Accounting Final

The interest charged on a $200,000 note payable, at the rate of 6%, on a 60-day notewould be

2000 = 200,000 x 6% x (60/360)

If the market interest rate for a bond is higher than the stated interest rate, the bond willsell at

A discount

The accounting equation may be expressed as

Assets = Liabilities + Stockholders' Equity

For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both, T or F?

False

If $150,000 face value bonds are issued at 102, the proceeds received will be $102,000, T or F?

False

If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded, T or F?

False

If any portion of a long-term debt is to be paid in the next year, the entire debt should be classified as a current liability, T or F?

False

The book value of a plant asset is always equal to its fair market value, T or F?

False

When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a Land Improvements account, T or F?

False

If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable will increase as the bonds approach maturity, T or F, why?

False because they decrease, not increase

If the straight-line method of amortization is used, the amount of unamortized premium on bonds payable will increase as the bonds approach maturity, T or F?

False, they will decrease

Assume that the Hudson Corporation uses the indirect method to depict cash flows. Indicate where, if at all,an accounts receivable decrease would be classified on the statement of cash flows.

Financing activities section

Liabilities are classified on the balance sheet as current or

Long-term

The ________ principle gives accountants guidance as to when revenue is to be recorded.

Revenue recognition

Which of the following is not true of ordinary repairs?

They primarily benefit the current accounting period

A corporation acts under its own name rather than in the name of its stockholders, T or F?

True

For accounting purposes, stated value is treated the same way as par value, T or F?

True

LMU sells 200 season tickets for $40,000 that includes a five-concert season. The amount of UnearnedTicket Revenue after the third concert is $24,000, T or F?

True

Recording depreciation each period is an application of the matching principle, T or F?

True

The liability of a stockholder is usually limited to the stockholder's investment in the corporation, T or F?

True

When a business sells an item and collects a state sales tax on it, a current liability arises, T or F?

True

The liability of a stockholder is usually limited to the stockholder's investment in the corporation, T or F? Why?

True because personal assets of stockholders are not available to creditors or lenders

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity, T or F?

True, 20,000 x 8% x (9/12) = 1200

Hudson Corporation purchases merchandise on account from James Company,terms 2/10, n/30. Hudson and James both use periodic inventory systems. If Hudson pays within the discount period, James will

a) credit the amount of the discount to Sales Revenue. b) debit the amount of the discount to Sales Discounts. c) credit the amount of the discount to Cash. d) credit the amount of the discount to Purchases Discounts

The balance in the Accumulated Depreciation account represents the

amount charged to expense since the acquisition of the plant asset

The first step in the recording process is to

analyze the transaction

The book value of an asset is equal to the

asset's cost less accumulated depreciation

Management should select the depreciation method that

best measures the plant asset's contribution to revenue over its useful life

The category that is generally considered to be the best measure of a company'sability to continue as a going concern is

cash flows from operating activities.

Depreciation is a process of

cost allocation

Recording depreciation each period is necessary in accordance with the

expense recognition principle

A $600,000 bond was retired at 98 when the carrying value of the bond was$592,000. The entry to record the retirement would include a

gain on bond redemption of $4,000

The statement of cash flows

is a special section of the income statement

A net loss

is closed to Retained Earnings even if it would result in a debit balance

The par value of a stock

is legally significant

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that

is used for tax purposes

The four subdivisions of plant assets are

land, land improvements, buildings, equipment

A small stock dividend is defined as

less than 20-25% of the corporation's issued stock

If a company reports a net loss, it

may still have a net increase in cash

Dividends in arrears on cumulative preferred stock

must be paid before common stockholders can receive a dividend

On the dividend record date

no entry is required

The book value of an asset will equal its fair value at the date of sale if

no gain or loss on disposal is recorded

A corporation records a dividend-related liability

on the declaration date.

The order of presentation of activities on the statement of cash flows is

operating, investing, and financing

The primary purpose of the statement of cash flows is to

provide information about the cash receipts and cash payments during a period

Unearned Rental Revenue is

reported as a current liability

When the terms of sale are FOB ______________, ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller.

shipping point

A change in the estimated useful life of equipment requires

that the amount of periodic depreciation be changed in the current year and in future years

A characteristic of a plant asset is that it is

used in the operations of a business

A characteristic of a plant asset is that it is

used in the operations of a business.

All of the following statements about the useful life factor associated withdepreciation are true except

useful life is also called expected trade-in value

A current liability is a debt that can reasonably be expected to be paid

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