Q&A Hero

Q: Use the information above to answer the following question. What journal entry will Brickyard make when paying the interest at maturity? A) Debit Notes Payable and credit Cash for $206,000 B) Debit Interest Expense for $4,000, and credit Cash for $4,000 C) Debit Interest Expense for $6,000 and Cash for $206,000 D) Debit Interest Payable for $4,000, credit Interest Expense for $2,000, and credit Cash for $6,000

Q: Use the information above to answer the following question. What adjusting entry should Brickyard make on June 30 before preparing its annual financial statements? A) Debit Interest Expense and credit Interest Payable for $4,000 B) Debit Interest Expense and credit Interest Payable for $4,000 C) Debit Interest Payable and credit Interest Expense for $4,000 D) Debit Interest Payable and credit Interest Expense for $4,000

Q: Use the information above to answer the following question. On January 1, which of the following journal entries will be made by Brickyard to record the issuance of the note? A) Debit Interest Expense for $6,000, debit Cash $194,000, and credit Notes Payable for $200,000 B) Debit Cash and credit Notes Payable for $200,000 C) Debit Cash for $200,000, debit Interest Expense for $6,000, and credit Notes Payable for $206,000 D) Debit Cash for $200,000, debit Interest Expense for $6,000, credit Notes Payable for $200,000, and credit Interest Payable for $6,000

Q: A company pays $18,000 in interest on notes, consisting of $12,000 interest that was accrued during the last accounting period and $6,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books. The journal entry for the interest payment should: A) debit Interest Expense for $18,000 and credit Cash for $18,000. B) debit Cash for $18,000 and credit Interest Payable for $18,000. C) debit Interest Expense for $6,000, debit Interest Payable $12,000 and credit Cash for $18,000. D) debit Interest Payable for $12,000, debit Accrued Interest $6,000 and credit Cash for $18,000.

Q: A company pays $9,000 in interest on notes consisting of $6,000 of interest that was accrued during the last accounting period and $3,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books. The journal entry for the interest payment should include a: A) debit to Interest Expense for $9,000 and a credit to Cash for $9,000. B) debit to Cash for $9,000 and a credit to Interest Payable for $9,000. C) debit to Interest Expense for $3,000, a debit to Interest Payable for $6,000, and a credit to Cash for $9,000. D) debit to Interest Payable for $6,000, a debit to Accrued Interest for $3,000, and a credit to Cash for $9,000.

Q: On October 1, 2015, Attra Inc. borrows $200,000 on a three-year note that requires the company to pay 6% interest on March 31 and September 30. On December 31, 2015, the adjusting entry to accrue interest on the note should debit: A) Interest Expense and credit Interest Payable for $3,000. B) Interest Payable and credit Interest Expense for $3,000. C) Interest Expense and credit Cash for $6,000. D) Interest Expense and credit Interest Payable for $6,000.

Q: A 6-month note is issued on November 1. If no previous accruals have been made, how many months of interest should be accrued at December 31? A) Six B) Two C) Four D) None

Q: The total amount of interest that will be paid on a four-month, $6,500, 9% note payable equals: A) $585 B) $292 C) $146 D) $195

Q: A one-year, $15,000, 12% note is signed on April 1. If the note is repaid on September 1 of the same year, how much interest expense is incurred? A) $1,800 B) $900 C) $750 D) $600

Q: Interest on an obligation is recorded: A) as time passes. B) when goods are purchased on account. C) at maturity. D) when a bank loan is obtained.

Q: On October 1, Angelica Inc. signs a note for $200,000 to provide the funds needed to build a new facility. The note is due in 10 years, includes an annual interest rate at 7%, and requires semiannual interest payments each April and October. The journal entry to record the issuance of the promissory note should debit: A) Notes Payable for $200,000, debit Interest Expense for $14,000, credit Cash for $200,000, and credit Interest Payable for $14,000. B) Accrued Interest and credit Cash for $14,000. C) Cash and credit Notes Payable for $200,000. D) Cash for $200,000, debit Interest Expense for $14,000, credit Notes Payable for $200,000, and credit Interest Payable $14,000.

Q: A company purchased equipment by issuing a $200,000, one-year, 8% note payable. The transaction would be recorded in the accounting records with a credit to Notes Payable for: A) $200,000. B) $216,000. C) $184,000. D) $208,000.

Q: In October, you sign a note for $50,000 in order to buy new equipment. The note is due in five years, at 8% annual interest. Semiannual interest payments are due each March and September. Assuming no other long-term debt, what is the initial balance in the related long-term debt account? A) $46,000 B) $50,000 C) $52,000 D) $54,000

Q: Employer payroll taxes: A) represent the federal taxes withheld from the employees paychecks. B) are the amounts paid by the employee. C) are an added payroll expense beyond the wages and salaries earned by employees. D) represent the FICA taxes withheld from employees paychecks.

Q: Which of the following must be paid by both the employee and the employer? A) FICA taxes B) State unemployment tax C) State withholding tax D) Federal unemployment tax

Q: Which of the following statements about payroll is correct? A) Payroll deductions are an expense of the company. B) When recording the payroll, Salaries and Wages Expense equals the sum of all the deductions. C) The net pay is debited to Salaries and Wages Expense when the payroll is recorded. D) Gross earnings are computed by multiplying the time worked by the pay rate promised by the employer.

Q: Payroll taxes paid by employees include which of the following? A) Federal income tax, federal unemployment tax, and Medicare B) Social security, federal unemployment tax, and state unemployment tax C) Social security, federal unemployment tax, and state unemployment tax D) Federal income tax withheld, state income tax withheld, and Medicare

Q: Use the information above to answer the following question. What is the employers payroll tax expense for the week? A) $113.00 B) $119.20 C) $174.20 D) $235.40

Q: Use the information above to answer the following question. What would be the amount of Darlings payroll check for the first week of January? A) $683.80 B) $741.80 C) $628.80 D) $625.80

Q: If a company's gross salaries and wages are $12,000, and it withholds $1,800 for income taxes and $800 for FICA taxes, the journal entry to record the employees' pay should include a: A) debit to Salaries and Wages Expense for $9,400. B) debit to Salaries and Wages Payable for $9,400. C) credit to Salaries and Wages Payable for $12,000. D) credit to Salaries and Wages Payable for $9,400.

Q: During one pay period, your company distributes $130,500 to employees as net pay. The income tax withholdings were $19,000 and the FICA withholdings were $5,000. Total payroll costs to the company for this pay period, excluding any unemployment taxes, was: A) $149,500. B) $130,500. C) $154,500. D) $159,500.

Q: Which of the following statements about payroll liabilities is correct? A) Accrued payroll includes liabilities required by law or voluntarily requested by employees that have not yet been paid (or remitted). B) Only employees are required to pay FICA taxes. C) Both employers and employees are required to pay unemployment taxes. D) Accrued payroll liabilities do not include any voluntary deductions by employees for charitable contributions or union dues.

Q: A company typically records the amount owed to suppliers for goods or services when: A) they are ordered. B) a verbal commitment to purchase the goods or services has first been made. C) payment is made. D) the goods or services are received.

Q: Which of the following events does not create a liability? A) Buying goods and services on credit B) Obtaining a short-term loan C) Issuing long-term debt D) Remitting sales tax to the government

Q: A typical classified balance sheet provides no information about which of the following items? A) To whom the company owes money B) For what the company owes money C) How much the company owes D) The proportion of the company's debts that will be paid in the short-term

Q: Obligations due to be paid within one year or the companys operating cycle, whichever is longer, are classified as: A) current assets. B) current liabilities. C) earned revenues. D) noncurrent liabilities.

Q: Current liabilities are due: A) but not receivable for more than one year or the current operating cycle, whichever is longer. B) but not payable for more than one year or the current operating cycle, whichever is longer. C) and receivable within the current operating cycle or one year, whichever is longer. D) and payable within the current operating cycle or one year, whichever is longer.

Q: Current liabilities could include all of the following except: A) an accounts payable due in 30 days. B) a notes payable due in 9 months. C) a bank loan due in 18 months. D) any part of long-term debt due during the current period.

Q: The effective-interest method of amortization is considered a conceptually superior method of accounting for bonds.

Q: The straight-line method of amortization allocates the amount of bond premium or discount over each period of a bonds life in amounts corresponding to the bonds carrying value.

Q: When the times interest earned ratio increases, the likelihood of default on liabilities decreases.

Q: The debt-to-assets ratio indicates financing risk by computing the proportion of total assets financed by debt.

Q: The threshold for recording contingent liabilities under IFRS is higher than that under GAAP.

Q: If the likelihood of a loss is reasonably possible, a contingent liability is recorded by making an appropriate journal entry.

Q: Contingent liabilities arise from past transactions, but depend on future events.

Q: FICA payments consist of Social Security taxes and Medicare taxes.

Q: The gross earnings for all employees is credited to Salaries and Salaries and Wages Payable.

Q: When a company issues bonds that include no periodic interest payments, the bonds are referred to as zero-coupon bonds.

Q: Callable bonds can be converted to stock.

Q: Bonds that are not backed by collateral are referred to as debentures.

Q: Bonds that are backed by a companys assets are referred to as secured bonds.

Q: The entry to record a bond retirement at maturity usually involves no gain or loss.

Q: The net amount of a bond liability that appears on the balance sheet is equal to the face value of the bond plus any related discount or minus any related premium.

Q: At the maturity date, the carrying value of a bond should always be equal to the face value.

Q: If the market rate exceeds the stated interest rate, a bond will sell at a premium.

Q: Bonds allow a company to borrow large sums of money from many different investors.

Q: An entertainment company received $6 million in cash for advance season ticket sales. Prior to the beginning of the season, these sales should be recorded as a liability.

Q: The principal of a loan does not include any interest charges.

Q: Operating cycles are generally longer than a year.

Q: A declining fixed asset turnover ratio suggests that a: A) company is not as efficient in using its fixed assets as it was in previous periods. B) company's net sales must be increasing. C) company must have purchased some intangible assets. D) company's beginning fixed asset balance must be greater than its ending fixed asset balance.

Q: The fixed asset turnover is the: A) number of sales dollars generated by each dollar of total assets. B) rate at which inventories are being rotated. C) number of dollars in notes payable generated by each dollar in fixed assets. D) number of sales dollars generated by each dollar of fixed assets.

Q: The fixed asset turnover ratio measures the: A) useful life of long-lived assets. B) the average difference between book value and disposal value of fixed assets. C) useful life of intangible assets. D) efficiency with which the investment in fixed assets produces revenue.

Q: T. Powers Companys financial statements on December 31, 2015, showed the following: Net Sales $275,000 Fixed Assets, January 1 $ 73,000 Fixed Assets, December 31 $ 67,000 Total Assets, January 1 $ 97,000 Total Assets, December 31 $100,000 What is the fixed asset turnover for 2015 (rounded to two decimal places)? A) 3.93 B) 2.60 C) 4.10 D) 2.79

Q: The company has net sales revenue of $3.6 million during 2016. The companys records also included the following information: Assets 12/31/13 12/31/14 Property, plant and equipment $2.3 million $2.5 million Licensing agreements $0.5 million $0.4 million Goodwill $0.3 million $0.3 million Investments $0.4 million $0.5 million What is the companys fixed asset turnover ratio for 2016? A) 18.00 B) 1.33 C) 1.00 D) 1.50

Q: Your company has net sales revenue of $36 million during the year. At the beginning of the year, fixed assets are $8 million. At the end of the year, fixed assets are $10 million. What is the fixed asset turnover ratio? A) 4.5 B) 4.0 C) 2.0 D) 3.6

Q: Which of the following companies (all U.S. companies except for Lego, which is a Danish company) would most likely capitalize the costs of developing a prototype? A) Lego B) Southwest Airlines C) Walmart D) Cedar Fair

Q: The fair value of land owned by a company has increased this year. The journal entry to record this increase in fair value would include: A) a credit to Gain on Asset Value Increase. B) a debit to Land. C) a credit to Non-Impairment of Asset. D) nothing; no entry would be made according to GAAP.

Q: When S. Dee Company bought B. Darin Company, the purchase price included a patent valued at $15,000. The patent has 10 years remaining of its legal life, but its estimated useful life to S. Dee Company was only 8 years. The journal entry to record the annual patent amortization would include a: A) debit to Patent, $1,875. B) debit to Amortization expense, $1,875. C) credit to Patent, $1,500. D) credit to Amortization expense, $1,500.

Q: Your company pays $620,000 for a patent that has 10 years remaining. Each year, your company should: A) debit Amortization Expense for $62,000 and credit Accumulated Depreciation for $62,000. B) debit Intangible assets and credit Accumulated Amortization for an amount equal to 20% of book value. C) debit Amortization expense for $62,000 and credit Patent for $62,000. D) report no Amortization Expense because patents are not subject to amortization. Answer: C Feedback: Amortization is credited directly to the Patent account; a contra account is not necessary. Solution: Amortization Expense = Cost Useful Life Amortization Expense =$620,000 10 Amortization Expense =$62,000

Q: Which of the following statements is correct? A) Depreciation allocates the cost of tangible assets over their useful lives. B) Depreciation allocates the cost of intangible assets over their useful lives. C) Amortization allocates the cost of tangible assets over their useful lives. D) The term "depreciation" relates to all long-lived assets whereas amortization relates only to intangible assets.

Q: Which of the following statements is correct? A) Amortization of intangible assets is always recorded in a contra asset account. B) Items in a company's inventory that are not expected to be sold in the next year are considered long-lived assets. C) All long-lived intangible assets must be amortized over a period of 40 years or less. D) Intangible assets with unlimited or indefinite lives are not amortized.

Q: Which of the following statements about tangible long-lived assets is not correct? A) Depreciation and maintenance are expenses associated with the use of tangible long-lived assets. B) Assuming no additions, replacements, or extraordinary repairs, the carrying value of a long-lived asset is never more than its original cost. C) The cost of a long-lived asset minus the Accumulated Depreciation is called the carrying value of the asset. D) All long-lived assets are depreciated as they are used in the business.

Q: Which of the following assets would be amortized? A) Land improvements B) Trademarks C) Goodwill D) Franchise

Q: The net amount shown on a balance sheet for an intangible asset with an unlimited life should be: A) the price for which it could be sold. B) its book value or impaired fair value, whichever is lower. C) its purchase price minus accumulated amortization. D) its purchase price adjusted for inflation.

Q: Which of the following statements regarding goodwill is not correct? A) Goodwill is not amortized. B) Goodwill is tested annually for impairment. C) Goodwill is written down if its value is found to be impaired. D) Private companies amortize goodwill using the straight-line method over 20 years or less.

Q: Goodwill A) is not amortized, but is tested annually for impairment. B) is amortized using the straight-line method. C) is amortized using the units-of-production method. D) is not amortized and is not tested for impairment.

Q: In recording the acquisition cost of an entire business: A) goodwill is recorded as the excess of cost over the fair value of identifiable net assets. B) assets are recorded at the seller's book values. C) goodwill, if it exists, is never recorded. D) goodwill is recorded as the excess of cost over the book value of identifiable net assets.

Q: Goodwill: A) should be treated like most other intangible assets and amortized over a useful life of not more than 40 years. B) is an accounting measurement of how well a company's employees behave towards the company's customers. C) should be recorded as a negative value if a company is purchased for less than the net carrying value of its assets. D) is recorded when the purchasers of a business pay more than the fair value of the assets purchased.

Q: Goodwill may be attributable to all of the following except: A) a significant amount of charitable contributions. B) a great reputation. C) an established customer base. D) successful business operations.

Q: The MegaHit Film Studio has a licensing right (or agreement) to distribute films produced by the Artsy Film Company. How would the MegaHit Company classify this licensing right? A) Tangible asset B) Research and development C) Intangible asset D) Fixed asset

Q: The right to exclude others from making or using an invention is a: A) patent. C) franchise. D) licensing right. Answer: A

Q: A) Patent B) Trademark C) Franchise agreement Answer: D

Q: The balance sheet category Intangible Assets includes: A) patents, trademarks, and franchises. B) equipment, land, and buildings. C) investments, receivables, and cash. D) goodwill, inventory, and vehicles.

Q: Which of the following statements about disposal of long-lived assets is not correct? A) The gain or loss resulting from the disposal of a long-lived asset always appears below the Income from Operations line on the income statement. B) A journal entry is usually needed to update depreciation expense on a long-lived asset at the time of disposal. C) A company may dispose of long-lived assets by selling them, trading them in on new assets, or by scrapping them. D) The amount of the gain or loss on disposal of a long-lived asset before the end of its useful life will be influenced by the depreciation method that had been used.

Q: Use the information above to answer the following question. If the company sells the machine at the end of 5 years and receives $11,500, the journal entry to record the sale will include which of the following? A) Debit to Accumulated Depreciation for $138,000 B) Credit to Machine for $138,000 C) Debit to Loss on Sale for $500 D) Credit to Residual Value for $12,000

Q: Use the information above to answer the following question. What is the depreciation expense for the first year using the double-declining-balance method? A) $52,800 B) $57,600 C) $53,000 D) $55,200

Q: A truck costing $12,000, which has Accumulated Depreciation of $9,000, was sold for $2,000 cash. The entry to record this event would include a: A) gain of $1,000. B) loss of $1,000. C) credit to the Vehicles account for $3,000. D) credit to Accumulated Depreciation for $9,000.

Q: Use the information above to answer the following question. Assume the company decides to sell the computer system on July 1, 2017 for $1,000,000. Which of the following statements about the journal entry (or entries) required on July 1 is not correct? A) The depreciation expense must be recorded for 6 months, January 1 to July 1. B) The Equipment asset account must be credited for $1,600,000 to record the sale. C) Accumulated Depreciation is debited for $612,500 in the entry to record the sale. D) The loss on the sale is $12,500.

Q: Use the information above to answer the following question. Which of the following is correct about the depreciation recorded? A) Accumulated Depreciation will be debited for $266,667. B) The book value of the computer system at December 31, 2015 will be $1,225,000. C) Depreciation expense will be debited for $245,000. D) The depreciable cost of the computer system is $1,600,000.

Q: On January 1, 2016, Horton Inc. sells a machine for $23,000. The machine was originally purchased on January 1, 2014 for $40,000. The machine was estimated to have a useful life of 5 years and a residual value of $0. Horton uses straight-line depreciation. In recording this transaction: A) a loss of $1,000 would be recorded. B) a gain of $1,000 would be recorded. C) a loss of $17,000 would be recorded. D) a gain of $23,000 would be recorded.