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Accounting
Q:
If a company uses a periodic inventory system, the gross profit method can be used to estimate inventory for monthly or quarterly statements. a. True b. False
Q:
mintz company issued $300,000, 10%, 10-year bonds on january 1, 2012, at 105. interest is payable annually. mintz uses the straight-line method of amortization and has a calendar year end. instructions prepare all journal entries made in 2012 related to the bond issue.
Q:
If a fire destroys the merchandise inventory, the gross profit method can be used to estimate the cost of merchandise destroyed. a. True b. False
Q:
on january 1, 2012, hauke corporation issued $800,000, 6%, 10-year bonds at face value. interest is payable annually on january hauke corporation has a calendar year end. instructions prepare all entries related to the bond issue for 2012.
Q:
Under the periodic inventory system, the merchandise inventory account continuously discloses the amount of inventory on hand. a. True b. False
Q:
on january 1, 2012, hannigan company issued bonds with a face value of $800,000. the bonds carry a stated interest of 7% payable each january a.prepare the journal entry for the issuance assuming the bonds are issued at 97. b.prepare the journal entry for the issuance assuming the bonds are issued at 102.
Q:
A subsidiary inventory ledger can be an aid in maintaining inventory quantities at their proper levels. a. True b. False
Q:
the board of directors of lauber corporation are considering two plans for financing the purchase of new plant equipment. plan #1 would require the issuance of $5,000,000, 7%, 20-year bonds at face value. plan #2 would require the issuance of 200,000 shares of $5 par value common stock that is selling for $25 per share on the open market. lauber corporation currently has 100,000 shares of common stock outstanding and the income tax rate is expected to be 30%. assume that income before interest and income taxes is expected to be $600,000 if the new factory equipment is purchased. instructions prepare a schedule that shows the expected net income after taxes and the earnings per share on common stock under each of the plans that the board of directors is considering.
Q:
Inventory controls start when the merchandise is shelved in the store area. a. True b. False
Q:
mantle publications publishes a golf magazine for women. the magazine sells for $4.00 a copy on the newsstand. yearly subscriptions to the magazine cost $36 per year (12 issues). during december 2011, expert publications sells 4,000 copies of the golf magazine at newsstands and receives payment for 5,000 subscriptions for 2012. financial statements are prepared monthly. instructions (a)prepare the december 2011 journal entries to record the newsstand sales and subscriptions received. (b)prepare the necessary adjusting entry on january 31, 2012. the january 2012 issue has been mailed to subscribers.
Q:
Unsold consigned merchandise should be included in the consignee's inventory. a. True b. False
Q:
Manuel Company had cash sales of $65,100 (including taxes) for the month of June. Sales are subject to 8.5% sales tax. Prepare the entry to record the sale.
Q:
Peterson Company billed its customers a total of $735,000 for the month of November. The total includes a 5% state sales tax.Instructions(a) Determine the proper amount of revenue to report for the month.(b) Prepare the general journal entry to record the revenue and related liabilities for the month.
Q:
If ending inventory for the year is understated, net income for the year is overstated. a. True b. False
Q:
Inventory turnover measures the length of time it takes to acquire, sell, and replace the inventory. a. True b. False
Q:
on april 1, holton company borrows $80,000 from west bank by signing a 6-month, 6%, interest-bearing note. instructions prepare the necessary entries below associated with the note payable on the books of nolton company. (a)prepare the entry on april 1 when the note was issued. (b)prepare any adjusting entries necessary on june 30 in order to prepare the semiannual financial statements. assume no other interest accrual entries have been made.
Q:
steiner sales company has the following selected accounts after posting adjusting entries:instructionsprepare the current liability section of steiner sales company's balance sheet, assuming $15,000 of the mortgage is payable next year.
Q:
Of the three widely used inventory costing methods (FIFO, LIFO, and weighted average cost), the LIFO method of costing inventory assumes costs are charged based on the most recent purchases first. a. True b. False
Q:
The weighted average inventory cost flow method is the least used of the inventory costing methods. a. True b. False
Q:
sielert corporation borrowed $600,000 from national bank on may 31, 2011. the three-year, 7% note required annual payments of $228,630 beginning may 31, 2012. the total amount of interest to be paid over the life of the loan is a.$42,000 b.$85,890 c.$167,602 d.$126,000
Q:
sielert corporation borrowed $600,000 from national bank on may 31, 2011. the three-year, 7% note required annual payments of $228,630 beginning may 31, 2012. interest expense for the year ended december 31, 2011 was a.$24,500 b.$28,000 c.$42,000 d.$0
Q:
Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory. a. True b. False
Q:
In valuing merchandise for inventory purposes, net realizable value is the estimated selling price less any direct costs of disposal. a. True b. False
Q:
wolford company borrowed $750,000 from u.s. bank on january 1, 2011 in order to expand its mining capabilities. the five-year note required annual payments of $195,327 and carried an annual interest rate of 9.5%. what is the balance in the notes payable account at december 31, 2012? a.$750,000 b.$490,059 c.$625,923 d.$607,500
Q:
wolford company borrowed $750,000 from u.s. bank on january 1, 2011 in order to expand its mining capabilities. the five-year note required annual payments of $195,327 and carried an annual interest rate of 9.5%. what is the amount of expense wolford must recognize on its 2012 income statement? a.$71,250 b.$59,463 c.$52,694 d.$46,555
Q:
In the retail inventory method, the cost to retail ratio is equal to the cost of merchandise sold divided by the retail price of the merchandise sold. a. True b. False
Q:
The lower of cost or market is a method of inventory valuation. a. True b. False
Q:
fornelli corporation borrowed $360,000 from central bank on may 31, 2011. the three-year, 7% note required annual payments of $137,178 beginning may 31, 2012. the total amount of interest to be paid over the life of the loan is a.$25,200 b.$51,534 c.$100,562 d.$75,600
Q:
When merchandise inventory is shown on the balance sheet, both the method of determining the cost of the inventory and the method of valuing the inventory should be shown. a. True b. False
Q:
fornelli corporation borrowed $360,000 from central bank on may 31, 2011. the three-year, 7% note required annual payments of $137,178 beginning may 31, 2012. interest expense for the year ended december 31, 2011 was a.$14,700 b.$16,800 c.$25,200 d.$0
Q:
It is not unusual for large companies to use different inventory costing methods for different segments of their inventory. a. True b. False
Q:
collins company borrowed $500,000 from banktwo on january 1, 2011 in order to expand its mining capabilities. the five-year note required annual payments of $130,218 and carried an annual interest rate of 9.5%. what is the balance in the notes payable account at december 31, 2012? a.$500,000 b.$326,706 c.$417,282 d.$405,000
Q:
If the perpetual inventory system is used, the merchandise inventory account is debited for purchases of merchandise. a. True b. False
Q:
collins company borrowed $500,000 from banktwo on january 1, 2011 in order to expand its mining capabilities. the five-year note required annual payments of $130,218 and carried an annual interest rate of 9.5%. what is the amount of expense collins must recognize on its 2012 income statement? a.$47,500 b.$39,642 c.$35,129 d.$31,037
Q:
The weighted average cost method will always yield results between FIFO and LIFO. a. True b. False
Q:
thayer company purchased a building on january 2 by signing a long-term $4,200,000 mortgage with monthly payments of $38,500. the mortgage carries an interest rate of 10 percent. the amount owed on the mortgage after the first payment will be a.$4,200,000 b.$4,196,500 c.$4,165,000 d.$4,161,500
Q:
FIFO is the inventory costing method that follows the physical flow of the goods. a. True b. False
Q:
thayer company purchased a building on january 2 by signing a long-term $4,200,000 mortgage with monthly payments of $38,500. the mortgage carries an interest rate of 10 percent. the entry to record the first monthly payment will include a a.debit to the cash account for $38,500 b.credit to the cash account for $35,000 c.debit to the interest expense account for $35,000 d.credit to the mortgage payable account for $38,500
Q:
thayer company purchased a building on january 2 by signing a long-term $4,200,000 mortgage with monthly payments of $38,500. the mortgage carries an interest rate of 10 percent. the entry to record the mortgage will include a a.debit to the cash account for $4,200,000 b.credit to the cash account for $4,200,000 c.debit to the mortgage payable account for $4,200,000 d.credit to the mortgage payable account for $4,200,000
Q:
When using the FIFO inventory costing method, the most recent costs are assigned to the cost of merchandise sold. a. True b. False
Q:
which of the following statements best describes the behavior over time of the components of equal mortgage payments? a.the proportion of interest expense to payment of principal remains the same b.interest expense increases and payment of principal decreases c.payment of principal increases and interest expense decreases d. both payment of principal and interest expense decrease
Q:
The specific identification inventory method should be used when the inventory consists of identical, low-cost units that are purchased and sold frequently. a. True b. False
Q:
match the items below by entering the appropriate code letter in the space provided.A. Serial bonds B. Debenture bonds C. Bond indenture D. Market interest rate E. Discount on bonds payable F. Current ratioG. Straight-line method of amortizationH. Times interest earned ratioI. Callable bondsJ. Maturity date____ 1. Bonds subject to retirement at a stated dollar amount prior to maturity.____ 2. A legal document that sets forth the terms of a bond issue.____ 3. Bonds that mature in installments.____ 4. A measure of a company’s short-term liquidity.____ 5. The time that the final payment on a bond is due from the bond issuer.____ 6. A measure of a company’s solvency.____ 7. The rate investors demand for loaning funds to a corporation.____ 8. Unsecured bonds issued against the general credit of the borrower.____ 9. Occurs when the contractual rate of interest is less than the market rate of interest.____ 10. Produces a periodic interest expense that is the same amount each interest period.
Q:
During periods of increasing costs, the use of the FIFO method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method. a. True b. False
Q:
A perpetual inventory system is an effective means of control over inventory. a. True b. False
Q:
a method of amortizing bond discount or premium that allocates an equal amount each period is the ________________ method.
Q:
the ________________ ratio provides an indication of a companys ability to meet interest payments as they come due.
Q:
The choice of an inventory costing method has no significant impact on the financial statements. a. True b. False
Q:
discount on bonds payable is ________________ (deducted from or added to) bonds payable on the balance sheet. premium on bonds payable is ________________ (deducted from or added to) bonds payable on the balance sheet.
Q:
Inventory errors, if not discovered, will self-correct within two years. a. True b. False
Q:
if bonds were issued at a premium, then the contractual rate of interest was _______________ than the market rate of interest.
Q:
A physical inventory should be taken at the end of every month. a. True b. False
Q:
The lower-of-cost-or-market method of determining the value of ending inventory can be applied on an item-by-item basis or to the total inventory. a. True b. False
Q:
if a $1 million, 10%, 10-year bond issue was sold at 97, the cash proceeds from the issuance of the bonds amounted to $________________.
Q:
if bonds are issued at face value (par), it indicates that the ________________ rate of interest must be equal to the ________________ rate of interest.
Q:
Average inventory is computed by adding the inventory at the beginning of the period to the inventory at the end of the period and dividing by 2. a. True b. False
Q:
the market price of bonds is obtained by computing the present value of the ________________ paid at maturity, and all ________________ payments to be made over the term of the bond.
Q:
A consignor who has goods out on consignment with an agent should include the goods in ending inventory even though they are not in the possession of the consignor. a. True b. False
Q:
On May 15, Holt's Clothiers borrowed some money on a 4-month note to provide cash during the slow season of the year. The interest rate on the note was 8%. At the time the note was due, the amount of interest owed was $800.Instructions(a) Determine the amount borrowed by Holt's.(b) Assume the amount borrowed was $36,000. What was the interest rate if the amount of interest owed was $720?(c) Prepare the entry for the initial borrowing and the repayment for the facts in part (a).
Q:
The three inventory costing methods will normally each yield different amounts of net income. a. True b. False
Q:
On January 1, 2011, Asianic Inc. issued 10-year bonds with a face amount of ¥20,000,000 and a contract rate of 8% payable annually on January 1. The effective-interest rate on the bonds is 10%. Present value factors are as follows:Total issue price of the bonds wasa. ¥20,000,000.b. ¥19,600,000.c. ¥18,400,000.d. ¥17,552,000.
Q:
A purchase order establishes an initial record of the receipt of the inventory. a. True b. False
Q:
selected data from 2011 financial statements of xi corporation include the following (amount in millions):Current Assets ¥ 759Total Assets 1,200Current Liabilities 400Total Liabilities 850Cash 80Interest Expense 50income Taxes 100Net Income 160The debt to total assets ratio isa. 70.8%b. 53.3%c. 1.41%d. 6.2 times
Q:
Generally, the lower the days' sales in inventory, the better. a. True b. False
Q:
the adjusted trial balance for beneteau corporation at the end of the 2011 included the following accounts:The total non-current liabilities reported on the statement of financial position at December 31, 2011 area. €9,380,000b. €9,530,000c. €9,620,000d. €9,860,000
Q:
During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches more recent costs against current revenues. a. True b. False
Q:
whitmore corporation issues a £1,200,000, 10%, 10-year mortgage on december 31, 2011. the terms call for semi-annual installment payments of £96,290.the entry to record the first installment payment will include a.a debit to interest payment of £96,290 b.a debit to mortgage notes payable of £23,710 c.a debit to interest expense of £120,000 d.a credit to cash of £96,290
Q:
The use of the lower-of-cost-or-market method of inventory valuation increases net income for the period in which the inventory replacement price declined. a. True b. False
Q:
on january 1, 2011, michelin company, a calendar-year company, is issued €6,000,000 of mortgage notes payable, of which €2,000,000 is due on january 1 for each of the next three years. the proper statement of financial position presentation on december 31, 2011, isa.current liabilities, €6,000,000b.long-term debt, €6,000,000c.current liabilities, €3,000,000; long-term debt, €3,000,000d.current liabilities, €2,000,000; long-term debt, €4,000,000
Q:
finney company borrowed €800,000 from banktwo on january 1, 2011 in order to expand its mining capabilities. the five-year note required annual payments of €208,349 and carried an annual interest rate of 9.5%. what is the balance in the notes payable account at december 31, 2012?a.€800,000b.€522,729c.€667,651d.€648,000
Q:
Safeguarding inventory and proper reporting of the inventory in the financial statements are the reasons for controlling the inventory. a. True b. False
Q:
"Market" as used in the phrase "lower of cost or market" for valuing inventory, refers to the price at which the inventory is being offered for sale by its owner. a. True b. False
Q:
herman company received proceeds of 188,500 on 10-year, 8% bonds issued on january 1, 2010. the bonds had a face value of 200,000, pay interest semi-annually on june 30 and december 31, and have a call price of 101. herman uses the straight-line method of amortization. herman company decided to redeem the bonds on january 1, 2012. what amount of gain or loss would herman report on its 2012 income statement? a.9,200 gain b.11,200 gain c.11,200 loss d.9,200 loss
Q:
During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits. a. True b. False
Q:
chang company retired bonds with a face amount of 90,000,000 at 98 when the carrying value of the bond was 89,670,000. the entry to record the retirement would include a a.gain on bond redemption of 1,470,000 b.loss on bond redemption of 330,000 c.loss on bond redemption of 1,800,000 d.gain on bond redemption of 2,130,000
Q:
Direct disposal costs do not include special advertising or sales commissions. a. True b. False
Q:
wittebury corporation retires its £5,000,000 face value bonds at 105 on january 1, following the payment of annual interest. the carrying value of the bonds at the redemption date is $5,187,250. the entry to record the redemption will include a.a credit of £62,750 to gain on bond redemption b.a debit of £62,750 to loss on bond redemption c.a credit of £25,000 to bonds payable d.a credit of £62,250 to bonds payable
Q:
Susan Jones works for Trend Press, a fairly large book publishing firm. Her best friend and rival, Diane Nilson, works for Lifeline Books, a smaller publisher. Both companies issue $100,000 in bonds on July 1. Trend's bonds were issued at a discount, while Lifeline's were issued at a premium. Diane sent Susan a fax the next day. She told Susan that it was obvious who the better publisher was and the market had shown its preference! She reminded Susan again of her recent increase in salary as further proof of the superiority of Lifeline Books.Required:Draft a short note for Susan to send to Diane. Explain how such a result could occur.
Q:
Under the periodic inventory system, a physical inventory is taken to determine the cost of the inventory on hand and the cost of the merchandise sold. a. True b. False
Q:
Use of the retail inventory method requires taking a physical count of inventory. a. True b. False