Q&A Hero

Q: A company borrowed $300,000 cash from the bank by signing a five-year, 8% installment note. The present value factor for an annuity at 8% for five years is 3.9927. Each annuity payment equals $75,137. How much cash did the company receive from the bank on the day they borrowed this money? A. $75,137 B. $94,013 C. $300,000 D. $375,685 E. $1,197,810

Q: A company must repay the bank $10,000 cash in three years for a loan. The loan agreement specifies 8% interest compounded annually. The present value factor for three years at 8% is 0.7938. How much cash did the company receive from the bank on the day they borrowed this money? A. $10,000 B. $12,400 C. $7,938 D. $9,200 E. $7,600

Q: Installment notes payable that require periodic payments of accrued interest plus equal amounts of principal result in: A. Periodic total payments that gradually decrease in amount. B. Periodic total payments that are equal. C. Periodic total payments that gradually increase in amount. D. Increasing amounts of interest each period. E. Increasing amounts of principal each period.

Q: The carrying value of a long-term note payable: A. Is computed as the future value of all remaining future payments, using the market rate as interest. B. Is the face value of the long-term note less the total of all future interest payments. C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance. D. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest. E. Decreases each time period the discount on the note is amortized.

Q: Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: A. Debentures B. Discounted notes C. Installment notes D. Indentures E. Investment notes

Q: To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: A. Safe deposit boxes B. Mortgages C. Equity D. The FASB E. Debentures

Q: GAAP criteria for identifying a lease as a capital lease are more general than the criteria under IFRS.

Q: Two common ways of retiring bonds before maturity are to (1) exercise a call option or (2) purchase them on the open market.

Q: The effective interest method yields increasing amounts of bond interest expense and decreasing amount of premium amortization over the life of the bond .

Q: Premium on Bonds Payable increases a companys liabilities..

Q: A premium on bonds payable occurs when bonds have a contract rate greater than the market rate at issuance.

Q: A discount on bonds payable occurs when a company issues bonds at a price less than par value.

Q: A company with liabilities of $2,816,000 and equity of $826,000 has a debt to equity ratio equal to 29.33%

Q: The debt to equity ratio helps assess the risks of a company's financing structure.

Q: The debt to equity ratio is calculated by dividing total liabilities by total assets.

Q: A bond's par value is not necessarily the same as its market value.

Q: Callable bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity.

Q: A bond listed at 103 on a stock exchange is selling at 103% of its par value.

Q: The type of bond that provides the greatest security from theft of loss is the debenture.

Q: Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

Q: Interest payments on bonds are determined by multiplying the par value of the bond by the stated contract rate.

Q: An advantage of bonds is that interest does not have to be paid.

Q: An advantage of bond financing is that issuing bonds does not affect owner control.

Q: A pension plan is a contractual agreement between an employer and its employees in which the employer provides benefits to employees after they retire.

Q: Operating leases are long-term or noncancelable leases in which the lessor transfers all the risks and rewards of ownership to the lessee.

Q: A lease is a contractual agreement between a lessor and a lessee that grants the lessee the right to use the asset for a period of time in return for cash payment(s) to the lessor.

Q: If a bond's interest period does not coincide with the issuing company's accounting period, an adjusting entry is necessary to recognize bond interest expense accruing since the most recent interest payment.

Q: The present value of an annuity factor for six years at 10% is 4.3553. This means that the present value of an annuity of six annual $2,000 payments at 10% would equal $8,711.

Q: The present value of an annuity can be computed as the sum of the individual future values for each payment.

Q: An annuity is a series of equal payments made at equal time intervals.

Q: A basic present value concept is that cash received in the future is worth more value than the same amount of cash received today.

Q: A basic present value concept is that cash in the future is worth less than the same amount of cash today.

Q: The carrying value of a long-term note is computed as the present value of all remaining future payments, discounted using the market rate at the time of issuance.

Q: If the borrower fails to pay a mortgage, most mortgage contracts grant the lender the right to foreclose on the property that is identified as security in the contract.

Q: Bonds and long-term notes are similar in that they are typically transacted with multiple lenders.

Q: A common payment pattern for installment notes is to pay the accrued interest periodically and to pay the principle amount on the maturity date.

Q: An installment note is an obligation to the issuing company that requires a series of periodic payments to the holder.

Q: The following special journal is taken from a merchandising company that uses the perpetual inventory system: Date Account Credited Explanation PR Cash Dr. Sales Discount Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. Cost of Goods Sold Dr. Inventory Cr. 1/31 Balance 51,739 1,023 13,265 5,567 33,930 3,000 2/2 H. Jones Inv. 452 x 637 13 650 2/14 Notes Payable Note to bank 351 1,300 1,300 2/17 Sales Cash sales x 1,248 1,248 680 2/22 Equipment 181 651 651 2/28 M. Sims Inv. 403 x 156 156 55,731 1,036 14,071 6,815 35,881 3,680 (101) (413) (112) (411) (X) (511/113) a. What is the name of the journal shown above? b. Write an explanation for each entry in this journal. c. What do the numbers in parentheses at the bottom of the journal indicate?

Q: Segment Segment return on assets = Segment operating income / Segment average assets North America $1,494 / $4,869 = 7% Africa $ 224 / $ 541 = 41.4% Latin America $1,033 / $1,443 = 71.6%

Q: The following information is available for some of a companys segments (all amounts are in millions): North America Africa Latin America Segment sales $6,264 $694 $2,089 Segment operating income 1,494 224 1,033 Segment average assets 4,869 541 1,443 a. Determine the segment return on assets for each geographic segment b. Comment on the results. How do the segments compare with respect to profitability?

Q: Discuss the differences in the special journals between a company using a perpetual inventory system and one using a periodic inventory system.

Q: Explain how the amounts in the subsidiary ledgers are tested for accuracy.

Q: What is the segment return on assets ratio? What is it used for?

Q: Discuss how technology-based information systems affect accounting.

Q: What are controlling accounts and subsidiary ledgers? What is the relationship between them?

Q: What are the five basic components of accounting information systems?

Q: A company entered into the following transactions. Match each transaction with the appropriate journal. The journals can be used one time, zero times, or more than one time if necessary. A. Cash receipts journal B. Cash disbursements journal C. Sales journal D. Purchases journal E. General journal ______1. Paid a utility bill for $3,400 cash. ______2. Purchased $1,590 of store supplies on account. ______3. Purchased a display rack on account for $4,700. ______4. Paid $65,000 cash for wages and salaries. ______5. Borrowed $5,000 cash from the bank. ______6. Returned defective inventory purchased on account, $2,900. ______7. A customer returned a $250 item purchased on account. ______8. Purchased merchandise on account, $2,700. ______9. Recorded cash sales of $14,700. ______10. Recorded depreciation on store equipment of $4,000.

Q: Match the following terms with the appropriate definitions: A. Cash receipts journal B. Compatibility principle C. Cost-benefit principle D. Purchases journal E. Sales journal F. Segment margin G. Information storage H. Special journal I. Controlling account J. Schedule of accounts receivable ______1. A measure of the profitability of a segment, calculated as segment operating income divided by segment average assets. ______2. Any journal used for recording and posting transactions of a similar type. ______3. The special journal that is used to record all receipts of cash. ______4. An information system principle requiring that the benefits from an activity in an accounting information system outweigh the costs of that activity. ______5. The component of an accounting system that keeps data in a form accessible to information processors. ______6. A journal used to record sales of merchandise on credit. ______7. A general ledger account, the balance of which (after posting) equals the sum of the balances of the accounts in a related subsidiary ledger ______8. An information system principle requiring that an accounting information system conform with a company's activities, personnel and structure. ______9. A journal used to record all purchases on credit _____10. A list of each customer from the accounts receivable ledger with their balances and the total.

Q: Match the following terms with the appropriate definition(s): A. Accounting information system B. Business segment C. Cash receipts journal D. Control principle E. Relevance principle F. Enterprise resource planning G. Cash disbursements journal H. Computer network I. Information processor J. Schedule of accounts receivable _______1. An information system principle requiring that an accounting information system aid managers in controlling and monitoring business activities. _______2. A list of each customer from the accounts receivable ledger with their balances and the total. _______3. The special journal that is used to record all payments of cash. _______4. The people, records, methods, and equipment that collect and process data from transactions and events, organize them in useful forms, and communicate results to decision makers. _______5. Links among computers giving different users and different computers access to common databases and programs. _______6. A part of a company that can be separately identified by the products or services that it provides or by the geographic market that it serves. _______7. The component of an accounting system that interprets, transforms, and summarizes information for use in analysis and reporting. _______8. Programs that manage a company's vital operations which range from order-taking to manufacturing to accounting. _______9. The special journal used to record all receipts of cash. _______10. An information system principle requiring that an accounting system report useful, understandable, timely, and pertinent information for decision making.

Q: Match the following accounting system components with the appropriate item(s): A. Input devices B. Information storage C. Information processor D. Output devices E. Source document ______1. Computer hard drive ______2. Computer monitor ______3. Employee paychecks ______4. Electronic files ______5. Computer keyboard ______6. Journal entries ______7. Software ______8. Financial statements ______9. Journals ______10. Invoice from suppliers

Q: Identify the accounting information system principle below that applies to each of these situations: A. Flexibility B. Compatibility C. Control D. Cost-benefit E. Relevance __________1. Global Company has designed its accounting information system so that key managers can obtain the information they need to make decisions relating to new products, sales, and controlling costs __________2. Global Company's accounting information system has policies to ensure that financial statements are reliable, assets are protected, and relevant laws and regulations are complied with. __________3. Global Company's accounting information system can be improved markedly for a cost of about $30,000,000. However, the incremental benefits from such improvements are not expected to outweigh this cost. __________4. Global Company has worldwide operations that must handle several thousand different products, so the accounting information system is fairly complex, encompassing marketing and manufacturing. __________5. Global Company has designed its accounting information system to be adaptable to changes in technology, the business environment, and the needs of decision makers.

Q: A company uses a cash receipts journal (periodic system) as shown below: Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. How would the following transactions be recorded in this cash receipts journal? 12/10 Sold merchandise to Cat Company for $7,500 cash (cost is $4,250) 12/11 Sold merchandise on credit to Dog, Inc, Invoice No. 852, for $4,000 (cost is $2,200) Terms are 2/10, n/30. A. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 7,500 12/11 Sales Credit Sales 4,000 B. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 7,500 7,500 12/11 Sales Credit Sales 80 3,920 C. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 7,500 7,500 12/11 Sales Credit Sales 80 3,920 4,000 D. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 7,500 7,500 E. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 7,500 7,500

Q: Argyle Company uses a cash receipts journal (periodic system) as shown below: Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. How would the following transactions be recorded in this cash receipt journal? 12/10 Sold merchandise to Sock Company for $9,260 cash (cost is $5,556) 12/11 Sold merchandise on credit to Gardner, Inc, invoice no. 873, for $7,000 (cost is $4,200). Terms are 2/10, n/30. A. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 9,260 12/11 Sales Credit Sales 7,000 B. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 9,260 9,260 12/11 Sales Credit Sales 140 6,860 C. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 9,260 9,260 12/11 Sales Credit Sales 140 6,860 7,000 D. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 9,260 9,260 E. Date Account Credited Explanation Cash Dr. Sales Disc. Dr. Accounts Receivable Cr. Sales Cr. Other Accounts Cr. 12/10 Sales Cash Sales 9,260 9,260

Q: The main difference in the sales journal under the perpetual and periodic inventory system is: A. The column to record cost of goods sold and inventory amounts sold that is used under the perpetual system but not the periodic. B. The sales tax receivable column that is used under the perpetual system but not the periodic. C. The sales tax payable column that is used under the perpetual system but not the periodic. D. The accounts receivable column that is used under the perpetual system but not the periodic. E. The column for recording cash that is used under the perpetual system but not the periodic.

Q: Assume that a company using a purchases journal made an error in totaling the journal's columns. The error should be discovered: A. When the purchases journal is posted to the general ledger. B. When the trial balance is prepared. C. When the total of the schedule of accounts payable is compared with the balance of the Accounts Payable account. D. When the creditors receive their payments. E. When the financial statements are prepared.

Q: After posting is completed, there may be an error if: A. The sum of the customer account balances does not equal the total in the sales journal. B. The sum of the accounts receivable ledger does not equal the balance in the Sales account. C. The sum of the customer account balances does not equal the Accounts Receivable controlling account balance. D. The balance in the sales journal does not equal the Accounts Receivable account balance. E. The sum of the accounts receivable ledger does not equal the balance in the sales journal.

Q: The Accounts Payable account in the general ledger is: A. A controlling account for the subsidiary accounts payable ledger. B. The account that controls the purchases journal. C. The subsidiary account to the purchases journal. D. Part of a special journal. E. Part of a subsidiary ledger.

Q: A list of all the accounts in the accounts receivable ledger with their balances and the total is a(n): A. Chart of accounts B. Controlling account C. Schedule of accounts receivable D. Subsidiary ledger E. Special journal

Q: A company returned merchandise to a supplier because it did not meet their specifications. This transaction would be recorded in which of the following journals? A. Sales journal B. Purchases journal C. Cash disbursements journal D. Cash receipts journal E. General journal

Q: A company had cash sales during the period. These transactions would be recorded in which of the following journals? A. Sales journal B. Purchases journal C. Cash disbursements journal D. Cash receipts journal E. General journal.

Q: A company borrowed money from the bank and signed a long-term note payable. This transaction would be recorded in which of the following journals? A. Sales journal B. Purchases journal C. Cash disbursements journal D. Cash receipts journal E. General journal

Q: A customer who had purchased $75,000 worth of merchandise on account returns 5% of this order to the seller because he is not satisfied with the quality of the goods. This transaction would be recorded in which journal if historically the seller has had very few returns of this nature? A. Sales journal B. Purchases journal C. Cash disbursements journal D. Cash receipts journal E. General journal

Q: A customer who had purchased $60,000 worth of merchandise on account returns 10% of this order to the seller because she is not satisfied with the quality of the goods. How would this entry be recorded on the books of the seller if historically the seller has had very few returns of this nature? A. Sales 6,000 Accounts Receivable 6,000 B. Accounts Receivable 6,000 Sales 6,000 C. Sales Returns and Allowances 6,000 Accounts Receivable 6,000 D. Accounts Receivable 6,000 Sales Returns and Allowances 6,000 E. Sales 60,000 Accounts Receivable 60,000

Q: A customer who had purchased $25,000 worth of merchandise on account returns 20% of this order to the seller because he is not satisfied with the quality of the goods. How would this entry be recorded on the books of the seller if historically the seller has had very few returns of this nature? A. Sales 5,000 Accounts Receivable 5,000 B. Accounts Receivable 5,000 Sales 5,000 C. Sales Returns and Allowances 5,000 Accounts Receivable 5,000 D. Accounts Receivable 5,000 Sales Returns and Allowances 5,000 E. Sales 25,000 Accounts Receivable 25,000

Q: When the sales journal's column for accounts receivable and sales is totaled at the end of the month, its total is: A. Debited to Sales and credited to Accounts Receivable. B. Debited to Accounts Receivable and credited to Cash. C. Debited to Cash and credited to Accounts Receivable. D. Debited to Accounts Receivable and credited to Sales. E. Debited to Cash and credited to Sales.

Q: The management of Pasama Inc. is evaluating the three segments of the company. Given the data below, which of the following statements is true regarding segment return on assets? Segment Segment Operating Income (in $mil.) Segment Assets (in $mil.) 2013 2012 2013 2012 Africa $63 $69 $472 $426 Belgium 25 27 93 68 Canada 22 19 36 33 A. Segment Africa has the highest operating income and the highest return on assets. B. Segment Belgium has the highest operating income and the highest return on assets. C. Segment Canada has the highest operating income and the highest return on assets. D. Segment Canada has the highest return on assets and Segment Africa has the lowest return on assets. E. Segment Belgium has a higher return on assets than Segment Canada.

Q: The Consumer Products segment of a company had a segment return on assets of 53%. If the revenues and operating income of this segment were $872,630 million and $517,916 million, respectively, what is the segment's average total assets amount? A. $462,493 million B. $977,200 million C. $695,273 million D. $274,495 million E. $736,989 million

Q: The Midwest segment of a company had a segment return on assets of 13%. If the revenues and operating income of this segment were $4 million and $1 million, respectively, what is the segment's average total assets amount? A. $130,000 B. $52,000 C. $30,769,230 D. $7,692,308 E. $23,076,923

Q: The Asian segment of a multinational company had a segment return on assets of 60%. If the revenues and operating income of this segment were $17,000 million and $14,586 million, respectively, what is the segment's average total assets amount? A. $24,310 million B. $28,333 million C. $52,643 million D. $10,200 million E. $8,751 million

Q: The segment return on assets: A. Can only be determined for international companies. B. Is a measure of the profitability of a segment. C. Is difficult to calculate because companies with traded stock are not required to report segment information. D. Is calculated as segment average assets divided by segment operating income. E. Is calculated as segment sales divided by segment average assets.

Q: A company's Southwest segment had revenues of $12 million, operating income of $2 million, and average total assets of $3 million. The Southwest segment return on assets is: A. 42.85% B. 41.67% C. 25.00% D. 16.67% E. 66.67%

Q: A companys Latin American segment had revenues of $2,089 million, operating income of $1,033 million, and average total assets of $1,443 million. The Latin American segment return on assets is: A. 49.4% B. 69.0% C. 71.6% D. 139.7% E. 144.8%

Q: A business segment: A. Requires only internal reporting. B. Is a part of a company that is separately identified by its products, services, or geographic market. C. Requires special journals. D. Requires subsidiary ledgers. E. Cannot report its results separately.

Q: In a typical purchases journal, you would expect to see the following columns: A. Accounts payable dr. B. Purchase discounts cr. C. Accounts receivable cr. D. Inventory dr. (if perpetual method used). E. Cost of Goods Sold dr. (if perpetual method used).

Q: In a typical cash disbursements journal, you would expect to see the following columns: A. Accounts payable dr. B. Sales discounts dr. C. Accounts receivable dr. D. Inventory dr. (if perpetual method used). E. Cost of Goods Sold dr. (if perpetual method used).

Q: In a typical cash receipts journal, you would expect to see the following columns: A. Sales dr. B. Sales discounts cr. C. Accounts receivable dr. D. Inventory dr. (if perpetual method used). E. Cost of Goods Sold dr. (if perpetual method used).

Q: In a typical sales journal, you would expect to see the following columns: A. Sales dr. B. Sales cr. C. Purchases dr. (if periodic method used). D. Inventory dr. (if perpetual method used). E. Cost of Goods Sold cr. (if perpetual used).

Q: An approach that enters and processes data as soon as source documents are available is called: A. Date storage B. Batch processing C. Online processing D. Computer programming E. Web communication

Q: Enterprise resource planning software: A. Refers to programs that help manage a company's vital operations. B. Is another name for spreadsheet programs. C. Uses batch processing of business information. D. Is substantially declining in use. E. Is another name for database programs.

Q: The accounts receivable ledger: A. Is for recording credit sales. B. Is for storing transactions data for individual customers. C. Is for storing transactions data for individual creditors. D. Is for recording cash receipts from customers. E. Is also the controlling account.