Acc 2101

ABC has a $5 million liability at December 31, 2018, of which $1 million is payable in each of the next five years. ABC reports the liability on the balance sheet as a:

$1 million current liability and a $4 million long-term liability.

ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line method, depreciation expense for 2019 and the book value at December 31, 2019 would be:

$11,000 and $38,000

On January 1, 2018, ABC purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. Assume the truck was totaled in an accident on December 31, 2019. What amount of gain or loss should ABC record on December 31, 2019 (If a loss, put a minus number in front) ?

-38000

What are the two most common Inventory Flow assumptions?

1. LIFO 2. FIFO

Which type of inventory is in a factory?

1. Work in process 2. raw material

Which of the following is a negative sign that a company is not selling its inventory quickly (may have more than one answer)?

1.A high average days in inventory 2.A low inventory turnover ratio.

At the end of a reporting period, ABC determines that its ending inventory has a cost of $300,000 and a net realizable value of $230,000. What would be the effect(s) of the adjustment to write down inventory to net realizable value (may have more than one answer)?

1.Decrease total assets 2.Decrease net income 3.Decrease Retained Earnings

Uncontrolled Liquidations

1.Increase Income for LIFO companies 2.Increase Taxes for LIFO companies

What is included in Work in Process inventory?

1.Raw Materials 2. Direct labor 3.Overhead

Which type of inventory is in a factory (may have more than one answer)?

1.Raw Materials 2.Work in Process

Calculation of Ending Inventory has an effect on which statements (ignore taxes) (may have more than one answer)

1.Statement of Changes in Equity 2.Income Statement 3.Balance Sheet

In a natural resource, the quantity (for instance barrels of oil) reported on the financial statements depends on

1.geological estimates 2.Market Value of oil 3.Extraction costs of the oil

ABC's sales equal $60,000 and cost of goods sold equals $20,000. Its beginning inventory was $1,600 and its ending inventory is $2,400. ABC's inventory turnover ratio equals how many times?

10

Parent Co. purchased the entire business of Subsidiary Co. including all its assets and liabilities for $600,000. Below is information related to the two companies: Parent Subsidiary Fair value of assets $1,050,000 $800,000 Fair value of liabilities 575,000 300,000 Reported assets 800,000 650,000 Reported liabilities 500,000 250,000 Net Income for the year 60,000 50,000 How much goodwill did Parent pay for acquiring Subsidiary?

100,000

On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC should report interest payable at December 31, 2018, in the amount of:

1000

Sales revenue $350,000 Accounts receivable $280,000 Ending inventory $230,000 Cost of goods sold $180,000 Sales returns $50,000 Sales Discount $20,000 Given the information in the above table, what is the company's gross profit?

100000

Sales revenue $350,000 Accounts receivable $280,000 Ending inventory $230,000 Cost of goods sold $180,000 Sales returns $50,000 Sales discount $20,000 What is the gross profit?

100000

On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would

1090

The following information pertains to ABC: March 1 Beginning inventory = 30 units @ $5 March 3 Purchased 15 units @ $4 March 9 Sold 25 units @ $8 What is the cost of goods sold for ABC assuming it uses LIFO?

110

ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line method, depreciation expense for 2018 would be: (Just write the number)

11000

During the first two years, ABC drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of depreciation expense should ABC record in the second year using the activity-based method?

11000

Net sales $296,000 Cost of goods sold 138,000 Average inventory 50,000 What is the average days in inventory (round to the nearest whole day)?

132

ABC has beginning inventory for the year of $12,000. During the year, ABC purchases inventory for $150,000 and ends the year with $20,000 of inventory. ABC will report cost of goods sold equal to:

142000

ABC has beginning inventory for the year of $18,000. During the year, ABC purchases inventory for $230,000 and has cost of goods sold equal to $233,000. ABC's ending inventory equals:

15000

The balance sheet of ABC' reports total assets of $800,000 and $900,000 at the beginning and end of the year, respectively. The return on assets for the year is 20%. What is ABC's net income for the year?

170000

Accounts Payable $55,000 Land $90,000 Inventory $10,500 Accounts Receivable $7,500 Equipment $8,000 Deferred Revenue $58,500 Short-term Investments $20,000 Notes Receivable (due in 8 months) $45,500 Interest Payable $2,000 Patents $75,000 What is the amount of long-term assets assuming the accounts above reflect normal activity?

173000

ABC has the following current assets: cash, $102 million; receivables, $94 million; inventory, $182 million; other current assets, $18 million. ABC also has the following liabilities: accounts payable, $98 million; long-term debt, $23 million. Based on these amounts, what is the acid-test ratio ?

2

How many types of inventory are in the factory

2

On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would Debit Interest Expense

2000

The balance sheet of Subsidiary Co. shows assets of $86,400 and liabilities of $15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000. Parent Co. paid Subsidiary $95,000 to acquire it. Parent should record goodwill on this purchase of:

20000

The balance sheet of Subsidiary shows assets of $86,400 and liabilities of $15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000. Parent paid $95,000 to acquire Subsidiary. Parent should record goodwill on this purchase of:

20000

Cost of goods sold $420,000 Sales revenue 800,000 Nonoperating expenses 10,000 Operating expenses 170,000 Income tax expense 80,000 What is operating income?

210000

ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the double-declining balance method, depreciation expense for 2018 would be:

24000

Sales revenue $440,000 Advertising expense 60,000 Interest expense 10,000 Salaries expense 55,000 Utilities expense 25,000 Income tax expense 45,000 Cost of goods sold 180,000 What is the gross profit?

260000

On September 1, 2018, ABC signed a $100,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. ABC should report interest payable at December 31, 2018, in the amount of:

3000

On December 1, 2018, ABC signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1, 2019?

307500

ABC issued callable bonds on January 1, 2018. ABC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 1/1/2018 $194,758 6/30/2018 $7,000 $7,790 $790 195,548 12/31/2018 7,000 7,822 822 196,370 6/30/2019 7,000 7,855 855 197,225 12/31/2019 7,000 7,889 889 198,114 6/30/2020 7,000 7,925 925 199,039 12/31/2020 7,000 7,961 961 200,000 ABC buys back the bonds for $196,000 immediately after the interest payment on 12/31/2018 and retires them. What gain or loss, if any, would ABC record on this date (use a minus sign in front of the number if it is a loss)?

370

ABC reported the following data for its first year of operations: Net sales $2,800 Cost of goods sold 1,680 Operating expenses 880 Ending inventories 820 What is ABC's gross profit ratio (round to nearest whole percentage, just put in the number with no %)?

40

Net sales $2,800 Cost of goods sold 1,680 Operating expenses 880 Ending inventories 820 What is the gross profit ratio (put in the number without %) ?

40

ABC borrowed $100,000 on November 1, 2018, and signed a six-month note bearing interest at 12%. Principal and interest are payable in full at maturity on May 1, 2019. In connection with this note, ABC should report interest expense in 2019 for the amount of:

4000

ABC purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assuming the company uses the straight-line method, what is the carrying value at the end of the first year?

40000

The balance sheet of ABC reports total assets of $400,000 and $450,000 at the beginning and end of the year, respectively. The return on assets for the year is 10%. What is ABC's net income for the year?

42500

Inventory records for ABC revealed the following: Apr. 1 Beginning inventory 500 $2.40 Apr. 20 Purchase 400 2.50 ABC sold 700 units of inventory during the month. Ending inventory assuming LIFO would be:

480

ABC purchased equipment for $60,000 on January 1, 2018. The equipment is expected to have a five-year life, with a residual value of $5,000 at the end of five years. Using the straight-line method, the book value at December 31, 2018 would be:

49000

Date Transaction Number of Units Unit Cost Apr. 1 Beginning inventory 500 $2.40 Apr. 20 Purchase 400 2.50 700 units of inventory were sold during the month. Ending inventory assuming FIFO would be:

500

The balance sheet of ABC reports total assets of $450,000 and $550,000 at the beginning and end of the year, respectively. The return on assets for the year is 10%. What is ABC's net income for the year?

50000

ABC purchased a piece of equipment by paying $5,000 cash. They also incurred a shipping cost of $400 to get the equipment to its factory. The fair value of this equipment is $7,000. For what amount should ABC record the equipment?

5400

ABC issues $10 million in bonds on January 1, 2018. The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds: What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six month rate. (round to nearest whole percentage, just put in the number with no %)

6

A machine has a cost of $15,000, an estimated residual value of $3,000, and an estimated useful life of four years. The machine is being depreciated on a straight-line basis. At the end of the second year, what amount will be reported for accumulated depreciation?

6000

ABC issued callable bonds on January 1, 2018. ABC's accountant has projected the following amortization schedule from issuance until maturity: Date Cash Paid Interest Expense Increase in Carrying Value Carrying Value 1/1/2018 $194,758 6/30/2018 $7,000 $7,790 $790 195,548 12/31/2018 7,000 7,822 822 196,370 6/30/2019 7,000 7,855 855 197,225 12/31/2019 7,000 7,889 889 198,114 6/30/2020 7,000 7,925 925 199,039 12/31/2020 7,000 7,961 961 200,000 What is the annual stated interest rate on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate. (Round to nearest whole percentage and just put in the number without %)

7

Accounts Payable $55,000 Land $90,000 Inventory $10,500 Accounts Receivable $7,500 Equipment $8,000 Deferred Revenue $58,500 Short-term Investments $20,000 Notes Receivable (due in 8 months) $45,500 Interest Payable $2,000 Patents $75,000 What is the amount of intangible assets assuming the accounts above reflect normal activity?

75000

2018 2017 Accounts receivable $40,000 $36,000 Inventory 28,000 35,000 Net sales 190,000 186,000 Cost of goods sold 114,000 108,000 Total assets 425,000 405,000 Total stockholders' equity 240,000 225,000 Net income 32,500 28,000

77.1

ABC reports income tax expense of $800,000. Income tax payable at the beginning and end of the year are $50,000 and $70,000, respectively. What is the amount of cash paid for income taxes?

780000

Date Quantity Price March 1 Beginning Inventory 20 $2 March 7 Purchase 15 3 March 11 Sale 25 7 March 12 Purchase 20 4 What is gross profit using LIFO cost flow assumptions?

80

March 1 Beginning Inventory 20 $2 March 7 Purchase 15 3 March 11 Sale 25 7 March 12 Purchase 20 4 What is gross profit using LIFO cost flow assumptions?

80

ABC has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?

80,000

The balance sheet of ABC reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is ABC's stockholders' equity?

800000

ABC's beginning inventory is $2,000 and its ending inventory is $1,000. The inventory turnover is 6 times. Cost of goods sold for the year must equal:

9000

Accounts Payable $55,000 Land $90,000 Inventory $10,500 Accounts Receivable $7,500 Equipment $8,000 Deferred Revenue $58,500 Short-term Investments $20,000 Notes Receivable (due in 8 months) $45,500 Interest Payable $2,000 Patents $75,000 What is the total amount of property, plant, and equipment assuming the accounts above reflect normal activity?

98000

When we collect Sales tax we DR Cash and Credit

A Liability

ABC retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. The entry to record the retirement will include:

A credit of $6 million to a gain account.

Which of the following statements regarding liquidity ratios is true?

A high working capital generally indicates the ability to pay current liabilities on a timely basis.

ABC purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use for $25,000 cash. ABC should record:

A loss of $5,000.

Define Liquidity:

Ability to pay Current Debt

Choose one

Accountants prefer to report harder numbers rather than softer numbers

The contra asset account associated with Building and Equipment is called (2 words)

Accumulated Depreciation

When a company has a Defined Benefit Pension they have to hire a(n) (1 word)

Actuary

Calculating Ending Inventory and Cost of Goods Sold is what kind of problem (1 word)

Allocation

When intangible assets, like franchises or patents, die, it is called (2 words)

Amortization Expense

Is goodwill an

Asset

ABC developed a new horse transport device and incurred research and development costs of $250,000. Rather than continue with their own research, ABC decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments?

Assets $350,000; Expenses $250,000.

Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 7% interest. The current market rate of interest is 7%. Which of the following is correct?

Bond X will sell for more than Bond Y.

Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 9% interest. The current market rate of interest is 8%. Which of the following is correct?

Bond Y will sell for more than Bond X.

Which is riskier when raising money for a business

Borrowing is always riskier than issuing shares

Which of the following is a positive sign that a company is selling its inventory quickly?

Both a high inventory turnover ratio and a low average days in inventory.

THIS year a company made an error in its ending inventory

Both this year's Balance Sheet and Income Statement will be wrong

Define Business

Buy Low Sell High

Freight on FOB Shipping Point is paid by the

Buyer

Air conditioning cost in a company

Can be an Asset or an Expense

The term when we treat something as an asset is: we (1 word) it

Capitalize

Specific Identification is used by:

Car dealers

Over the last 50 years, which company had a higher ROA

Cola Cola

LCM is based on which accounting principle (1 word)

Conservatism

Lower of Cost or Market is based on which accounting principle(s)?

Conservatism

Goods Available for Sale minus Ending Inventory Equals (4 words)

Cost of Goods Sold

Finished Goods eventually turn into ________ of ________ _______ ________

Cost of goods sold expense

Days in Inventory + Days in Receivables - Days in Payables = (4 words)

Days in Operating Cycle

Under the principle of lower of cost and net realizable value, when a company has 10 units of inventory A with net realizable value of $50 and a cost of $60, what is the adjustment?

Debit Cost of Goods Sold $100; credit Inventory $100.

ABC sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a perpetual inventory system?

Debit Cost of Goods Sold $700; credit Inventory $700.

ABC, sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a perpetual inventory system?

Debit Cost of Goods Sold $700; credit Inventory $700.

On December 1, 2018, ABC signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2019. ABC should record which of the following adjusting entries at December 31, 2018?

Debit Interest Expense and credit Interest Payable, $1,250.

On September 1, 2018, ABC signed a $100,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on March 1, 2019, ABC would

Debit Interest Expense, $1,500.

On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would

Debit Interest Expense, $2,000.

In a perpetual inventory system, the entry at the time of a sale to record the cost of the inventory sold includes a:

Debit to Cost of Goods Sold.

Government pension plans are usually

Defined Benefit

If your employer declares bankruptcy, this can have a major effect on your pension if you are in a:

Defined Benefit Plan

Which pension plan has more complicated Accounting

Defined Benefit Plan

State and city politicians generally prefer giving their workers

Defined Benefit Plans

The expense when a natural resource is being used up is called (1 word)

Depletion

If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is probable, a contingent liability should be

Disclosed and reported as a liability.

If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be

Disclosed, but not reported as a liability.

When a bond with a face value of $100,000 is sold for $90,000, the bond is being issued at a (1 word)

Discount

What is expensed in Sales Office

Everything

When Prices are Rising, which will generally lead to Higher Net Income?

FIFO

When Prices are Rising, which will generally lead to Higher Tax Payments?

FIFO

A company can use LIFO for taxes and FIFO for Financial reporting

False

A contingent gain can sometimes be disclosed in a footnote

False

Current Liabilities are only amounts we owe to suppliers (of merchandise or services) bought on credit

False

In an Operating Lease the Lessee records an Asset and a Liability

False

Of the following inventories turn into Cost of Goods Sold directly (may have more than one answer)?

Finished Goods Inventory

Freight on FOB Shipping point is called

Freight In

Freight on FOB Destination is called

Freight Out

The assumption that a business will continue to operate into the future is the:

Going concern assumption.

Opening Inventory Plus Purchases Equals (4 words)

Goods Available for sale

Opening Inventory Plus Purchases Equals

Goods available for sale

When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:

Greater than the interest expense.

ABC correct ending balance for the inventory account at the end of 2018 should be $5,000, but the company incorrectly stated it as $3,000. In 2019, ABC correctly recorded its ending balance of the inventory account. Which one of the following is true?

Gross profit is overstated by $2,000 in 2019.

ABC's correct ending balance for the inventory account at the end of 2018 should be $5,000, but the company incorrectly stated it as $3,000. In 2019, ABC correctly recorded its ending balance of the inventory account. Which one of the following is true?

Gross profit is overstated by $2,000 in 2019.

When goodwill dies, this is called (1 word)

Impairment

Which of the following is true regarding LIFO and FIFO?

In a period of rising costs, LIFO results in lower net income than FIFO.

ABC spends $50,000 this year in research and development for a new drug to cure liver damage. By the end of the year, management feels confident that the new drug will gain FDA approval and lead to higher future sales. What impact will the $50,000 spending have on this year's financial statements?

Increase Expenses

ABC issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements?

Increase assets and liabilities.

Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will an increase in accounts receivable affect each ratio?

Increase the current ratio and increase the acid-test ratio.

In a perpetual inventory system, the purchase of inventory is debited to:

Inventory

Social Security

Is a Defined Benefit Pension Plan

When I raise money for my business, I will be better off

It depends how well the business does

When Prices are Falling, which will generally lead to Higher Net Income?

LIFO

When Prices are Falling, which will generally lead to Higher Tax Payments?

LIFO

If over the year the selling price of inventory increases, but the cost of the inventory remains constant

LIFO net income will be identical to FIFO net income

If the benefit value of inventory changes, but the sacrifice value of the inventory remains constant

LIFO net income will be identical to FIFO net income

What collateral is the safest because it can't disappear (1 word)?

Land

A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is:

Less than $500,000.

When bonds are issued at a discount and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is:

Less than the interest expense.

Unearned Revenue is what kind of account

Liability

LCM stands for (5 words)

Lower of Cost or Market

In accounting, goodwill:

May be recorded when a company purchases another business.

A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 6%. These bonds will sell at a price that is:

More than $500,000.

Land is depreciated

Never

When we get a line of credit from the bank:

No change to the Balance Sheet and no change to the Income Statement

Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will the purchase of inventory with cash affect each ratio?

No change to the current ratio and decrease the acid-test ratio.

ABC sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a periodic inventory system?

No entry is required for cost of goods sold and inventory.

In a periodic inventory system, the entry at the time of a sale to record the cost of inventory sold includes a:

Not recorded at this time of the sale.

What is expensed in a factory?

Nothing

Managers prefer that a lease be:

Operating

What does OPM stand for (3 words)

Other people's money

When company A acquires company B, company A is called the (1 word)

Parent

Choose one:

Periodic Inventory Accounting is less expensive to maintain than Perpetual Inventory Accounting

Periodic vs.Perpetual Inventory Accounting

Periodic and Perpetual Inventory Accounting result in the same Cost of Goods Sold

When a bond with a face value of $100,000 is sold for $115,000, the bond is being issued at a (1 word)

Premium

Return on assets equals:

Profit margin × Asset turnover.

Which ratio is strongly influenced by the long-term Debt of a company

ROE

After evaluating the lower of cost and net realizable value of inventory, the accountant prepares a year-end adjustment. That adjustment would:

Reduce the company's stockholders' equity.

An Operating Lease will have which of these expenses(may have more than one answer)?

Rental Expense

If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true?

Retained earnings is overstated in year 1.

Unearned Revenue usually turns into

Revenue

When we collect Sales Tax, we Credit which account (3 words)

Sales Tax Payable

When we pay Sales Tax, we Debit which account (3 words)

Sales Tax Payable

The gross profit ratio will typically be higher for companies that:

Sell products that are more highly specialized.

Freight on FOB Destination is paid by the

Seller

The Debt to Equity Ratio is a measure of

Solvency

When company A acquires company B, company B is called the (1 word)

Subsidiary

A contingent liability can sometimes be ignored

TRUE

Which statement is true

The accounting for a Defined Benefit Pension Plan usually requires an actuary.

If a company understates its count of ending inventory in Year 1, which of the following is true?

The balance of retained earnings is correct at the end of Year 2.

Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?

The current ratio will always be equal to or larger than the acid-test ratio for a specific company

A company in NY is buying goods from a Japanese company. The goods are sold FOB San Francisco port

The freight from Japan to San Francisco is an expense, the freight from San Francisco to New York is an Asset

Gain contingencies usually are recognized in a company's income statement when:

The gain is certain

Which of the following would increase the gross profit ratio?

The sales price of a product increases by a higher percentage than does its cost of goods sold.

Goodwill is:

The value of a business as a whole, over and above the value of its net identifiable assets.

The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when:

The value of inventory declines below cost.

LAST year a company made an error in its ending inventory. For THIS year

This year's Balance Sheet will be correct but the Income Statement will be wrong

Window Dressing causes which kind of entry (may have more than one answer)?

Transaction

A company overstates its ending inventory for 2018. What effect will this have on the reported amount of cost of goods sold for 2018?

Understate cost of goods sold.

Suppose that ABC overstates its ending inventory for 2018. What effect will this have on the reported amount of cost of goods sold for 2018?

Understate cost of goods sold.

In doing an allocation for a basket purchase

Use the total cost and the individual market values

Can a contingent Liability require a journal entry?

Yes

In which plan(s) does an employer often match what an employee pays to a pension fund?

a Defined Contribution Pension Plan

ABC purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. ABC should record:

a gain of $1,000.

When a company spends money to fix an appliance under warranty, they Credit Cash and Debit:

a liability

The year end adjusting entry for warranties credits

a liability account

ABC purchased a computer that cost $10,000. It had an estimated useful life of 5 years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. ABC should record:

a loss of $1,000

Window Dressing is done by (may have more than one answer)?

accountants, manager

On the cost of Goods Sold Statement

all numbers are Sacrifice numbers

When you see an interest rate, it is

always an annual rate

When applying Lower of Cost or Market (LCM,) the Net Income of a firm:

always goes down

when applying LCM, the Net Income of a firm

always goes down

When prices are rising, a LIFO liquidation will

always increase income

The year end adjusting entry for warranties debits

an expense account

Periodic Inventory Accounting and Perpetual Inventory Accounting

are two different bookkeeping systems

Payroll expense will usually

be more than the cash amount paid to an employee

A bond which the company may repay whenever they want is a called a (2 words)

callable bond

What is the accounting principle that doesn't allow companies to switch between LIFO and FIFO every year (1 word)

consistency

A bond which allows the bondholder to trade in his/her bond for stock is called a (2 words)

convertible bond

The current portion of long term debt is a (2 words)

current liability

In an Operating Lease the Lessee records an Asset and a Liability

false

Someone who sells gasoline must report their inventory using Weighted Average

false

When a business pays dividends to its shareholders, the dividends are tax deductible

false

A physical inventory count is necessary to calculate Cost of Goods Sold

in Periodic Inventory Accounting but not in Perpetual Inventory Accounting

It is possible to calculate shrinkage

in Perpetual Inventory Accounting but not in Periodic Inventory Accounting

A Capital (Financing) Lease will have which of these expenses (may have more than one answer)?

interest expense, depreciation expense

The account "Warranty Liability":

is adjusted at the end of the year.

Freight on FOB Shipping point

is an asset

Freight on FOB Destination

is an expense

When a firm takes a big bath (may have more than one answer):

it increases expenses

Window Dressing is

legal

In the USA Goodwill on a financial statement

must be bought, not internally developed

Liquidity is the ability to (3 words)

pay current debt

Solvency is the ability to (4 words)

pay long term debt

Managers generally prefer

recording an Operating Lease rather than a Financing (or Capital) Lease.

If a bond limits the ability of the business to issue dividends, this is called a (2 words)

restrictive covenant

A creditor who has collateral is called a _____________ (1 word) creditor

secured

Interest is usually paid on a bond how often (1 word)

semiannually

A bond in which the payment of principal is done continuously through the life of the bond is called a (2 words)

serial bond

Freight is

sometimes an asset, sometimes an expense

At year end, by paying off debt or purchasing inventory on account a manager can manipulate

the Current Ratio

Which is always the larger ratio

the Current ratio

In a defined Contribution Plan who has the investment risk?

the employee

In a Defined Benefit Plan who has the investment risk?

the employer

When a firm gets less risky what will happen to its bonds

the market interest rate of the bonds will go down and the price of the bonds will go up

When a firm gets riskier what will happen to its bonds

the market interest rate of the bonds will go up and the price of the bonds will go down

The difference between a Defined Contribution Plan and a Defined Benefit Plan

the plans are totally different

When a firm gets riskier what will happen to its bonds

the stated interest rate of the bonds will not change

When a firm gets riskier what will happen to its bonds

the stated interest rate of the bonds will not changeCorrect

Managers use controlled liquidations

to increase income when they are are measuring inventory using LIFO.

A company can use FIFO for taxes and LIFO for Financial reporting

true

A contingent liability be disclosed in a footnote

true

For financial reporting a company can have some inventory on FIFO and some on LIFO

true

Historical cost numbers are usually harder than market value numbers

true

In a Financing Lease the Lessee records an Asset and a Liability

true

Someone who sells coal can report their inventory using FIFO

true

Someone who sells milk can report their inventory using LIFO

true

When a business pays interest to its bondholders, some (or all) the interest is tax deductible

true

It is easier for a company to cheat on its taxes

under periodic inventory accounting than under perpetual inventory accounting

Collateral is useful

when there are multiple creditors

The Going Concern Assumption means we assume that a company

will collect all its liabilities