Financial Accounting Test #4

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determines when revenue is credited to a revenue account

What is the revenue recognition concept?

when they are incurred, whether or not cash is paid

Using accrual accounting, expenses are recorded and reported only

debit Insurance expense 10000; credit prepaid insurance 10000

What is the proper adjusting entry at April 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $16,000, and unexpired amounts per analysis of policies, $6,000

LIFO

The inventory method that assigns the most recent costs to cost of good sold is

LIFO

The inventory costing method that reports the earliest costs in ending inventory is

$24,000

Equipment with a cost of $130,000 had an estimated residual value of $10,000 and an estimated life of 5 years or 12,000 hours. It is depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

$12,400

Computer equipment was acquired at the beginning of the year at a cost of $65,000 that has an estimated residual value of $3000 and an estimated useful life of 5 years. Determine the 2nd years' depreciation using straight-line depreciation

effective interest rate

The market interest rate related to a bond is also called the

present value of 50 semiannual payments of $320,000, plus present value of $8,000,000 to be repaid in 25 years

A corporation issues for cash $8,000,000 of 8%, 25-year bonds, interest payable semiannually. The amount received for the bonds will be

callable bonds

Bonds that are subject to retirement at a stated amount prior to maturity at the option of the issuer are called

the unamortized discount decreases from its balance at issuance date to a zero balance at maturity

A corporation issues for cash $1,000,000 of 10%, 20-year bonds interest payable annually, at a time when the market rate is 12%. The straight-line method is adopted for the amortization of bond discount or premium. What is true?

The amount of annual interest paid to bondholders remains the same over the life of the bonds.

A corporation issues for cash $15,000,000 of 8%, 30-year bonds, interest payable annually, at a time when the market rate of interest is 9%. The straight-line method is adopted from the amortization of bond discount of premium. What is true?

debit insurance expense; debit premium on Bonds Payable, credit Cash

The entry to record the amortization of a premium on bonds payable on an interest payment date includes:

debit cash, credit Premium on Bonds Payable and bonds payable

The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be

debit interest expense, credit cash and discount on bonds payable

The journal entry a company records for the payment of interest, interest expense, and amortization on bond discount is

$5,800

On january 1, 2010 the Baker Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is Decemeber 31, 2014. Baker records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31, 2010 is

greater than its face value

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

can repurchase them in the open market

if bonds payable are not callable, the issuing corporation

a separate schedule

Preferred stock issued in exchange for land would be reported in the statement of cash flows in

investing activities

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under

the cash flows from operating activities section

depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

depreciation expense

What is deducted from net income when calculating net cash flow from operating activities using the indirect method?

$96,000

Accounts receivable from sales transactions were $44,000 at the beginning of the year and $53,000 at the end of the year. Net Income reported on the income statement for the tear was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is:

net sales

In a common size income statement, the 100% figure is:

net sales

in performing a vertical analysis, the base for cost of goods sold is

net income - preferred dividends

the numerator of the rate earned on common stockholders' equity ratio is equal to

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