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Study Resources (Accounting)

Learning Objective 12-8 1) On January 1, 2015, Finch Company issued $72,000 of 5-year bonds with a stated rate of 8%. The market rate at time of issue was 12%, so the bonds were discounted and sold for $61,401. Finch uses the effective-interest method of amortization for bond discount. Semiannual interest.
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31) On April 1, 2015, Ardos Gardening Products borrowed $100,000 on a 15%, 10-year note with annual installment payments of $10,000 plus interest due on April 1 of each succeeding year. Provide the journal entry for the first installment payment made on April 1, 2016. 32) Hernandez Carpets Company buys a.
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11) Which of the following accounting principles requires that warranty expenses must be estimated and recognized in the same period when the related sales revenue is recognized? A) the matching principle B) the disclosure principle C) the revenue principle D) the consistency principle 12) Bison Inc. reported sales revenue for 2013 of $900,000. The products.
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Learning Objective 12-3 1) The amortization of bond premium increases interest expense over the life of the bonds. 2) The face value of a bond payable minus the current balance of the discount account or plus the current balance of the premium account is the bond's carrying amount. 3) The balance in the.
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Learning Objective 11-3 1) Warranties pose an accounting challenge because a company does not know which or how many products will have to be repaired. 2) The entry to accrue warranty payable includes a credit to Warranty Expense. 3) Estimated Warranty Payable would be included in the liability section of the balance sheet. 4).
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Learning Objective 10-3 1) When a company makes investments in equity securities with less than 20% ownership using idle cash, its total equity will increase. 2) Equity securities, in which the investor owns less than 20% ownership in the voting stock of the investee, can be either trading investments or available-for-sale investments. 3).
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Learning Objective 11-4 1) A contingent liability that has a remote possibility of becoming an actual loss is not included in a note to the financial statements. 2) A contingent liability that will probably become an actual liability, and can be reasonably estimated, must be recorded as an expense and a liability. 3).
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Learning Objective 12-7 1) The fact that invested cash earns income over time is called the time value of money. 2) Simple interest means that interest is calculated on the principal and on all previously earned interest. 3) Compound interest means that interest is calculated only on the principal amount. 4) A stream of.
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11) Consolidation accounting is the way to combine the financial statements of two or more companies that have the same owners. 12) Which of the following is true of the comparison between equity securities and debt securities? A) Debt securities represent stock ownership in a company whereas equity securities represent a credit.
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Learning Objective 11-2 1) Gross pay is the total amount of salary, wages, commissions, and bonuses earned by an employee during a pay period, after taxes or any other deductions. 2) The old age, survivors, and disability insurance portion of FICA taxes is imposed on all of an individual employee's earnings. 3) The.
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Learning Objective 12-5 1) The United Way Payable account would normally be shown on the balance sheet under current liabilities. 2) FICA—OASDI Tax Payable would normally be shown on the balance sheet under long-term liabilities. 3) Federal Unemployment Taxes Payable is typically shown on the balance sheet under the long-term liabilities section. 4) The.
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21) All available-for-sale (AFS) investments are reported on the balance sheet at ________. A) historical cost B) replacement cost C) current market value D) net realizable value 22) If there is an unrealized holding gain on available-for-sale investments, it is reported ________. A) as an adjustment to stockholders' equity on the balance sheet B) as a debit.
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Learning Objective 12-4 1) The main reason companies retire bonds prior to their maturity date is to relieve the pressure of paying interest payments. 2) An alternative to calling the bonds is to purchase them in the open market at their current market price. 3) Callable bonds are bonds that the issuer may.
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Learning Objective 13-2 1) When a corporation sells 10,000 shares of $10 par value common stock for $120,000, the Common Stock account is credited for $100,000. 2) Stock sold for amounts in excess of par value results in a gain reported on the income statement. 3) The price that the corporation receives from.
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Learning Objective 10-2 1) When a company invests in a long-term bond investment by paying cash, the total assets remain unchanged 2) When a firm receives interest revenue on a bond, the equity remains unchanged. 3) When a firm collects the face value of a bond investment at maturity, the total assets increase. 4).
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Learning Objective 11-1 1) Amounts owed for products or services, due within one year, are current liabilities. 2) Amounts owed for products or services purchased on account are accounts receivable. 3) Unearned revenues relating to a one-year service contract are current liabilities until they are earned. 4) Notes payable are considered long-term debts, usually.
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Learning Objective 13-1 1) A corporation is a separate legal entity and is organized independently of its owners. 2) Stockholders of a corporation are not personally liable for the corporation's debt. 3) All classes and types of a corporation's stock carry the same degrees of risk for the stockholder. 4) Preferred stockholders receive a.
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Learning Objective 12-2 1) Bonds are short-term debt issued to multiple lenders called bondholders, usually in increments of $1,000. 2) On the maturity date, the bondholder is paid the face amount of the bond plus the last interest payment. 3) If a bond is issued at a discount, it will sell for more.
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11) The following information is from the balance sheet of Tudor Corporation as of December 31, 2015. Preferred Stock, $100 par $300,000 Paid-In Capital in Excess of Par—Preferred 21,000 Common Stock, $1 par 102,000 Paid-In Capital in Excess of Par—Common 306,000 Retained Earnings 78,900 Total Stockholders' Equity $807,900 What was the total paid-in capital as of December 31, 2015? A) $606,000 B) $807,900 C) $729,000 D) $708,000 12).
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Learning Objective 12-1 1) The current portion of notes payable is the principal amount that will be paid within two years of the balance sheet date and the remaining portion is long term. 2) The current portion of notes payable must be reported on the balance sheet under current liabilities and the.
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11) Which of the following corporate characteristics is a disadvantage of a corporation? A) Stockholders of a corporation have limited liability. B) A corporation has a continuous life. C) There is no mutual agency among the stockholders and the corporation. D) Earnings of a corporation are taxed twice. 12) Outstanding stock refers to the ________. A).
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Learning Objective 11-5 1) Investors use the times-interest-earned ratio to evaluate a company's ability to pay interest expense. 2) The times-interest-earned ratio is also called the short interest ratio. 3) A high interest-coverage ratio indicates a company's difficulty in paying interest expense. 4) The times-interest-earned ratio is calculated as ________. A) earnings before interest and.
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31) Glitter Services Inc. pays $1,350,000 to acquire 35% of voting stock of Grey Investments Inc. on March 5, 2016. When this transaction is reported in the balance sheet, the ________. A) total equity will increase B) total assets will increase C) total assets will decrease D) total cash will decrease 32) Glitter Services Inc..
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21) Which of the following occurs when a cash dividend is declared? A) liabilities remain unchanged B) stockholders' equity decreases C) liabilities decrease D) assets increase 22) Dividends in arrears are ________. A) a liability on the balance sheet B) passed dividends on noncumulative preferred stock C) passed dividends on cumulative preferred stock D) passed dividends on common stock 23).
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Learning Objective 13-3 1) The declaration and payment of cash dividends cause a decrease in both assets (Cash) and stockholders' equity (Retained Earnings) for the corporation. 2) The declaration of a cash dividend does not create an obligation (liability) for the corporation. 3) Declaring and paying dividends causes an increase in both assets.
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