Accounting Final Exam

The total amount of simple interest calculated annually on a $4,000 note payable in five years at 9% is Correct! a. $1,800.00. b. $1,411.20. c. $2,154.60. d. $554.04.

a. $1,800.00.

Which one of the following financial statements reports an entity's financial position at a specific date? c. Income statement b. Statement of retained earnings Correct! a. Balance sheet d. Both the income statement and the balance sheet

a. Balance sheet

. Annual reports must include an internal control report. In this report, which group has the primary responsibility for establishing and maintaining an adequate control structure and procedures for financial reporting? c. The company's internal audit staff b. The company's CPAs Correct! a. Management d. The audit committee of the company's board of directors

a. Management

A cereal company includes one premium coupon in every cereal box. Upon returning ten such coupons to the company, a customer will be sent a free cereal bowl. In a recent year, the company sold 200,000 boxes of cereal for $1 a box. It is estimated that 20% of the coupons will be returned. If the cereal bowls cost the company $3 each, what amount of liability for premium redemption must be recorded by the company? Correct! b. $12,000 a. $6,000 d. $200,000 c. $24,000

b. $12,000

CBA Corp. has grown significantly over the past year. One area that has plagued the controller of CBA is the reconciliation of supplies expense. The end-of-year supplies on hand totaled $20, purchases totaled $500, and supplies on hand at the beginning of the year amounted to $300. How much will CBA report as supplies expense for the current year? d. $500 c. $300 Correct! b. $780 a. $20

b. $780

Port, Inc. paid a cash dividend on January 2 that had been declared prior to the end of its fiscal year. The entry to pay the dividend will c. decrease Retained Earnings and increase Cash Dividend Payable. a. increase Cash and increase Cash Dividend Payable. b. decrease Cash Dividend Payable and decrease Cash. d. decrease Cash Dividend Payable and increase Retained Earnings.

b. decrease Cash Dividend Payable and decrease Cash

Lucky Company purchased a truck at a cost of $12,000 in 2012. As of January 1, 2017, depreciation of $10,000 had been recorded on this asset. Depreciation expense for 2017 is $2,000. After the adjustments are recorded and posted at December 31, 2017, what is the carrying value of the truck? a. $2,000 b. $5,500 c. $12,000 Correct! d. $0

d. $0

A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in inventory. If current liabilities are $14,350, then the quick ratio would be a. 5.0 to 1. c. 2.0 to 1. Correct! d. 1.2 to 1. b. 2.6 to 1.

d. 1.2 to 1.

On May 1, Chris Company borrowed $30,000 from Third Street Bank on a one-year, 6% note. If the company keeps its records on a calendar year, an entry is needed on December 31 to increase Correct! d. interest payable by $1,200. a. interest expense by $600. c. interest payable by $900. b. interest expense by $1,800.

d. interest payable by $1,200.

Newco Publishing Company purchased equipment at the beginning of 2017 for $200,000. The company decided to depreciate the equipment over an eight-year period using the straight-line method. The company estimated the equipment's residual value at $20,000. The adjustment for depreciation expense for 2017 will Correct! d. increase Depreciation Expense and increase Accumulated Depreciation for $22,500. b. increase Accumulated Depreciation and decrease Equipment for $25,000. a. increase Depreciation Expense and increase Accumulated Depreciation for $25,000. c. increase Depreciation Expense and decrease Equipment for $22,500.

! d. increase Depreciation Expense and increase Accumulated Depreciation for $22,500.

Murphy Corporation's end-of-year balance sheet consisted of the following amounts: ​ Cash $ 35,000 Accounts receivable $46,000 Property, plant, and equipment 69,000 Long-term debt 41,000 Capital stock 107,000 Accounts payable 22,000 Retained earnings ? Inventory 33,000 ​ ​ What is Murphy's owners' equity balance at the end of the current year? a. $3,000 d. $173,000 Correct! b. $120,000 c. $63,000

Correct! b. $120,000

. Mobile Power Corp. reported the following information for the year ended December 31, 2017. Revenue $ 40,000 Expenses 23,000 Dividends 10,000 Retained earnings at December 31, 2017 175,000 ​ What was the retained earnings balance for Mobile Power at December 31, 2016? d. $192,000 Correct! b. $168,000 a. $165,000 c. $182,000

Correct! b. $168,000

If a company has $152,000 of revenues, declares and pays $55,000 in dividends, and has net income of $89,000, how much were expenses for the year? Correct! b. $63,000 a. $8,000 c. $144,000 d. Unable to determine the amount due to incomplete information.

Correct! b. $63,000

Which one of the following groups is considered an internal user of financial statements? c. The financial analysts for a brokerage firm who are preparing recommendations for the firm's brokers on companies in a certain industry Correct! d. Factory managers who supervise production line workers a. A bank reviewing a loan application from a corporation b. The labor union representing employees of a company that is involved in labor negotiations

Correct! d. Factory managers who supervise production line workers

Lynx Corp.The data presented below for Lynx Corp. are for the year ended December 31, 2017: Sales (100% on credit) $1,000,000 Sales returns 30,000 Accounts receivable (December 31, 2017) 170,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31, 2017) 1,300 Estimated amount of uncollectible accounts based on aging analysis 14,000 See the data for Lynx Corp.If Lynx Corp. uses the aging of accounts receivable approach to estimate its bad debts, what amount will be reported as bad debts expense for 2017? ​ ​ b. $13,700 c. $14,000 Correct! a. $12,700 d. $15,300

a. $12,700

On January 2, 2017, Hi-Tech Master Construction, Inc. issued $500,000, ten-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8%, and the market rate is 6%. The annual cash payment (paid in semiannual payments) on the bonds is c. $20,000. Correct! a. $40,000. d. $15,000. b. $30,000.

a. $40,000.

On January 1, 2017, Sharpsburg, Inc. issued $400,000, ten-year, 10% bonds for $354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%. What is the carrying value of the bonds at the end of the ten years? b. $480,000 c. $380,000 d. $354,200 Correct! a. $400,000

a. $400,000

In 2017, Morton Co. sold 100 hot air balloons at $4,000 each. The balloons carry a five-year warranty for defects. Morton estimates that repair costs will average 4% of the total selling price. The estimated warranty liability at the beginning of the year was $42,000. $11,000 in claims was actually incurred during the year to honor their warranty. What was the balance of the estimated warranty liability at the end of the year Correct! a. $47,000 b. $42,000 d. $5,000 c. $37,000

a. $47,000

CarWorks Company has 100,000 authorized shares of $4 par common stock. The company issued 40,000 shares at $8. Subsequently, CarWorks declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the Retained Earnings account to paid-in capital accounts as a result of the stock dividend? a. $8,800 d. $6,400 c. $3,200 b. $4,800

a. $8,800

Carrington, Inc. recorded $97,000 in salary expense for January 2017. Its beginning balance in salaries payable was $3,000, and its ending balance was $4,000. How much was paid in cash for salaries during January 2017? You Answered b. $97,000 d. $99,000 c. $98,000 Correct Answer a. $96,000

a. $96,000

If you must calculate the present value of an amount at 12% compounded quarterly for two years, then the interest factor used in the calculation is d. None of these are correct Correct Answer a. 3% for eight periods. c. the interest factor for 12% for two periods divided by 4. You Answered b. 12% for eight periods.

a. 3% for eight periods.

The following set of items describes activities completed by a company in purchasing and paying for merchandise. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. All documents attached to an invoice approval form are canceled before a check is signed. d. cannot be determined. b. Violates sound internal control procedures c. Neither strengthens nor violates internal control Correct! a. Adheres to sound internal control procedures

a. Adheres to sound internal control procedures

Which of the following statements with regard to large stock dividends is true? b. Retained earnings is reduced by the market value of the stock issued in the stock dividend. d. As the result of a 50% stock dividend, a stockholder who had previously held 20 shares will then hold 40 shares. a. As a result of the stock dividend, retained earnings is reduced by the par value of the stock issued. c. If the market price of the stock before a 50% stock dividend is $30, after the stock dividend it will be $45.

a. As a result of the stock dividend, retained earnings is reduced by the par value of the stock issued.

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded? Correct! a. Assets decrease and stockholders' equity decreases. c. Assets decrease and liabilities decrease. b. Assets increase and stockholders' equity increases. d. Liabilities increase and stockholders' equity decreases.

a. Assets decrease and stockholders' equity decreases.

Which one of the following is an accurate description of Allowance for Doubtful Accounts? c. Revenue account d. Expense account Correct! a. Contra account b. Liability account

a. Contra account

Happy Corporation leased a building from Sensor Company. The ten-year lease is recorded as a capital lease. The annual payments are $10,000, and the recorded cost of the asset is $67,100. The straight-line method is used to calculate depreciation. Which of the following statements is true? d. No interest expense will be recorded by Happy Corporation. Correct! a. Depreciation expense of $6,710 will be recorded each year. b. Depreciation expense of $10,000 will be recorded each year. c. No depreciation expense will be recorded by Happy Corporation.

a. Depreciation expense of $6,710 will be recorded each year.

Fall Corp. uses plant assets that are subject to rapid decreases in value due to obsolescence and physical deterioration. Which of the following depreciation methods is most appropriate to measure the decline in the usefulness of the company's assets? b. Revenue expenditure method c. Straight-line d. Units-of-production Correct! a. Double-declining-balance

a. Double-declining-balance

Wagner's Bookstore acquires a 6%, $12,000 certificate of deposit on September 1. The term of the CD is six months. At that time, all principal and accrued interest will be paid in cash. Indicate the effect on the financial statements at December 31. b. Interest Receivable increases $360, Interest Revenue increases $360 d. Interest Receivable increases $720, Interest Revenue increases $720 Correct! a. Interest Receivable increases $240, Interest Revenue increases $240 c. Interest Receivable increases $480, Interest Revenue increases $480

a. Interest Receivable increases $240, Interest Revenue increases $240

Yellow Dog Transit sold an old truck on December 31, 2017, for $18,400 cash. The following data were available when the truck sold: Acquisition cost $75,000 Estimated residual value at time of acquisition 8,000 Accumulated depreciation on December 31, 2017, after adjustment 53,600 ​ When this transaction is recorded, it should include a(n) Correct! a. Loss on Disposal account for $3,000. d. Gain on Disposal account for $5,000. c. Gain on Disposal account for $3,000. b. decrease of $21,400 to the Truck account.

a. Loss on Disposal account for $3,000.

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement? b. Market rate d. Yield rate c. Effective rate Correct! a. Nominal rate

a. Nominal rate

. On December 1, 2017, Vonn Corporation paid $8,000 rent in advance. The rent per month is $1,000. If Vonn's accounting period ends on December 31, 2017, what will be reported on the financial statements? d. Rent Revenue of $7,000 on its 2017 income statement Correct! a. Prepaid Rent of $7,000 on its balance sheet at December 31, 2017 b. Prepaid Rent of $8,000 on its balance sheet at December 31, 2017 c. Rent Expense of $8,000 on its 2017 income statement

a. Prepaid Rent of $7,000 on its balance sheet at December 31, 2017

Which one of the following is not a major category for long-term assets? d. Investments c. Intangibles b. Property, plant, and equipment Correct! a. Receivables

a. Receivables

The asset account, Supplies, has a balance of $700 on January 1. During January, the company purchased $16,000 of supplies on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance of $900. Which one of the following is a correct amount to be reported on the company's financial statements for the month ending January 31? Correct! a. Supplies Expense—$15,800 b. Supplies on Hand—$700 d. Supplies Expense—$16,700 c. Accounts Payable—$15,800

a. Supplies Expense—$15,800

. At the end of 2017, Mirror Productions determined that one of its copyrights was worthless. The copyright had a cost of $320,000. The copyright had been amortized for eight years of its estimated 25-year legal life. Which of the following statements is the justification for removing the remaining cost of the copyright from the accounting records? d. The cost of the copyright has usefulness that will impact the net income of future accounting periods. b. The federal government does not allow copyrights to be recorded as assets once they are deemed worthless. Correct! a. The copyright no longer represents a future benefit to the company. c. The cost of the copyright represents an obligation to return capital contributions to the stockholders.

a. The copyright no longer represents a future benefit to the company.

Borden Company incurred the following costs to acquire and prepare land for a new parking lot: purchase price for land, cost to clear the land, cost of paving, lighting for the parking lot, and landscaping for the parking lot. How should the company determine which costs should be recorded as Land Improvements and which cost should be recorded as Land? b. The costs with a limited life will increase Land, and the costs with an unlimited useful life will increase Land Improvements. c. The costs to be depreciated will increase Land, and the costs that will not be depreciated will increase Land Improvements. Correct! a. The costs with an unlimited life will increase Land, and the costs with a limited useful life will increase Land Improvements. d. Costs that are depreciable will increase Land Improvements, while other costs are expensed immediately because of a lack of definite life.

a. The costs with an unlimited life will increase Land, and the costs with a limited useful life will increase Land Improvements.

Which one of the following statements is true? b. Financing activities involve the acquisition of property, plant and equipment. c. Borrowed funds are a more permanent source of financing than funds invested by owners. Correct! a. The two primary sources of financing available to corporations are borrowed funds and funds invested by owners. d. Investing activities involve the selling of products or services and the incurring of expenses related to selling these products and services.

a. The two primary sources of financing available to corporations are borrowed funds and funds invested by owners.

The Retained Earnings account balance for a large corporation is $10,000,000. This amount represents c. the amount of cash available for dividends. b. cash in the bank. a. earnings that have not been distributed to shareholders. d. revenues for all past years of operations.

a. earnings that have not been distributed to shareholders.

A bank loaned Darden Company $10,000 on a one-year, 6% note, but deducted the interest in advance. The journal entry made by Darden to record receipt of the cash would include a(n) Correct! a. increase in cash for $9,400. c. decrease in notes payable for $10,600. b. increase in cash for $600. d. decrease in notes payable for $9,400.

a. increase in cash for $9,400.

Executive, Inc. has a weekly payroll of $10,000 for a five-day workweek, Monday through Friday. If December 31, the last day of the accounting year, falls on Thursday, Executive would make an adjusting entry that would d. increase wages payable by $2,000. b. decrease wages payable by $2,000. Correct! a. increase wages expense by $8,000. c. decrease cash by $8,000.

a. increase wages expense by $8,000.

Arco Corporation declared a cash dividend on June 2 of $6 per common share. The company has 2,000 shares of common stock authorized, 1,000 shares issued, and 200 in the treasury. The entry to record the declaration of the cash dividend increases a(n) d. stockholders' equity account. b. asset. a. liability. c. expense.

a. liability.

Because of changing market conditions, Friendly Corporation made the decision to redeem $300,000 of its bonds prior to maturity. The bonds had been issued at a discount and the balance in the discount account at the time of redemption was $15,000. The corporation's bond certificates indicated that the bonds could be retired early at 103. Friendly's retirement of the bonds would result in a(n) b. gain of $6,000. d. increase in assets of $15,000. Correct! a. loss of $24,000. c. decrease in owners' equity of $9,000.

a. loss of $24,000.

On January 1, 2017, the Long-Term Liability section of Eden Company's balance sheet showed a balance of $35,000 in the Bonds Payable account. On December 31, 2017, the balance in that same account was $20,000. This change would appear on the statement of cash flows as an c. outflow of cash of $15,000 in the Investing Activities category. b. inflow of cash of $15,000 in the Financing Activities category. You Answered d. inflow of cash of $15,000 in the Investing Activities category. Correct Answer a. outflow of cash of $15,000 in the Financing Activities category.

a. outflow of cash of $15,000 in the Financing Activities category.

. On January 1, 2017, the Long-Term Liability section of Quick Silver Co.'s balance sheet showed a balance of $800,000 in the Bonds Payable account. On December 31, 2017, the balance in that same account was $765,000. This change would appear on the statement of cash flows as an You Answered d. inflow of cash of $35,000 in the Investing Activities category. c. outflow of cash of $35,000 in the Investing Activities category. Correct Answer a. outflow of cash of $35,000 in the Financing Activities category. b. inflow of cash of $35,000 in the Financing Activities category.

a. outflow of cash of $35,000 in the Financing Activities category.

All of the following statements are true about a 3-for-1 split, except d. a stockholder with 20 shares before the split owns 60 shares after the split. a. total contributed capital increases. b. the market price will probably decrease. c. par value per share is reduced to one-third of what it was before the split.

a. total contributed capital increases.

Gear Shop purchased supplies at a cost of $1,000 during the year. At January 1, the beginning balance in the Supplies account was $300. At December 31, supplies on hand are $100. Determine supplies expense for the year Correct! b. $1,200 c. $1,100 a. $1,300 d. $1,400

b. $1,200

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​How much would have to be deposited in a savings account earning 6%, so that equal annual withdrawals of $200 can be made at the end of each of ten years? The balance at the end of the last year would be zero. a. $528 c. $2,000 d. $2,636 Correct! b. $1,472

b. $1,472

Bennington Corp. issued a $40,000, ten-year bond at the face rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period? d. $4,000 a. $800 Correct! b. $1,600 c. $3,200

b. $1,600

Cranberry Corp. constructed equipment to manufacture a new line of home products during 2017. The average balance of accumulated expenditures on the equipment during September through December 2017 was $500,000. Construction started on September 1, 2017, and was still in progress at the end of 2017. If Cranberry borrowed $500,000 for one year on September 1, 2017, to finance the construction, and the interest rate on the construction loan was 6%, how much interest can Cranberry capitalize as part of the equipment cost for 2017? c. $20,000 a. $0 d. $30,000 Correct! b. $10,000

b. $10,000

Royal Company purchased a dump truck at the beginning of 2015 at a cost of $60,000. The truck had an estimated life of six years and an estimated residual value of $24,000. On January 1, 2017, the company made major repairs of $20,000 to the truck that extended the life one year. Thus, starting with 2017, the truck has a remaining life of five years and a new salvage value of $8,000. Royal uses the straight-line depreciation method. What amount should be recorded as depreciation expense each year starting in 2017? c. $13,600 d. $14,400 a. $6,000 Correct! b. $12,000

b. $12,000

Lynx Corp.The data presented below for Lynx Corp. are for the year ended December 31, 2017: Sales (100% on credit) $1,000,000 Sales returns 30,000 Accounts receivable (December 31, 2017) 170,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31, 2017) 1,300 Estimated amount of uncollectible accounts based on aging analysis 14,000 See the data for Lynx Corp.If Lynx Corp. uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debts expense? Correct! b. $156,000 c. $167,000 c. $167,000 a. $140,000

b. $156,000

On January 2, 2017, Garage Master Construction, Inc. issued $500,000, ten-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. The interest expense on the bonds at June 30, 2017, is You Answered a. $2,764. Correct Answer b. $17,236. d. $22,764. c. $20,000.

b. $17,236.

In 2017, Aspinwall Company issued $200,000 of bonds for $175,000. If the face rate of interest was 9% and the effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds using the effective interest method? d. $10,000 × 9% a. $175,000 × 7.99% Correct Answer b. $175,000 × 9% You Answered c. $10,000 × 7.99%

b. $175,000 × 9%

Verilux Company sold merchandise to Flight Corp. on November 1, 2017, for $10,000. Verilux accepted a promissory note from Flight Corp. for $10,000. The note has a term of five months and a stated interest rate of 7%. Verilux's accounting period ends on December 31, 2017. What amount should Verilux recognize as interest revenue on the maturity date of the note? Correct Answer b. $175.00 a. $0 d. $420.00 You Answered c. $291.67

b. $175.00

In 2017, Baloga Heating Company sold 400 water heaters for $350 each. The water heaters carry a two-year warranty for repairs. Baloga estimates that repair costs will average 2% of the total selling price. How much is recorded in the warranty liability account as a result of selling the water heaters during 2017? Correct! b. $2,800 a. $4,200 c. $1,400 d. No liability should be recorded until the water heaters are brought back for repairs.

b. $2,800

If a company purchases $3,000 worth of inventory with terms of 1/15, n/30 and pays within 15 days, then the amount paid to the seller would be a. $2,550. You Answered c. $3,000. d. $3,030. Correct Answer b. $2,970.

b. $2,970.

In 2017, Scranton, Inc. sold 2,000 carpets for $50 each. The carpets carry a two-year warranty for repairs. Scranton estimates that repair costs will average 3% of the total selling price. What amount would be recorded in the warranty liability account as a result of selling the carpets during 2017? Correct! b. $3,000 a. $1,500 d. No liability should be recorded until the carpets are returned for repairs. c. $50

b. $3,000

Vake purchased supplies at a cost of $18,000 during 2017. At January 1, 2017, the beginning balance in the Supplies account was $1,000. For 2017, supplies expense was $16,000. How much "Supplies" are on hand as of December 31, 2017? c. $16,000 d. $17,000 Correct! b. $3,000 a. $1,000

b. $3,000

The current balance sheet of Blawnox Inc. reports total assets of $20 million, total liabilities of $2 million, and owners' equity of $18 million. Blawnox Inc. is considering several financing possibilities in order to expand operations. What is the additional amount that Blawnox Inc. can borrow and not exceed a debt-to-equity ratio of 0.3? Correct! b. $3.4 million d. $4.0 million a. $5.4 million c. $5.5 million

b. $3.4 million

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​Denise wants to help pay for her niece's college tuition. Her niece will begin college in one year. How much would Denise need to put into a savings account today at 6% so that her niece can withdraw $10,000 per year for four years and reduce the account balance to zero at the end of the four years? d. $37,720 You Answered c. $37,600 Correct Answer b. $34,650 a. $31,680

b. $34,650

The data presented below are for Falconi, Inc. for 2017. Credit sales during the year $2,100,000 Accounts receivable—December 31, 2017 395,000 Allowance for doubtful accounts—December 31, 2017 20,000 Bad debts expense for the year 17,000 ​ What amount will Falconi show on its year-end balance sheet for the net realizable value of its accounts receivable? a. $378,000 d. $ 20,000 Correct! b. $375,000 c. $358,000

b. $375,000

A company's weekly payroll amounts to $50,000 and payday for the week is every Friday. Employees work five days per week, Monday through Friday. The appropriate journal entry was recorded at the end of the accounting period, Monday, March 31, 2017. What amount is wages expense for April for the payday, Friday, April, 4, 2017? Correct! b. $40,000 c. $10,000 d. $50,000 a. $0

b. $40,000

Masters Company borrowed on a one-year, 10%, $150,000 note on May 1, with interest and principal to be paid at maturity. How much interest payable will be reported on Masters' balance sheet as of November 30 of the same year? Correct Answer b. $8,750 a. $7,500 You Answered c. $15,000 d. $30,000

b. $8,750

What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded? d. Stockholders' equity increases and decreases by the same amount. Correct! b. Assets increase and stockholders' equity increases. c. Assets decrease and liabilities decrease. a. Assets increase and liabilities increase.

b. Assets increase and stockholders' equity increases.

. How are assets that are expected to be realized in cash, sold, or consumed within the normal operating cycle of a business or within one year (if the operating cycle is shorter than one year) reported on a classified balance sheet? Correct! b. Current assets d. Current liabilities a. Property, plant, and equipment c. Intangible assets

b. Current assets

. [APPENDIX] Debbie and Alex formed a new partnership. The partnership agreement specified that income should be allocated in a 2-to-1 ratio, with Debbie receiving the larger portion. If revenue for the first year was $90,000 and expenses were $60,000, how much would be allocated to each partner? c. Debbie—$60,000; Alex—$30,000 a. Debbie—$45,000; Alex—$45,000 b. Debbie—$20,000; Alex—$10,000 d. Debbie—$40,000; Alex—$20,000

b. Debbie—$20,000; Alex—$10,000

Genuine Parts received a promissory note from a customer on March 1, 2017. The face amount of the note is $8,000; the terms are 90 days and 9% interest. At the maturity date, the customer pays the amount due for the note and interest. What entry is required on the books of Genuine Parts on the maturity date assuming none of the interest had already been recognized? Correct Answer b. Increase Cash, $8,180; increase Interest Revenue, $180; and decrease Notes Receivable, $8,000 You Answered c. Increase Cash, $8,720; decrease Notes Receivable, $8,000; and increase Interest Revenue, $720 d. No entry required; the customer pays amount due to the bank a. Increase Cash, $8,000; and decrease Notes Receivable, $8,000

b. Increase Cash, $8,180; increase Interest Revenue, $180; and decrease Notes Receivable, $8,000

Biglersville Corp. purchased equipment at the beginning of 2017 for $16,000. Biglersville Corp. decided to depreciate the equipment over a five-year period using the straight-line method. Biglersville Corp. estimated the equipment's residual value at $1,000. The estimated fair market value at the end of 2017 was $15,000. Which of the following statements is correct concerning Biglersville Corp.'s financial statements at December 31, 2017? Correct! b. The book value of the equipment is $13,000. c. The total accumulated depreciation is $1,000. a. The book value of the equipment is $30,000. d. The equipment will be reported on the balance sheet at it fair market value of $15,000.

b. The book value of the equipment is $13,000.

Which of the following statements about bonds is correct? d. The difference between the interest expense and the interest paid is deducted from the carrying value of the bonds if bonds were sold at a discount. Correct! b. The cash interest paid is calculated as the bond face value × the face rate of interest. a. The cash interest paid is calculated as the bond face value × the effective rate of interest. c. The difference between the cash interest paid and the interest expense is added to the carrying value of the bonds if bonds were sold at a premium.

b. The cash interest paid is calculated as the bond face value × the face rate of interest.

Which one of the approaches for the allowance method of accounting for bad debts emphasizes matching bad debts expense with revenue on the income statement? d. The uncollectible approach c. The direct write-off method Correct! b. The percentage of net credit sales approach a. The percentage of accounts receivable approach

b. The percentage of net credit sales approach

Which of the following is not a requirement of a company's external auditors under the Sarbanes-Oxley Act? They must give an opinion that the company maintained an effective internal control system over financial reporting. d. All of these are requirements of a company's external auditors the Sarbanes-Oxley Act. Correct! b. They must design and implement an effective information system design. c. They cannot perform any brokerage services for the company.

b. They must design and implement an effective information system design.

Amortization of a bond discount results in a(n) a. decrease in the bonds payable account. Correct! b. decrease in stockholders' equity. d. decrease in the Cash account. c. increase in stockholders' equity.

b. decrease in stockholders' equity.

An invoice received from a supplier for $8,000 on January 1 with terms 1/15, n/30 means that the company should pay Correct! b. either $7,920 before January 16 or $8,000 before the end of the month. c. $8,000 between January 2 and January 16. a. $7,920 before the end of January. d. $6,800 before January 16.

b. either $7,920 before January 16 or $8,000 before the end of the month.

Boston Trombley Company is a defendant in a lawsuit alleging damages of $3 billion. The litigation is anticipated to continue for several years, but no reasonable estimate can be made at this time regarding ultimate financial responsibility. This situation is an example of a(n) d. None of these are correct. Correct! b. loss contingency that should be disclosed in the notes to Boston's financial statements. a. $3 billion expense to be recorded in the income statement during the year of the suit. c. estimated liability that must appear in Boston Trombley Company's balance sheet.

b. loss contingency that should be disclosed in the notes to Boston's financial statements.

If a company has both common and preferred shares outstanding and wishes to calculate book value per share, d. stockholders' equity, less the cost of treasury shares held, must be divided by the number of common shares outstanding. c. stockholders' equity must be divided by the total number of both classes of stock. a. net assets must be divided by the total number of both classes of stock. b. net assets, less the redemption value of the preferred stock, must be divided by the number of shares of common stock outstanding.

b. net assets, less the redemption value of the preferred stock, must be divided by the number of shares of common stock outstanding

Harkin Company purchased a building on a tract of land and allocated the entire cost of the purchase to building. Normally, it depreciates buildings over 20 years using the straight-line method with zero residual value and does not depreciate land. Because of its accounting treatment of the purchase, Harkin's income before taxes for the next 20 years will be You Answered a. overstated. d. in conformance with GAAP. Correct Answer b. understated. c. unaffected.

b. understated.

Prairie Charters reported the following information at December 31, 2017: Common stock, $1 par, 500,000 shares authorized, 100,000 shares issued $100,000 Additional paid-in capital—common 25,000 Retained earnings 75,000 Total stockholders' equity $200,000 The average recorded value per share of common stock at December 31, 2017, is d. $2.50. a. $1.00. c. $1.25. b. $1.75.

c. $1.25.

Roman Industries' plant operates five days per week with a daily payroll of $6,000. Employees are paid every Saturday for the workweek just completed (Monday through Friday). The last day of the month is Wednesday, March 31. What is the amount of Wages Expense recorded on the next payday, Saturday, April 3? b. $30,000 Correct Answer c. $12,000 You Answered a. $0 d. $18,000

c. $12,000

Benton CorporationThe data below are for Benton Corporation for 2017. Accounts Receivable—January 1, 2017 $334,000 Credit sales during 2017 850,000 Collections from credit customers during 2017 725,000 Customer accounts written off as uncollectible during 2017 12,000 Allowance for doubtful accounts (credit balance) (after write-off of uncollectible accounts) ​ 1,700 Estimated uncollectible accounts based on an aging analysis 13,200 Refer to the data for Benton Corporation.If the aging approach is used to estimate bad debts, what should the balance in Allowance for Doubtful Accounts be after the bad debts adjustment? Correct! c. $13,200 a. $26,900 d. $13,300 b. $14,900

c. $13,200

Harbor City Corporation's end-of-year balance sheet consisted of the following amounts: ​ Cash $ 15,000 Accounts receivable $50,000 Property, plant, and equipment 70,000 Long-term debt 40,000 Capital stock 100,000 Accounts payable 20,000 Retained earnings ? Inventory 35,000 ​ What amount should Harbor City report on its balance sheet for total assets? b. $155,000 d. $190,000 Correct! c. $170,000 a. $110,000

c. $170,000

Genuine Parts received a promissory note from a customer on March 1, 2017. The face amount of the note is $8,000; the terms are 90 days and 9% interest. What amount of interest will Genuine Parts receive when the note is paid? Correct! c. $180 d. $720 a. $60 b. $90

c. $180

. Realistic Sound's unadjusted bank balance amounted to $3,000. Outstanding checks amounted to $500 and deposits in transit totaled $300. Based on this information alone, Realistic's adjusted cash balance is Correct! c. $2,800. b. $3,300. a. $3,200. d. $2,700.

c. $2,800

Redfern Company has current assets of $150,000 and current liabilities of $60,000. How much inventory could it purchase on account and achieve its minimum desired current ratio of 2 to 1? a. $10,000 d. $40,000 b. $20,000 Correct! c. $30,000

c. $30,000

Shidan Apartments purchased an apartment building to rent to university students on November 18, 2017. The following costs were incurred during 2017, before the tenants moved in: Purchase price of the building $220,000 Purchase price of the land 100,000 Transfer taxes 10,000 Interest incurred on the mortgage loan to purchase 4,000 Attorney and real estate agent's fees 15,000 Repave the parking lot 6,000 ​ How much will Shidan Apartments record as an asset? d. $355,000 Correct! c. $351,000 b. $345,000 a. $320,000

c. $351,000

Taylor Corp. identified the following data in preparing a bank reconciliation on October 31, 2017. Bank statement balance $29,600 Taylor's book balance (before adjustments) ? Outstanding checks 3,100 NSF check 300 Service charge 200 Deposits in transit 2,200 Interest earned on checking account 100 ​​ What is the net amount of the adjustments to Taylor's cash balance as a result of the bank reconciliation? Correct Answer c. $400 decrease b. $400 increase a. No amounts need to be recorded. You Answered d. $900 decrease

c. $400 decrease

Mayflower Company had a machine with a cost of $123,000 and accumulated depreciation of $87,000 that was sold at for a gain of $5,000. What amount of cash was received from the sale b. $36,000 a. $30,000 Correct! c. $41,000 d. $128,000

c. $41,000

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​Kingston inherited $140,000 from an aunt. If Kingston decides not to spend his inheritance but to leave the money in his savings account until he retires in 15 years, how much money will he have assuming an annual interest rate of 8%, compounded semiannually? a. $308,000 Correct! c. $454,020 d. $7,851,900 b. $509,880

c. $454,020

. Birken Co. purchased a building for $500,000 in 2012. At the end of 2017, when it had a book value of $450,000, it was appraised for $1,000,000. A potential buyer offered $900,000. Birken rejected the offer. What amount is in Birken's records at the end of 2017 in the Building account? a. $2,000,000 Correct! c. $500,000 d. $350,000 b. $800,000

c. $500,000

On January 2, 2017, Lawn Master Construction, Inc. issued $500,000, ten-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8%, and the market rate is 6%. What is the carrying value of the bonds at the end of ten years before the final maturity payment is made a. $574,540 b. $525,000 Correct! c. $500,000 d. $425,460

c. $500,000

On January 2, 2017, Roof Master Construction, Inc. issued $500,000, ten-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8%, and the market rate is 6%. At the maturity date, besides an interest payment, Roof Master would repay the bondholders b. $520,000. Correct! c. $500,000. d. only the last interest payment. a. $574,540.

c. $500,000.

Royal Company purchased a dump truck at the beginning of 2015 at a cost of $60,000. The truck had an estimated life of six years and an estimated residual value of $24,000. On January 1, 2016, the company made major repairs of $20,000 to the truck that extended the life one year. Thus, starting with 2017, the truck has a remaining life of five years and a new salvage value of $8,000. Royal uses the straight-line depreciation method. What is the book value of the truck to be reported on the balance sheet at December 31, 2017? d. $62,000 Correct! c. $56,000 a. $44,000 b. $50,000

c. $56,000

On December 1, 2017, Xeon Company bought land and an accompanying warehouse from Yen Company for $800,000. The fair market values of the land and the building at the time of purchase were $700,000 and $300,000, respectively. How much of the purchase price should Xeon Company allocate to the land, and how much should be allocated to the building? a. $457,143 and $342,857, respectively Correct! c. $560,000 and $240,000, respectively b. $700,000 and $300,000, respectively d. $500,000 and $300,000, respectively

c. $560,000 and $240,000, respectively

The statement of stockholders' equity for Jutras Corporation shows an increase in the Common Stock account of $8,000, an increase in Additional Paid-In Capital—Common in the amount of $22,000, and an increase in Retained Earnings of $50,000. If the stock has a par value of $3 and dividends of $10,000 were declared and paid during the year, what is the amount of net income for the year c. $60,000 a. $40,000 d. $90,000 b. $50,000

c. $60,000

. [APPENDIX] Tarr, a sole proprietorship, had the following balances and transactions during 2017: beginning capital, $40,000; contribution of cash to the business by the owner, $15,000; revenue, $60,000; expenses, $35,000; withdrawal by the owner, $5,000. What is the amount of the ending capital balance? c. $75,000 a. $40,000 b. $60,000 d. $85,000

c. $75,000

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​If interest is compounded annually, the total amount of interest on an $18,000 note payable for four years at 10% is d. $8,500. Correct! c. $8,352. a. $5,706. b. $7,200.

c. $8,352.

On November 1, 2017, Brownsville Co. borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity. The interest on this loan is stated separately. At December 31, 2017, Brownsville Co.'s overall liability for this loan amounts to b. $80,000. d. $83,200. Correct! c. $81,600. a. $84,800.

c. $81,600.

To calculate the future value of an amount that is invested at 12%, compounded quarterly, at the end of three years, the interest factor used would be Correct! c. 3% for 12 periods. a. 1% for 12 periods. b. 3% for four periods. d. 12% for three periods.

c. 3% for 12 periods.

Flagg Company issued $500,000 of bonds for $498,351. Interest is paid semiannually. The bond markets and the financial press are likely to state the bond issue price as a. 498.35. Correct! c. 99.67. d. 49.84. b. 100.00.

c. 99.67.

Emory Co. operates five days per week with a daily payroll of $4,000. Employees are paid every Saturday for the workweek just completed (Monday through Friday). The last day of the month is Wednesday, March 31. What is the effect of the correct adjustment at March 31? Correct! c. Decreases Stockholders' Equity and increases Wages Payable by $12,000 b. Increases Wages Payable and decreases Cash by $12,000 d. Increases Wages Payable and increases Wages Expense by $8,000 a. Increases Stockholders' Equity and Wages Payable by $8,000

c. Decreases Stockholders' Equity and increases Wages Payable by $12,000

Wexford Co. Wexford Co. purchased a new delivery truck at the beginning of 2017. The truck has a cost of $37,000, an estimated life of five years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2017. The truck was driven 20,000 miles during 2017 and 24,000 miles during 2018. The number of expected miles over five years is 100,000. Refer to the information about Wexford Co. ​Wexford Co. wants to use the depreciation method that will result in the highest depreciation expense for 2017. Which method should be used? b. Units-of-production Correct! c. Double-declining-balance a. Straight-line d. All methods create the same income in 2017.

c. Double-declining-balance

Wexford Co. Wexford Co. purchased a new delivery truck at the beginning of 2017. The truck has a cost of $37,000, an estimated life of five years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2017. The truck was driven 20,000 miles during 2017 and 24,000 miles during 2018. The number of expected miles over five years is 100,000. ​Refer to the information for Wexford Co. Wexford is comparing the straight-line and double-declining-balance depreciation methods. Of these two methods, which method creates the larger expense and larger tax savings in 2017? d. Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings. b. Straight-line depreciation creates both the larger expense and the larger tax savings. Correct Answer c. Double-declining-balance depreciation creates both the larger expense and the larger tax savings. You Answered a. Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings.

c. Double-declining-balance depreciation creates both the larger expense and the larger tax savings.

Which of the following statements is not true? Correct! c. IFRS do not have a specific rule that requires residual value and asset life to be reviewed annually. d. The FASB generally requires operating assets to be recorded at acquisition cost, less depreciation, and the assets' values are not changed to reflect their fair market values or selling prices. a. IFRS require that estimates of residual value and the life of the asset be reviewed at least annually and revised if necessary. b. The FASB standards do not have a specific rule that requires residual value and asset life to be reviewed annually.

c. IFRS do not have a specific rule that requires residual value and asset life to be reviewed annually.

On January 2, 2017, Hannah Company sold a machine for $1,000 that it had used for several years. The machine cost $12,000 and had accumulated depreciation of $9,000 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine? b. Loss of $11,000 d. Gain of $3,000 Correct! c. Loss of $2,000 a. Gain of $2,000

c. Loss of $2,000

Which of the following statements is correct? b. If the face rate of interest on a bond is not equal to the market rate of interest, then the company desiring to issue the bonds must reprint its bond certificates. d. The market rate of interest has no bearing on the selling price of the bonds. a. Bonds are issued at a price calculated by using the present value of the stated rate of interest on the day the bond is purchased. Correct! c. The actual issue price of a bond represents the present value of all future cash flows related to the bond.

c. The actual issue price of a bond represents the present value of all future cash flows related to the bond.

On January 2, 2017, Wynn Corporation sold $750,000 of bonds for $745,000. The bonds will mature in ten years and pay interest annually on December 31. Wynn properly recorded the payment of interest and amortization of the discount using the effective interest method. Which of the following statements is true about the carrying value of the bonds and/or the unamortized discount at the end of 2017? a. The carrying value will be less than $745,000. b. The carrying value will be $745,000. Correct! c. The carrying value will be greater than $745,000. d. The unamortized premium will be less than $5,000.

c. The carrying value will be greater than $745,000.

Lewis Corporation reported the following information for the year ended December 31, 2017: Net income $10,000 Dividends 6,000 Retained earnings at December 31, 2017 25,000 ​ What was the economic effect of the payment of Lewis's dividends? Correct! c. The dividends reduced total retained earnings for the year. a. The dividends reduced net income for 2017. d. The dividends must be paid whenever Lewis Corporation reports net income. b. The dividends should be equal to net income if the company's accounting equation is in balance.

c. The dividends reduced total retained earnings for the year.

Surplus Mining Company has leased a machine from Craft Machinery Company. The annual payments are $6,000, and the life of the lease is eight years. It is estimated that the useful life of the machine is nine years. How would Surplus Mining record the acquisition of the machine? d. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for nine years. Correct! c. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for eight years. b. The company would not record the machine as an asset but would record rent expense of $6,000 per year. a. The machine would be recorded as an asset with a cost of $48,000.

c. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for eight years.

At the end of 2017, Clock Products, Inc. determined that one of its patents was worthless. The patent had a cost of $300,000. The patent had been amortized for five years of its estimated 15-year legal life. Which of the following statements is correct? b. The patent must be reduced to 5/15, or 33.3% of its original cost and amortized over the remaining ten years. a. Clock Products must continue to amortize the patent over its remaining ten years of life. d. Clock Products must correct its financial statements for the past five years, so that the entire cost is allocated to that five-year period. Correct! c. The remaining unamortized cost must be removed from the accounting records and treated as a loss on the income statement.

c. The remaining unamortized cost must be removed from the accounting records and treated as a loss on the income statement.

Capitalizing an expenditure rather than recording it as a revenue expenditure d. has no effect on the book value of plant assets on the balance sheet or the amount of income reported on the income statement. b. affects the total book value of plant assets on the balance sheet, but has no effect on the amount of net income reported during an accounting period. a. affects the amount of net income reported during an accounting period, but has no effect on the total book value of plant assets on the balance sheet. Correct! c. affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.

c. affects the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.

The book value per share for a corporation is d. the amount stockholders would receive if they sold their shares back to the corporation. c. based on the excess of total assets over total liabilities. b. the cost of investments in stock of other corporations. a. the market price of the stock.

c. based on the excess of total assets over total liabilities.

. If technology changes rapidly, a firm should d. use the straight-line method of depreciation as it is the easiest. Correct! c. consider an accelerated rate of depreciation. a. expense plant assets immediately because of the uncertainty of future benefits. b. depreciate plant assets over long periods of time.

c. consider an accelerated rate of depreciation.

When bonds are issued by a company, the accounting entry shows an a. increase in liabilities and a decrease in stockholders' equity. You Answered b. increase in liabilities and an increase in stockholders' equity. Correct Answer c. increase in assets and an increase in liabilities. d. increase in assets and an increase in stockholders' equity.

c. increase in assets and an increase in liabilities.

. Textbooks.com accepts VISA for payments of purchases made by students. The credit card drafts are deposited directly in a bank account. VISA charges a 2% collection fee. Credit card drafts totaling $12,000 are deposited during September. The effect of recording the sales and deposits will include an a. increase in Cash for $12,000. c. increase to Accounts Receivable for $11,760. Correct! c. increase to Accounts Receivable for $11,760. d. increase in Collection Fee Expense for $240. b. increase to Sales for $11,760.

c. increase to Accounts Receivable for $11,760. d. increase in Collection Fee Expense for $240.

A company's balance sheet shows the account, Notes Payable. This resulted from a loan made by the company's bank. If the end-of-year balance in the Notes Payable account exceeds the beginning-of-year balance by $5,000, this is shown on the cash flow statement as an a. inflow of cash of $5,000 in the Operating Activities category. d. outflow of cash of $5,000 in the Financing Activities category. Correct! c. inflow of cash of $5,000 in the Financing Activities category. b. outflow of cash of $5,000 in the Operating Activities category.

c. inflow of cash of $5,000 in the Financing Activities category.

On October 1, Lawrence Company borrowed $60,000 from Fourth National Bank on a one-year, 7% note. If the company's fiscal year ends as of December 31, Lawrence should make an entry to increase b. notes payable, $1,050. Correct! c. interest payable, $1,050. a. interest expense, $4,200. d. prepaid interest, $3,150.

c. interest payable, $1,050.

Under the effective interest method, the cash paid on each interest payment date will b. increase if bonds are issued at a premium. Correct! c. remain constant regardless of the issuance price. a. decrease if bonds are issued at a premium. d. increase if bonds are issued at a discount.

c. remain constant regardless of the issuance price.

Readers of the financial pages of the daily newspaper noticed the following information with regard to the Connor Company stock: Daily high, 45.50; Daily low, 42.25; Last, 43.50; Change, +0.75. This tells readers that the d. company's stock is a popular investment. b. stock gained $3.00 in value over the previous day. a. stock was selling at 43.50% of par at the close of the day. c. stock gained $0.75 in value over the previous day.

c. stock gained $0.75 in value over the previous day.

Use the information provided in the time value of money tables (Tables 9-1 through 9-4) in the text to answer the question that follows. ​Global Company issued $1,000,000, 8%, seven-year bonds, interest payable semiannually. The market rate of interest was 6%. The issuance price of the bonds is a. $1,111,560. Correct! d. $1,112,840. b. $1,000,000. c. $1,151,480.

d. $1,112,840.

Marcos Inc. had net income for 2017 of $40,000. It declared and paid a $3,500 cash dividend in 2017. If the company's retained earnings for the end of the year was $38,200, what was the company's retained earnings balance at the beginning of 2017? a. $81,700 Correct! d. $1,700 c. $5,300 b. $74,700

d. $1,700

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​The future value of $6,000 at 12% compounded quarterly for five years is a. $6,954. Correct! d. $10,836. b. $9,600. c. $10,572.

d. $10,836.

Lynx Corp.The data presented below for Lynx Corp. are for the year ended December 31, 2017: Sales (100% on credit) $1,000,000 Sales returns 30,000 Accounts receivable (December 31, 2017) 170,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31, 2017) 1,300 Estimated amount of uncollectible accounts based on aging analysis 14,000 See the data for Lynx Corp. If Lynx Corp. estimates its bad debt to be 1% of net credit sales, what will be the balance in Allowance for Doubtful Accounts after the adjustment for bad debts? Correct! d. $11,000 c. $8,400 b. $9,700 a. $1,300

d. $11,000

Waxman Company purchased a patent for $170,000 at the beginning of 2017 and estimated that its expected useful life was ten years. The patent has a legal life of 17 years. What amount should be recorded as amortization expense for the patent in 2017? c. $10,000 Correct! d. $17,000 b. $7,000 a. $0

d. $17,000

In 2017, Morton Co. sold 150 hot air balloons at $4,000 each. The balloons carry a five-year warranty for defects. Morton estimates that repair costs will average 4% of the total selling price. The estimated warranty liability at the beginning of the year was $14,000. $20,000 in claims was actually incurred during the year to honor their warranty. What was the warranty expense for 2017? You Answered c. $20,000 b. $18,000 a. $10,000 Correct Answer d. $24,000

d. $24,000

If a company purchases $3,200 worth of inventory with terms of 2/10, n/30 on March 3 and pays April 2, then the amount paid to the seller would be b. $3,150. c. $3,168. Correct! d. $3,200. a. $3,136.

d. $3,200.

The solution to this problem requires time value of money calculations. Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​David, a high school math teacher, wants to set up an IRA account into which he will deposit $2,000 per year. He plans to teach for 20 more years and then retire. If the interest on his account is 7% compounded annually, how much will be in his account when he retires? b. $21,118 a. $4,800 Correct! d. $81,990 c. $74,458

d. $81,990

Line Corporation's balance sheet showed the following amounts for their liability and stockholders' equity accounts: Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, $2,000; and Deferred Income Taxes, $300. Total stockholders' equity was $6,000. The debt-to-equity ratio is a. 0.63. Correct! d. 1.47. b. 0.83. c. 1.42.

d. 1.47.

Which of the following statements is true with regard to early retirement of bonds? b. Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates. a. If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss. Correct! d. Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company. c. It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount.

d. Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company.

. Which of the following statements regarding leases is false? c. If a lessor classifies a lease as a capital lease, then the lessee records a lease liability on its balance sheet. a. Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash. b. Accounting recognizes two types of leases—operating leases and capital leases. Correct! d. If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet.

d. If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet.

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2017, for $9,000 and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What is the actual maturity date of the note? Correct! d. March 1, 2018 a. December 31, 2017 b. January 29, 2018 c. February 28, 2018

d. March 1, 2018

If Grove City Corp. continues to use the ship in its eleventh year, what is the correct accounting procedure? c. The company may not use it any longer. Correct! d. No longer depreciate it but leave it on the records at its book value at the end of its useful life. b. Continue to depreciate it. a. Take the asset off the books and record a gain on the disposal.

d. No longer depreciate it but leave it on the records at its book value at the end of its useful life.

What five-member body created by the Sarbanes-Oxley Act was given authority to set U.S. auditing standards? a. FASB c. IAS Correct! d. PCAOB b. SEC

d. PCAOB

Tarkington Beers, Inc. purchased the most popular and well-known pub in a college town. Its purchase price was $1,200,000. The appraisers determined that the land should be valued at $400,000, the building at $500,000, and the equipment at $200,000. Which of the following statements is correct? Correct! d. Tarkington Beers, Inc. needs to record goodwill of $100,000. c. Tarkington Beers, Inc. paid too much for the business and needs to record a loss. b. Tarkington Beers, Inc. needs to adjust the value of the assets in proportion to their appraised value so that the total of the assets equals the purchase price. a. Tarkington Beers, Inc. should record only the appraised value of the assets.

d. Tarkington Beers, Inc. needs to record goodwill of $100,000.

The balance of the $0.50 par value Common Stock account for Murdock Company was $60,000 before its recent 3-for-1 stock split. The market price of the stock was $30 per share before the stock split. What likely occurred as a result of the stock split? b. The balance in the Common Stock account likely declined to $20,000. a. The balance in the Retained Earnings account likely decreased. d. The market price of the stock likely dropped to approximately $10 per share. c. The market price of the stock was not likely affected.

d. The market price of the stock likely dropped to approximately $10 per share.

To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use which type of time value of money calculation c. The future value of an annuity a. The future value of a single amount b. The present value of a single amount Correct! d. The present value of an annuity

d. The present value of an annuity

What is the primary objective of financial reporting? b. To help management assess cash flows. a. To help investors make credit decisions. c. To protect users from fraudulent financial information. Correct! d. To provide useful information for decision making

d. To provide useful information for decision making

Comprehensive income is d. an all-inclusive approach to income that includes transactions that affect stockholders' equity with the exception of those transactions that affect owners. c. reporting all items that are not under management's control on the statement of retained earnings. a. considered an appropriation of retained earnings when reported in the Stockholders' Equity section of the balance sheet. b. the result of all events and transactions that affect income during the accounting period that are reported on the income statement.

d. an all-inclusive approach to income that includes transactions that affect stockholders' equity with the exception of those transactions that affect owners.

Comfort Shoes received a promissory note from a customer on April 1, 2017. The face amount of the note is $2,000; the terms are 12 months and 8% annual interest. At the maturity date, the customer pays for the note and interest. Comfort Shoes made the proper adjustment at the end of December for interest. The effect of recognizing the transaction on the maturity date is a(n) a. decrease to Cash. c. increase to Discount on Notes Receivable. b. increase to Notes Receivable. Correct! d. decrease to Notes Receivable.

d. decrease to Notes Receivable.

Boalsburg Co. purchased a truck on January 1, 2015, for $30,000. The truck had an estimated life of five years and an estimated residual value of $5,000. Boalsburg used the straight-line method to depreciate the asset. On July 1, 2017, the truck was sold for $17,000 cash. The journal entry to record the sale of the truck in 2017 b. increases total assets. Correct! d. decreases stockholders' equity. a. increases net income. c. decreases total expenses.

d. decreases stockholders' equity.

On November 1, 2017, Brownsville Co. borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity. The interest on this loan is stated separately. At December 31, 2017, the adjustment for this note includes a(n) a. increase to interest expense for $3,200. c. decrease to cash for $4,800. b. increase to notes payable for $1,600. Correct! d. increase to interest payable for $1,600.

d. increase to interest payable for $1,600.

Measurement of the economic effects on an entity involves each of the following except a. quantification of effects. c. selection of an appropriate unit of measure. b. identification of the attribute to be measured. Correct! d. recording the economic effects in the financial statements.

d. recording the economic effects in the financial statements.

In preparing financial statements, accountants should consider all of the following except a. the objectives of financial reporting. c. the most useful way to display the information found on the financial statements. Correct Answer d. the presentation of the value of a company. You Answered b. the characteristics that make accounting information useful.

d. the presentation of the value of a company.

You are a potential stockholder and are concerned that a particular company you are ready to invest in might have too much debt. Which financial statement would provide you with information needed in order to evaluate your concern? a. Income statement c. Statement of retained earnings Correct! b. Balance sheet d. Statement of Cash flows.

! b. Balance sheet

Which of the following statements does not present financial information based on the accrual basis of accounting? Correct! d. Statement of cash flows b. Income statement a. Balance sheet c. Statement of retained earnings

d. Statement of cash flows

How is the balance sheet linked to the other financial statements? a. The amount of retained earnings reported on the balance sheet is equal to net income. d. There is no link between the balance sheet and other statements, as each contains different accounts and provides different information. b. Retained earnings is added to total assets and reported on the balance sheet. Correct Answer c. Net income increases retained earnings on the statement of retained earnings, which ultimately increases retained earnings on the balance sheet.

Net income increases retained earnings on the statement of retained earnings, which ultimately increases retained earnings on the balance sheet.

Which statement summarizes the income earned and the dividends paid? c. Balance sheet You Answered d. Income statement a. Statement of cash flows Correct Answer b. Statement of retained earnings

Statement of retained earnings

During its fifth year of operations, Bright Creations Company reports a beginning cash balance of $132,000, cash inflows from investing activities of $210,000, cash outflows for financing activities of $79,000, and cash outflows for operating activities of $13,000. What was Bright Creations' cash balance at the end of the fifth year? c. $276,000 d. $132,000 b. $434,000 Correct! a. $250,000

a. $250,000

Oreo Company has current assets of $20,000, current liabilities of $8,000, and long-term liabilities of $3,000. Oreo wants to buy new equipment. How much of its existing cash can Oreo use to acquire equipment without allowing its current ratio to decline below 2.0 to 1? d. $12,000 b. $8,000 c. $10,000 Correct! a. $4,000

a. $4,000

Marcos Company reported the following items on its financial statements for the year ending December 31, 2017: ​ Sales $560,000 Cost of goods sold $410,000 Salary expense 40,000 Interest expense 30,000 Dividends 20,000 Income tax expense 25,000 ​ How much will be reported as net income on Marcos' balance sheet at December 31, 2017, if this is the first year of operations? Correct! a. $55,000 b. $65,000 c. $85,000 d. Not enough information is provided.

a. $55,000

On January 15, 2017, the accounts receivable balance was $7,000 and the balance in Allowance for Doubtful Accounts was $700. On January 16, 2017, a $200 uncollectible account was written off. The net realizable value of accounts receivable on January 16 immediately after the write-off is c. $6,500. Correct! a. $6,300. b. $6,800. d. $7,900.

a. $6,300

The following set of items describes activities completed by a company in collecting cash for merchandise sales. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures. ​Cash register tapes are picked up on a regular basis each day by an employee from the accounting department. b. Violates sound internal control procedures d. Cannot be determined. Correct! a. Adheres to sound internal control procedures c. Neither strengthens nor violates internal control

a. Adheres to sound internal control procedures

Jones, Inc., a manufacturer of tires, has given you its most recent annual report in an effort to obtain a sizable loan. The company is very profitable and appears to have a sound financial position. Based on a report presented on prime-time television last night, you are aware that Jones is a defendant in several lawsuits related to its defective tires that cause vehicles to overturn. The information presented on television is an example of financial information that is b. consistent. Correct! a. relevant. d. comparable. c. predictable.

a. relevant.

Which of the following statements does not describe the responsibilities of a company's internal audit staff? b. Internal auditors focus on the efficiency with which the organization is run. c. Internal auditors help ensure that the company's policies and procedures are followed. d. Internal auditors periodically review both accounting and administrative controls. Correct! a. Internal auditors ensure that the company's financial statements have been presented fairly.

a. Internal auditors ensure that the company's financial statements have been presented fairly.

Which of the following is not a generally recognized internal control procedure? Correct Answer a. Internal review by the audit committee of the board of directors You Answered b. Independent verification of the work of one employee by another employee d. Segregation of duties c. Independent review and appraisal by internal auditors

a. Internal review by the audit committee of the board of directors

The data presented below are for Falconi, Inc. for 2017. Credit sales during the year $2,100,000 Accounts receivable—December 31, 2017 295,000 Allowance for doubtful accounts—December 31, 2017 28,000 Bad debts expense for the year 17,000 ​ What is the effect on net accounts receivable when Falconi records its estimate for bad debts expense using the allowance method? d. Net accounts receivable both increase and decrease. c. Net accounts receivable stay the same. b. Net accounts receivable increase. Correct! a. Net accounts receivable decrease.

a. Net accounts receivable decrease.

A company forgot to record four adjustments during 2017. Which one of the following omissions of adjustments will understate net income? Correct! a. Sales made during the last week of the period are not recorded. c. Prepaid insurance is not reduced for the portion of the policy that has expired during the period. d. Income taxes owed but not yet paid are ignored. b. Interest on monies borrowed has not yet been recorded.

a. Sales made during the last week of the period are not recorded.

Which internal control procedure is violated when the cashier at the checkout stand also records the daily receipts in the journal? c. Independent verification d. Proper authorizations Correct! a. Segregation of duties b. Independent review and appraisal

a. Segregation of duties

Which one of the following is an example of an accrued liability? c. An insurance policy that expires in a future period has been acquired. Correct! a. Wages have been earned by employees, but have not been paid at the end of the period. b. Equipment that will benefit several periods has been purchased. d. Supplies are purchased and used over several months.

a. Wages have been earned by employees, but have not been paid at the end of the period.

Benton CorporationThe data below are for Benton Corporation for 2017. Accounts Receivable—January 1, 2017 $334,000 Credit sales during 2017 850,000 Collections from credit customers during 2017 725,000 Customer accounts written off as uncollectible during 2017 12,000 Allowance for doubtful accounts (credit balance) (after write-off of uncollectible accounts) ​ 1,700 Estimated uncollectible accounts based on an aging analysis 13,200 Refer to the data for Benton Corporation.If the aging approach is used to estimate bad debts, what amount should be recorded as bad debts expense for 2017? a. $2,900 d. $26,900 You Answered c. $23,500 Correct Answer b. $11,500

b. $11,500

On January 1, 2017, Accounts Receivable and Allowance for Uncollectible Accounts for Darius Company carried balances of $20,000 and $550, respectively. During the year, the company reported $70,000 of credit sales. There were $400 of receivables written off as uncollectible in 2017. Cash collections of receivables amounted to $74,700. The company estimates that it will be unable to collect 5% of the year-end accounts receivable balance. ​The net realizable value of receivables appearing on the 2017 balance sheet will amount to Correct! b. $14,155. d. $15,450. c. $14,900. a. $14,105.

b. $14,155.

On January 1, 2017, Accounts Receivable and Allowance for Uncollectible Accounts for Darius Company carried balances of $20,000 and $550, respectively. During the year, the company reported $70,000 of credit sales. There were $400 of receivables written off as uncollectible in 2017. Cash collections of receivables amounted to $74,700. The company estimates that it will be unable to collect 5% of the year-end accounts receivable balance. ​The amount of bad debts expense recognized in the 2017 income statement will be: c. $745. Correct Answer b. $595. You Answered a. $545. d. $795.

b. $595.

Lynx Corp.The data presented below for Lynx Corp. are for the year ended December 31, 2017: Sales (100% on credit) $1,000,000 Sales returns 30,000 Accounts receivable (December 31, 2017) 170,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31, 2017) 1,300 Estimated amount of uncollectible accounts based on aging analysis 14,000 ​ ​See the data for Lynx Corp.If Lynx Corp. estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debts expense for 2017? c. $1,700 a. $9,560 d. None of these are correct Correct! b. $9,700

b. $9,700

For several years, Bosco Corporation has had a current ratio that was consistent with other companies in its industry. For the most recent year, Bosco's current ratio was significantly higher than that for the industry. What is the best possible explanation for this situation? Correct! b. Bosco's liquidity has improved or is not leveraging financial resources effectively. a. The other companies in the industry were not as profitable. c. Bosco has less property, plant, and equipment than other companies. d. Bosco has too much debt.

b. Bosco's liquidity has improved or is not leveraging financial resources effectively.

While reconciling the checking account, an accountant with Sonic Corporation noticed that an error had been made in recording a check received by the company. Sonic recorded the receipt as $729, and the correct amount of the check was $279. Which of the following reconciling adjustments is required? c. Add $450 to the bank statement balance a. Add $450 to the company's book balance Correct! b. Deduct $450 from the company's book balance d. Deduct $450 from the bank statement balance

b. Deduct $450 from the company's book balance

Which one of the following sections on a statement of cash flows is used to report the cash flow effects of buying and selling property, plant, and equipment? Correct! b. Investing Activities a. Operating Activities c. Financing Activities d. Profit Activities

b. Investing Activities

Which one of the following statements is true? a. Recognition is concerned with the dollar amount of each economic effect that should be reported in the financial statements. d. The monetary unit assumption is concerned with the valuation of economic effects in terms of current purchasing power. Correct! b. Measurement is concerned with how economic effects should be quantified. c. The stability concept is concerned with identification of the specific entity for which economic effects are to be recognized and measured.

b. Measurement is concerned with how economic effects should be quantified.

Harvest Catering is a local catering service. Conceptually, when should Harvest recognize revenue from its catering service? a. On the date the customer places the order d. On the date the customer's payment is received Correct! b. On the date the meals are catered c. On the date the invoice is mailed to the customer

b. On the date the meals are catered

Windstar Corp. purchased supplies at a cost of $6,000 during the year. At December 31, supplies on hand are $1,400. Supplies expense for the year was $5,200. How much were supplies on hand at January 1? Correct! d. $600 c. $1,400 a. $2,200 b. $11,200

d. $600

If a company erroneously records a $500 deposit as $400 in its books, which of the following must occur when reconciling the bank statement? You Answered d. The company will have to decrease the balance per the books by $100. a. The company will have to increase the balance per the bank statement by $100. c. The company will have to decrease the balance per bank statement by $100. Correct Answer b. The company will have to increase the balance per the books by $100.

b. The company will have to increase the balance per the books by $100.

Sally's Choice sells season memberships for $200 each. During January 2017, 60 season memberships were sold. As of March 31, 2017, $3,000 of season membership fees had been collected from customers. The season runs for four months starting March 1, 2017. Which one of the following is an amount reported on the financial statements for the period ending March 31, 2017? c. Accounts receivable of $3,000 You Answered a. Unearned membership revenue of $3,000 Correct Answer b. Unearned membership revenue of $9,000 d. Membership revenue of $9,000

b. Unearned membership revenue of $9,000

The following set of items describes activities completed by a company in purchasing and paying for merchandise. For each activity, identify whether or not the activity adheres to or violates sound internal control procedures.The receiving department compares the quantity received with the quantity printed on the receiving report when the purchase order was prepared. Correct! b. Violates sound internal control procedures c. Neither strengthens nor violates internal control d. Cannot be determined. a. Adheres to sound internal control procedures

b. Violates sound internal control procedures

Border Company's Cash account had a balance of $962 on August 31. This included a bank deposit of $87 that was in transit. The August 31 bank statement contained the following information: Bank statement balance $1,089 NSF check 16 Bank service charge 7 Collection of notes receivable 68 Border also had checks outstanding of $169. What is Border's adjusted cash balance at August 31? d. $1,089 b. $940 You Answered a. $920 Correct Answer c. $1,007

c. $1,007

Gentech Corp. prepared a bank reconciliation as of June 30, 2017. The following items were identified: Gentech's bank balance $14,300 Deposits in transit 1,000 Outstanding checks 1,300 Bank service charge 50 Customer's NSF check returned by the bank 150 ​ Gentech's adjusted cash balance at June 30, 2017 is b. $14,100. Correct Answer c. $14,000. a. $13,800. You Answered d. $14,300.

c. $14,000.

The treasurer for Rahm Corp. was preparing a bank reconciliation as of September 30, 2017. The following items were identified: Rahm's book balance $32,800 Deposits in transit 4,300 Outstanding checks 2,200 Interest earned on checking account 100 Customer's NSF check returned by the bank 400 ​ Rahm Corp.'s adjusted cash balance at September 30, 2017 is b. $34,900. a. $34,600. d. $32,800. Correct! c. $32,500.

c. $32,500.

Music CorporationThe data below are for Music Corporation for 2017. Accounts receivable—January 1, 2017 $236,000 Credit sales during 2017 820,000 Collections from credit customers during 2017 590,000 Customer accounts written off as uncollectible during 2017 8,000 Allowance for doubtful accounts—January 1, 2017 8,700 Estimated uncollectible accounts based on an aging analysis 9,600 Refer to the data for Music Corporation.What is the balance of Accounts Receivable at December 31, 2017? b. $448,400 Correct! c. $458,000 d. $466,000 a. $336,000

c. $458,000

Lasiter Corp. reported net credit sales of $2,000,000 and cost of goods sold of $1,400,000 for 2017. On January 1, 2017, accounts receivable was $250,000. Amounts owed by customers increased by $20,000 during 2017. Rounding to two decimal places, what is Lasiter's accounts receivable turnover ratio for 2017? Correct! c. 7.69 b. 8.00 d. 7.41 a. 8.33

c. 7.69

The following data was identified by Raines Corp. in preparation of a bank reconciliation on October 31, 2017: ​ Bank statement balance $30,700 Raines' book balance (before adjustments) ? Outstanding checks 4,200 NSF checks 400 Service charge 300 Deposits in transit 3,100 Interest earned on checking account 100 ​ What is the net amount of the increase or decrease in Raines' cash balance which must be recorded as a result of the adjustments identified by the bank reconciliation? b. $300 decrease Correct Answer d. $600 decrease You Answered c. $400 decrease a. $100 decrease

d. $600 decrease

Which of the following statements is true concerning external users of financial information? Correct Answer c. External users rely on the financial statements to help make informed decisions. d. External users rely on management to tell them whether the company is a good investment. You Answered a. External users need detailed records of the business to make informed decisions. b. External users are primarily responsible for the preparation of financial statements.

c. External users rely on the financial statements to help make informed decisions.

A company forgot to record four adjustments during 2017. Which one of the following omissions of adjustments will overstate assets? You Answered b. Interest on monies borrowed has not yet been recorded. Correct Answer c. Prepaid insurance is not reduced for the portion of the policy that has expired during the period. d. Income taxes owed but not yet paid are ignored. a. Sales made during the last week of the period are not recorded.

c. Prepaid insurance is not reduced for the portion of the policy that has expired during the period.

Tavella Co. applies the consistency convention. What does this mean? a. Tavella Co. uses the same names for all its expenses as its competitors. b. Tavella Co. has selected certain accounting principles that can never be changed. d. Tavella Co. applies the same accounting principles as its competitors. Correct! c. Tavella Co. applies the same accounting principles each accounting period.

c. Tavella Co. applies the same accounting principles each accounting period.

Which of the following statements is true? Correct! c. The audit committee is a subset of individuals on the board of directors that acts as a direct contact between the stockholders and the independent accounting firm. b. The audit committee has become less involved in the financial accounting system as a result of the Foreign Corrupt Practices Act. a. The audit committee provides contact between the board of directors and the key officers of the company. d. The board of directors consists of the company's external auditors.

c. The audit committee is a subset of individuals on the board of directors that acts as a direct contact between the stockholders and the independent accounting firm.

Which one of the following statements is true? When a company uses a subsidiary ledger, the balance in the control account, Accounts Receivable, shows only the amount the company expects to collect from the accounts receivable, net of any expected uncollectible accounts. Correct! c. The balance in the control account, Accounts Receivable, should be equal to the sum of the balances in the subsidiary ledger for accounts receivable. b. An accounts receivable subsidiary ledger represents amounts due to vendors and suppliers. d. A subsidiary ledger takes the place of the control account for some companies.

c. The balance in the control account, Accounts Receivable, should be equal to the sum of the balances in the subsidiary ledger for accounts receivable.

On October 31, Michael Corporation signed a one-year contract to provide services to Love Company for $80,000 throughout the next year. Love will pay for the services on November 1. Using the accrual basis of accounting, when should Michael Corporation recognize revenue? a. November 1 of the current year when the cash is received from Love Correct! c. Throughout the year as the revenue is earned d. At December 31 of the current year and October 31 of the next year b. On October 31 of the next year when all services have been provided

c. Throughout the year as the revenue is earned

If there are no changes in a company's capital stock during a period, the company may choose to prepare Correct Answer c. a statement of retained earnings instead of a statement of stockholders' equity. a. an income statement instead of a statement of stockholders' equity. You Answered d. a statement of cash flows instead of a statement of retained earnings. b. an income statement instead of a statement of retained earnings.

c. a statement of retained earnings instead of a statement of stockholders' equity.

On July 1, 2017, Falcon Company received a $20,000 promissory note from Jordyn Company. The annual interest rate is 5%. Principal and interest are paid in cash at the maturity date of June 30, 2018. ​If Falcon's fiscal year ends September 30, 2017, an adjustment is needed to d. increase notes receivable by $1,000. Correct! c. increase interest receivable by $250. b. increase notes receivable by $250. a. increase interest revenue by $1,000.

c. increase interest receivable by $250.

Sun City Corporation's end-of-year balance sheet consisted of the following amounts: Cash $ 25,000 Accounts receivable $70,000 Property, plant, and equipment 70,000 Long-term debt 40,000 Capital stock 100,000 Accounts payable 20,000 Retained earnings ? Inventory 35,000 What amount should Sun City report on its balance sheet for total assets? c. $165,000 b. $95,000 Correct! d. $200,000 a. $100,000

d. $200,000

Wang Corporation for 2017 following data concern:The Credit sales during the year $1,600,000 Accounts receivable—December 31, 2017 235,000 Allowance for doubtful accounts—December 31, 2017 18,000 Bad debts expense for the year 11,000 ​ What amount will Wang show on its year-end balance sheet for the net realizable value of its accounts receivable? Correct! d. $217,000 b. $235,000 a. $253,000 c. $224,000

d. $217,000

Espat Corp. reported net sales (all on credit) of $1,600,000 and cost of goods sold of $1,100,000 for 2017. Its beginning balance of Accounts Receivable was $150,000. The accounts receivable balance decreased by $10,000 during 2017. Rounded to two decimal places, what is Espat's accounts receivable turnover ratio for 2017? a. 7.59 b. 10.32 b. 10.32 Correct! d. 11.03

d. 11.03

Which of the following documents is used in the control of cash receipts? You Answered b. Receiving reports Correct Answer d. Bank deposit slips a. Purchase requisitions c. Canceled checks from customers

d. Bank deposit slips

Which one of the following equations represents retained earnings activity? b. Beginning Balance + Cash Inflows - Cash Outflows = Ending Balance Correct! d. Beginning Balance + Net Income - Dividends = Ending Balance c. Beginning Balance + Dividends - Net Income = Ending Balance a. Beginning Balance + Net Income + Dividends = Profits for the Year

d. Beginning Balance + Net Income - Dividends = Ending Balance

Fox Auto sold merchandise to a customer for $3,000 on credit on March 10. The customer paid Fox Auto the amount due on March 31. Under the accrual basis of accounting, which of the following statements is true? b. The March 10 transaction increases revenue, but has no effect on assets because cash has not been received. c. Revenue is recognized after the cost of the merchandise sold has been paid by Fox Auto. Correct! d. The March 31 transaction has no effect on total assets under the accrual basis. a. Fox Auto will recognize the revenue on March 31.

d. The March 31 transaction has no effect on total assets under the accrual basis.

A voucher is usually supported by c. a receiving report. a. a supplier's invoice. b. a purchase order. Correct! d. all of these.

d. all of these.

The Sarbanes-Oxley Act requires that the audit committee be composed of Correct! d. entirely outside members of the board of directors. b. a majority of all of the members of the board of directors. c. the outside members of the board of directors and the external auditor. a. at least 50 percent of key officers who are on the board of directors.

d. entirely outside members of the board of directors.

A debit memorandum appeared on Cinco Inc.'s May bank statement. How will Cinco treat this amount on its May bank reconciliation? a. Add it to the bank balance b. Add it the book balance Correct! d. Deduct it from the book balance c. Deduct it from the bank balance

d. Deduct it from the book balance

Frank Corporation purchased supplies at a cost of $15,000 during 2017. At January 1, 2017, supplies on hand were $2,000. At December 31, 2017, supplies on hand are $2,500. Calculate supplies expense for 2017. d. $17,000 Correct! b. $14,500 a. $15,500 c. $15,000

b. $14,500

Adjustments are necessary only if a. the cash basis of accounting is used for all accounting periods. c. management reports its adjustments on the statement of cash flows. d. the company reports revenue in the same period cash is collected. Correct! b. cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting.

b. cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting.

When preparing a bank reconciliation, NSF checks are: You Answered d. deducted from the bank statement balance. a. added to the company's book balance. c. added to the bank statement balance. Correct Answer b. deducted from the company's book balance.

b. deducted from the company's book balance.

Which of the following is not a procedure in the approval of a specific invoice for payment? Correct! c. The purchasing department prepares a voucher to request payment. d. All of these are procedures in the approval of a specific invoice for payment. a. The purchase requisition, purchase order, receiving report, and invoice are compared. An accounting department employee must verify the mathematical accuracy of the amounts that appear on the invoice.

c. The purchasing department prepares a voucher to request payment.

Which of the following statements regarding limitations on internal control is true? c. An entity's size has little effect on the degree of control that it can obtain. Correct Answer d. Human errors can weaken an internal control system. a. Companies can design a system of internal control that is foolproof. b. A well-designed internal control system is a luxury that few companies can afford.

d. Human errors can weaken an internal control system.

For which of the following is the current ratio most useful? a. In evaluating a company's profitability c. In evaluating a company's return on assets Correct! d. In evaluating a company's liquidity b. In evaluating a company's solvency

d. In evaluating a company's liquidity

Carrington & Co. rented office space to a tenant on January 31 and received a total of $9,000 for the first three months of rent. The amount was recorded as Rent Collected in Advance when received. Adjustments are recorded only at the end of every quarter. What effect does the adjustment at March 31 have on Carrington's net income for the quarter ending March 31? c. Decrease by $3,000 b. Decrease by $6,000 Correct! d. Increase by $6,000 a. Increase by $9,000

d. Increase by $6,000

On November 2, 2017, Quaint General Store concluded that a customer's $400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on Quaint's 2017 net income and balance sheet totals assuming the allowance method is used to account for bad debts? b. Increase in net income; no effect on total assets a. Decrease in net income; decrease in total assets c. No effect on net income; decrease in total assets Correct Answer d. No effect on net income; no effect on total assets

d. No effect on net income; no effect on total assets

Which statement is true concerning gains and losses? c. The amounts of gains and losses are included in the calculation of the current ratio, in the numerator and denominator, respectively. Correct Answer d. None of these are correct. You Answered b. Gains and losses are special types of revenues and liabilities that are reported on the income statement. a. Gains and losses are reported on the balance sheet in the Assets and Liabilities sections, respectively.

d. None of these are correct.

Which of the following represents one of the purposes of the notes to financial statements? b. To provide comparative ratios for the company's financial data c. To provide the CPA's opinion of the fairness of the financial statements a. To provide a place for management to justify questionable items in the statements Correct! d. To satisfy the need for full disclosure of all the facts relevant to a company's results and financial position

d. To satisfy the need for full disclosure of all the facts relevant to a company's results and financial position