ACCT Final Review

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is a.cash flows from operating activities. b. cash flows from investing activities. c. cash flows from financing activities. d. usually different from year to year.

a

The order of presentation of activities on the statement of cash flows is a. operating, investing, and financing. b. operating, financing, and investing. c. financing, operating, and investing. d. financing, investing, and operating.

a

A company purchased factory equipment for $350,000. It is estimated that the equipment will have a $35,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the first year after purchase would be a. $140,000. b. $84,000. c. $126,000. d. $75,600.

A

Alpha First Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 150 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is a. $780 b. $1,170 c. $1,260 d. $990

A

At December 31, 2014, before any year-end adjustments, Dallis Company's Prepaid Insurance account had a balance of $2,900. It was determined that $1,300 of the Prepaid Insurance had expired. The amount of Insurance Expense for the year would be: a. $1,300 b. $1,600 c. $2,900 d. $1,400

A

Four thousand bonds with a face value of $1,000 each, are sold at 97. The entry to record the issuance is a. Cash .......................................................... 3,880,000 Bonds Payable.......................... 3,880,000 b. Cash ................................. 3,880,000 Discount on Bonds Payable...................... 120,000 Bonds Payable.................................. 4,000,000 c. Cash ..................................... 3,880,000 Premium on Bonds Payable................ 120,000 Bonds Payable........................... 4,000,000 d. Cash ........................................ 4,000,000 Discount on Bonds Payable............... 120,000 Bonds Payable........................ 3,880,000

B

Gilkey Corporation began the year with retained earnings of $155,000. During the year, the company issued $210,000 of common stock, recorded expenses of $600,000, and paid dividends of $40,000. If Gilkey's ending retained earnings was $165,000, what was the company's revenue for the year? a. $610,000 b. $650,000 c. $820,000 d. $860,000

B

Henson Company began the year with retained earnings of $350,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year? a. $510,000 b. $430,000 c. $810,000 d. $470,000

B

A company purchased inventory as follows: 200 units at $5.00 300 units at $5.50 The average unit cost for inventory is a. $5.00. b. $5.25. c. $5.30. d. $5.50.

C

An income statement shows a. revenues, liabilities, and stockholders' equity. b. expenses, dividends, and stockholders' equity. c. revenues, expenses, and net income. d. assets, liabilities, and stockholders' equity.

C

Cash receipts from interest and dividends are classified as a.financing activities. b.investing activities. c.operating activities. d.either financing or investing activities.

C

Dawson Company issued 600 shares of no-par common stock for $5,400. Which of the following journal entries would be made if the stock has stated value of $2 per share? a. Cash 5,400 Common Stock 5,400 b. Cash 5,400 Common Stock 1,200 Paid-in Capital in Excess of Par 4,200 c. Cash 5,400 Common Stock 1,200 Paid-in Capital in Excess of Stated Value 4,200 d. Common Stock 5,400 Cash 5,400

C

The FIFO inventory method assumes that the cost of the first units purchased are a. the last to be allocated to cost of goods sold. b. the first to be allocated to ending inventory. c. the first to be allocated to cost of goods sold. d. not allocated to cost of goods sold or ending inventory.

C

The acquisition of land by issuing common stock is a. a cash transaction that is not reported in the body of a statement of cash flows. b. a cash transaction and would be reported in the body of a statement of cash flows. c. a noncash transaction that is not reported in the body of a statement of cash flows. d. only reported if the statement of cash flows is prepared using the direct method.

C

The payment of a cash dividend would be classified as a(n) a. operating activity. b. investing activity. c. financing activity. d. significant noncash activity.

C

Which of the following assets does not decline in service potential over the course of its useful life? a. Equipment. b. Furnishings. c. Land. d. Fixtures.

C

Allowance for Doubtful Accounts on the balance sheet a. is offset against total current assets. b. increases the cash realizable value of accounts receivable. c. appears under the heading "Other Assets." d. is deducted from accounts receivable

D

Alpha First Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 150 units on hand. Using the FIFO inventory method, the value of the ending inventory on June 30 is a. $780 b. $1,170 c. $1,260 d. $990

D

An accountant has debited an asset account for $800 and credited a liability account for $700. Which of the following would be an incorrect way to complete the recording of the transaction?: a. Credit an asset account for $100. b. Credit another liability account for $100. c. Credit a stockholders' equity account for $100. d. Debit a stockholders' equity account for $100.

D

Bonds with a face value of $300,000 and a quoted price of 102¼ have a selling price of a. $360,675. b. $306,075. c. $300,675. d. $306,750.

D

If the retained earnings account increases from the beginning of the year to the end of the year, then a. net income is less than dividends. b. a net loss is less than dividends. c. additional investments are less than net losses. d. net income is greater than dividends.

D

Which of the following is NOT a variant of the Accounting Equation? a. Assets = Liabilities + Owners' Equity b. Assets - Owners' Equity = Liabilities c. Assets - Liabilities = Owners' Equity d. Assets + Owners' Equity = Liabilities

D

Atom Company just began business and made the following four inventory purchases in June: June 1 150 units $ 825 June 10 200 units 1,120 June 15 200 units 1,140 June 28 150 units 885 $3,970 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is a. $1,105. b. $1,100. c. $1,170. d. $1,180.

A

Bonds with a face value of $300,000 and a quoted price of 97¼ have a selling price of a. $291,750. b. $291,075. c. $291,006. d. $292,500.

A

Generally, the most important category on the statement of cash flows is cash flows from a. operating activities. b. investing activities. c. financing activities. d. significant noncash activities

A

If Lantz Company issues 5,000 shares of $5 par value common stock for $210,000, the account a. Common Stock will be credited for $25,000. b. Paid-in Capital in Excess of Par Value will be credited for $25,000. c. Paid-in Capital in Excess of Par Value will be credited for $210,000. d. Cash will be debited for $185,000.

A

Investing activities include a. collecting cash on loans made. b. obtaining cash from creditors. c. obtaining capital from owners. d. repaying money previously borrowed.

A

Jason Hansen has invested $600,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Hansen stand to lose? a. Up to his total investment of $600,000. b. Zero. c. The $600,000 plus any personal assets the creditors demand. d. $400,000.

A

Prepaid expenses are: a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.

A

The LIFO inventory method assumes that the cost of the first units purchased are a. the last to be allocated to cost of goods sold. b. the first to be allocated to ending inventory. c. the first to be allocated to cost of goods sold. d. not allocated to cost of goods sold or ending inventory.

A

The double-entry system requires that each transaction must be recorded: a. in at least two different accounts. b. in two sets of books. c. in a journal and in a ledger. d. first as a revenue and then as an expense.

A

The two ways that a corporation can be classified by ownership are a. publicly held and privately held. b. stock and non-stock. c. inside and outside. d. majority and minority.

A

Bad Debt Expense is considered a. an internal control weakness. b. a necessary risk of doing business on a credit basis. c. avoidable unless there is a recession. d. an avoidable cost in doing business on a credit basis.

B

Carson Company on July 15 sells merchandise on account to Tayler Co. for $2,000, terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $800 to Carson Company. On July 24 payment is received from Tayler Co. for the balance due. What is the amount of cash received? a. $1,200 b. $1,176 c. $1,160 d. $2,000

B

Crawford Company started the year with $30,000 in its Common Stock account and a credit balance in Retained Earnings of $22,000. During the year, the company earned net income of $24,000 and declared and paid $10,000 of dividends. In addition, the company sold additional common stock amounting to $14,000. As a result, the amount of its retained earnings at the end of the year would be: a. $80,000 b. $36,000 c. $66,000 d. $50,000

B

Follow the question (8), which of the following amounts should be shown in cell (ii)? a. $54,000 b. $46,000 c. $52,000 d. $40,000

B

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at a. a premium. b. a discount. c. par. d. either a discount or premium.

B

If total liabilities decreased by $4,000, then: a. stockholders' equity must have decreased by $4,000. b. assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000. c. assets and stockholders' equity each increased by $2,000. d. assets must have increased by $4,000.

B

Inventory costing methods place primary reliance on assumptions about the flow of a. goods. b. costs. c. resale prices. d. values.

B

On January 15, Nifty Company sells merchandise on account to Martinez Associates for $3,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $600 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received? a. $2,400 b. $2,328 c. $2,310 d. $1,680

B

The agency of the United States Government that oversees the U.S. financial markets is the a. Internal Revenue Service. b. Security Exchange Commission. c. Financial Accounting Standards Board. d. International Auditing Standards Committee.

B

The following is selected information from L Corporation for the fiscal year ending October 31, 2014. Cash received from customers $300,000 Revenue earned 390,000 Cash paid for expenses 170,000 Cash paid for computers on November 1, 2013 that will be used for 3 years 48,000 Expenses incurred including any depreciation 216,000 Proceeds from a bank loan, part of which was used to pay for the computers 100,000 Based on the accrual basis of accounting, what is L Corporation's net income for the year ending October 31, 2014? a. $204,000 b. $174,000 c. $158,000 d. $220,000

B

The periodicity assumption states a. the business will remain in operation for the foreseeable future. b. the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared. c. every economic entity can be separately identified and accounted for. d. only those things that can be expressed in money are included in the accounting records.

B

The two ways that a corporation can be classified by purpose are a. general and limited. b. profit and not-for-profit. c. state and federal. d. publicly held and privately held.

B

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a a. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. b. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts. c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. d. debit to Loss on Credit Sales and a credit to Accounts Receivable.

B

Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office Supplies Balance Sheet December 31, 2014 Cash $ 130,000 Accounts payable $ 140,000 Accounts receivable 100,000 Salaries and wages payable 20,000 Inventory 110,000 Mortgage payable 160,000 Prepaid insurance 60,000 Total liabilities $320,000 Stock investments (long-term) 170,000 Land 180,000 Buildings $210,000 Common stock $240,000 Less: Accumulated Retained earnings 500,000 depreciation (40,000) 170,000 Total stockholders' equity $740,000 Trademarks 140,000 Total liabilities and Total assets $1,060,000 stockholders' equity $1,060,000 a. $570,000 b. $400,000 c. $340,000 d. $290,000

B

Which of the following activities would be classified as an investing activity? a. Cash received from interest revenue. b. Cash paid (loaned) to a borrower as a loan. c. Cash received from dividend revenue. d. Cash paid to reacquire capital stock.

B

Which of the following is not a common cost flow assumption used in costing inventory? a. First-in, first-out b. Middle-in, first-out c. Last-in, first-out d. Average cost

B

Which of the following statements about treasury stock is true? a. Few corporations have treasury stock. b. Purchasing treasury stock is done to eliminate hostile shareholder buyouts. c. Companies acquire treasury stock to increase the number of shares outstanding. d. Companies acquire treasury stock to decrease earnings per share.

B

Which of the following would not be true of a privately held corporation? a. It is sometimes called a closely held corporation. b. Its shares are regularly traded on the New York Stock Exchange. c. It does not offer its shares for sale to the general public. d. It is usually smaller than a publicly held company.

B

Which one of these statements about the adjusting entries is false? a. to ensure that the revenue recognition and expense recognition principles are followed. b. cash can be included in the adjusting entries. c. include one income statement account and one balance sheet account. d. adjusting entries are required every time a company prepares financial statements.

B

You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to a. debit Allowance for Doubtful Accounts and credit Bad Debt Expense. b. debit Allowance for Doubtful Accounts and credit Accounts Receivable. c. debit Bad Debt Expense and credit Allowance for Doubtful Accounts. d. debit Bad Debt Expense and credit Accounts Receivable.

B

A company purchased office equipment for $30,000 and estimated a salvage value of $6,000 at the end of its 10-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is a. 10%. b. 15%. c. 20%. d. 2%.

C

Accounts receivable are valued and reported on the balance sheet a. in the investments section. b. at gross amounts less sales returns and allowances. c. at cash realizable value. d. only if they are not past due.

C

Alt Corp. issues 3,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to: a. Common Stock $30,000 and Paid-in Capital in Excess of Stated Value $12,000. b. Common Stock $28,000. c. Common Stock $30,000 and Paid-in Capital in Excess of Par Value $12,000. d. Common Stock $30,000 and Retained Earnings $12,000.

C

Depreciation is a process of a. asset devaluation. b. cost accumulation. c. cost allocation. d. asset valuation.

C

Depreciation is the process of allocating the cost of a plant asset over its useful life in a(n) a. equal and equitable manner. b. accelerated and accurate manner. c. systematic and rational manner. d. conservative market-based manner.

C

Finney Company began the year by issuing $20,000 of common stock for cash. The company recorded revenues of $185,000, expenses of $160,000, and paid dividends of $10,000. What was Finney's net income for the year? a. $15,000 b. $35,000 c. $25,000 d. $45,000

C

Follow the question (8), which of the following amounts should be shown in cell (iii)? a. $10,000 b. $20,000 c. $4,000 d. $2,000

C

Four thousand bonds with a face value of $1,000 each, are sold at 102. The entry to record the issuance is a.Cash ............................................................... 4,080,000 Bonds payable................................. 4,080,000 b. Cash ...................................................... 4,000,000 Premium on Bonds Payable............................... 80,000 Bonds Payable..................................... 4,080,000 c. Cash ...................................................... 4,080,000 Premium on Bonds Payable............ 80,000 Bonds Payable..... ...................... 4,000,000 d. Cash ................................................... 4,080,000 Discount on Bonds Payable............ 80,000 Bonds Payable................................ 4,000,000

C

Generally accepted accounting principles a. are accounting rules formulated by the Internal Revenue Service. b. are sound in theory but rarely used in real life. c. are accounting rules that are recognized as a general guide for financial reporting. d. have eliminated all errors in accounting

C

In computing depreciation, salvage value is a. the fair value of a plant asset on the date of acquisition. b. subtracted from accumulated depreciation to determine the plant asset's depreciable cost. c. an estimate of a plant asset's value at the end of its useful life. d. ignored in all the depreciation methods.

C

In recording an accounting transaction in a double-entry system: a. the number of debit accounts must equal the number of credit accounts. b. there must always be entries made on both sides of the accounting equation. c. the amount of the debits must equal the amount of the credits. d. there must only be two accounts affected by any transaction.

C

In the first month of operations, the total of the debit entries to the Cash account amounted to $1,400 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a: a. $800 credit balance. b. $1,400 debit balance. c. $600 debit balance. d. $600 credit balance.

C

Interline Trucking purchased a tractor trailer for $84,000. Interline uses the units-of-activity method for depreciating its trucks and expects to drive the truck 1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $12,000. If the truck is driven 80,000 miles in its first year, how much depreciation expense should Interline record? a. $5,333. b. $6,720. c. $5,760. d. $6,222.

C

Marvin Services Corporation had the following accounts and balances: Accounts payable $12,000 Equipment $14,000 Accounts receivable 2,000 Land 14,000 Buildings 34,000 Unearned service revenue 4,000 Cash 6,000 Total stockholders' equity ? What would be the stockholders' equity? a. $68,000 b. $70,000 c. $54,000 d. $50,000

C

Molina Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 103. The journal entry to record the issuance will show a a. debit to Cash of $4,000,000. b. debit to Premium on Bonds Payable for $120,000. c. credit to Bonds Payable for $4,000,000. d. credit to Cash for $4,120,000.

C

Quark Inc. just began business and made the following four inventory purchases in June: June 1 150 units $ 825 June 10 200 units 1,120 June 15 200 units 1,140 June 28 150 units 885 $3,970 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is a. $1,105. b. $1,100. c. $1,170. d. $1,180.

C

The following partial amortization schedule is available for Courtney Company who sold $500,000, five-year, 10% bonds on January 1, 2014 for $520,000 and uses annual straight-line amortization. BOND AMORTIZATION SCHEDULE Interest Periods January 1, 2014 January 1, 2015 (i)Interest to be paid (ii)Interest expense (iii)Premium Amortization (iv) Unamortized Premium $20,000 (v) bond Carrying Value $520,000 Which of the following amounts should be shown in cell (i)? a. $52,000 b. $54,000 c. $50,000 d. $10,000

C

Under the allowance method, Bad Debt Expense is recorded a. when an individual account is written off. b. when the loss amount is known. c. for an amount that the company estimates it will not collect. d. several times during the accounting period.

C

What organization issues U.S. accounting standards (Statement of Financial Accounting Standard)?: a. Security Exchange Commission (SEC) b. Public Company Accounting Oversight Board (PCAOB) c. Financial Accounting Standards Board (FASB) d. International Accounting Standards Board (IASB)

C

Which of the following is not true of a corporation? a. It may buy, own, and sell property. b. It may sue and be sued. c. The acts of its owners bind the corporation. d. It may enter into binding legal contracts in its own name.

C

Which of the following methods of computing depreciation is production based? a. Straight-line. b. Declining-balance. c. Units-of-activity. d. None of these answer choices are correct.

C

Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets? a. Salvage value. b. Estimated useful life. c. Cash needed to replace the plant asset. d. Cost.

C

A credit is not the normal balance for which account listed below?: a. Common Stock account b. Revenue account c. Liability account d. Dividends account

D

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause: a. expenses to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated.

D

All of the following are characteristics of every accounting information system except it is a system: a. that collects transaction data. b. that processes transaction data. c. that communicates financial information to decision makers. d. of data storage hardware for the chart of accounts.

D

Charlene Cosmetics Company just began business and made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 $4,200 A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is a. $1,229. b. $1,368. c. $1,323. d. $1,260.

D

Equipment with a cost of $320,000 has an estimated salvage value of $30,000 and an estimated life of 4 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,000 hours? a. $80,000. b. $87,500. c. $82,500. d. $72,500.

D

Gomez Corporation issues 600, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 96. The journal entry to record the issuance will show a a. debit to Cash of $600,000. b. credit to Discount on Bonds Payable for $24,000. c. credit to Bonds Payable for $576,000. d. debit to Cash for $576,000.

D

La More Company had the following transactions during 2013: •Sales of $4,500 on account •Collected $2,000 for services to be performed in 2014 •Paid $1,875 cash in salaries for 2013 •Purchased airline tickets for $250 in December for a trip to take place in 2014 What is La More's 2013 net income using accrual accounting? a. $2,875 b. $4,875 c. $4,625 d. $2,625

D

Liabilities are generally classified on a balance sheet as a. small liabilities and large liabilities. b. present liabilities and future liabilities. c. tangible liabilities and intangible liabilities. d. current liabilities and long-term liabilities.

D

On the statement of cash flows, the cash flows from operating activities section would include a. receipts from the issuance of capital stock. b. receipts from the sale of investments. c. payments for the acquisition of investments. d. cash receipts from sales activities.

D

The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the a. economic entity assumption. b. monetary unit assumption. c. periodicity assumption. d. going concern assumption.

D

The purchase of an asset for cash: a. increases assets and stockholders' equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. leaves total assets unchanged.

D

These are selected account balances on December 31, 2014. Land $100,000 Buildings 800,000 Inventory 200,000 Equipment 450,000 Furniture 100,000 Accumulated Depreciation 300,000 What is the total amount of property, plant, and equipment that will appear on the balance sheet? a. $1,500,000 b. $1,300,000 c. $1,800,000 d. $1,150,000

D

Two methods of accounting for uncollectible accounts are the a. allowance method and the accrual method. b. allowance method and the net realizable method. c. direct write-off method and the accrual method. d. direct write-off method and the allowance method

D

Which of the following correctly identifies normal balances of accounts?: a. Assets Debit Liabilities Credit Common Stock Credit Revenues Debit Expenses Credit b. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Credit c. Assets Credit Liabilities Debit Common Stock Debit Revenues Credit Expenses Debit d. Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit

D

Which one of the following would not be considered an advantage of the corporate form of organization? a. Limited liability of stockholders. b. Separate legal existence. c. Continuous life. d. Government regulation.

D

You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the direct write-off method, the entry you make is to a. debit Allowance for Doubtful Accounts and credit Bad Debt Expense. b. debit Allowance for Doubtful Accounts and credit Accounts Receivable. c. debit Bad Debt Expense and credit Allowance for Doubtful Accounts. d. debit Bad Debt Expense and credit Accounts Receivable.

D

Financing activities involve a. lending money. b. acquiring investments. c. issuing debt. d. acquiring long-lived assets.

c