Final Exam MC

When a company buys equipment for $150,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation? A) Total assets increase $150,000. B) Total assets increase $100,000. C) Total liabilities decrease $50,000. D) Total liabilities increase $150,000.

A) Total assets increase $150,000.

Schager Company purchased a computer system on January 1, 2022, at a cash cost of $26,100. The estimated useful life is 10 years, and the estimated residual value is $3,550. The company will use the double declining-balance depreciation method.How much is the 2023 depreciation expense? A) $4,510. B) $4,176. C) $5,220. D) $3,608.

B) $4,176.

company acquires land by issuing 10,000 shares of its $10 par value common stock which is currently trading at $20 per share, and the appraised value of the land is $250,000. Which of the following statements correctly describes the recording of the land? A) Record the land at its appraised value of $250,000 and recognize a gain of $50,000 since the issued stock is currently worth $200,000. B) Record the land at the $200,000 value of the consideration given up. C) Record the land at the average of its appraised value of $250,000 and the $200,000 value of the stock issued, thereby recognizing a $25,000 gain. D) Record the land at the par value of the stock given up, $100,000.

B) Record the land at the $200,000 value of the consideration given up.

Which of the following accounts is not a liability on the balance sheet? A) Notes payable B)Retained earnings C) Accounts payable D) Interest payable

B)Retained earnings

Eaton Company issued $5 million of bonds with a 10% coupon rate of interest. When Eaton issued the bonds, the market rate of interest was 11%. Which of the following statements is correct? A. The bonds were issued at a premium. B. Annual interest expense will exceed the company's actual cash payments for interest. C. Annual interest expense will be $500,000. D. The book value of the bond will decrease as the bond matures.

B. Annual interest expense will exceed the company's actual cash payments for interest.

Which of the following correctly describes the various financial statements? A) The balance sheet is a financial statement that covers a period of time. B) The statement of stockholders' equity is a financial statement at a specific point in time. C) An income statement covers a period of time. D) The cash flow statement is a financial statement at a specific point in time.

C) An income statement covers a period of time.

Which of the following correctly describes retained earnings? A) It is the cumulative earnings of a company. B) It represents the investments by stockholders in a company. C) It equals total assets minus total liabilities. D) It is the cumulative earnings of a company less dividends declared.

C) It equals total assets minus total liabilities.

Which of the following statements is correct? A) Assets normally have a credit balance and are increased with debits. B) Assets normally have a debit balance and are increased with credits. C) Stockholders' equity accounts normally have credit balances and are increased with credits. D) Liability accounts normally have debit balances and are increased with debits.

C) Stockholders' equity accounts normally have credit balances and are increased with credits.

Which of the following describes the primary objective of the balance sheet?A) To measure the net income of a business up to a particular point in time. B) To report the difference between cash inflows and cash outflows for the period. C) To report the financial position of the reporting entity at a particular point in time. D) To report changes in common stock and retained earnings for the period.

C) To report the financial position of the reporting entity at a particular point in time.

A company has bottling equipment which cost $8.5 million, has a net book value of $4.1 million, estimated future cash flows of $3.7 million, and a fair value of $3.1 million.How much is the asset impairment loss? A) $5.4 million. B) $4.1 million. C) $0.4 million. D) $1.0 million.

D) $1.0 million.

In what order would the following assets be listed on a balance sheet? A) Cash, Inventory, Intangible Assets, Accounts Receivable B) Cash, Intangible Assets, Accounts Receivable, Property and Equipment C) Cash, Accounts Receivable, Property and Equipment, Inventory D) Cash, Short-term Investments, Accounts Receivable, Inventory

D) Cash, Short-term Investments, Accounts Receivable, Inventory

During 2022, a company purchased a mine at a cost of $3,000,000. The company spent an additional $600,000 getting the mine ready for its intended use. It is estimated that 300,000 tons of mineral can be removed from the mine and the residual value of the mine will be $600,000. During 2022, 45,000 tons of mineral were removed from the mine and 35,000 tons were sold.Which of the following statements is correct with respect to the accounting for the mine? A) The 2022 net income decreased $450,000 as a result of the mining during the year. B) The book value of the mine decreased $350,000 during 2022. C) The inventory of minerals was $450,000 at December 31, 2022. D) The 2022 cost of goods sold was $350,000.

D) The 2022 cost of goods sold was $350,000.

Which of the following journal entries is correct when common stock is sold for cash at a price greater than par value? A) Cash xxxRetained earnings xxx B) Cash xxxAdditional paid-in capital xxx C) Cash xxxCommon Stock xxx D) Cash xxxCommon Stock xxxAdditional paid-in capital xxx

D) debit Cash Credit Common Stock Credit Additional paid-in capital

During 2022, Sigma Company earned service revenue amounting to $720,000, of which $605,000 was collected in cash; the balance will be collected in January, 2023. Also in 2022, there were collections of cash prior to the delivery of goods/services totaling $11,200. What amount should the 2022 income statement report for service revenue? a.) $720,000 b.) $115,000 c.) $605,000 d.) $590,000

a.) $720,000

A landlord collected $6,100 cash from a tenant for December 2022's rent but the contract rate set for the tenant's December rent is $8,100. Which of the following is true with respect to the landlord's financial statements using generally accepted accounting principles? a.) $8,100 would appear on the income statement as rent revenue. b.) $8,100 would appear on the balance sheet as rent receivable. c.) $8,100 would be reported on the statement of cash flows. d.) $6,100 would appear on the balance sheet as prepaid rent.

a.) $8,100 would appear on the income statement as rent revenue.

Which of the following is incorrect? a.) Interest that will be paid in the future is included in the reported amount of a current liability. b.)Current liabilities impact a company's liquidity. c.)Working capital is equal to current assets minus current liabilities. d.)Current liabilities are those that will be satisfied within one year or the operating cycle, whichever is longer.

a.) Interest that will be paid in the future is included in the reported amount of a current liability.

Which of the following describes an accrued liability? a.) It is an expense that has been incurred but not yet paid. b.) It is an expense that has been prepaid but not yet consumed. c.) It is an expense that has been both incurred and paid. d.)It is a liability where the cash flow has taken place but the revenue has yet to be earned.

a.) It is an expense that has been incurred but not yet paid.

Blaylock Industries declared and distributed a 10% stock dividend on 25,000 shares of issued and outstanding $5 par value common stock. The market price per share was $14 on the declaration date. Which of the following correctly describes the effect of accounting for the declaration and distribution of the stock dividend? a.) Retained earnings decreased $35,000. b.) Additional paid-in capital increased $25,000. c.) Common stock increased $35,000. d.) Retained earnings decreased $37,500.

a.) Retained earnings decreased $35,000.

Which of the following accounts would most likely not require an adjusting entry at year end? a.) cash b.) office supplies c.) unearned subscription revenue d.) prepaid rent

a.) cash

Aura Industries purchased land by paying $26,000 cash on the purchase date and agreeing to pay $26,000 for each of the next six years beginning one-year from the purchase date. Aura's incremental borrowing rate is 7%. On the balance sheet as of the purchase date, after the initial $26,000 payment was made, the liability reported is closest to: Note: Use the appropriate factor(s) from the tables in the book, or Excel, or a financial calculator. a.) $149,930. b.) $123,930. c.) $103,941. d.) $156,000.

b.) $123,930.

Which of the following describes the transaction resulting in a journal entry with a debit to Wages Payable and a credit to Cash? a.) Wages expense has been incurred but is unpaid. b.) Cash was used to pay for wages that were previously recorded as an expense. c.) Cash was used to pay for wages that were not previously recorded as an expense. d.) Cash was used to prepay employee wages.

b.) Cash was used to pay for wages that were previously recorded as an expense.

A company purchased supplies for cash, which will be consumed during future months. Which of the following correctly describes the impact of the supplies purchase on the financial statements? a.) Total assets will decrease. b.) Total assets will remain unchanged. c.) Operating expenses will increase. d.) Income from operations will decrease.

b.) Total assets will remain unchanged.

Which of the following journal entries is created as the result of an accrual? a.) deferred revenue, revenue b.) interest expense, interest payable c.) cash, deferred revenue d.) revenue receivable, unearned revenue

b.) interest expense, interest payable

Which of the following correctly describes the closing entry process? a.) the closing process reduces the balances in the permanent accounts to zero at the end of each period b.) the closing process creates a zero balance in all temporary accounts at the end of each period c. the closing entries are usually prepared prior to the adjusted trial balance d. the closing process creates a zero balance at the end of each period for all accounts on the year end trial balance

b.) the closing process creates a zero balance in all temporary accounts at the end of each period

a company acquired some land (independently appraised at 14,300) and paid for it by issuing 1,230 shares of its common stock (par 10 per share, no market price was quotes) how should this be reported on the statement of cash flows? a.) report 14,300 as inflow and outflow of cash b.) the transaction should not be reported on the statement of cash flows c.) report in a schedule of significant noncash investing and financing activities d.) report 14,300 as an inflow of cash

b.) the transaction should not be reported on the statement of cash flows

Which of the following statements is correct? a.) Revenue accounts result in increases in net income and stockholders' equity and therefore have debit balances. b.)Loss accounts result in decreases in net income and stockholders' equity and therefore have debit balances. c.)Gain accounts result in increases in net income and stockholders' equity and therefore have debit balances. d.)Expense accounts result in decreases in net income and stockholders' equity and therefore have credit balances.

b.)Loss accounts result in decreases in net income and stockholders' equity and therefore have debit balances.

Toby Toy Store has noticed the following items that need to be considered for its income statement for the year ended December 31, 2022: Commissions of $3,000 for salespeople who made sales in December will be paid January 3, 2023. The phone bill of $400 for December was received and will be paid January 20, 2023. The store rent of $2,000 for January 2023 was paid on December 28, 2022. At the beginning of November, Toby paid $1,500 for advertising in a monthly magazine that is distributed in November and December of 2022, and January of 2023. a.) 6,900 b.) $6,400 c.) $4,400 d.) $5,900

c.) $4,400

Red rock company has provided the following information pertaining to its recent year of operation: net income 202,000 accounts receivable increased 18,400 prepaid insurance decreased 6,200 depreciation expense was 34,000 gain on sale of land 4,200 wages payable decreased 14,400 unearned revenue increased 22,400 using the indirect method, how much was red rocks net cash provided by operating activities? a.) 236,000 b.) 256,000 c.) 227,600 d.)1,784,000

c.) 227,600

Gertrude company's unearned rent revenue accounts shows a balance of $55,000 on January 1, 2023. During the adjustment process at December 31, 2023, Gertrude recorded a $60,000 adjustment to unearned rent revenue to recognize revenue earned during the year. If the balance in Gertrude's unearned rent revenue account was $52,500 after the adjustments were recorded, what was the amount of cash collected by Gertrude for rent revenue during the year? a.) 107,500 b.) 62,500 c.) 57,500 d.) 63,000

c.) 57,500

Tinker's cost of goods sold in the year of sale (2022) was $900,000 and 2021 cost of goods sold was $920,000. The inventory at the end of 2022 was $203,000 and at the end of 2021 the inventory was $223,000. Tinker's average number of days to sell its inventory during 2022 is closest to: Note: Use 365 days a year. Do not round intermediate calculations. a.) 85 b.) 88 c.) 86 d.) 82

c.) 86

Which of the following correctly describes the impact of collecting cash from customers for services to be provided in the future? a.) Assets and stockholders' equity increase b.) Assets and revenues increase c.) Assets and liabilities increase d.) Assets and income from operations increase

c.) Assets and liabilities increase

elena Company received cash from a customer in advance of providing the service to the customer. Which of the following does not accurately describe the impact on the financial statements when Yelena later provides the service? a.) Income from operations increases. b.) Liabilities are decreased. c.) Assets are increased. d.) Retained earnings increases.

c.) Assets are increased.

Under the FIFO cost flow assumption during a period of rising costs, which of the following is false? a.) income tax expense will be higher under FIFO than under LIFO. b.) Net income will be higher under FIFO than under LIFO. c.) Ending inventory will be lower under FIFO than under LIFO. d.) Cost of goods sold will be lower under FIFO than under LIFO.

c.) Ending inventory will be lower under FIFO than under LIFO.

Which of the following expenses does not affect the reporting of income from operations? a.) Rent expense b.) Depreciation expense c.) Income tax expense d.) Cost of goods sold

c.) Income tax expense

Which of the following would not be a cash flow from financing activities? a.) issuance of common stock for cash b.) borrowing cash on a long term note payable c.) collections of a cash dividend from a stock investment in another company d.) repayment of principal on a long term note payable.

c.) collections of a cash dividend from a stock investment in another company

On April 1, 2023, the premium on a one year insurance policy was purchased for $4,800 cash with the insurance coverage beginning on that date. The books are adjusted only at year end. Which of the following correctly describes the effect on the financial statements of the December 31, 2021 adjusting entry? a.) prepaid insurance will decrease 1,200 b.) prepaid insurance will increase 3,600 c.) insurance expense will increase 3,600 d.) insurance expense will increase 1,200

c.) insurance expense will increase 3,600

Which of the following transactions is not reported in the statement of cash flows as a cash flow from investing activities? a.) selling a depreciable asset for cash at a loss b.) purchasing a patent using cash c.) purchasing land in exchange for common stock d.) purchasing shares of common stock of another company using cash

c.) purchasing land in exchange for common stock

Which of the following correctly describes the effects of accruing income tax expense at year-end? a.) a cash payment is made to pay the taxes due b.) liabilities are not affected c.) retained earnings decreases d.) net income increases

c.) retained earnings decreases

which of the following types of bonds has specific assets pledged to guarantee repayment? a.) debenture bond b.) callable bond c.) secured bond d.) convertible bond

c.) secured bond

Which of the following statements does not correctly describe the accounting for bonds that were issued at a discount? a.) the interest expense over the life of the bond exceeds the total cash interest payments. b.) the interest expense over the life of the bond increases as the bonds mature when the effective interest method is used. c.) the amortization of the discount on bonds payable account decreases as the bonds mature when the effective interest method is used. d.) the book value of the bond liability increases when interest expense is accrues

c.) the amortization of the discount on bonds payable account decreases as the bonds mature when the effective interest method is used.

Lockhart Industries reported total stockholders' equity of $340,000 on its balance sheet dated December 31, 2021. During the year ended December 31, 2022, the company declared and paid a cash dividend of $8,000, declared and distributed a 10% stock dividend with a $10,000 total market value, and issued additional common stock for $80,000. If total stockholders' equity as of December 31, 2022 is $452,000, what was the amount of net income for the year ended December 31, 2022? a.)$50,000. b.)$72,000. c.)$40,000. d.)$62,000.

c.)$40,000.

Which of the following statements is not correct? a.) Issuance of common stock creates a financing activities cash inflow. b.) Issuance of preferred stock creates a financing activities cash inflow. c.)Payment of a common stock cash dividend creates an operating activities cash outflow. d.)Purchase of treasury stock creates a financing activities cash outflow.

c.)Payment of a common stock cash dividend creates an operating activities cash outflow.

On October 1, 2022, Donna Equipment signed a one-year, 9% interest-bearing note payable for $48,000. If Donna Equipment maintains its books on a calendar year basis, how much interest expense should be reported in the 2023 income statement? a.) $2,160. b.) $4,320. c.) $1,080. d.) $3,240.

d.) $3,240

Which of the following statements is correct? a.)A 10% common stock dividend decreases both earnings per share and total stockholders' equity. b.)A 2-for-1 common stock split decreases both earnings per share and total stockholders' equity. c.)A 2-for-1 common stock split increases both the number of common shares outstanding and total stockholders' equity. d.) A 30% common stock dividend increases the number of common shares outstanding and does not affect total stockholders' equity.

d.) A 30% common stock dividend increases the number of common shares outstanding and does not affect total stockholders' equity.

Which of the following journal entries is prepared by an auto repair shop when a customer will pay cash subsequent to delivery of goods or services? a.) Cash, Unearned revenue b.) Revenue, Accounts receivable c.) Unearned, revenue Cash d.) Accounts receivable Revenue

d.) Accounts receivable, Revenue

Which of the following statements regarding the balance sheet is false? a.) buildings and equipment are reported at book value b.) assets are reported in the order of liquidity c.) current liabilities are obligations to be paid with current assets d.) the balance sheet reflects balances for a period of time

d.) the balance sheet reflects balances for a period of time

SRJ Corporation entered into the following transactions: The accrual of interest expense on a six-month note payable. Collected cash for services to be provided within the next six months. The reclassification of short-term debt to long-term debt. Which of the transactions for SRJ Corporation resulted in a decrease in working capital? a.)Both the accrual of interest expense and collecting cash for services to be provided in the future. b.) Collecting cash on accounts receivable. c.) Collecting cash for services to be provided in the future. d.)The accrual of interest expense.

d.)The accrual of interest expense.

Flow Company has provided the following information for the year ended December 31, 2022: • Cash paid for interest, $23,000 • Cash paid for dividends, $6,600 • Cash dividends received, $4,600 • Cash proceeds from bank loan, $35,000 • Cash purchase of treasury stock, $14,000 • Cash paid for equipment purchase, $30,000 • Cash received from issuance of common stock, $40,000 • Cash received from sale of land with a $32,000 book value, $27,400 • Acquisition of land costing $51,000 in exchange for preferred stock issuance • Payment of a $130,000 note payable by exchanging used machinery with a $80,000 book value and $130,000 fair value How much was Flow's net cash flow from investing activities? From financing activities?

investing = 32,400 financing = 19,400

On January 1, 2022, Frame Industries purchased a delivery vehicle costing $26,650. The vehicle has an estimated 7-year life and a $2,500 residual value.Frame uses the units-of-production depreciation method and Frame estimates that the vehicle will be driven 105,000 miles. What is the vehicle's book value as of December 31, 2023, assuming the vehicle was driven 10,500 miles during 2022 and driven 18,500 miles during 2023?Note: Do not round your intermediate calculations. A) $19,980. B) $17,650. C) $20,150 D) $17,480.

A) $19,980

The Pioneer Company has provided the following account balances:Cash 38,300Short-term investments 4,300Accounts receivable 49,500Supplies 6,300Long-term notes receivable 2,300Equipment 97,500Factory Building 183,000Intangible assets 6,300Accounts payable 29,700Accrued liabilities payable 3,850Short-term notes payable 14,600Long-term notes payable 93,500Common stock 183,000Retained earnings 62,850What are Pioneer's total current assets? A) $98,400 B) $51,200 C) $48,900 D) $42,600

A) $98,400

Beacon, Incorporated reported the following amounts at the end of the first year of operations:Common stock $ 332,000Sales revenue $ 1,328,000 Total assets $ 996,000 Dividends declared $ 76,000 Total liabilities $ 400,000 What are the retained earnings of Beacon at the end of the year, and what amount of expenses were incurred during the year? A) Retained earnings are $264,000 and expenses incurred totaled $988,000. B) Retained earnings are $264,000 and expenses incurred totaled $1,064,000. C) Retained earnings are $596,000 and expenses incurred totaled $732,000. D) Retained earnings are $596,000 and expenses incurred totaled $928,000.

A) Retained earnings are $264,000 and expenses incurred totaled $988,000.