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Principles of Accounting I
Terms in this set (74)
Willie Company's retained earnings increased $20,000 during 2010. What was Willie's 2010 net income or loss given that Willie declared $25,000 dividends during 2010?
Net income was $45,000
Which of the following would be reported in the financing section of a cash flow statement?
Cash paid for dividends to stockholders
Which of the following best describes the balance sheet?
It provides information pertaining to a company's assets and the providers of the assets
Atlantic Corporation reported the following amounts at the end of the first year of operations: contributed capital $200,000; sales revenue $800,000; total assets $600,000; dividends declared; $40,000; and total liabilities $320,000. What are Atlantics' retained earnings at the end of the year and how much expenses were incurred during the year?
Retained earnings are $80,000 and expenses incurred totaled $680,000
Which of the following would not be reported in the operating activities section of a cash flow statement?
Cash paid for dividends to stockholders
Chad Jones is the sole owner and manager of Jones Glass Repair shop. Jones purchased a truck for $30,000 to be used in the business. Which of the following fundamentals requires Jones to record the truck at the price paid to buy it?
Historical cost principle
Which of the following is the amount of revenue reported on the income statement of a retail company prepared in accordance with generally accepted accounting principles?
Both cash and credit sales for the period
Which of the following best describes the matching principle?
It requires expenses to be recorded when incurred to generate revenues.
Which of the following best describes the time period assumption?
It assumes we divide the long life of a business into a series of shorter time periods for accounting and reporting purposes.
Which of the following reflects the impact of a transaction where $200,000 cash was invested by stockholders in exchange for stock?
Stockholders' equity and assets each increased $200,000
On October 1, 2011, Adams company paid $4,000 for a two-year insurance policy with the insurance coverage beginning on that date. As of December 31, 2010, which of the following account balances are correct after adjusting entries have been made?
Prepaid insurance, $3500; and insurance expense $500
On April 1, 2011, the premium on a one-year insurance policy was purchased for $3,000 cash with the insurance coverage beginning on that date. Which of the following correctly describes the effect of the December 31,2011 adjusting entry on the financial statements?
Insurance expense will increase $2250
On April 1, 2011, Allen Company signed a $100,000, 18 month (due in 18 months), 5 percent not payable. The principal and interest will be paid on Septamber 30, 2012. How much interest expense should be reported on the income statement for the year ended December 31, 2011?
At year-end December 2012, Hilda's Decorators Inc. needs to record utilities expense of $4,100 based on the December power bill received in the mail. The adjusting entry needed to record the utilities expense is:
Utilities expense...........$4,100 Accounts Payable.........$4,100
Flipp and SIck, P.C. is a calendar- year law firm that specializes in criminal defense. Legal services valued at $9,500 were rendered during December to a client who had made payment in advance. The advance payment was booked as unearned revenue when received by the firm. What adjusting journal entry is needed if any to Flipp and Sick's books at year end December 31?
Unearned Rev........$9,500 Legal services Rev.......$9,500
Which of the following correctly describes the effects of recording prepaid supplies expense when cash is paid to purchase the supplies?
Total assets do not changes
Which of the following correctly describes the following journal entry? Depreciation exp.........$22,900 Accumulated depreciation.........$22,900
Total assets decrease
What is the effect on the financial statements when a company fails to accrue revenue earned a year-end?
Net income is understated and assets are understated.
On December 31, 2011, Krug Company reported pretax income of $120,000 prior to recording the following adjustments: Depreciation exp $31,000; accrued service rev totaled $29,000; acccrued exp totaled $12,000; expired insurance, which was prepaid, totaled $9,000. How much is Krug's pretax income after adjusting entries?
In what order are current assets usually reported on the balance sheet?
From the most liquid to least liquid
Which of the following would not be classified as a current asset?
Which of the following is an objective of the external audit of a company's financial statements?
To provide credibility and assurance that the financial statement information conforms with generally accepted accounting principles in all material respects.
Which of the following are primarily responsible for the information provided in a company's financial statements?
the Chief Executive Officer and the Chief Financial Officer
The Callie Company has provided the following information: operating expenses wee $231,000; cost of goods sold was $367,000; Net sales were $910,000; interest expense was $32,000; gain on sale of a building was $76,000 and income tax expense was $151,000. What was Callie's gross profit?
Best Buy, Inc. a calendar year corporation, reported the following financial information: Net Income 2011-1,277; 2010-1317; Preferred dividends -0-; Shares outstanding Jan 1 2011 419; 2010 414; Shares issued July 1 2011-10; 2010-5; Shares outstanding Dec 31 2011-429; 2010-419. What is Best Buy's Inc. earnings per share for the year ended in Dec 31, 2011?
The concept that small accounts do not need to be separately reported or accounted for precisely if they would not affect user's decisions is referred to as:
What type of information is not normally found in the notes to financial statements?
Projections of future financial statement amounts
The classified income statement provides detailed information about a firm's profitability. What does gross profit measure?
The excess of net sales revenue over the cost of goods sold
ROA can be decomposed into two components; net profit margin and total asset turnover. Which of the following changes, holding other factors constant, would increase ROA?
Increase sales price
The information below came from the financial statements of Battery Junction. What was the ROA for 2009 and 2010 respectively?
32.32% and 30.83%
Which of the following is correct when bad debt expense is recorded at year-end?
Income from operations will decrease
Which of the following journal entries correctly records bad debt expense?
DR Bad debt Xp CR Accounts Receivable
The CHS Company has provided the following information: accounts receivable written-offs as uncollectible during the year amounted to $11,500; accounts receivable balance at the beginning of the year was $150,000; the accounts receivable balance at the end of the year was $210,000; the allowance for doubtful accounts balance at the beginning of the year was $14,000; the allowance for doubtful accounts balance at the end of the year after recording of bad debt expense was $12,900; credit sales during the year totaled $900,000. How much was CHS Company's bad debt expense?
L'Homme, Inc. has provided the following information: cash sales $127,500; Credit sales $382,500; Selling and administrative expenses $93,500; Sales returns and allowance $25,500; Gross profit $416,500; Accoutns receivable $93,500; Sales discounts $11,900; Allowance for doubtful accounts credit balance $1020. How much is bad debt expense assuming that 3% of accounts receivable is estimated to be uncollectible?
A company had the following partial list of account balances at year-end: Sales returns and allowance $1,200; accounts receivable $41,800; Sales discounts $2,520; sales revenue $104,500; Allowance for doubtful accounts $1,320. How much is net sales revenue?
Which of the following is most likely to cause a decrease in a company's gross profit percentage?
The selling price decrease
When using the allowance method for accounting for bad debts, accounts receivable is reported on the balance sheet a the expected net realizable value. When a particular receivable from a customer ultimately is determined to be uncollectible and is written off, the recording of this event will
Have no effect on the net realizable value of the accounts receivable
Which of the following statements is correct when inventory prices are increasing?
FIFO will result in a higher net income and a higher inventory valuation than will LIFO.
What is the ending inventory using avg cost method?
What is the cost of goods sold using the avg cost method?
What is the cost of goods sold using the FIFO method?
What is the cost of ending inventory using the LIFO method of inventory costing?
On Dec 31, 2010, Cruise Company has 10,000 units of an inventory item, which cost $30 per unit when purchased on June 15, 2010. The selling price was $70 per unit. On Dec 30, 2010, the replacement cost was $28 per unit. At what amount should the 10,000 units of inventory be reported at on Dec 31, 2010 balance sheet?
A company provided the following data: sales $400,000; beginning inventory $45,000; ending inventory $40,000; gross profit $150,000. What was the amount of inventory purchased during the year?
Which of the following costs will not affect cost of goods sold (ie which is not a product cost)?
Inventory related selling costs
Gilbert Company made an ordinary repair to a delivery truck during 2010 at a cost of $500 and capitalized the repair cost. What will be the effect on the 2010 financial statements as a result of the capitalization?
Assets and net income are both over stated
GT Company sold a used piece of equipment for cash of $25,000. The equipment was purchased several years ago and the total capitalized cost was $68,800. At the date of sale, accumulated depreciation on the asset was $40,000. The sale resulted in a gain or loss of how much?
NATS Company owns an asset that while still in good operating condition has become nearly obsolete due to new technology available on newer models. At the end of the company's fiscal year, the asset's carrying value or net book value was $16,000, but based on its limited usefulness, the company expects that future cash flows that can be generated by the machine total only $8,500. Company management has identified a buyer who is willing to pay $4,800 for the machine. Based on her study of the rules of asset impairment, the company's accountant thinks the asset is impaired and should be written down. How much, if any, impairment loss should be booked by NATS Company at year-end?
$11,200 loss on impairment
Which of the following types of expenditures would not be considered a capital expenditure?
Cost to change the oil in aircraft engines, replacing lights in the control panels, and fixing torn fabric in passenger seats on a corporate jet owned by a business.
THWG mining Inc. purchased a new supersized truck to haul large quantities of ore at one of its sites. The cost of the truck was $950,000 and was paid in cash. In addition to the purchase price, THWG paid shipping and delivery expense of $15,500. After accepting delivery, THWG paid $3,500 for testing of hte truck to ensure that it would operate as expected. THWG purchased liability insurance to cover any unforeseen accidents that might happen involving the truck. THWG paid $6,000 for 12 months of liability insurance coverage. What is the capitalized cost of the truck?
Intangible assets can be classified as those with an indefinite life and those with a definite life. Which of the following is correct about these two categories of intangible assets?
Intangible assets with a definite life- amortize over useful life Intangible assets with an indefinite life- book value is only adjusted for impairments
Selected information from the GTR institute's most recent financial statement appears below. Based on this information, What is the company's quick ratio? Sales $979,100; accounts payable $85,800; Accounts receivable $491,100; Cash $295,800; Current portion of long term debt $35,000; Income taxes payable $70,900; Inventory $137,900; Long term debt $437,000; Marketable securities $48,800; Prepaid expense $10,500; Wages payable $202,000
The following information pertaining to the month of September was taken from the payroll records of the Harris Company: Salaries $18,000; FICA taxes employee share $1,378; FICA taxes emplolyers share $1,378; Federal and state income taxes withheld $3960; FUTA taxes $70 What was the amount of cash aid to employees?
Jerry owns a restaurant and has the opportunity to buy a high-quality espresso coffee machine for $4,200. After carefully studying the project cost and revenues, Jerry estimates that the machine will produce a net cash flow of $1,800 annually and will last for 5 years with no residual value. He determines that an interest rate of 8% is an adequate return on investment for his business. Calculate the net present value of the machine to Jerry.
On the last day of October, Wicker Company borrows $110,000 on a bank note due in 180 days (6 months) at 10 percent interest. Interest is not included in the face amount. Assume that Wicker properly recorded the borrowed amount ot Oct 31. If no payments have been made with respect to the loan, should a liability be recorded at Wickers fiscal year end of December 31, and if so, what is the amount of the liability that should be recorded? Assume that each month has 30 days.
Yes, a liability should be recorded in the amount of $1,833
Blondie Corporation purchased a precision tool machine with compute controls that had a purchase price of $800,000. Blondies paid 40% of the purchase price in cash at the purchase date and agreed to pay 30% of the price one year later, and the remaining 30% of hte price in later years with no interest. Assuming that the prevailing interest rate for such a transaction is 13% , compounded annually, what is the capitalized cost of the machine?
Which of the following correctly describes the accounting for leases?
A capital lease reports an asset on the balance sheet
Young Company is involved in a lawsuit . When would the lawsuit be recorded as a liability on the balance sheet?
When the loss is probable and the amount can be reasonably estimated
Which of the following properly describes the accounting for goodwill?
Goodwill is written down when it has been determined to be impaired,
A company issued 5-year bonds paying interest semi-annually. The face-amount of the bonds was $30,000. The stated interest rate is 4%. The bonds were priced to yield 6%. The present value of the future interest payments is:
A company issued 5-year bonds paying interest semi-annually. The face-amount of the bonds was $30,000. The stated interest rate is 4%. The bonds were priced to yield 6%. The present value of the future principal payment:
The Man, Inc. issues bonds with a face value of $10,000,000 having a 8% coupon rate of interest. The market rate for similar bonds is 7.5%. The bonds were issued:
at a premium
The Man. Inc. uses the effective interest method to determine the interest expense on $4,300,000 of bonds issued with a coupon rate of 7%, when the market rate was 8%. The bonds mature in 10 years and pay interest every 6 months. If the difference between the face value and the issue price of the bonds is $292,140 at the time the bonds were issued, what amount of interest expense does the company recognize on the first interest payment?
When bonds with a face value of $5,320,000 having a 8% stated rate of interest are issued at $5,960,000, the journal entry to record the transaction would be:
Cash $5,960,000 Premium on bonds payable bonds payable
MARTA issued zero coupon bonds with a maturity balue of $900,000 in 10 years. The bonds were sold at a price to yield 4% compounded annually. What were the total proceeds generated by this bond issue?
Daurice Outdoor Furniture issued 4 year bonds with a face value of $600,000 having a 4% coupon interest rate, with interest payments every 6 months The market rate for similar bonds is 6%. What are the total proceeds fot the bond issue?
Which of the following statements is false?
Corporations are governed by their stockholders
RKJ Company has provided the following: 100,000 shares of $5 par value common stock are authorized; 70,000 shares were issued for $9 per share; 65,000 shares are outstanding. Which of the following statements is correct based only on the above facts?
Common stock is reported at $350,000 on the balance sheet.
Which of the following statements about earnings per share is correct?
It is calculated using the average number of common shares of stock outstanding
Which of the following entries would be recorded when a company reissues 1,000 shares of treasury stock for $50 per share when they were repurchased at a cost of $47 per share and have $1 par value?
Cash $50,000 Treasury stock $47,000 Capital in excess of par value $3000
During 2012, Thomas Corporation repurchased some shares of its own common stock. What effect did this transaction have on 2012 stockholders' equity and earnings per share respectively?
Decrease equity and increase earning per share
On Dec 15, 2009, the board of directors of cross corporation declared a cash dividend, payable on Jan 8, 2010 of $.80 per share on the 2,000,000 common shares outstanding. On Dec 15, 2009, Cross Corp should
Decrease retained earning $1.6 million and increase liabilities $1.6 million
A company declares a 40% stock dividend when there were 4 million common shares outstanding with a $1 par value. The current market price is $20 per common share. Which of the following will be the effect of the stock dividend?
Retained earning will decrease by $1.6 million and contributed capital will increase by $1.6 million
A company reported total stockholders equity of $520,000 on its balance sheet dated Dec 31, 2010. During the year ended Dec 31, 2011, the company reported net income of $60,000, declared and paid a cash dividend of $18,000, sold treasury stock costing $12,000 for $15,000, and issued additional common stock for $70,000. What is total stockholders equity as of Dec 31, 2011?
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