85. Which of the following transactions would cause a decrease in both assets and stockholders’ equity? a. Paying insurance premium for the next two years. b. Purchasing office equipment on account. c. Paying advertising for the current month. d. Providing installation services to customers. 86. When a company issues common stock for cash, what is the effect on the accounting equation […]
100.A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after […]
31.Which one of the following would you expect to find as part of cash flows from investing activities? a. The issuance of common stock in exchange for a factory b. Cash dividends paid c. Cash inflows from the proceeds of a sale of a building d. The write-off of accounts receivable 32.When preparing a statement of cash flows using the indirect method, an increase […]
53. The journal entry to record an encumbrance would include: A) A debit to Encumbrance Control B) A debit to Budgetary Fund Balance – Reserve for Encumbrances C) A credit to Budgetary Fund Balance – Reserve for Encumbrances D) A and C would both be included in the journal entry 54. The journal entry to record the property tax levy for a municipality would […]
101. Which of the following is/are true? A. U.S. GAAP and IFRS require firms to recognize the cost of retirement benefits (pensions, health care, life insurance) as an expense while employees work, not when they receive payments or other benefits during retirement. B. Employers often contribute cash to a trust, an entity legally separate from the employer, to fund their retirement obligations. C. The accounting records of the […]
60.When finished goods are sold, the entry to record the cost of goods sold includes A. a debit to Finished Goods Inventory and a credit to Cost of Goods Sold. B. a debit to Cost of Goods Sold and a credit to Sales. C. a debit to Cost of Goods Sold and a credit to Finished Goods Inventory. D. a debit to Finished Goods […]
Objective 6.6 1) Multinational budgeting is more complex than budgeting in a domestic environment due to the possibility of: A) exchange rate fluctuations B) sophisticated techniques used by multinationals such as forward, future, and options contracts C) different political, legal, and economic environments faced by multinationals D) All of these answers are correct. 2) Multinational budgeting is useful for everything EXCEPT: A) […]
35) During 2011, Rob M. Clean Company recorded the following business events. For each, determine whether the accounting treatment was correct, and show the effect of any errors on the accounting equation. Rob M. Clean: Assets Liabilities Shareholders’ equity CC Retained earnings 1. recorded $5,000 of advertisements run in 2009 as expenses ___ overstated ___understated ___correctly stated ___ […]
81. At the beginning of the year, the balance in the Allowance for Doubtful Accounts is a credit of $640. During the year, $350 of previously written-off accounts were reinstated and accounts totaling $410 are written-off as uncollectible. The end of the year balance in the Allowance for Doubtful Accounts should be A. $760 B. $410 C. $580 D. $700 82. Allowance for Doubtful Accounts has a debit balance of […]
43. Which of the following is true with respect to Special revenue funds? A) Special revenue funds are used when it is desirable to provide separate reporting of resources that are designated for specific purposes. B) Special revenue funds are used when it is desirable to provide separate reporting for funds provided by other governments to support capital projects. C) Special revenue funds are […]
101. On January 1, a company issued and sold a $400,000, 7%, 10-year bond payable, and received proceeds of $396,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The journal entry to record the first interest payment is:
A. Debit Bond Interest Expense $14,000; credit Cash $14,000.
B. Debit Bond Interest Expense $28,000; credit Cash $28,000.
C. Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200.
D. Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000.
E. Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200.
102. A company issued 5-year, 7% bonds with a par value of $100,000. The company received $97,947 for the bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:
A. $3,294.70.
B. $3,500.00.
C. $3,705.30.
D. $7,000.00.
E. $7,410.60.
103. The effective interest amortization method:
A. Allocates bond interest expense over the bond's life using a changing interest rate.
B. Allocates bond interest expense over the bond's life using a constant interest rate.
C. Allocates a decreasing amount of interest over the life of a discounted bond.
D. Allocates bond interest expense using the current market rate for each interest period.
E. Is not allowed by the FASB.
104. A company issued 7%, 5-year bonds with a par value of $100,000. The market rate when the bonds were issued was 7.5%. The company received $97,947 cash for the bonds. Using the effective interest method, the amount of interest expense for the first semiannual interest period is:
A. $3,500.00.
B. $3,673.01.
C. $3,705.30.
D. $7,000.00.
E. $7,346.03.
105. The market value of a bond is equal to:
A. The present value of all future cash payments provided by a bond.
B. The present value of all future interest payments provided by a bond.
C. The present value of the principal for an interest-bearing bond.
D. The future value of all future cash payments provided by a bond.
E. The future value of all future interest payments provided by a bond.
106. The Premium on Bonds Payable account is a(n):
A. Revenue account.
B. Adjunct or accretion liability account.
C. Contra revenue account.
D. Contra asset account.
E. Contra liability account.
107. Adidas issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adidas received $206,948 in cash proceeds. Which of the following statements is True?
A. Adidas must pay $200,000 at maturity and no interest payments.
B. Adidas must pay $206,948 at maturity and no interest payments.
C. Adidas must pay $200,000 at maturity plus 20 interest payments of $8,000 each.
D. Adidas must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
E. Adidas must pay $200,000 at maturity plus 20 interest payments of $7,500 each.
108. A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a:
A. Credit to Interest Income.
B. Credit to Premium on Bonds Payable.
C. Credit to Discount on Bonds Payable.
D. Debit to Premium on Bonds Payable.
E. Debit to Discount on Bonds Payable.
109. If an issuer sells bonds at a date other than an interest payment date:
A. This means the bonds sell at a premium.
B. This means the bonds sell at a discount.
C. The issuing company will report a loss on the sale of the bonds.
D. The issuing company will report a gain on the sale of the bonds.
E. The buyers normally pay the issuer the purchase price plus any interest accrued since the prior interest payment date.
110. A company issues at par 9% bonds with a par value of $100,000 on April 1, which is 4 months after the most recent interest date. The cash received for accrued interest on April 1 by the bond issuer is:
A. $750.
B. $5,250.
C. $1,500.
D. $3,000.
E. $6,000.
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