Accy E1 SBs

Calculate the amount of interest (straight basis) on a 6-month loan of $2,000 at a 15 percent interest rate. $2,000 x 0.15 = $300 $2,000 x 0.15 x 6/12 = $150 $2,000 x 0.15 x 2 = $600 $2,000 x 0.15 x 6 = $1,800

$2,000 x 0.15 x 6/12 = $150

A boat was sold for $160,000, which resulted in a loss of $20,000. Accumulated depreciation on the boat (updated to the date of sale) was $105,000. The original cost of the boat was: $285,000 $245,000 $160,000 $265,000

$285,000

Prepaid expenses such as insurance premiums and lease (rental) payments that have been paid in advance should be treated as _ (assets/liabilities) until the benefits associated with the prepayment are received and thus the _ (revenue/expense) has been _ (earned/incurred).

assets, expense, incurred

An agreement by the borrower to supply financial statements to the lender and an agreement by the borrower to refrain from paying dividends until the note is paid are both examples of provisions known as _ collateral/covenants/interest/default).

covenants

The entry made to record the impairment of goodwill is: Dr. Goodwill Impairment Loss Cr. Goodwill Dr. Goodwill Impairment Loss Cr. Accumulated Amortization Dr. Accumulated Amortization Cr. Goodwill Dr. Goodwill Cr. Goodwill Impairment Loss

Dr. Goodwill Impairment Loss Cr. Goodwill

The entry to record accrued interest on Notes Receivable is: Dr. Interest Receivable xx Cr. Interest Expense xx Dr. Cash xx Cr. Interest Receivable xx Dr. Interest Receivable xx Cr. Interest Income xx Dr. Cash xx Cr. Interest Income xx

Dr. Interest Receivable xx Cr. Interest Income xx

The effects on the financial statements of accruing interest on Notes Receivable include: an increase to net income. an increase to liabilities. an increase to assets. an increase to revenues. an increase to expenses.

an increase to net income. an increase to assets. an increase to revenues.

A building was sold for $510,000, which resulted in a gain of $30,000. Accumulated depreciation on the building (updated to the date of sale) was $140,000. The journal entry to record this transaction would include all of the following except a: credit to Cash for $510,000. credit to Buildings for $620,000. credit to Gain on the Sale of Buildings for $30,000. debit to Accumulated Depreciation for $140,000.

credit to Cash for $510,000.

A building was sold for $510,000, which resulted in a gain of $30,000. Accumulated depreciation on the building (updated to the date of sale) was $140,000. The journal entry to record this transaction would include all of the following except a: debit to Accumulated Depreciation for $140,000. credit to Gain on the Sale of Buildings for $30,000. credit to Cash for $510,000. credit to Buildings for $620,000.

credit to Cash for $510,000.

The beginning inventory for ProKnows Ltd. consisted of 20 units at $4 each. During March, 40 more units of inventory were purchased for $5 each, and during May, an additional 40 units were purchased for $6 each. A total of 70 units of inventory were sold during the year. Under the weighted-average cost flow assumption, _____. cost of goods sold = 30 units x $5.20 per unit = $156. cost of goods sold = 70 units x $5.00 per unit = $350. ending inventory = 30 units x $5.20 per unit = $156. ending inventory = 30 units x $5.00 per unit = $150.

ending inventory = 30 units x $5.20 per unit = $156.

The amount in the Cash account, which is reported as an asset on the balance sheet, includes all of the following except: petty cash fund balances. expected litigation settlements. demand deposit balances. undeposited receipts.

expected litigation settlements.

The cost of an inventory item is released to the income statement as an: expense when the product is purchased. expense when the product is lost or stolen. revenue when the product is sold. asset when the product is purchased. expense when the product becomes worthless. expense when the product is sold.

expense when the product is lost or stolen. expense when the product becomes worthless. expense when the product is sold.

Maintenance expenditures should be capitalized if they: are required by the regularity authority to do so. extend the useful life and/or increase the salvage value of an asset. are recorded as an expense rather than as an asset. form the part of routine expenses for the concerned firm.

extend the useful life and/or increase the salvage value of an asset.

Accelerated depreciation methods result in - (greater/lower) depreciation expense and _ (higher/lower) net income than the straight-line depreciation method during the early years of an asset's life.

greater, lower

The employer's Wages Expense for a payroll period represents the employees' _ (gross/net) pay.

gross

Current maturities of long-term debt are reported _____. in the noncurrent liability section but separately from long -term debt in the current liability section but separately from short-term debt in the noncurrent liability section along with long-term debt in the current liability section along with short-term debt

in the current liability section but separately from short-term debt

Buildings and equipment are recorded at their original cost, which includes the purchase price plus: -interest costs incurred during the construction phase of a building. -the cost of the land that is being used for the building's construction site. -the cost of paving a parking lot next to the building and lighting for the parking lot. -material, labor, and overhead costs for equipment made by a firm's own employees. -installation and shakedown costs.

interest costs incurred during the construction phase of a building. material, labor, and overhead costs for equipment made by a firm's own employees. installation and shakedown costs.

One of the key advantages of issuing debt as opposed to common stock to raise additional funds is that: interest expense is deductible in calculating taxable income, whereas dividends are not tax deductible. issuing common stock substantially increases a corporation's perceived risk. issuing debt reduces a corporation's financial leverage and thus allows ROI to become approximately equal to ROE. capital investment projects are normally more successful when financed by debt as opposed to equity.

interest expense is deductible in calculating taxable income, whereas dividends are not tax deductible.

In times of rising prices, inventory profits (or phantom profits) are said to occur under the FIFO cost flow assumption. This occurs because under FIFO, the release of older, lower costs to the income statement results in higher profits than if current costs were to be recognized. This creates a problem for the reporting company because: lower costs means higher taxable income and higher taxes payable. lower costs means higher net income and higher retained earnings. lower costs means lower net income and lower retained earnings. lower costs means lower taxable income and lower taxes payable.

lower costs means higher taxable income and higher taxes payable.

Inventory is reported on the balance sheet at: lower of cost or market value. current replacement cost. original (historical) cost. current market value.

lower of cost or market value.

In times of rising prices, LIFO results in: _ ending inventory value and _ cost of goods sold value than FIFO. (lower/higher)

lower, higher

Short-term marketable debt securities that fall in the held-to-maturity category are reported on the balance sheet at the entity's cost, which is usually about the same as market value, because _____. -the underlying assets in these securities are equities of banking companies -the underlying assets in these securities are equities of small-cap companies -of their high quality and the short time until maturity -of their high risk and the short time until maturity

of their high quality and the short time until maturity

In times of rising prices, inventory profits (or phantom profits) are said to occur under the FIFO cost flow assumption. This occurs because under FIFO, the release of _ (older/newer), _ (higher/lower) costs to the income statement results in _ (higher/lower) profits than if current costs were to be recognized.

older, lower, higher

Accounts payable are normally shown: on the balance sheet as a current liability, net of anticipated cash discounts. on the balance sheet as a current liability, but not reduced by anticipated cash discounts. on the balance sheet as a noncurrent liability, but not reduced by anticipated cash discounts. on the income statement as an expense, but not reduced by anticipated cash discounts.

on the balance sheet as a current liability, but not reduced by anticipated cash discounts.

Land that is owned and used in the operations of the firm is shown on the balance sheet at its: current market value. original cost less accumulated depreciation. original cost. replacement cost.

original cost.

The LIFO cost flow assumption results in the most _ (distant/recent) costs being transferred to cost of goods sold. In times of rising prices, the costs transferred to cost of goods sold under LIFO will therefore be _ (higher/lower) than the costs transferred to cost of goods sold under FIFO.

recent, higher

Short-term marketable debt securities that are in the held-to-maturity category are reported on the balance sheet at: the entity's cost of the securities less accumulated depreciation. the entity's cost of the securities. the lower of the entity's cost of the securities or the market value of the securities. the market value of the securities.

the entity's cost of the securities.

Short-term marketable debt securities that are in the held-to-maturity category are reported on the balance sheet at: the entity's cost of the securities. the entity's cost of the securities less accumulated depreciation. the lower of the entity's cost of the securities or the market value of the securities. the market value of the securities.

the entity's cost of the securities.

The "market" in the lower of cost of market valuation is generally: the historical cost of the inventory less depreciation. the current selling price of the inventory less the company's normal profit margin. the replacement cost of the inventory. the current selling price of the inventory.

the replacement cost of the inventory.

Buildings and equipment are recorded at their original cost, which includes the purchase price plus all ordinary and necessary costs incurred: to get the building or equipment ready for sale in the ordinary course of business. to use the building or equipment in a manner that will enhance the firm's profitability. to get the building or equipment ready for its use in the operations of the firm. to obtain legal title to the building or equipment.

to get the building or equipment ready for its use in the operations of the firm.

Buildings and equipment are recorded at their original cost, which includes the purchase price plus all ordinary and necessary costs incurred: to use the building or equipment in a manner that will enhance the firm's profitability. to obtain legal title to the building or equipment. to get the building or equipment ready for its use in the operations of the firm. to get the building or equipment ready for sale in the ordinary course of business.

to get the building or equipment ready for its use in the operations of the firm.

The amount in the Cash account, which is reported as an asset on the balance sheet, includes: 1. undeposited receipts including checks 2. money on hand in petty cash funds 3. checking account balances 4. savings account balances 5. IOUs from credit worthy customers 6. supplies on hand

undeposited receipts including checks money on hand in petty cash funds checking account balances savings account balances

A note receivable: usually bears interest. involves penalties if not paid on the maturity date. are notes that are only offered to the most creditworthy customers. represents a formal, legal contract. is easier to account for.

usually bears interest. involves penalties if not paid on the maturity date. represents a formal, legal contract.

Accumulated depreciation is: a contra asset account. a revenue account. a liability account. an expense account.

a contra asset account.

Assume that the balances in Accounts Receivable and the Allowance for Bad Debts accounts were $50,000 and $3,000, respectively, before a write-off entry for $1,000 was recorded. How much would have been reported on the balance sheet as "Net accounts receivable" after the write-off entry was recorded? $47,000 $48,000 $50,000 $46,000

$47,000

Assume that Missvel Inc. has credit sales terms of 3/10, n90. On May 5, Missvel Inc. made a $10,000 sale to Terene Co. This means that Terene Co. has the option of paying: $9,700 by May 15 or paying $10,000 by August 3. $9,700 by May 15 or paying $10,300 by August 3. $10,000 by May 15 or paying $10,300 by August 3. $9,700 by May 15 or paying $10,000 by May 30.

$9,700 by May 15 or paying $10,000 by August 3.

Identify the true statements regarding the balance sheet presentation of accounts receivable. -In the balance sheet, the Allowance for Bad Debts account that is added to the accounts receivable represents accounts written off during the year. -"Net accounts receivable" is the net realizable value reported on the balance sheet. -"Net accounts receivable" represents the balance of an asset account less the balance of a contra asset account. -The allowance for bad debts is added to accounts receivable while presenting the accounts receivable in the balance sheet. -The allowance for bad debts is subtracted from accounts receivable while presenting the accounts receivable in the balance sheet.

-"Net accounts receivable" is the net realizable value reported on the balance sheet. -"Net accounts receivable" represents the balance of an asset account less the balance of a contra asset account. -The allowance for bad debts is subtracted from accounts receivable while presenting the accounts receivable in the balance sheet.

Identify the true statements regarding a bank reconciliation. -In a bank reconciliation, service charges are subtracted from the company's book balance. -In a bank reconciliation, outstanding checks are subtracted from the company's book balance. -In a bank reconciliation, NSF checks are subtracted from the company's book balance. -In a bank reconciliation, interest earned is added to the company's book balance. -In a bank reconciliation, deposits in transit are added to the company's book balance.

-In a bank reconciliation, service charges are subtracted from the company's book balance. -In a bank reconciliation, NSF checks are subtracted from the company's book balance. -In a bank reconciliation, interest earned is added to the company's book balance.

Periodically, the petty cash fund is reimbursed to: 1. ensure that there will be enough cash on hand to pay the next month's electric bill. 2. record the sales that have taken place since the fund was last reimbursed. 3. record all of the debits to Merchandise Inventory that have accumulated. 4. bring the cash in the fund back to the original amount.

4

The beginning inventory for ProKnows Ltd. consisted of 20 units at $4 each. During March, 40 more units of inventory were purchased for $5 each, and during May, an additional 40 units were purchased for $6 each. A total of 70 units of inventory were sold during the year. Under the LIFO cost flow assumption, cost of goods sold: = (30 @ $6) = $180. = (20 @ $4) + (40 @ $5) + (10 @ $6) = $80 + $200 + $60 = $340. = (20 @ $4) + (10 @ $5) = $130. = (40 @ $6) + (30 @ $5) = $240 + $150 = $390.

= (40 @ $6) + (30 @ $5) = $240 + $150 = $390.

Assume that on September 1, Year 1, a six-month property insurance premium of $12,000 was paid for a policy whose coverage began on that day. Also assume that the Prepaid Insurance account was debited for $12,000 at this time. The December 31, Year 1, adjustment with respect to the this policy will include a: Credit to Prepaid Insurance for $8,000. Debit to Insurance Expense for $4,000. Credit to Prepaid Insurance for $4,000. Debit to Insurance Expense for $12,000.

Credit to Prepaid Insurance for $8,000.

If ending inventory was understated at the end of Year 1 but counted correctly at the end of Year 2 and this error was not discovered until sometime in Year 3, then: Cost of goods sold was overstated in Year 1 and understated in Year 2 but the error would have self-corrected in total. Cost of goods sold was understated in Year 1 and understated in Year 2 and the error would have doubled in total. Cost of goods sold was understated in Year 1 and overstated in Year 2 but the error would have self-corrected in total. Cost of goods sold was overstated in Year 1 and overstated in Year 2 and the error would have doubled in total.

Cost of goods sold was overstated in Year 1 and understated in Year 2 but the error would have self-corrected in total.

Purchases = $144,000, Cost of goods available for sale = $200,000, and Ending inventory = $40,000. Thus: Beginning inventory = $56,000 and Cost of goods sold = $240,000. Beginning inventory = $160,000 and Cost of goods sold = $156,000. Beginning inventory = $56,000 and Cost of goods sold = $160,000. Beginning inventory = $62,000 and Cost of goods sold = $188,000.

Beginning inventory = $56,000 and Cost of goods sold = $160,000.

Select all that apply Identify the impact of recording the cash received in advance from customers. Cash increases. Unearned revenues are recorded and this increases net income. Net income is not affected. Working capital increases. Current liabilities increase.

Cash increases. Net income is not affected. Current liabilities increase.

Which of the following accounts are examples of intangible assets? Merchandise inventory Copyrights Leaseholds Current maturities of long-term debt Customer lists Goodwill

Copyrights Leaseholds Customer lists Goodwill

True or false: The determination of a contingent liability depends on one or more future events. True False

True

Deferred tax liabilities: are normally long term in nature. involve a straightforward computational process and are a noncontroversial and easily understood liability category. are provided for temporary differences between income tax and financial statement recognition of revenues and expenses. are one of the most significant liabilities shown on the balance sheet for many firms.

are normally long term in nature. are provided for temporary differences between income tax and financial statement recognition of revenues and expenses. are one of the most significant liabilities shown on the balance sheet for many firms.