Accounting Unit 3 Multiple Choice Practice

On the first day of the current year, Griffin Company sold equipment for less than its book value. Which of the following is part of the journal entry to record the sale?

A debit to Loss on Sale of Plant Assets

Which of the following events decreases a corporation's stockholders' equity?

A declaration of a $1 cash dividend per share on preferred stock

An exclusive right to operate or sell a specific brand of products in a given geographic area is called:

A franchise.

Which of the following is not disclosed in a statement of cash flows?

A transfer of cash to a cash equivalent investment

The statement of stockholders' equity includes each of the following except:

Account receivable

What does the statement of stockholders' equity include?

Retained earnings, paid-in-capital in excess of par value, treasury stock

Which of the following accounts has a normal debit balance?

Treasury Stock

Which of the following statements is false?

Expenditures for ordinary repairs are a capital expenditure.

A firm issued $250,000 of ten‐year, 12 percent bonds payable on January 1, for $281,180, yielding an effective rate of ten percent. Interest is payable on January 1 and July 1 each year. The firm records amortization on each interest date. Bond interest expense for the first six months using effective interest amortization (see Appendix 10A) is:

$14,059

Goldsteen Corporation obtained a $5,000 loan from a bank on April 1. If the bank charges eight percent interest annually, how much interest will be accrued at December 31?

$300

Davidson Company sold one of its worn out delivery trucks on December 31, 2022. The truck was purchased on January 1, 2019, for $50,000 and was depreciated on a straight‑line basis over a 5‑year life. There was no salvage value associated with the truck. If the truck was sold for $14,000, what was the amount of gain or loss recorded at the time of the sale?

$4,000 gain

Wyler Company issued 20,000 shares of $10 par value common stock in exchange for a building with a current fair value of $1,000,000. In recording this transaction, what amount should be credited to the Paid‑in Capital in Excess of Par Value account?

$800,000

What is disclosed on a statement of cash flows?

1.) Cash outflows from investing activities during the period 2.) Cash inflows from financing activities during the period 3.) Amount of cash at the end of the year

What will appear in cash flows from investing section of the statement of cash flows?

Cash payment of dividends, cash received as interest, cash received from issuance of stock

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?

Cash purchase of treasury stock

Which of the following events will appear in the cash flows from investing activities section of the statement of cash flows?

Cash purchase of truck

Preferred stock that may be converted into common stock has which of the following characteristics?

Convertible feature

Which type of stock may have dividends in arrears?

Cumulative preferred stock

Which of the following statements is true?

Plant assets are shown on the balance sheet net of the Accumulated Depreciation account.

In financial statement presentations, the Discount on Bonds Payable account is:

Deducted from Bonds Payable

What expenses are added back to net income when using the indirect method to prepare a statement of cash flows?

Depletion, Amortization, Depreciation

Which of the following methods will disclose the cash received from customers in the statement of cash flows?

Direct Method

On January 1, Bush Company purchased a delivery truck for $10,000. The company estimates the truck will be driven 80,000 miles over its eight‑year useful life. The estimated salvage value is $2,000. The truck was driven 12,000 miles in its first year. Which method results in the largest depreciation expense for the first year?

Double-declining balance

Which of the following payroll related taxes are not withheld from an employee's earnings?

Federal unemployment taxes

Which of the following is not a cash equivalent?

IBM common stock

Which of the following statements is true?

Intangible assets are amortized to expense on the income statement.

Which of the following events will not appear in the cash flows from financing activities section of the statement of cash flow?

Issuance of stock in exchange for plant assets

What is the usual liability of stockholders for corporation actions?

Limited to the amount of their investment in the corporation

What is a cash equivalent?

Money-market account, Short‐term certificate of deposit, Short‐term U.S. Treasury bill

Which of the following is not considered to be a contingent liability?

Notes Payable

Which of the following is not an example of a natural resource?

Oil Rig

Accounting for the periodic amortization of intangible assets is similar to which depreciation method?

Straight‑line

Which of the following is not one of the criteria for classifying a lease as finance or operating?

The lessee frequently leases the same type of asset.

The acquisition cost of a plant asset is equal to the asset's implied cash price and:

The reasonable and necessary costs incurred to prepare the asset for its intended use.