Intermediate Financial Accounting I Exam 2

In preparing a statement of cash flows, which of the following transactions would be considered an investing activity? A) Sale of equipment at book value B) Sale of merchandise on credit C) Declaration of a cash dividend D) Issuance of bonds payable at a discount.

A) Sale of equipment at book value

If plant assets of a manufacturing company are sold at a gain of $1,800,000 with related taxes of $540,000, and the gain is not considered unusual or infrequent, the income statement for the period would disclose these effects as A) a gain of 1,800,000 and an increase in income tax expense of 540,000. B) operating income net of applicable taxes 1,260,000. C) a prior period adjustment net of applicable taxes 1,260,000. D) a discontinued operations gain net of applicable taxes 1,260,000.

A) a gain of 1,800,000 and an increase in income tax expense of 540,000.

In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cah inflows from A) investing activities B) selling activities C) financing activities D) operating activities

A) investing activities

A material item which is unusual in nature or infrequent in occurence, but not both should be shown in the income statement Net of Tax ... Disclosed separately A) no ... yes B) yes ... no C) yes ... yes D) no ...no

A) no ... yes

Young Enterprises has an overdraft at one of its banks, Bank of Cleveland. Young has no other accounts at Bank of Cleveland. Young should report the bank overdraft as an offset against cash held at other banks. True False

False

How should an unusual event not meeting the criteria for an extraordinary item be disclosed in the financial statements? A) shown as a separate item in operating revenues or expenses if material and supplemented by a footnote if deemed appropriate. B) shown in operating revenues or expenses if material but not shown as a separate item. C) shown net of income tax after ordinary net earnings but before extraordinary items. D) shown net of income tax after extraordinary items but before net earnings

A) shown as a separate item in operating revenues or expenses if material and supplemented by a footnote if deemed appropriate.

The basis for classifying assets as current or noncurrent is conversion to cash within A) the operating cycle or one year, whichever is longer. B) the accounting cycle or one year, whichever is longer. C) the operating cycle or one year, whichever is shorter. D) the accounting cycle or one year, whichever id shorter. E) None of the above

A) the operating cycle or one year, whichever is longer.

A cash discount of 1/10, n/30 means the customer gets a: A. 1% discount if they pay within 10 days. B. 10% discount if they pay within 20 days. C. 1% discount if they pay within 20 days. D. 10% discount if they pay within 30 days.

A. 1% discount if they pay within 10 days.

Comprehensive income is defined as A. Net income plus other comprehensive income. B. Changes in equity for a period from all sources except those by nonowner sources. C. Changes in equity for a period resulting from all sources. D. Changes in retained earnings for a period resulting from owner sources.

A. Net income plus other comprehensive income.

The balance sheet is useful for analyzing all of the following except A. profitability. B. financial flexibility. C. solvency. D. liquidity.

A. profitability.

Which of the following would be reported as "other comprehensive income"? A. unrealized holding gain on available-for-sale securities. B. correction for understatement of net income in a prior period. C. gain from the sale of available-for-sale securities. D. loss on impairment of an intangible asset.

A. unrealized holding gain on available-for-sale securities.

The following information was extracted from the 2017 financial statements of Max Company: Income from continuing operations before income tax $705,000 Selling and adminstrative expenses $480,000 Income from continuing operations $495,000 Gross profit $1,350,000 The amount reported for other expenses and losses is A) $210,000 B) $15,000 C) $165,000 D) $225,000

C) $165,000

For the year ended December 31, 2013, Transformers Inc. reported the following: Net income... $60k Preferred dividends declared... $10k Common dividends declared... $2k Unrealized holding loss, net of tax... $1k Retained earnings, beginning balance... $80k Common stocks... $40k Accumulated Other Comprehensive Income, Beginning Balance... $5k What would Transformers report as total stockholders' equity? A) $168,000 B) $120,000 C) $172,000 D) $128,000

C) $172,000

The following information is available for Murphy Company: Allowance for doubtful accounts at December 31, 2016 $24,000 Credit sales during 2017 $1,200,000 Accounts receivable deemed worthless and written off during 2017 $27,000 As a result of a review and aging of accounts receivable in early January 2018, it has been determined that an allowance for doubtful accounts of $16,000 is needed at December 31, 2017. What amount should Murphy record as "bad debt expense" for the year ended December 31, 2017? A) $13,000 B) $16,000 C) $19,000 D) $40,000

C) $19,000

The following information was extracted from the accounts of Essex Corporation at December 31, 2013: Total reported income since incorporation $1.7M Total cash dividends paid (800k) Unrealized holding loss (120k) Total stock dividends distributed (200k) Prior period adjustment, recorded January 1, 2013 75k What should be the balance of retained earnings at December 31, 2013? A) $700,000 B) $580,000 C) $775,000 D) $655,000

C) $775,000

Lincoln Corporation reports the following information: Net cash provided by operating activities $255,000 Average current liabililities $150,000 Average long-term liabilities $100,000 Dividends paid $60,000 Capital expenditures $110,000 Payments of debt $35,000 Lincoln's cash debt coverage ratio is A) 1.70 B) 3.00 C) 1.02 D) 2.55 E) None of the above

C) 1.02

The correct order to present current assets is A) Cash, inventories, prepaid items, accounts receivable. B) Cash, accounts receivable, prepaid items, inventories. C) Cash, accounts receivable, inventories, prepaid items. D) Cash, inventories, accounts receivable, prepaid items. E) None of the above

C) Cash, accounts receivable, inventories, prepaid items.

Silas Company reported the following information for 2007: Sales revenue $500,000 Cost of goods sold 350,000 Operating expenses 55,000 Unrealized hold gain on available-for-sale securities 20,000 Cash dividends received on the securities 2,000 For 2007, Silas would report comprehensive income of A) $ 97,000 B) $ 20,000 C) $ 115,000 D) $ 117,000 E) $ 75,000 F) None of the above

D) $ 117,000

Madsen Company reported the following information for 2017: Sales revenue $2,040,000 Cost of goods sold $1,400,000 Operating expenses $220,000 Unrealized holding gain on available-for-sale securities $120,000 Cash dividends received on the securities $8,000 For 2017, Madsen would report other comprehensive income of A) $ 428k B) $ 420k C) $ 128k D) $ 120k

D) $ 120k

The following information was extracted from the accounts of Essex Corporation at December 31, 2017: Total reported income since incorporation $4.8M Total cash dividends paid ($2.4M) Unrealized holding loss on available-for-sale ($360k) Total stock dividends distributed ($600k) Prior period adjustment, recorded January 1, 2017 $225k What should be the balance of retained earnings at December 31, 2017? A) $1,665,000 B) $1,800,000 C) $2,940,000 D) $2,025,000

D) $2,025,000

For the year ended December 31, 2013, Transformers Inc. reported the following: Net income... $60k Preferred dividends declared... $10k Common dividends declared... $2k Unrealized holding loss, net of tax... $1k Retained earnings, beginning balance... $80k Common stocks... $40k Accumulated Other Comprehensive Income, Beginning Balance... $5k What would Transformers report as the ending balance of Accumulated Other Comprehensive Income? A) $5,000 B) $1,000 C) $6,000 D) $4,000

D) $4,000

Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as A) An increase in depreciation expense for the year in which the error is discovered. B) A component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. C) A change in accounting principle for the year in which the error was made. D) A prior period adjustment.

D) A prior period adjustment.

During 2014, Lopez Corporation disposed of Pine Division, a major component of its business. Lopez realized a gain of $1.2M, net of taxes, on the sale of Pines's assets. Pine's operating losses, net of taxes, were $1.4M in 2014. How should these facts be reported in Lopez's income statement for 2014? Total amount to be Included in A) Income from Continuing Operations ($1.2M gain).... Discontinued Operations ($1.4M loss) B) Income from Continuing Operations($1.4M loss) .... Discontinued Operations ($1.2M gain) C) Income from Continuing Operations ($200k loss).... Discontinued Operations (0) D) Income from Continuing Operations (0).... Discontinued Operations ($200k loss)

D) Income from Continuing Operations (0).... Discontinued Operations ($200k loss)

Which of the following is an example of managing earnings down? A) Reducing research and development expenditures. B) Not writing off obsolete inventory. C) Changing estimated bad debts from 3 percent to 2.5 percent of sales. D) Revising the estimated life of equipment from 10 years to 8 years.

D) Revising the estimated life of equipment from 10 years to 8 years.

Olmsted Company has the following items: common stock, $950,000; treasury stock, $105,000; deferred income taxes, $125,000 and retained earnings, $454,000. What total amount should Olmsted Company report as stockholders' equity? a. $1,174,000. b. $1,299,000. c. $1,424,000. d. $1,549,000.

b. $1,299,000.

David Company uses the gross method to record sales made on credit. On June 10, 2017, it sold goods worth $250,000 with terms 2/10, n/30 to Charles Inc. On June 19, 2017, David received payment for 1/2 of the amount due from Charles Inc. David's fiscal year end is on June 30, 2017. What amount will be reported in the financial statements for the accounts receivable due from Charles Inc.? a. $122,500. b. $125,000. c. $250,000. d. $245,000.

b. $125,000.

Smithson Corporation had a 1/1/17 balance in the Allowance for Doubtful Accounts of $30,000. During 2017, it wrote off $21,600 of accounts and collected $6,300 on accounts previously written off. The balance in Accounts Receivable was $600,000 at 1/1 and $720,000 at 12/31. At 12/31/17, Smithson estimates that 5% of accounts receivable will prove to be uncollectible. What is Bad Debt Expense for 2017? a. $6,000. b. $21,300. c. $27,600. d. $36,000.

b. $21,300.

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue? a. $24,500. b. $24,750. c. $25,000. d. $25,250.

b. $24,750.

Which of the following is a generally accepted method of determining the amount of the adjustment to bad debt expense? a. Actual losses from uncollectible accounts b. A percentage of accounts receivable adjusted for the balance in the allowance c. A percentage of accounts receivable not adjusted for the balance in the allowance d. An amount derived from aging accounts receivable and not adjusted for the balance in the allowance

b. A percentage of accounts receivable adjusted for the balance in the allowance

How can accounting for bad debts be used for earnings management? a. Determining which accounts to write-off. b. Changing the percentage of receivables recorded as bad debt expense. c. Using an aging of the accounts receivable balance to determine bad debt expense. d. Reversing previous write-offs.

b. Changing the percentage of receivables recorded as bad debt expense.

Which of the following is considered cash? a. Certificates of deposit (CDs) b. Money market checking accounts c. Money market savings certificates d. Postdated checks

b. Money market checking accounts

Working capital is a. capital which has been reinvested in the business. b. unappropriated retained earnings. c. cash and receivables less current liabilities. d. none of these answer choices are correct.

b. unappropriated retained earnings.

Moorman Corporation reports the following information: Correction of understatement of depreciation expense in prior years, net of tax ... $430,000 Dividends declared ... 320,000 Net income ... 1,000,000 Retained earnings, 1/1/13, as reported ...2,000,000 Moorman should report retained earnings, 1/1/13, as adjusted at a. $2,430,000. b. $3,110,000. c. $2,000,000. d. $1,570,000.

d. $1,570,000.

During the year, Kiner Company made an entry to write off a $32,000 uncollectible account. Before this entry was made, the balance in accounts receivable was $400,000 and the balance in the allowance account was $36,000. The net realizable value of accounts receivable after the write-off entry was a. $400,000. b. $396,000. c. $332,000. d. $364,000.

d. $364,000.

Wellington Corp. has outstanding accounts receivable totaling $6.5 million as of December 31 and sales on credit during the year of $24 million. There is also a credit balance of $12,000 in the allowance for doubtful accounts. If the company estimates that 6% of its outstanding receivables will be uncollectible, what will be the amount of bad debt expense recognized for the year? a. $402,000. b. $390,000. c. $1,440,000. d. $378,000.

d. $378,000.

Which of the following should be reported for capital stock? a. The shares authorized b. The shares issued c. The shares outstanding d. All of these answer choices are correct.

d. All of these answer choices are correct.

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows? a. Cash purchases of equipment. b. Cash purchases of bonds issued by another company. c. Cash received as repayment for funds loaned. d. Cash purchase of treasury stock.

d. Cash purchase of treasury stock.

If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows? a. It would depend on whether you are using the direct or the indirect method. b. It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section. c. It would be a negative $8,000 in the financing section and a positive $8,000 in the investing section. d. It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.

d. It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amounts of cash and a. is acceptable as a means to pay current liabilities. b. has a current market value that is greater than its original cost c. bears an interest rate that is at least equal to the prime rate of interest at the date of liquidation. d. is so near its maturity that it presents insignificant risk of changes in interest rates.

d. is so near its maturity that it presents insignificant risk of changes in interest rates.

Travel advances should be reported as a. supplies. b. cash because they represent the equivalent of money. c. investments. d. receivables

d. receivables

Treasury stock should be reported as a(n) a. current asset. b. investment. c. other asset. d. reduction of stockholders' equity.

d. reduction of stockholders' equity.

Trade discounts are a. recorded as other revenues and gains. b. used to induce prompt payment. c. presented in terms such as 2/10, n/30. d. used to avoid frequent changes in catalogs

d. used to avoid frequent changes in catalogs

Madsen Company reported the following information for 2013: Sales revenue $510,000 Cost of goods sold 350,000 Operating expenses 55,000 Unrealized holding gain on available-for-sale securities 40,000 Cash dividends received on the securities 2,000 For 2013, Madsen would report other comprehensive income of A) $ 40k B) $ 137k C) $ 135k D) $ 42k

A) $ 40k

Korte Company reported the following information for 2017: Sales revenue $2,500,000 Cost of goods sold $1,750,000 Operating expenses $275,000 Unrealized holding gain on available-for-sale securities $85,000 Cash dividends received on the securities $10,000 For 2017, Korte would report comprehensive income of A) $ 570k B) $ 560k C) $ 485k D) $ 85k

A) $ 570k

For the year ended December 31, 2013, Transformers Inc. reported the following: Net income... $60k Preferred dividends declared... $10k Common dividends declared... $2k Unrealized holding loss, net of tax... $1k Retained earnings, beginning balance... $80k Common stocks... $40k Accumulated Other Comprehensive Income, Beginning Balance... $5k What would Transformers report as the ending balance of Retained Earnings? A) $128k B) $139k C) $127k D) $133k

A) $128k

For Randolph Company, the following information is available: Capitalized leases $560,000 Copyrights $240,000 Long-term receivables $210,000 In Randolph's balance sheet, intangible assets should be reported at A) $240,000 B) $210,000 C) $800,000 D) $770,000

A) $240,000

Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $232,000. It also has the following items (gross amounts). Unusual loss $37,000 Gain on disposal of equipment 8,000 Change in accounting principle increasing prior year's income 74,000 What is the amount of income tax expense Arreaga would report on its income statement? A) $81,200 B) $62,000 C) $92,800 D) $99,200

A) $81,200

During 2017 the DLD Company had a net income of $85,000. In addition, selected accounts showed the following changes: Acoounts Receivable 3,000 increase Accounts Payable 1,000 increase Buildings 4,000 decrease Depreciation Expense 1,500 increase Bonds Payable 8,000 increase What was the amount of cash provided by operating activities? A) $84,500 B) $85,000 C) $86,500 D) $94,500

A) $84,500

At Ruth Company, events and transactions during 2017 included the following. the tax rate for all items is 30%. (1) Depreciation for 2015 was found to be understated be $150,000. (2) A strike by the employees of a supplier resulted in a loss of $125,000. (3) The inventory at December 31, 2015 was overstated by $200,000. The effect of these events and transactions on 2017 income from continuing operations net of tax would be A) ($87,500) B) ($192,500) C) ($332,500) D) ($245,000)

A) ($87,500)

The stockholders' equity section is usually divided into that three parts? A) Capital stock, additional paid-in capital, retained earnings. B) Capital stock, appropriated retained earnings, unappropriated retained earnings. C) Preferred stock, common stock, retained earnings D) Preferred stock, common stock, treasury stock E) None of the above

A) Capital stock, additional paid-in capital, retained earnings.

The occurrence that most likely would have no effect on 2014 net income is the A) Correction of an error in the financial statements of a prior period discovered subsequent to their issuance. B) Stock purchased in 1996 deemed worthless in 2014. C) Collection in 2014 of a dividend from an investment. D) Sale in 2014 of an office building contributed by a stockholder in 1961.

A) Correction of an error in the financial statements of a prior period discovered subsequent to their issuance.

Which of the following should be reported as a prior period adjustment? Change in Estimated Lives of Depreciable Assets .... Change from Unaccepted Principle to Accepted Principle A) No .... Yes B) Yes ... No C) No ... No D) Yes ... Yes

A) No .... Yes

Arreaga Corp. has a tax rate of 40 percent and income before non-operating items of $1,392,000. It also has the following items (gross amounts). Unusual loss $222,000 Discontinued operations loss $606,000 Gain on disposal of equipment $48,000 Change in accounting principle increasing prior year's income $318,000 What is the amount of income tax expense Arreaga would report on its income statement? A) $556,800 B) $487,200 C) $595,200 D) $372,000

B) $487,200

Which of the following is a change in accounting principle? A) A change from straight-line to doulble-declining-balance B) A change from FIFO to LIFO and a change from straight-line to doulble-declining-balance C) A change from FIFO to LIFO D) A change in the estimated service life of machinery

B) A change from FIFO to LIFO and a change from straight-line to doulble-declining-balance

Making and collecting loans and disposing of property, plant and equipment are A) operating activities. B) investing activities. C) financing activities. D) liquidity activities.

B) investing activities.

Jim Yount, M.D., keeps his accounting records on the cash basis. During 2007, Dr. Yount collected $360k from his patients At Decemeber 31, 2006. Dr. Yount had accounts receivable of $50k. At December 31, 2007, Dr. Yount had accounts receivable of $70k and unearned revenue of $10k. On the accrual basis, how much was Dr. Yount's patient service revenue for 2007? A. $ 310K B. $ 370K C. $ 380K D. $ 390K

B. $ 370K

Fara Co. reported bonds payable of $47,000 at December 31, 20X5 and $50,000 at December 31, 20X6. During 20X6, Fara issued $20,000 of bonds payable in exchange for equipment. There was no amortization of bond premiums or discounts during the year. What amount should Fara report in its 20X6 Statement of Cash Flows for the redemption of bonds payable? A. $23,000 B. $17,000 C. $20,000 D. $3,000

B. $17,000

When converting from cash basis to accrual basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual basis operating expenses? A. Add beginning accrued liabilities. B. Add beginning prepaid expense. C. Subtract endding prepaid expense. D. Subtract interest expense.

B. Add beginning prepaid expense. C. Subtract endding prepaid expense

Noncontrolling interest A. Is shown in a separate section of the income statement after discontinued operations, net of tax. B. Is reported as a separate item below net income or loss. C. Is shown in a separate section of the income statement after continuing operations but before discontinued operations net of tax. D. Is not shown on the face of the income statement.

B. Is reported as a separate item below net income or loss.

Which of the following would be reported as a long-term investment at December 31, 2017? A. Equipment used in the manufacturing process. B. Land held for speculative purposes. C. Trading securities. D. Trademark.

B. Land held for speculative purposes.

On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaing payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts, the entry recorded on April 27 would include a: A) Debit to Cash and credit to Accounts Receivable for $15,840. B) Debit to Accounts Receivable and credit to Sales Revenue for $40,000. C) Debit to Accounts Receivable and credit to Sales Discounts Forfeited for $160. D) Debit to Cash and credit to Sales Discounts Forfeited for $400.

C) Debit to Accounts Receivable and credit to Sales Discounts Forfeited for $160.

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as A) a prior period adjustment. B) an extraordinary item. C) an amount after continuing operations. D) a bulk sale of plant assets included in income from continuing operations.

C) an amount after continuing operations.

In preparing a statement of cash flows, cash flows from operating activities A) are always equal to accrual accounting income. B) are calculated as the difference between revenues and expenses. C) can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash. D) can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash.

C) can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.

The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as A) solvency B) financial flexibility C) liquidity D) exchangeability

C) liquidity

New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000. New England's cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000, and proceeds of $40,000 were received from the sale. What was New England's cash balance at the end of the year? A.$248,000 B. $27,000 C. $208,000 D. $40,000

C. $208,000

The required balance in Wheeler's Allowance for Doubtful Accounts is $36,750, based on an aging of its accounts receivable. The Allowance for Doubtful Accounts currently has a debit balance of $4,200. Wheeler's bad debt expense for the period is A. $36,750. B. $4,200. C. $40,950. D. $32,550.

C. $40,950.

Kresley Co. has provided the following 20X5 current account balances for the preparation of the annual Statement of Cash Flows: January 1/ December 31 Accounts receivable $11,500 $14,500 Allowance for uncollectible accounts 400 500 Prepaid rent 6,200 4,100 Accounts payable 9,700 11,200 Kresley's 20X5 net income is $75,000. Net cash provided by operating activities in the Statement of Cash Flows should be A. $74,300. B. $75,500. C. $75,700. D. $72,700.

C. $75,700.

When converting from cash basis to accrual accounting, which of the following adjustments should be made to cash receipts from customers to determine accrual basis service revenue? A. Subtract ending accounts receivable. B. Subtract beginning unearned service revenue. C. Add ending accounts receivable. D. Add cash sales.

C. Add ending accounts receivable.

How should a material unusual or infrequent gain or loss be disclosed in the financial statements? A. Reported in separate section of Income Statement called "Unusual or infrequent gains or losses" and supplemented by a footnote. B. Reported in operating revenues or expenses but not shown as a separate item. C. Reported in "Other revenues and gains" or "Other expenses and losses" section of Income Statement and supplemented by a footnote. D. Reported as a separate item below net income or loss in the Income Statement.

C. Reported in "Other revenues and gains" or "Other expenses and losses" section of Income Statement and supplemented by a footnote.

Short-term paper with maturities of less than 3 months should be classified as A. investments. B. temporary investments. C. cash equivalents. D. receivables.

C. cash equivalents.

Non-trade receivables include all of the following except A. claims against defendants under suit. B. dividends receivable. C. oral promises of the purchaser to pay for goods and services sold. D. deposits paid to cover potential losses.

C. oral promises of the purchaser to pay for goods and services sold.

Cash consists of all of the following except: A. certified checks. B. money orders. C. short-term paper with a maturity of 6 months. D. personal checks.

C. short-term paper with a maturity of 6 months.

Shank Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper amount. Correction of the error when discovered in the next year should be treated as A) an increase in depreciation expense for the year in which the error is discovered. B) a component of income for the year in which the error is discovered, but separately listed on the income statement and fully explained in a note to the financial statements. C) an extraordinary item for the year in which the error was made. D) a prior period adjustment. E) Both A&D. F) Both B&C.

D) a prior period adjustment.

The net assets of a business are equal to A) current assets minus current liabilities. B) total assets plus total liabilities. C) total assets minus total stockholders' equity. D) none of these answer choices are correct.

D) none of these answer choices are correct.

At the beginning of 2016, Gannon Company received a three-year zero-intrest-bearing $1,000 trade note. The market rate for equivalent notes was 8% at that time. Gannon reported this note as a $1,000 trade note receivable on its 2016 year-end statement of financial position and $1,000 as sales revenue for 2016. What effect did this accounting for the note have on Gannon's net earnings for 2016, 2017, 2018, and its retained earnings at the end of 2018, respectively? A) Overstate, overstate, understate, zero B) Overstate, understate, understate, understate C) Overstate, overstate, overstate, overstate D)Overstate, understate, understate, zero

D)Overstate, understate, understate, zero

Weaver Company sells magazine subscriptions for a 1-year, 2-year, or 3-year period. Cash receipts from subscribers are credited to magazine subscriptions collected in advance, and this account had a balance of $1,700,000 at December 31, year 1. Information for the year ended December 31, year 2, is as follows: Cash receipts from subscribers $2,100,000 Magazine subscriptions revenue (credited at 12/31/Y2) 1,500,000 In its December 31, year 2 balance sheet, what amount should Weaver report as the balance for magazine subscriptions collected in advance? A. $2,100,000 B. $1,400,000 C. $1,900,000 D. $2,300,000

D. $2,300,000

If the accountant forgets to record salary expense in the Statement of Income, what is the result? A. Retained earnings is too low. B. Net income is too low. C. Retained earnings is correctly stated, as the omission only affects the Income Statement. D. Net income is too high.

D. Net income is too high.

If a company employs the net method of recording accounts receivable from customers, then sales discounts forfeited (not taken) should be reported as A. an addition to sales in the income statement. B. a deduction from accounts receivable in determining the net realizable value of accounts receivable. C. sales discounts forfeited in the cost of goods sold section of the income statement. D. an item of "other revenues and gains" in the income statement.

D. an item of "other revenues and gains" in the income statement.

If a potential investor wants to assess the ability of a company to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities, the investor is assessing: A. profitability. B. solvency. C. liquidity. D. financial flexibility.

D. financial flexibility.

If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as a. a deduction from sales in the income statement. b. an item of "other expense" in the income statement. c. a deduction from accounts receivable in determining the net realizable value of accounts receivable. d. sales discounts forfeited in the cost of goods sold section of the income statement.

a. a deduction from sales in the income statement.

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to: a. beginning retained earnings of the earliest period presented. b. net income of the period in which the change occurred. c. comprehensive income for the earliest period presented. d.stockholders' equity of the period in which the change occurred.

a. beginning retained earnings of the earliest period presented.

Palomo Corp has a tax rate of 30 percent and income before non-operating items of $1,785,000. It also has the following items (gross amounts). Unusual gain $ 115,000 Loss from discontinued operations $915,000 Dividend revenue $30,000 Income increasing prior period adjustment $370,000 What is the amount of income tax expense Palomo would report on its income statement? a. $579,000 b. $304,500 c. $415,500 d. $544,500

a. $579,000

AG Inc. made a $25,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $24,500. b. Debit Accounts Receivable for $24,500 and Sales Discounts for $500. c. Debit Accounts Receivable for $25,000. d. Debit Accounts Receivable for $25,000 and Sales Discounts for $500.

a. Debit Accounts Receivable for $24,500.

What might a manager do during the last quarter of a fiscal year if she wanted to decrease current annual net income? a. Delay shipments and sales to customers until after the end of the fiscal year. b. Relax credit policies for customers. c. Pay suppliers all amounts owed. d. Delay purchases from suppliers until after the end of the fiscal year.

a. Delay shipments and sales to customers until after the end of the fiscal year.

Gross billings for merchandise sold by Lang Company to its customers last year amounted to $12,720,000; sales returns and allowances were $370,000, sales discounts were $175,000, and freight-out was $140,000. Net sales last year for Lang Company were a. $12,720,000 b. $12,350,000 c. $12,175,000 d. $12,035,000

c. $12,175,000

Kaniper Company has the following items at year-end: Cash in bank $35,000 Petty cash $300 Short-term paper with maturity of 2 months $5,500 Postdated checks $1,400 Kaniper should report cash and cash equivalents of a. $35,000. b. $35,300. c. $40,800. d. $42,200.

c. $40,800.

Which of the following is true of accounting for changes in estimates? a. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements. b. A company accounts for changes in estimates only in the period of change, even though it affects the future periods. c. Changes in estimates are not carried back to adjust prior years. d. Changes in estimates are considered as errors.

c. Changes in estimates are not carried back to adjust prior years.

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $24,750. b. Debit Accounts Receivable for $24,750 and Sales Discounts for $250. c. Debit Accounts Receivable for $25,000. d. Debit Accounts Receivable for $25,000 and Sales Discounts for $250.

c. Debit Accounts Receivable for $25,000.

What might a manager do during the last quarter of a fiscal year if she wanted to improve current annual net income? a. Delay shipments to customers until after the end of the fiscal year. b. Delay purchases from suppliers until after the end of the fiscal year. c. Relax credit policies for customers. d.Increase research and development activities.

c. Relax credit policies for customers.

Which of the following is an example of managing earnings up? a. Decreasing estimated salvage value of equipment. b. Writing off obsolete inventory. c. Underestimating warranty claims. d. Accruing a contingent liability for an ongoing lawsuit.

c. Underestimating warranty claims.

The occurrence that most likely would have no effect on 2017 net income is the a. sale in 2017 of an office building contributed by a stockholder in 1964. b. collection in 2017 of a dividend from an investment. c. correction of an error in the financial statements of a prior period discovered subsequent to their issuance. d. stock purchased in 1999 deemed worthless in 2017.

c. correction of an error in the financial statements of a prior period discovered subsequent to their issuance.