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53 Cards in this Set
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Which statement is true? -The Sales account is used to record only sales on account -Gross Profit is the excess of sales revenue over costs of goods sold -A service company purchases products from suppliers and then sells them -Purchase returns and allowances increase the net amount of purchases |
-Gross profit is the excess of sales revenue over cost of goods sold |
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When applying the lower-of-cost-or-market rule to inventory, "market" generally means... -original cost, less physical deterioration -original cost -resale value -current replacement cost |
-current replacement cost |
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During a period of rising prices, the inventory method that will yield the highest net income and asset value is ... -specific identification -average cost -LIFO -FIFO |
-FIFO |
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Bell Company had cost of goods sold of $160,000. The beginning and ending inventories were $8,000 and $23,000, respectively. Purchases for the period must have been... |
Beg I +Purchases - Ending I = Cost of G S End I + Cost of G S - Beg I = Purchases 23,000 + 160,000 - 8,000 = 175,000 |
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Palamino had an $18,000 beg I and a $21,000 ending I. Net sales were $200,000; purchases, $95,000; purchase returns and allowances, $6,000; and freight in, $8,000. Cost of goods sold for the period is $94,000. What is Palamino's gross profit percentage? |
Gross profit (Net sales - Cos of G S) / (Net sales)=GPP % (200,000 - 94,000) / 200,000 = 0.53 x 100 =53% |
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Bentley, Inc., purchased a tract of land, a small office building, and some equipment for $1,800,000. The appraised value of the land was $1,144,000, the building $660,000, and the equipment $396,000. What is the cost of the land? |
MV of the Land / Total MV = % of total MV 1,144,000 / 2,200,000 = 0.52 x 100 = 52% %of total MV x total cost = Cost of land .52 x 1,800,000 = $936,000 |
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On October 1, 2014, Freedom Communication purchased a new piece of equipment that cost $35,000. The estimated useful life is five years and estimated residual value is $8,000. What is the depreciation expense for 2014 if Freedom uses the STRAIGHT-LINE Method? |
(Cost - Residual Value)/Useful life yrs)x(Mos. used/12)=Depreciation Expense (35,000 - 8,000)/5)x3/12= $1,350 |
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Assume Freedom Communications purchased a new piece of equipment on January 1, 2014 that cost $35,000. The estimated useful life is five yrs and estimate residual value is $8,000. If Freedom uses the DOUBLE-DECLINING Bal Method, what is depreciation for 2015? |
(1/useful life yrs) x doub the rate = DDB dep. rate (1/5) x 2 = 0.4 Cost-Accumulated dep = Book value x DDB R =DDB rate YEAR 1 35,000 - 0 = 35,000 x 0.4 = 14,000 Cost - Accumulated D yr 1 = Book Value x DDB R = Year 2 35,000 - 14000 = 21,000 x 0.4 = $8400 |
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On Oct 1, 2014, Freedom purchased a new piece of equipment that cost $35,000. The estimates useful life is 5 yrs and estimated residual value is $8,000. Assume that Freedom uses the STRAIGHT-LINE Method of Dep. & sells the Equipment for $22,400 on Oct 1, 2018. The result of the sale of the equipment is a gain (loss) of... |
(cost-residual value)/useful life yrs)=annual dep (35,000 - 8000/5) = 5,400 cost - accumulated dep (annual x yrs used)=BV 35000 - 21600 = 13,400 sale value - BV = Gain (loss) on sale 22,400 - 13,400 = $9,000 |
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Which of the following is NOT a capital expenditure? -a complete overhaul of an air-conditioning system -replacement of an old motor with a new one in a piece of equipment -the cost of installing a piece of equipment -a tune-up of a company vehicle -the addition of a building wing |
-a tune-up of a company vehicle |
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Recording estimated warranty expense in the year the related products are sold BEST follows which accounting principle? -full disclosure -consistency -historical cost -materiality -expense recognition (matching |
-expense recognition (matching) |
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A contingent liability should be recorded in the accounts if.... |
the amount can be reasonably estimated AND if the related future event will probably occur |
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A bond that matures in installments is called a? -callable bond -zero coupon -secured bond -serial bond -term bond |
-serial bond |
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McVay issued $100,000 of 4.5% 10-year bonds. The bonds are dated and sold on Jan 1, 2015. Interest payment dates are Jan 1 and July 1. The bonds are issued for $96,103 to yield the market interest rate of 5%. Using the STRAIGHT-LINE amortization, the carrying amount of McVay bonds at Dec 31, 2015, is... |
par value of the bonds-cash received on issuance = discount amount 100,000 - 96,103 = 3,897 discount/# of interest periods(10 yrs pays 2x = 20 periods)=amortization of discount 3,897/20 = 195$ Bonds payable-discount account balance(discount amt - (discount ammortization x # of periods 2)=bond carrying amount 100,000-3507 = $96,493 |
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Failure to accrue interest expense results in... |
an OVERSTATEMENT of NET INCOME and an UNDERSTATEMENT of LIABILITIES |
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An end-of-period adjusting entry that debits Unearned Revenue most likely will credit... -an expense -an asset -a revenue -a liability |
-a revenue |
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The following are the account balances of McCorkle @ Aug 31, 2014 Dividends Payable: 22,500 Preferred Stock, $100 par: 150,000 Paid-in Capital in Excess of Par-Common:100 Cash: 124,000 Common Stock, $1 par: 200,000 Retained Earnings: 400,000 How many shares of common stock has McCorkle issued? |
(total par value/par value per share) = common shares issued 200,000 / 1.00 = 200,000 |
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With the date given in the last question, What is McCorkles total stockholders' equity as of Aug 31, 2014? |
Common stock + Preferred stock + Retained Earnings + Paid-in capital in excess of par-common = total stockholders' equity 200,000 + 150,000 + 400,000 + 100,000 = $850,000 |
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When does a cash dividend become a legal liability? -on date of payment -never, because it is paid -on date of record -on date of declaration |
-on date of declaration |
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stock dividends -are distributions of cash to stockholders -have no effect on total stockholders' equity -reduce the total assets of the company -increase the corporations total liabilities |
-have no effect on total stockholders' equity |
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What is the effect of a stock dividend and a stock split on total assets? |
No effect on BOTH |
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Preferred stock is least likely to have which of the following characteristics? -preference as to dividends -preference as to voting -preference as to assets on liquidation of the corporation -the right of the holder to convert to common stock |
-preference as to voting |
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Which of the following classification represents the most shares of common stock? -issued shares -outstanding shares -unissued shares -treasury shares -authorized shares |
-authorized shares |
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A company paid $26 per share to purchase 500 shares of its common stock as treasury stock. The stock was originally issued at $10 per share. Which of the following is the journal entry to record the purchase of the treasury stock? |
shares purchased x cost per share = treasury stock 500 x 26 = 13,000 Treasury stock 13,000 Cash 13,000 |
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The quality of earnings suggests that... -continuing operations and one-time transaction are of equal importance -income from continuing operation is a more relevant predictor of future performance than income from one-time transactions -stockholders want the corporation to earn enough income to be able to pay its debts -net income is the best measure of the results of operations |
-income from continuing operation is a more relevant predictor of future performance than income from one-time transactions |
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Which statement is true? -discontinued operations are a separate category on the income statement -extraordinary items are combined with continuing operations on the income statement -extraordinary items are part of discontinued operations -all of the above are true |
-discontinued operations are a separate category on the income statement. |
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Baylor, Texas, purchased earth-moving equipment from a Canadian company. The cost was $1,400,000 Canadian, and the Canadian dollar was quoted at $0.97. A month later, Baylor County paid its debt, and the Canadian dollar was quoted at $0.98. What was Baylor County's cost of the equipment? |
Cost of equipment (canadian) x Quoted exchange rate = Cost of equipment (US dollars) 1,400,000 x 0.97 = $1,358,000 |
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Deferred Tax Liability is usually... (which type of account and where is it reported?) |
on the LONG-TERM account, reported on the BALANCE SHEET |
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An auditor report by independent accountants.. -gives investors assurance that the company's financial statements conform to GAAP -ensures that the financial statements are error-free -gives investors assurance that the company's stock is a safe investment -is ultimately the responsibility of the management of the client company |
-gives investors assurance that the company's financial statements conform to GAAP |
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What is the most relevant net income figure on a corporate multi-step income statement for predicting future profits and for use in investment valuation? -continuing operations -prior-period adjustments -discontinued operations -extraordinary items |
-continuing operations |
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Foreign currency transaction gains and losses are reported on the.. -balance sheet -consolidation work sheet -statement of cash flows -income statement |
-income statement |
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Earnings per share is NOT reported for.. -discontinued operations comprehensive income -extraordinary items -continuing operations |
-comprehensive income |
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segment information is reported in a company's.... -balance sheet -income statement -statement of stockholders' equity -financial statement footnotes |
-financial statement footnotes |
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Which statement is true? -auditors of public companies audit financial statements as well as internal controls -GAAP requires companies to issue reports on corporate social responsibility (CSR) -manafement audits the financial statements -independent auditors prepare the financial statements |
-auditors of public companies audit financial statements as well as internal controls |
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All except which of the following activities are reported on the statement of cash flows? -marketing activities -operating activities -investing activities -financing activities |
-marketing activities |
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On the statement of cash flows, activities that create long-term liabilities are usually... -operating activities -investing activities -financing activities -noncash investing and financing activities |
-financing activities |
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On the statement of cash flows, activities affecting long-term assets are... -operating activities -investing activities -financing activities -marketing activities |
-investing activities |
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On the statement of cash flows, activities that obtain the cash needed to launch and sustain a company are... -income activities -investing activities -financing activities -marketing activities |
-financing activities |
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Cold Cup Ice Cream began the year with $30,000 in accounts receivable and ended the year with $16,000 in accounts receivable. If credit sales for the year were $575,000, the cash collected from the customers during the year amounted to... |
Beg + sales - ending balance = cash collected 30,000 + 575,000 - 16,000 = 589,000$ |
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Paying off bonds payable is reported on the statement of cash flows under... -noncash investing and financing activities -financing activities -operating activities -investing activities |
-financing activities |
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The sale of inventory for cash is reported on the statement of cash flows under... -operating activities -noncash investing and financing activities -investing activities -financing activities |
-operating activities |
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selling equipment for cash is reported on the statement of cash flows under... -financing activities -noncash investing and financing activities -investing activities -operating activites |
-investing activities |
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which of the following terms appears on a statement of cash flows - indirect method? -collections from customers -cash receipt of interest revenue -payments to suppliers -depreciation expense |
-depreciation expense |
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on an indirect method of statement of cash flows, an increase in a prepaid insurance would be... -added to net income -added to increases in current assets -deducted from net income -included in payments to suppliers |
-deducted from net income |
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on an indirect method statement of cash flows, an increase in accounts payable would be.. -reported in the financing activities section -added to net income in the operating activities section -deducted from net income in the operating activities section -reported in the investing activities section |
-added to net income in the operating activities section |
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a company uses the direct method to prepare the statement of cash flows. Select an activity for each of the following transactions: 1. Receiving cash dividends is an...........activity 2. Paying cash dividends is an................activity |
1. operating 2. financing |
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On Oullettes's common-size balance sheet for 2014, Goodwill would appear as... or just the formula to find it (; |
goodwill/total assets = common-size statement goodwill |
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what is the formula for computing inventory turnover? |
Cost of G S / Avg inventory = Inventory Turnover |
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What is the formula to compute the rate of return on sales? |
(Net income - preferred dividends)/Total revenues = ROS % |
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What is the formula for the return on stockholders' equity? |
(Net income - preferred dividends) / Avg common stockholders' equity = ROE% |
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what is the formula for computing current ratio? |
current assets / current liabilities = current ratio |
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what is the formula for computing the acid-test ratio? |
(cash + short-term investments + accounts receivable)/current liabilities = acid-test ratio |
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What is the trend percentage formula? |
Net revenue 2014 / net revenue 2012 (base?) = trend % |
