Which of the following businesses would not report cost of sales on their income statements? A) A large law firm B) An automobile dealership C) A pizza restaurant chain D) A computer chip manufacturer E) All of the above would report cost of sales on their income statements The purchase of equipment with a note payable would A) Increase cash. B) Decrease cash. C) Increase a liability. D) Decrease a liability. E) None of the above is correct. The accounts payable account has a beginning balance of $12,000 and we purchased $50,000 of inventory on credit during the month. The ending balance was $10,000. How much did we pay our creditors during the month? A) $50,000 B) $52,000 C) $60,000 D) $62,000 Which of the following businesses would not report cost of sales on their income statements? A) A large law firm B) An automobile dealership C) A pizza restaurant chain D) A computer chip manufacturer E) All of the above would report cost of sales on their income statements Marion Company had these transactions during the first month of the new accounting period. Sold merchandise for $9,000 on credit; its cost was $5,000 and it was purchased and paid for last year. Collected $3,000 from an account receivable. The account was established in the previous year. Used office supplies of $1,500 purchased and paid for in the prior year. RUsing the above information, Marion would report net cash flow from operating activities for the new period as A) $2,500 B) $4,000 C) $8,000 D) $6,500 E) None of the above is correct. The statement of cash flows is important because A) of the three required financial statements, it is the only one which reports changes which took place during an accounting period. B) it indicates the asset and liability position of a company by reflecting the amounts and types of its assets and liabilities at the beginning and end of the period. C) it summarizes the information already reported in the income statement and balance sheet. D) it explains the sources and uses of cash during the period. E) None of the above is correct The difference between the equipment account balance and the accumulated depreciation, equipment account balance is called A) market value B) acquisition cost C) book value D) net realizable value E) none of the above The following item would be considered part of comprehensive income but would be debited or credited directly to a stockholders' equity account and not shown on the income statement. A) Foreign currency translation adjustment B) Unrealized gains or losses on securities investments C) Minimum pension liability adjustment D) None of the above E) All of the above When preparing the monthly bank reconciliation, the accountant for Kansett Motors noted that all cash deposits for the month were listed on the bank statement except one for $1,200 that was made on the last day of the month. In reconciling the bank balance with the company's cash account, the $1,200 should be A) deducted from the bank balance. B) added to the bank balance. C) deducted from the company's cash balance. D) added to the company's cash balance. E) None of the above is correct. On March 15, 2009, Ryan Company purchased $10,000 of merchandise on credit subject to terms, 2/10, n/30. Ryan records its purchases using the gross amount. The periodic inventory system is used. If Ryan pays for these goods on March 30, the entry made to record the payment should include A) $200 credit to Purchase discounts. B) debit of $9,800 to Accounts payable. C) debit of $10,000 to Accounts payable. D) $9,800 credit to cash. E) Two of the above are correct. Which of the following is a true statement? A) LIFO is not usually used for financial reporting of non-U.S. inventories because many foreign countries do not allow its use B) LIFO cannot provide a permanent tax saving because costs can drop or physical level of units can drop C) FIFO may be used for financial reporting of non-U.S. inventories if there is no LIFO conformity rule in that particular foreign country. D) All of the above are true E) None of the above is true Two systems are used in accounting for inventory --perpetual and periodic. Which of the following statements is correct? A) In a perpetual inventory system, the inventory account is not changed for each purchase during the accounting period. B) In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period. C) In a periodic inventory system, cost of goods sold is developed from a comparison of beginning inventory and ending inventory only. D) In a periodic inventory system, the inventory account is increased for each purchase during the accounting period. E) None of the above is correct. Which of the following would be classified as an operational (fixed) asset? A) Land purchased and held for sale by a realtor. B) Land purchased and held for development by Wal-Mart as a new store site. C) Land and buildings owned by Toys ?R? Us that are store sites closed due to restructuring and consolidating operations. D) A Ford Motor Company manufacturing plant used to manufacture the Taurus line in Dearborn, Michigan. E) All of the above are classified as operational (fixed) assets. On April 1, 2009, Kolbe purchased a car that cost $35,000 which had an estimated residual value of $5,000 and an estimated useful life of five years. To the nearest dollar, what is the amount of depreciation that should be recorded on the car for 2009 using the straight-line method? A) $4,500 B) $5,000 C) $5,200 D) $5,600 E) None of the above Which of the following about the characteristics of all long-lived, operational assets is true? A) They have physical substance. B) They are being used in the company's operations. C) They are classified as non-current assets on the balance sheet. D) Only B and C are true. E) All of the above are true Which of the following statements is true? A) A capital lease is a short-term lease. B) An operating lease is a long-term lease that essentially represents the purchase and financing of an asset. C) An operating lease requires the lessee to record both the asset and liability equal to the present value of the lease payments. D) All of the above are true. E) None of the above is true. If the market rate of interest is 10%, a rational person would just as soon receive $1,100 three years from now as what amount today (round to the nearest dollar)? A) $ 783. B) $ 826. C) $1,000. D) $1,100. E) None of the above is correct. Which of the following is false? A) If working capital is too high, it could indicate excessive inventory. B) Management of working capital is important because of their impact on cash flows. C) Working capital is not affected when cash is used to repay a short-term note. D) All of the above are false. E) None of the above is false. On December 31, 2006, Roberts Company sold $100,000, ten-year, 8% bonds at 104.5. The bonds were dated January 1, 2006, and interest is payable each December 31. The company uses the straight-line amortization method. The company should report the long-term liability (carrying value) for the bonds on the December 31, 2006, balance sheet as A) $100,000. B) $103,400. C) $104,000. D) $104,500. E) None of the above is correct. On March 31, 2009, Bundy Corporation retires $10 million of bonds when they have unamortized premium of $500,000 by repurchasing them in the market at 98 . Calculate the gain or loss on the retirement of the bonds. A) $150,000 loss. B) $150,000 gain. C) $650,000 loss. D) $350,000 loss. Which of the following is true? A) Interest payments reduce cash flow from operating activities. B) Calling the bonds would reduce cash from investing activities. C) Issuance of bonds would increase cash from investing activities. D) All of the above are true. E) None of the above is true. For each of the following types of inventory, enter a letter to indicate the type of business in which the inventory is more likely to appear. Match the descriptions with inventory costing methods by entering the proper letter in the space to the left. Hi-Crest Company purchased a machine on January 1, 2009, for $300,000. The machine has an estimated useful life of 5 years and a $10,000 residual value. It is now December 31, 2010 and Waters is in the process of preparing financial statements. Complete the following schedule assuming declining-balance method of depreciation with a 200% acceleration rate. Waterloo Corporation purchased factory equipment for a cost of $1,800,000. It cost $100,000 for its delivery, $220,000 for its installation and modifications to the production building, and cost $60,000 in interest costs on borrowed funds used to acquire the equipment. What is the acquisition cost of the new equipment? Match each concept with one of the values below: Match the liabilities with their usual classification on the balance sheet by entering the appropriate letters in the spaces. Match the way a bond will sell with the situations given. Consider the following statement: ?Issuing bonds at a discount is bad for the issuing corporation.? Required: Discuss the statement above and comment on its validity. Jennings Company uses the periodic inventory system and applied FIFO inventory costing. At the end of the annual accounting period, December 31, 2009, the accounting records for the best selling item in inventory showed: Frankel Feed purchased a new machine on January 1, 2006: Wolf Company borrowed $5,000 on an 8% (annual rate) interest-bearing note payable on March 1, 2008. The maturity date of the note (and payment of all interest) is September 1, 2009. The accounting period ends December 31. Give the entry for each of the following dates. Assume simple interest. Round to the nearest dollar. Grand Company authorized $150,000 of 5-year bonds dated January 1, 2006. The stated rate of interest was 14%, payable each December 31. The bonds were issued on January 1, 2006, when the market interest rate was 12%. Assume effective-interest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for 5 periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, and for 5 periods at 7% is 4.1002.) Round to the nearest dollar. (a) What would be the amount of premium amortization for December 31, 2006? (b) What would be the amount of the interest payment on December 31, 2006

Which of the following businesses would not report cost of sales on their income statements? A) A large law firm B) An automobile dealership C) A pizza restaurant chain D) A computer chip manufacturer E) All of the above would report cost of sales on their income statements The purchase of equipment with a note payable would A) Increase cash. B) Decrease cash. C) Increase a liability. D) Decrease a liability. E) None of the above is correct. The accounts payable account has a beginning balance of $12,000 and we purchased $50,000 of inventory on credit during the month. The ending balance was $10,000. How much did we pay our creditors during the month? A) $50,000 B) $52,000 C) $60,000 D) $62,000 Which of the following businesses would not report cost of sales on their income statements? A) A large law firm B) An automobile dealership C) A pizza restaurant chain D) A computer chip manufacturer E) All of the above would report cost of sales on their income statements Marion Company had these transactions during the first month of the new accounting period. Sold merchandise for $9,000 on credit; its cost was $5,000 and it was purchased and paid for last year. Collected $3,000 from an account receivable. The account was established in the previous year. Used office supplies of $1,500 purchased and paid for in the prior year. RUsing the above information, Marion would report net cash flow from operating activities for the new period as A) $2,500 B) $4,000 C) $8,000 D) $6,500 E) None of the above is correct. The statement of cash flows is important because A) of the three required financial statements, it is the only one which reports changes which took place during an accounting period. B) it indicates the asset and liability position of a company by reflecting the amounts and types of its assets and liabilities at the beginning and end of the period. C) it summarizes the information already reported in the income statement and balance sheet. D) it explains the sources and uses of cash during the period. E) None of the above is correct The difference between the equipment account balance and the accumulated depreciation, equipment account balance is called A) market value B) acquisition cost C) book value D) net realizable value E) none of the above The following item would be considered part of comprehensive income but would be debited or credited directly to a stockholders' equity account and not shown on the income statement. A) Foreign currency translation adjustment B) Unrealized gains or losses on securities investments C) Minimum pension liability adjustment D) None of the above E) All of the above When preparing the monthly bank reconciliation, the accountant for Kansett Motors noted that all cash deposits for the month were listed on the bank statement except one for $1,200 that was made on the last day of the month. In reconciling the bank balance with the company's cash account, the $1,200 should be A) deducted from the bank balance. B) added to the bank balance. C) deducted from the company's cash balance. D) added to the company's cash balance. E) None of the above is correct. On March 15, 2009, Ryan Company purchased $10,000 of merchandise on credit subject to terms, 2/10, n/30. Ryan records its purchases using the gross amount. The periodic inventory system is used. If Ryan pays for these goods on March 30, the entry made to record the payment should include A) $200 credit to Purchase discounts. B) debit of $9,800 to Accounts payable. C) debit of $10,000 to Accounts payable. D) $9,800 credit to cash. E) Two of the above are correct. Which of the following is a true statement? A) LIFO is not usually used for financial reporting of nonU.S. inventories because many foreign countries do not allow its use B) LIFO cannot provide a permanent tax saving because costs can drop or physical level of units can drop C) FIFO may be used for financial reporting of nonU.S. inventories if there is no LIFO conformity rule in that particular foreign country. D) All of the above are true E) None of the above is true Two systems are used in accounting for inventory perpetual and periodic. Which of the following statements is correct? A) In a perpetual inventory system, the inventory account is not changed for each purchase during the accounting period. B) In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period. C) In a periodic inventory system, cost of goods sold is developed from a comparison of beginning inventory and ending inventory only. D) In a periodic inventory system, the inventory account is increased for each purchase during the accounting period. E) None of the above is correct. Which of the following would be classified as an operational (fixed) asset? A) Land purchased and held for sale by a realtor. B) Land purchased and held for development by WalMart as a new store site. C) Land and buildings owned by Toys \"R\" Us that are store sites closed due to restructuring and consolidating operations. D) A Ford Motor Company manufacturing plant used to manufacture the Taurus line in Dearborn, Michigan. E) All of the above are classified as operational (fixed) assets. On April 1, 2009, Kolbe purchased a car that cost $35,000 which had an estimated residual value of $5,000 and an estimated useful life of five years. To the nearest dollar, what is the amount of depreciation that should be recorded on the car for 2009 using the straightline method? A) $4,500 B) $5,000 C) $5,200 D) $5,600 E) None of the above Which of the following about the characteristics of all longlived, operational assets is true? A) They have physical substance. B) They are being used in the company's operations. C) They are classified as noncurrent assets on the balance sheet. D) Only B and C are true. E) All of the above are true Which of the following statements is true? A) A capital lease is a shortterm lease. B) An operating lease is a longterm lease that essentially represents the purchase and financing of an asset. C) An operating lease requires the lessee to record both the asset and liability equal to the present value of the lease payments. D) All of the above are true. E) None of the above is true. If the market rate of interest is 10%, a rational person would just as soon receive $1,100 three years from now as what amount today (round to the nearest dollar)? A) $ 783. B) $ 826. C) $1,000. D) $1,100. E) None of the above is correct. Which of the following is false? A) If working capital is too high, it could indicate excessive inventory. B) Management of working capital is important because of their impact on cash flows. C) Working capital is not affected when cash is used to repay a shortterm note. D) All of the above are false. E) None of the above is false. On December 31, 2006, Roberts Company sold $100,000, tenyear, 8% bonds at 104.5. The bonds were dated January 1, 2006, and interest is payable each December 31. The company uses the straightline amortization method. The company should report the longterm liability (carrying value) for the bonds on the December 31, 2006, balance sheet as A) $100,000. B) $103,400. C) $104,000. D) $104,500. E) None of the above is correct. On March 31, 2009, Bundy Corporation retires $10 million of bonds when they have unamortized premium of $500,000 by repurchasing them in the market at 98 . Calculate the gain or loss on the retirement of the bonds. A) $150,000 loss. B) $150,000 gain. C) $650,000 loss. D) $350,000 loss. Which of the following is true? A) Interest payments reduce cash flow from operating activities. B) Calling the bonds would reduce cash from investing activities. C) Issuance of bonds would increase cash from investing activities. D) All of the above are true. E) None of the above is true. For each of the following types of inventory, enter a letter to indicate the type of business in which the inventory is more likely to appear. Match the descriptions with inventory costing methods by entering the proper letter in the space to the left. HiCrest Company purchased a machine on January 1, 2009, for $300,000. The machine has an estimated useful life of 5 years and a $10,000 residual value. It is now December 31, 2010 and Waters is in the process of preparing financial statements. Complete the following schedule assuming decliningbalance method of depreciation with a 200% acceleration rate. Waterloo Corporation purchased factory equipment for a cost of $1,800,000. It cost $100,000 for its delivery, $220,000 for its installation and modifications to the production building, and cost $60,000 in interest costs on borrowed funds used to acquire the equipment. What is the acquisition cost of the new equipment? Match each concept with one of the values below: Match the liabilities with their usual classification on the balance sheet by entering the appropriate letters in the spaces. Match the way a bond will sell with the situations given. Consider the following statement: \"Issuing bonds at a discount is bad for the issuing corporation.\" Required: Discuss the statement above and comment on its validity. Jennings Company uses the periodic inventory system and applied FIFO inventory costing. At the end of the annual accounting period, December 31, 2009, the accounting records for the best selling item in inventory showed: Frankel Feed purchased a new machine on January 1, 2006: Wolf Company borrowed $5,000 on an 8% (annual rate) interestbearing note payable on March 1, 2008. The maturity date of the note (and payment of all interest) is September 1, 2009. The accounting period ends December 31. Give the entry for each of the following dates. Assume simple interest. Round to the nearest dollar. Grand Company authorized $150,000 of 5year bonds dated January 1, 2006. The stated rate of interest was 14%, payable each December 31. The bonds were issued on January 1, 2006, when the market interest rate was 12%. Assume effectiveinterest amortization. (The present value factor for $1 at 6% for 10 periods is 0.5584, for $1 at 7% for 10 periods is 0.5083, for $1 at 14% for 5 periods is 0.5194, and for $1 at 12% for 5 periods is 0.5674. The present value of an annuity of $1 for 10 periods at 6% is 7.3601, for 10 periods at 7% is 7.0236, for 5 periods at 6% is 4.2124, and for 5 periods at 7% is 4.1002.) Round to the nearest dollar. (a) What would be the amount of premium amortization for December 31, 2006? (b) What would be the amount of the interest payment on December 31, 2006