ACCOUNTING FINAL
The acquisition of land by issuing common stock is 1. A noncash transaction that is not reported in the body statement of cash flows 2. A cash transaction and would be reported in the body of a statement of cash flows 3. A non cash transaction and would be reported in the body of a statement of cash flows 4. Only reported if the statement of cash flows is prepared using the direct method
1. A noncash transaction that is not reported in the body statement of cash flows
Which one of the following items is not generally used in preparing a statement of cash flows? 1. Adjusted trial balance 2. Comparative balance sheets 3. Current income statement 4. Additional information
1. Adjusted trial balance
Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called 1. Callable bonds 2. Early retirement bonds 3. Options 4. Debentures
1. Callable bonds
The date on which a cash dividend becomes a binding legal obligation is on the 1. Declaration date 2. Date of record 3. Payment date 4. Last day of the fiscal period
1. Declaration date
A stock split will 1. Have no effect on retained earnings 2. Increase total paid-in capital 3. Increase the total par value of the stock 4. Have no effect on the par value per share of stock
1. Have no effect on retained earnings
If bonds are issued at a premium, the stated interest rate is 1. Higher than the market rate of interest 2. Lower than the market rate of interest 3. Too low to attract investors 4. Adjusted to a higher rate of interest
1. Higher than the market rate of interest
Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, income taxes paid would be reported on the statement of cash flows 1. Operating activities section 2. Investing activities section 3. Financing activities section 4. Does not represent a cash flow
1. Operating activities section
Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, interest paid on a note would be reported on the statement of cash flows 1. Operating activities section 2. Investing activities section 3. Financing activities section 4. Does not represent a cash flow
1. Operating activities section
The order of presentation of activities on the statement of cash flows is 1. Operating, investing, and financing 2. Operating, financing, and investing 3. Financing, operating, and investing 4. Financing, investing, and operating
1. Operating, investing, and financing
The interest expense recorded on an interest payment date is increased 1. By the amortization of premium on bonds payable 2. By the amortization of discount on bonds payable 3. Only if the bonds were sold at face value 4. Only if the market rate of interest is less than the stated rate of interest on that date
2. By the amortization of discount on bonds payable
Which of the following activities would be classified as an investing activity 1. Cash received from interest revenue 2. Cash paid (loaned) to borrower as a loan 3. Cash received from dividend revenue 4. Cash paid to reacquire capital stock
2. Cash paid (loaned) to borrower as a loan
Selling the bonds at a premium has the effect of 1. Causing the total cost of borrowing to be higher than the bond interest paid 2. Causing the total cost of borrowing to be lower than the bond interest paid 3. Raising the effective interest rate above the state interest rate 4. Increasing the amount of cash paid for interest each 6 months
2. Causing the total cost of borrowing to be lower than the bond interest paid
In the balance sheet, the account Discount on Bonds Payable is 1. Added to bonds payable 2. Deducted from bonds payable 3. Classified as a stockholders' equity account 4. Classified as a revenue account
2. Deducted from bonds payable
Which of the following is not an advantage of issuing bonds instead of common stock? 1. Stockholder control is not affected 2. Earnings per share on common stock may be lower 3. Tax savings result 4. Each of these answer choices is an advantage
2. Earnings per share on common stock may be lower
From an accounting standpoint, all of the following are contingencies that must be evaluated for off-balance sheet purposes except 1. Product warranties 2. General business risks 3. Money-back guarantees for products 4. Environmental cleanup obligations
2. General business risks
A company would be expected to generate small amounts of cash from operations during the 1. Introductory phase 2. Growth phase 3. Maturity phase 4. Decline phase
2. Growth phase
All of the following are true regarding financial statement analysis ratios associated with liabilities except 1. A high times interest earned ratio indicates that a company is more likely to meet interest payments as scheduled 2. High liquidity ratios mean that lines of credit should be high to compensate 3. If a company's current ratio is lower than the industry average, then it make lack liquidity 4. Unrecorded obligations that cause sizable differences between liquidity and solvency ratios can be ignored
2. High liquidity ratios mean that lines of credit should be high to compensate
High quality international accounting require both high-quality accounting standards and: 1. A reconsideration of SOX to make it less onerous 2. High quality auditing standards 3. Government intervention to ensure that the public interest is protected 4. The development of new principles of internal control activities
2. High quality auditing standards
If bonds are issued at a discount, it means that the 1. Financial strength of the issuer is suspect 2. Market interest rate is higher than the contractual interest rate 3. Market interest rate is lower than the contractual interest rate 4. Bondholder will receive effectively less interest than the contractual rate of interest
2. Market interest rate is higher than the contractual interest rate
The present value of a bond is also known as its 1. Face value 2. Market price 3. Future value 4. Deferred value
2. Market price
Which of the following statements regarding the effective interest method of accounting for bonds is false? 1. GAAP requires use of the effective interest method 2. The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective interest method is used 3. Over the life of the bond, the carrying value increases for discounted bonds when using the effective interest method 4. The effective interest method applies a constant percentage to the bond carrying value to compute interest expense
2. The amount of periodic interest expense decreases over the life of a discounted bond issue when the effective interest method is used
Which of the following statements is not true about a 2-for-1 split? 1. Par value share is reduced to half of what it was before the split 2. Total contributed capital increases 3. The market price probably will decrease 4. A stockholder with ten shares before the split owns twenty shares after the split
2. Total contributed capital increases
Non-Us companies that follow IFRS: 1. Do not normally use the principles of internal controls activities described in this textbook 2. Often offset cash with accounts payable on the balance sheet 3. Are not required to follow SOX 4. None of the above
3. Are not required to follow SOX
Which of the following is not typically a characteristic experienced by a company during the introductory phase of the corporate life cycle? 1. Cash used in operations will exceed cash generated by operations 2. Considerable cash will be used to purchase productive assets 3. Cash from investing is positive 4. Cash from financing is positive
3. Cash from investing is positive
Which of the following would be added to net income using the indirect method? 1. An increase in accounts receivable 2. An increase in prepaid expenses 3. Depreciation expense 4. A decrease in accounts payable
3. Depreciation expense
Liabilities are classified as current or long-term based on their... 1. Description 2. Patent terms 3. Due date 4. Amount
3. Due date
When bonds are retired before maturity, 1. Only a loss on redemption can be recorded 2. Only a gain on redemption can be recorded 3. Either a gain or a loss on redemption can be recorded 4. Neither a gain nor a loss on redemption can be recorded
3. Either a gain or a loss on redemption can be recorded
If the market rate of interest is 10%, a 10,000, 12%, 10 year bond that pays interest annually would sell at an amount 1. Less than face value 2. Equal to face value 3. Greater than face value 4. That cannot be determined
3. Greater than face value
REVIEW QUESTION Secured bonds are bonds that 1. Are in the possession of a bank 2. Can be converted into common stock 3. Have specific assets of the issuer pledged as collateral 4. Mature in installments
3. Have specific assets of the issuer pledged as collateral
Corporations generally issue stock dividends in order to 1. Increase the market price per share 2. Exceed the stockholders' dividend expectations 3. Increase the marketability of the stock 4. Decrease the amount of capital in the corporation
3. Increase the marketability of the stock
The statement "Bond prices vary inversely with changes in the market rate of interest" means that if the 1. Market rate of interest increases, the contractual interest rate will decrease 2. Contractual interest rate increases, then bond prices will go down 3. Market rate of interest decreases, then bond prices will go up 4. Contractual interest rate increases, the market rate of interest will decrease
3. Market rate of interest decreases, then bond prices will go up
Compound interest is the return on principal 1. Only 2. For one or more periods 3. Plus interest for two or more periods 4. For one period
3. Plus interest for two or more period
The primary purpose of the statement of cash flows is to 1. Provide information about the investing and financing activities during a period 2. Prove that revenues exceed expenses if there is a net income 3. Provide information about the cash receipts and cash payment during a period 4. Facilitate banking relationships
3. Provide information about the cash receipts and cash payment during a period
Which of the following is not true of a corporation 1. It may buy, own, and sell property 2. It may sue and be sued 3. The acts of its owners bund the corporation 4. It may enter into binding legal contracts in its own name
3. The acts of its owners bund the corporation
Which of the following statements about dividends is not accurate? 1. Dividends are generally reported quarterly as a dollar amount per share 2. Low dividends may mean high stock returns 3. The board of directors is obligated to declare dividends 4. Payment of dividends from legal capital is illegal in many states
3. The board of directors is obligated to declare dividends
Under the corporate form of business organization 1. A stockholder is personally liable for the debts of the corporation 2. Stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation 3. The corporation's life is stipulated in its charter 4. Stockholder wishing to sell their corporation shares must get the approval of other stockholders
3. The corporation's life is stipulated in its charter
Additions and improvements 1. occur frequently during the ownership of a plant asset 2. normally involve immaterial expenditures 3. increase the company's investment in productive facilities 4. typically only benefit the current accounting period
3. increase the company's investment in productive facilities
Treasury stock is 1. Stock issued by the US treasury department 2. Stock purchased by a corporation and held as an investment in its treasury 3. Corporate stock issued by the treasurer of a company 4. A corporation's own stock, which has been acquired and held for future use
4. A corporation's own stock, which has been acquired and held for future use
Which of the following statements correctly describes the reporting of cash? 1. Cash cannot be combined with cash equivalents 2. Restricted cash funds may be combined with cash 3. Restricted cash funds cannot be reported as a current asset 4. Cash is listed first in the current asset section
4. Cash is listed first in the current asset section
Very often, failure to record a liability means failure to record a(n) 1. Revenue 2. Asset conversion 3. Footnote 4. Expense
4. Expense
Free cash flow provided an indication of a company's ability to 1. Generate cash to invest in capital expenditures 2. Generate net income 3. Generate cash to pay dividends 4. Generate cash to invest in capital expenditures and to pay dividends
4. Generate cash to invest in capital expenditures and to pay dividends
Par value 1. Represents what a share of stock is worth 2. Represents the original selling price for a share of stock 3. Is established for a share of stock after it is issued 4. Is the value assigned per share in the corporate charter
4. Is the value assigned per share in the corporate charter
The issuance of debt to purchase assets would be classified on teh cash flows statement under a(n) 1. Operating activity 2. Investing activity 3. Financing activity 4. None of these answers are correct
4. None of these answers are correct
Dividends in arrears on cumulative preferred stock 1. Are considered to be a non-current liability 2. Are considered to be a current liability 3. Only occur when preferred dividends have been declared 4. Should be disclosed in the notes to the financial statements
4. Should be disclosed in the notes to the financial statements
The contractual interest rate on a bond is often referred to as the 1.Callable rate 2. The maturity rate 3. Market rate 4. Stated rate
4. Stated rate
The market value (present value) of a bond is a function of all of the following except the 1. Dollar amounts to be received 2. Maturity date 3. Market interest rate 4. Types of bonds
4. Types of bonds
All of the following statements regarding impairments are true except 1. an impairment is a permanent decline in an assets market value 2. after an impairment write down, depreciation is generally lower is subsequent periods 3. immediate recognition of impairment write-downs is now required 4. impairments are generally recorded when the book value falls below the market value
4. impairments are generally recorded when the book value falls below the market value
ADVANTAGE OR DISADVANTAGE: Ability to acquire capital
ADVANTAGE
ADVANTAGE OR DISADVANTAGE: Continuous life
ADVANTAGE
ADVANTAGE OR DISADVANTAGE: Limited liability of stockholders
ADVANTAGE
ADVANTAGE OR DISADVANTAGE: Separate legal existence from owners
ADVANTAGE
ADVANTAGE OR DISADVANTAGE: Transferable ownership rights
ADVANTAGE
A company's ability to generate cash to pay dividends and to invest in new capital expenditures in measurable through its A. current cash debt coverage B. Free cash flow C. statement of cash flows D. cash debt coverage
B. Free cash flow
The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is:
Bank service charges
What asset is most susceptible to fraudulent activities?
Cash
The current carrying value of Pierce's 1,800,000 face value bonds is 1,793,200. If bonds are retired at 102, what would be the amount Pierce would pay its bondholders? A. 1,793,200 B. 1,800,000 C. 1,804,000 D. 1,836,000
D. 1,836,000
Bonds with a face value of 600,000 and a quoted price of 98 ½ have a selling price of A. 589,500 B. 588,300 C. 588,030 D. 591,000 (600,000 * .985)
D. 591,000 (600,000 * .985)
ADVANTAGE OR DISADVANTAGE: Double Taxation
DISADVANTAGE
ADVANTAGE OR DISADVANTAGE: Government Regulations
DISADVANTAGE
Journalize: Paid $1,810 to creditors for accounts payable due
DR AP CR Cash
Journalize: Billed customers for services performed $5,880
DR AR CR Service Rev
record the following transactions On July 1, Crane Company sold merchandise on account to Stacey Inc. for $25,200, terms 4/10, n/30.
DR AR CR Sales Rev
Journalize Transactions Made sales of $4,270 on Wildhorse Co. credit cards
DR AR CR Sales revenue
Prepare the entry to record the write‐off of uncollectible accounts during the period.
DR Allowance for doubtful accounts CR AR
Prepare the entry to record bad debt expense for the period.
DR Bad debt expense CR allowance for doubtful accounts
Prepare the journal entries to record the following transactions using a perpetual inventory system The cost of the merchandise sold was $571,700.
DR COGS CR Inventory
Journalize: Received $1,320 in cash from customers for accounts receivable due
DR Cash CR AR
Journalize: Stockholders invested $12,000 in the business in exchange for common stock.
DR Cash CR Common stock
Journalize Transactions Received cash dividends of $2 per share on BJ common stock (2,400 shares)
DR Cash CR Dividend revenues
Journalize: Performed $590 of services in exchange for cash
DR Cash CR Service Rev
Journalize Receives $50,000 cash in exchange for common stock to fund Nellie's dream of opening a dairy bar.
DR Cash CR Common stock
Journalize Transactions Received payment in full from Coote Inc. on the amount due
DR Cash CR Notes receivable CR Interest revenue
Journalize Transactions Received payment in full from Brady Co. on the amount due
DR Cash CR Notes receivable CR interest receivable
journalizing bonds- premium
DR Cash CR Premium on bonds payable CR Bonds payable
Journalize: Cash of $7,500 is received for services rendered.
DR Cash CR Service revenue
Journalize the transactions Sold 30 Martine Co. bonds for $32,000.
DR Cash CR debt investments CR Gain on sale of debt investments
Journalize the transactions Collected Cato Company note in full
DR Cash CR notes receivable CR interest revenue
record the following transactions On July 11, Stacey Inc. paid for the merchandise.
DR Cash DR Sales Discounts CR AR
Prepare the journal entries to record the following transactions using a perpetual inventory system On March 12, Ivanhoe Company received the balance due from Pharoah Company
DR Cash DR Sales Discounts CR Accounts receivable
Journalize Transactions Made sales of $500 on Visa credit cards. The credit card service charge is 3%.
DR Cash DR Service charge expense CR sales revenue
Prepare the entries Declared a cash dividend of $1.50 per share to stockholders of record on June 30.
DR Cash dividends CR Dividends payable
Journalize Transactions Purchased at par $720,000 of Dover Corporation 10-year, 7% bonds dated January 1, 2022, directly from the issuing corporation.
DR Debt invetsments CR cash
Prepare the adjusting entries for the month of march The equipment depreciates $190 per month.
DR Depreciation expense CR accumulated depreciation-equipment
Journalize: Paid a $270 cash dividend
DR Dividends CR Cash
prepare entry Acquired a 10-year franchise; expiration date July 1, 2,027, $604,800
DR Franchise CR Cash
Prepare the closing entries The income statement for the Kingbird, Inc. for the month ended July 31 shows Salaries and Wages Expense $8,540, Maintenance and Repairs Expense $3,320, and Income Tax Expense $1,280.
DR Income Summary CR Salaries and wages CR Maintenance and Repaid expense CR Income Tax Expense
Prepare the adjusting entries for the month of march Insurance expires at the rate of $280 per month.
DR Insurance expense CR prepaid insurance
Journalize Transactions Accrued interest revenue on all notes receivable
DR Interest receivable CR Interest revenue
On Oct. 1, 2020 company A lends $400,000 to company B at 6%. All principal interest is due on Sep. 30 2021. Prepare the adjusting journal entry at Dec 31, 2020 for company A
DR Interest receivable CR interest revenue
Prepare the journal entries to record the following transactions using a perpetual inventory system The cost of the merchandise returned was $62,200.
DR Inventory CR COGS
Splish Brothers pays the freight costs of $380 on June 11
DR Inventory CR Cash
Journalize Transactions Received a $9,600, 180-day, 8% note to settle an open account from A. Murdock
DR Notes receivable CR AR
Journalize Transactions Loaned $57,600 cash to C. Bohr on a 12-month, 8% note
DR Notes receivable CR Cash
Journalize Transactions Sold goods to K. R. Pine, Inc., receiving a $3,600, 90-day, 8% note
DR Notes receivable CR Sales revenue
Journalize the transactions Accepted a $4,000, 4‐month, 9% promissory note from Rian Company for balance due.
DR Notes receivable CR accounts receivable
prepare entry Purchased a patent (7-year life) $351,750
DR Patents CR Cash
Journalize: Insurance of $800 is paid for the year.
DR Prepaid Insurance CR Cash
Prepare the closing entries The statement of retained earnings shows an opening balance for Retained Earnings of $20,390 and Dividends $1,390.
DR RE CR Dividends
prepare entry Research and development costs $177,000
DR Research and development expense CR Cash
Journalize: Paid employee salaries $1,200
DR S&W expense CR Cash
Prepare the journal entries to record the following transactions using a perpetual inventory system On March 6, Pharoah Company returned $110,600 of the merchandise purchased on March 2.
DR Sales Returns and allowances CR Accounts receivable
record the following transactions On July 8, Stacey Inc. returned merchandise worth $2,500 to Crane Company.
DR Sales returns and allowances CR AR
Prepare the closing entries The income statement for the Kingbird, Inc. for the month ended July 31 shows Service Revenue $19,920
DR Service Rev CR Income Summary
Journalize Purchases $400 of supplies on credit.
DR Supplies CR Accounts payable
Prepare the adjusting entries for the month of march Supplies on hand total $920.
DR Supplies Expense CR Supplies
Prepare the adjusting entries for the month of march During March, services were performed for two-fifths of the unearned service revenue
DR Unearned service revenue CR service revenue
Journalize: Paid utilities $440
DR Utilities expense CR Cash
Prepare the journal entries to record the following transactions using a perpetual inventory system On March 2, Ivanhoe Company sold $936,300 of merchandise to Pharoah Company, terms 2/10, n/30.
DR accounts receivable CR Sales Revenue
redeeming bonds at maturity
DR bonds payable CR cash
Hydro slide inc issues an additional 1,000 shares of the $1 par value common stock for cash at $5 per share. The journal entry for this sale is
DR cash CR Common stock CR Additional paid in capital
Journalize Transactions Sold 1,000 shares of BJ common stock for $10,800
DR cash CR stock investments CR gain on sale of stock investments
Sunland Company needs $168,700 to cover next Friday's payroll. Its balance of outstanding accounts receivable totals $722,200. To alleviate this cash crunch, the company sells $179,200 of its receivables. Record the entry that Sunland Company would make. (Assume a 2% service charge.)
DR cash DR Service charge expense CR AR
Journalize Transactions Purchased 2,400 shares of BJ common stock (2% of outstanding shares) for $16,800
DR stock investments CR cash
Journalize: Supplies of $1,800 are purchased on account.
DR supplies CR Accounts Payable
The use of pre numbered checks in disbursing cash is an application of the principle of:
Documentation procedures
Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:
Establishment of responsibility
The principles of internal control do not include:
Management responsibility
Internal control is used in a business to enhance the accuracy and reliability of its accounting records and to:
Safeguard its assets
ADVANTAGE OR DISADVANTAGE: Corporate Management
both
Which of the following discount rates will produce the smallest present value? a. 8% b. 9% c. 10% d. 4%
c. 10%
bonds that can be bought back by the issuing company at the stated dollar amount prior to maturity bonds are called ____ bonds
callable
different companies use the same accounting principles
comparability
The cost to provide information should be weighed against the benefit that users will gain from having the information available
cost constraint
operating activities change
currents assets and liabilities
In present value calculations, the process of determining the present value is called a. Allocating b. Pricing c. Negotiating d. Discounting
d. Discounting
Personal transactions are not mixed with the company's transactions
economic entity
TRUE OR FALSE Restricted cash that is a current asset is reported as part of cash and cash equivalents.
false
TRUE OR FALSE The book value of a plant asset should approximate its fair value
false
TRUE OR FALSE: The periodic system provides better control over inventories than a perpetual system
false
TRUE OR FALSE: The issuance of common stock affects both paid-in capital and retained earnings
false
TRUE OR FALSE: The sale of shares in a corporation by one stockholder to another affects the total capital of the corporation
false
TRUE OR FALSE: Treasury stock is reported as an asset on the balance sheet because treasury stock may later be resold
false
TRUE OR FALSE: The operating cycle of a merchandiser is the same as that of a service company
false; merchandisers is typically longer
Operating, Financing, or Investing? Issue shares of common stock
financing
Operating, Financing, or Investing? Pay dividend to stockholders
financing
Operating, Financing, or Investing? issue bonds
financing
Where would each of these items be included on the statement of cash flows? declared and paid a 50,000 cash dividend
financing
Where would each of these items be included on the statement of cash flows? issued bonds for 200,000 cash
financing
investing, operating, or financing a cash dividend of 26,030 was declared and paid during the year
financing
investing, operating, or financing bonds payable matured and were paid off at face value for cash
financing
Assets are recorded and reported at original purchase price
historical cost
identify the internal control principle that is applicable to each procedure All cashiers are bonded
human resource controls
identify the internal control principle that is applicable to each procedure Daily cash counts are made by cashier department supervisors
independent internal verification
The first phase of the corporate life cycle is the ____ phase
introductory
Operating, Financing, or Investing? Purchase bonds or equity securities
investing
Where would each of these items be included on the statement of cash flows? purchased equipment for 180,000 cash
investing
Where would each of these items be included on the statement of cash flows? sold land costing 20,000 for 20,000 cash
investing
cash paid to purchase a new office building is a ____ activity
investing
collecting cash on loans belongs under the category of ________ activities
investing
investing, operating, or financing new plant assets costing 100,000 were purchased for cash during the year
investing
investing, operating, or financing old plant assets having an original cost of 57,500 and accumulated depreciation of 48,500 were sold for 1,500 cash
investing
investing activities change
investments and long term asset items
financing activities change
long term liability and stockholders equity items
In which section of the statement of the cash flows would a gain on the sale of equipment be reported
operating
Which section of the statement of cash flows includes interest payments
operating
identify the internal control principle that is applicable to each procedure All over-the-counter receipts are entered in cash registers
physical controls
Where would each of these items be included on the statement of cash flows? issued 75,000 of common stock at par value in exchange for a new truck
significant non cash
TRUE OR FALSE For a merchandiser, the primary source of revenues is the sale of inventory.
true