final exam review questions (9-10,13)

Andre Company collected $4,515 from cash sales to customers, which includes both sales revenue and 5% sales taxes. How much should be recognized as sales revenue? a. $4,300 b. $4,000 c. $4,515 d. $4,289.25

a. $4,300 The amount of sales can be computed by dividing total cash received by one plus the sales tax rate of 5%. The computation is as follows: $4,515/1.05 = $4,300

How is the market value of a bond issuance determined? a. By adding the present value of the principal amount to the present value of the interest payments b. By computing the present value of the interest payments c. By computing the present value of the principal d. By adding the face value of the principal amount to the stated value of the interest payments

a. By adding the present value of the principal amount to the present value of the interest payments The sum of the present value of the principal amount of the bond issuance and the present value of the interest payments is equal to the market value of the bond.

Which of the following represents the maximum number of shares a corporation can issue? a. Outstanding shares b. Authorized shares c. Treasury shares d. Issued shares

b. Authorized shares Authorized represents the maximum number of shares allowed under the corporate charter

Corristan Company purchased equipment and incurred these costs: Cash price $24,000 Sales taxes 1,200 Insurance during transit 200 Annual maintenance costs ____400 Total costs $25,800 What amount should be recorded as the cost of the equipment? a. $25,400 b. $25,200 c. $24,000 d. $25,800

a. $25,400 All costs necessary to get the asset ready to use should be included as part of the cost of the equipment because these are the costs that are necessary to acquire, safely transport, and prepare it for its intended use ($24,000 + $1,200 + $200 = $25,400). The annual maintenance costs are expensed, not capitalized.

What is the market value of a $1,000 bond, which has a coupon interest rate of 10% and will mature in 10 years if it is discounted at 15%? Interest is paid annually. a. $749.07 b. $1,000.00 c. $1,200.00 d. $876.64

a. $749.07 The present value of bonds is determined by multiplying the interest payment by the present value of an annuity factor and by multiplying the present value of a single sum factor times the principal at i=15 and n=10: ($100 × 5.01877) + ($1,000 × 0.24719) = $501.88 + $247.19 = $749.07.

Kant Enterprises purchased a truck for $11,000 on January 1, 2013. The truck will have an estimated salvage value of $1,000 at the end of 5 years. If you use the units-of-activity method, which formula can be used to calculate the balance in accumulated depreciation at December 31, 2014? a. ($10,000/Total estimated activity) × Units of activity for 2013 and 2014 b. ($11,000/Total estimated activity) × Units of activity for 2014 c. ($10,000/Total estimated activity) × Units of activity for 2014 d. ($11,000/Total estimated activity) × Units of activity for 2013 and 2014

a. ($10,000/Total estimated activity) × Units of activity for 2013 and 2014 The depreciation rate to use for units-of-activity is calculated as: (Cost - Salvage value)/Total activity expected. The depreciation rate should then be multiplied by the units of activity for both 2013 and 2014.

An asset purchased on January 1 for $48,000 has an estimated salvage value of $3,000. The current year's depreciation expense is $5,000 and the balance of the Accumulated Depreciation account, after adjustment, is $20,000. If the company uses the straight-line method, what is the asset's remaining useful life? a. 5 years b. 9 years c. 8 years d. 4 years

a. 5 years Since the depreciable cost is $45,000 ($48,000 purchase price less the salvage value of $3,000) and the annual depreciation is $5,000, this confirms the 9-year life. The balance in Accumulated Depreciation indicates that 4 years of life have been consumed ($20,000/$5,000). Of the total 9 years of life, 5 years remain.

Consider the following data for Soledad Corporation: Cash $30,000 Accounts receivable 125,000 Inventory 200,000 Prepaid assets 20,000 Total current assets $375,000 Performing vertical analysis and using total current assets as the base, what percentage of total current assets is inventory? a. 53.3% b. 187.5% c. 114.3% d. 46.7%

a. 53.3% Vertical analysis is a technique for evaluating financial statement data by expressing each item in a financial statement as a percent of a base amount in that statement. $200,000/$375,000 = 53.3%.

What is depreciation? a. A cost allocation method b. An adjustment to market value over time c. A valuation approach d. A cash accumulation approach

a. A cost allocation method Depreciation is a process of allocating the cost of a long-term asset over its useful service life.

Which one of the following costs will not be included in the cost of equipment? a. Annual insurance b. Freight c. Installation d. Testing

a. Annual insurance Because annual insurance costs are ongoing and do not benefit multiple periods, they are expensed in the year incurred. Insurance costs incurred while the equipment is in transit can be appropriately included in the cost of the equipment.

On January 1, 2014, Slice Corp. issues $200,000 of 5-year, 7% bonds at face value. Which one of the following is one effect of the entry to record the issuance of the bonds? a. Credit to Bonds Payable for $200,000 b. Debit to Bonds Payable for $200,000 c. Credit to Bond Interest Expense of $14,000 d. Credit to Cash for $14,000

a. Credit to Bonds Payable for $200,000 The issuance entry for the bonds includes a debit to cash for $200,000 and a credit to bonds payable for $200,000.

DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance? a. Credit to Common Stock for $15,000 b. Credit to Common Stock for $18,000 c. Debit to Cash for $15,000 d. Debit to Paid-in Capital in Excess of Par Value for $3,000

a. Credit to Common Stock for $15,000 The journal entry will increase the cash account for the total issue price, increase the common stock account for the par value per share times the number of shares issued, and increase paid-in capital in excess of par value for the excess received above par value. Debit to Cash = 3,000 × $6 = $18,000 Credit to Common stock = 3,000 × $5 = $15,000 Credit to Paid-in capital in excess of par value = 3,000 × ($6 - $5) = $3,000

Which one of the following decreases when a corporation purchases treasury stock? a. Outstanding shares b. Issued shares c. Treasury shares d. Authorized shares

a. Outstanding shares

For what reason might a company acquire treasury stock? a. To reissue the shares to officers and employees under bonus and stock compensation plans b. To increase the number of shares of stock outstanding c. To signal to the stock market that management believes the stock is overpriced d. To increase profit

a. To reissue the shares to officers and employees under bonus and stock compensation plans This is one of the reasons why treasury stock is purchased, but it's not the only reason.

The Jacksonville Jaguars sell season tickets to NFL football games. There are 10 home games during the season, which runs from August through December. During February, 65,000 season tickets were sold for $12,000,000 cash. Which account will be credited by the Jacksonville Jaguars upon receipt of the $12,000,000? a. Unearned Ticket Revenue b. Prepaid Tickets c. Tickets Receivable d. Ticket Revenue

a. Unearned Ticket Revenue Since the tickets are for future performances, it should be credited to Unearned Ticket Revenue by the Jaguars team.

Nashville Rail Co. issued $100,000 in 10-year bonds in 2009 at 103. The final interest payment was made and recorded. What entry will CityplaceNashville record for the redemption of its bonds at maturity? a. Bonds Payable d100,000 Cash c100,000 b. Bonds Payable d103,000 Premium on Bonds Payable c3,000 Cash c100,000 c. Bonds Payable d103,000 Cash c103,000 d. Bonds Payable d103,000 Gain on Bonds Redemption c3,000 Cash c100,000

a.Bonds Payable d100,000 Cash c100,000 When bonds mature, the principal is paid and the obligation removed from the Bonds Payable account. Any discount or premium will be completely amortized by maturity. The bonds payable and cash amounts of $100,000 are recorded in the redemption entry.

Ozone Inc. sells bonds with a face value of $1,000,000 and a contract interest rate of 9% for $800,000. The bonds will mature in 10 years. Using the straight line method of amortization of the bonds' discount, how much interest expense will be recognized in year 1? a. $108,000 b. $110,000 c. $90,000 d. $70,000

b. $110,000 The contractual interest is 9% × $1,000,000, which is $90,000. The annual bond amortization is $800,000 less $1,000,000 divided by 10 years, which is $20,000. The annual interest expense will be $90,000 plus $20,000, which results in a debit of $110,000.

How much money would you have to invest today at 4% in order to have $200,000 fifteen years from now so that you can pay your health care costs when you retire? a. $106,034 b. $111,052 c. $103,034 d. $115,152

b. $111,052 The present value is determined by multiplying the Present Value of a Sum factor at n=15 and i=4 by the future sum: $200,000 × 0.55526 = $111,052.

A purchase of equipment for $18,000 also involves freight charges of $500 and installation costs of $2,500. The estimated salvage value and useful life are $2,000 and 4 years, respectively. Under the straight-line method, how much is annual depreciation expense? a. $4,625 b. $4,750 c. $4,500 d. $4,125

b. $4,750 The cost of the equipment is $18,000 plus the freight costs of $500 and the installation costs of $2,500 for a total of $21,000. Depreciation expense = ($21,000 - $2,000)/4 = $4,750 per year.

On January 1, 2014, $5,000,000, 10-year, 8% bonds were issued at $5,150,000. Interest is paid each January 1 and July 1. The straight-line method of amortization is used to amortize the premium. How much is the amortization for each interest payment period? a. $1,500 b. $7,500 c. $15,000 d. $3,333

b. $7,500 The premium is amortized or is divided equally over the 10-year term of the bonds. The issue price of the bonds less the face amount of the bonds is the amount of the premium. When the premium of $150,000 is divided by the total semiannual interest payment periods, the result is amortization of $7,500 per interest payment period.

Assume the following cost of goods sold data for a company: 2014 1,500,000 2013 1,200,000 2012 900,000 If 2012 is the base year, what is the percentage increase in cost of goods sold from 2012 to 2014? a. 166.7% b. 66.7% c. 60.0% d. 40.0%

b. 66.7% The change between 2012 and 2014 is divided by the base year (2012) to result in the percentage change: ($1,500,000 - $900,000)/$900,000 = 66.67%.

On January 1, Pierce Corporation issues $500,000, 5-year, 12% bonds at 96 with interest payable on January 1. Which of the following is one part of the entry on December 31 to record accrued bond interest and the amortization of the bond discount using the straight-line method? a. A debit to Interest Expense, $57,600 b. A credit to Discount on Bonds Payable, $4,000 c. A debit to Interest Expense, $60,000 d. A credit to Discount on Bonds Payable, $2,000

b. A credit to Discount on Bonds Payable, $4,000 When a discount is amortized, the debit to interest expense is the sum of the cash to be paid ($500,000 × 12% = $60,000) plus the amount of discount amortization [($500,000 - ($500,000 × 96%))/5 = $4,000]. In this case, the debit to interest expense should be for $60,000 plus $4,000, or a total of $64,000. The entry to record accrued bond interest and the discount amortization includes a debit to interest expense for $64,000, a credit to discount on bond payable for $4,000 and a credit to cash for $60,000.

In horizontal analysis of a balance sheet, of what amount is each item expressed as a percentage? a. Current year total assets amount b. Base-year amount c. Current year net income amount d. Current year stockholders' equity amount

b. Base-year amount The purpose of horizontal analysis is to determine the increase or decrease that has taken place compared to previous periods. Each item is expressed as a percentage of the base-year amount.

Which measure(s) is (are) an evaluation of a company's ability to pay current liabilities? a. None of the answer choices are correct b. Both current ratio and current cash debt coverage c. Current cash debt coverage d. Current ratio

b. Both current ratio and current cash debt coverage The current cash coverage and the current ratio are measures that can be used to evaluate a firm's ability to pay current liabilities.

RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. Which statement is true at December 31? a. The interest payable is a current liability, but the note payable is not. b. Both the note payable and the interest payable are current liabilities. c. Neither the note payable nor the interest payable is a current liability. d. The note payable is a current liability, but the interest payable is not.*

b. Both the note payable and the interest payable are current liabilities. A current liability is a debt the company reasonably expects to pay (1) from existing current assets or through the creation of other current liabilities, and (2) within the next year or the operating cycle, whichever is longer. Since both the interest payable and the note payable are expected to be paid within one year, they both will be considered current liabilities.

What is interest that is computed on principal and on any interest earned that has not been paid or withdrawn? a. Simple interest b. Compound interest c. Complex interest d. Amortized interest

b. Compound interest Compound interest is computed on the principal and on any interest earned that has not been paid or withdrawn.

If a corporation has incurred a net loss, which account will it affect? a. Credited to a paid-in capital account in a closing entry b. Debited to Retained Earnings in a closing entry c. Debited to a paid-in capital account in a closing entry d. Credited to Retained Earnings in a closing entry

b. Debited to Retained Earnings in a closing entry A net loss reduces Retained Earnings with a debit entry. It is never closed to a paid-in capital account.

Which one of the following variables is not required to calculate the present value of a future amount? a. Length of time until the amount is received b. Dollar amount to be paid today c. Discount rate d. Dollar amount to be received

b. Dollar amount to be paid today The present value is based on three variables: 1) the dollar amount to be received, 2) the length of time until the dollar amount is received, and 3) the discount rate.

Which one of the following is not a typical current liability? a. Interest payable b. Mortgages payable c. Salaries payable d. Current maturities of long-term debt

b. Mortgages payable Mortgages are long-term liabilities as they are typically paid over 15 to 30 years.

Who is most interested in a company's current ratio? a. Stockholders b. Short-term creditors c. Long-term creditors d. Competitors

b. Short-term creditors The current ratio provides an indication of the ability of the firm to pay its current obligations as they become due. Short-term creditors are more interested in assessing liquidity.

Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, what does this indicate? a. The market interest rate exceeds the contractual interest rate. b. The contractual interest rate exceeds the market interest rate. c. The contractual interest rate and the market interest rate are the same. d. No relationship exists between the market and contractual rates.

b. The contractual interest rate exceeds the market interest rate. When bonds are sold at a premium, the contractual interest rate is higher than the market interest rate.

A corporation issues $1,000,000 of 8%, 5-year bonds. The 8% rate of interest is called the __________ rate. a. market b. contractual c. yield d. effective

b. contractual The interest rate printed on the bonds is the contractual, face, or stated rate. Yield, effective, and market rates are different terms to describe the interest rate that an investment can earn in the market.

If 1,000 shares of $5 par common stock are reacquired by a corporation for $12 a share, by how much will total stockholders' equity be reduced? a. $7,000 b. $5,000 c. $12,000 d. $0

c. $12,000 Stockholders' equity is reduced by the cost of acquiring the treasury stock: 1,000 shares × $12 = $12,000.

A company has the following asset account balances: Buildings and equipment $9,200,000 Accumulated depreciation 1,200,000 Patents 750,000 Land Improvements 1,000,000 Land 5,000,000 How much will be reported on the balance sheet under property, plant, & equipment? a. $13,550,000 b. $12,800,000 c. $14,000,000 d. $13,000,000

c. $14,000,000 Buildings and equipment, land improvements, and land, less accumulated depreciation are included for a total of $14,000,000.

Cuso Company purchased equipment on January 1, 2013, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used? a. $78,000 b. $160,000 c. $156,000 d. $80,000

c. $156,000 Since the asset has been in use for two years, the accumulated depreciation at December 31, 2014, is equal to two times the annual depreciation expense: ($400,000 - $10,000)/5 = $78,000 per year. Total accumulated depreciation = $78,000 per year × 2 years = $156,000.

Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2014. The machine was purchased for $80,000 on January 1, 2010, and was depreciated on a straight-line basis over a 10-year life assuming no salvage value. If the machine was sold for $26,000, how much is the gain or loss to be recorded at the time of the sale? a. $22,000 loss b. $46,000 loss c. $18,000 loss d. $54,000 gain

c. $18,000 loss The selling price less the book value of the machine equals the gain or loss on the sale. Book value of the machine: $80,000 - [($80,000 ÷ 10) × 4.5 yr.] = $44,000. Loss on sale = $26,000 - $44,000 = $18,000 loss.

Given the following account balances at year end, how much are total intangible assets on the balance sheet of Alisha Enterprises? Sales revenue $45,000,000 Cash 1,500,000 Accounts receivable 4,000,000 Land 15,000,000 Equipment 25,000,000 Trademarks 1,000,000 Goodwill 4,500,000 Research & development 2,000,000 a. $7,500,000 b. $11,500,000 c. $5,500,000 d. $9,500,000

c. $5,500,000 The intangibles are trademarks ($1,000,000) and goodwill ($4,500,000) totaling $5,500,000.

Your company has been bought out by another company. In the acquisition, you have been asked to leave the company and as severance pay may take either $100,000 per year for the next ten years or a lump settlement today. If 10% is a reasonable discount rate, what would be the minimum amount you would accept today? a. $641,457 b. $1,000,000 c. $614,457 d. $632,000

c. $614,457 The present value is determined by multiplying the present value of an annuity factor at i=10 and n =10 by the annuity amount: $100,000 × 6.14457 = $614,457.

Total current liabilities are $10,000 in 2012, $18,000 in 2013, and $22,000 in 2014. What is the percentage increase from 2012 to 2014? a. It cannot be computed from the data given b. 80% c. 120% d. 22%

c. 120% The difference ($22,000 - $10,000) of $12,000 is divided by the base year of $10,000 to result in 120%.

Which of the following measures provides an indication of how efficient a company is in employing its assets? a. Debt to total assets ratio b. Profit margin ratio c. Asset turnover ratio d. Current ratio

c. Asset turnover ratio The asset turnover rate is an indicator of how efficiently a company is employing its assets.

Dynatech issues 1,000 shares of $10 par value common stock at $12 per share. When the transaction is recorded, which accounts are credited? a. Common Stock $10,000 and Gain on Stock CityplaceSale $2,000 b. Common Stock $12,000 c. Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000 d. Common Stock $10,000 and Retained Earnings $2,000

c. Common Stock $10,000 and Paid-in Capital in Excess of Par Value $2,000 The journal entry will increase the cash account for the total issue price, increase the common stock account for the par value per share times the number of shares issued, and increase paid-in capital in excess of par value for the excess received above par value. Debit to Cash = 1,000 × $12 = $12,000 Credit to Common stock = 1,000 × $10 = $10,000 Credit to Paid-in capital in excess of par value = 1,000 × ($12 - $10) = $2,000

Which of the following is not a measure of liquidity? a. Current cash debt coverage b. Working capital c. Debt to total assets ratio d. Current ratio

c. Debt to total assets ratio Debt to total assets ratio measures solvency which is the the ability of a company to survive over a long period of time.

Sustainable income differs from net income because of which of the following items? a. Gains and losses, and regular and irregular revenues b. Irregular revenues, irregular expenses c. Gains and losses, and irregular revenues and irregular expenses d. Gains and losses

c. Gains and losses, and irregular revenues and irregular expenses Gains, losses, irregular revenues, and irregular expenses all cause differences between net income and sustainable income.

Who is most interested in a company's solvency? a. Stockholders b. Competitors c. Long-term creditors d. Short-term creditors

c. Long-term creditors Long-term creditors are most interested in knowing if debt is in jeopardy. Solvency represents an indication of the ability of the firm to survive over a long time period.

Which of the following is not a characteristic of a corporation? a. Ability to acquire capital easily b. Separate legal existence c. Unlimited liability for stockholders d. Easy transfer of ownership interests

c. Unlimited liability for stockholders Unlimited liability for stockholders is not a characteristic of a corporation. Stockholders may normally lose only up to the cost of their investment.

The time period for classifying a liability as current is one year or the operating cycle, whichever is a. possible. b. probable. c. longer. d. shorter.

c. longer. Liabilities are classified as current if they will be paid with current assets within one year or the current operating cycle, whichever is longer.

What is the market value of a $1,000 bond, which has a coupon interest rate of 8% and will mature in 20 years if it is discounted at 6%? Interest is paid annually. a. $876.64 b. $1,200.00 c. $1,000.00 d. $1,229.39

d. $1,229.39 The present value of bonds is determined by multiplying the interest payment by the present value of an annuity factor and by multiplying the present value of a single sum factor times the principal at i=6 and n=20: $917.59 ($80 × 11.46992) + $311.80 ($1,000 × 0.31180) = $1,229.39

If you bought a new truck for $40,000 for your auto parts delivery service, and you estimated that the truck would last you 200,000 miles with a salvage value of $4,000, what would be your depreciation expense for the first year in which you used the truck for 12,500 miles? a. $1,250 b. $2,500 c. $2,000 d. $2,250

d. $2,250 The depreciation rate per mile is $0.18, which is ($40,000 - $4,000) divided by 200,000 miles. Depreciation expense = $0.18 × 12,500 miles = $2,250.

A company purchased a dump truck for $25,000. In addition, freight charges were $500, and an additional payment of $800 was made to paint the company's logo on the truck. The estimated salvage value and useful life are $3,800 and 5 years, respectively. How much is annual depreciation expense under the straight-line method? a. $5,260 b. $4,240 c. $5,000 d. $4,500

d. $4,500 The purchase price includes all costs necessary to get the truck ready to use: $25,000 + $500 + $800 = $26,300. The annual depreciation is calculated as the sum of the purchase price less the salvage value divided by the useful life: ($26,300 - $3,800) / 5 years = $4,500.

A corporation shows the following account balances: Retained earnings $300,000 Treasury stock 10,000 Dividends payable 20,000 Paid-in capital in excess of par value 55,000 Common stock 200,000 How much is total stockholders' equity? a. $555,000 b. $565,000 c. $525,000 d. $545,000

d. $545,000 Retained earnings - treasury stock + paid-in capital in excess of par value + common stock = total stockholders' equity: $300,000 - $10,000 + $55,000 + $200,000 = $545,000

Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building. At what amount will the land be recorded in the accounting records? a. $92,000 b. $83,000 c. $80,000 d. $95,000

d. $95,000

Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value will the bond sell? a. Par b. A premium c. Face value d. A discount

d. A discount Since the contractual interest rate is less than the market interest rate, the bond will sell at a discount.

Which of the following is not a liquidity ratio? a. Inventory turnover b. Accounts receivables turnover c. Current ratio d. Asset turnover

d. Asset turnover Asset turnover is a measure of profitability.

Hanlin Enterprises issued 2,000 bonds with a face value of $1,000 each at 97. What is the entry to record the issuance? a. Cash d1,940,000 Bonds Payable c1,940,000 b. Cash d2,060,000 Discount on Bonds Payable c60,000 Bonds Payable c2,00,000 c. Cash d2,000,000 Discount on Bonds Payable c60,000 Bonds Payable c1,940,000 d. Cash d1,940,000 Discount on Bonds Payable d60,000 Bonds Payable c2,000,000

d. Cash d1,940,000 Discount on Bonds Payable d60,000 Bonds Payable c2,000,000 The debit to Cash is $1,000 × 2,000 bonds × 97%, which is $1,940,000. Discount on Bonds Payable is debited for $60,000, and Bonds Payable is credited for $2,000,000, the face amount of the bonds.

Which of the following is not a way to express the useful life of a depreciable asset? a. Thirty thousand units b. Ten thousand machine hours c. Five years d. Cost of acquisition

d. Cost of acquisition Cost is not a measure of how a depreciable asset contributes to revenue-producing activities. The useful life of a depreciable asset can be expressed in years, units, or hours.

On which date are entries for cash dividends required? a. Declaration date and the record date b. Record date and the payment date c. Declaration date, record date, and payment date d. Declaration date and the payment date

d. Declaration date and the payment date Entries for cash dividends are required on the declaration date and the payment date, but not on the record date.

A company sold for $3,000 a plant asset that had a cost of $10,000 and accumulated depreciation of $7,500. What gain or loss did the company experience? a. Loss of $7,000 b. Gain of $3,000 c. Loss of $500 d. Gain of $500

d. Gain of $500 Book value is $2,500 ($10,000 - $7,500). Since the proceeds ($3,000) exceed the book value ($2,500) by $500, there is a gain.

Which of the following is not a factor negatively affecting the quality of earnings? a. Improper recognition b. Alternative accounting methods c. Pro forma income d. Standardized accounting methods

d. Standardized accounting methods Standardization of accounting methods is not a factor affecting quality of earnings. Instead, those factors that obscure full and transparent reporting, like alternative accounting methods, pro forma income, improper recognition, and PE ratios often limit earnings quality.

If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty? a. The goodwill will generate a lot of positive business for the company for many years to come. b. The company is a valuable company worth investing in. c. The company has a well-established brand name. d. The company purchased another company.

d. The company purchased another company. In order to report goodwill, a company must have entered into an exchange transaction that involves the purchase of an entire business.

Which one of these statements is true? a. Intangible assets are typically combined with plant assets and natural resources and then shown in the property, plant, and equipment section. b. Since intangible assets lack physical substance, they need to be disclosed only in the notes to the financial statements. c. Goodwill should be reported as a contra account in the stockholders' equity section. d. Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements.

d. Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements.

The following schedule is a display of what type of analysis? Amount Percent Current assets $200,000 25% Property, plant, and equipment 600,000 75% Total assets $800,000 100% a. Horizontal analysis b. Ratio analysis c. Trend analysis d. Vertical analysis

d. Vertical analysis The schedule is a display of vertical analysis, in which the financial statement items are presented as a percentage of a base amount, in this case total assets.

When a bond is sold at a premium, at what value is it reported on the balance sheet? a. face value minus any amortized premium b. interest value plus any premium c. market value plus face value d. face value plus any premium

d. face value plus any premium The face value, which is the principal of the bond, is netted with any unamortized discount or premium. This net amount is the carrying value.

A corporation issued a $50,000, 9%, 4-month note on July 1. The corporation's year-end is September 30. Which one of the following is the adjusting entry for interest on September 30? a. Interest Expense 1,125 Notes Payable 1,125 b. Interest Expense 1,500 Interest Payable 1,500 c. Interest Expense 1,500 Notes Payable 1,500 d. Interest Expense 1,125 Interest Payable 1,125

d.Interest Expense 1,125 Interest Payable 1,125 Interest is calculated by multiplying the principal times the annual interest rate times the time period the note is outstanding: $50,000 × 9% × 3/12 = $1,125.