Question: Bond carrying value equals Bonds Payable a.

> On January 31, 2016, Danvers Logistics, Inc., issued five-year, 7% bonds payable with a face value of $10,000,000. The bonds were issued at 96 and pay interest on January 31 and July 31. Danvers Logistics, Inc., amortizes bond discount by the straight-lin

> Assume that Banff Electronics completed these selected transactions during March 2016: a. Sales of $2,100,000 are subject to estimated warranty cost of 2%. The estimated warranty payable at the beginning of the year was $35,000, and warranty payments fo

> Barclay Systems’ revenues for 2016 totaled $26.2 million. As with most companies, Barclay is a defendant in lawsuits related to its products. Note 14 of the Barclay annual report for 2016 reported the following: Requirements 1. Suppo

> Earth Friendly Structures, Inc., builds environmentally sensitive structures. The company’s 2016 revenues totaled $2,760 million. At December 31, 2016, and 2015, the company had, respectively, $658 million and $603 million in current as

> At December 31, 2016, Hawley Real Estate reported a current liability for income tax payable of $78,000. During 2017, Hawley earned income of $650,000 before income tax. The company’s income tax rate during 2017 was 35%. Also during 2017, Hawley paid inc

> Assume that Cart Sales Company completed the following note payable transactions: Requirements 1. How much interest expense must be accrued at December 31, 2016? (Round your answer to the nearest whole dollar.) 2. Determine the amount of Cart Sales&a

> Perrault has an annual payroll of $190,000. In addition, the company incurs payroll tax expense of 8%. At December 31, Perrault owes salaries of $8,200 and FICA and other payroll tax of $700. The company will pay these amounts early next year. Show what

> TransWorld Publishing completed the following transactions for one subscriber during 2016: Requirement 1. Journalize these transactions (explanations not required). Then report any liability on the company’s balance sheet at December

> The accounting records of Jim’s Appliances included the following balances at the end of the period: In the past, Jim’s warranty expense has been 9% of sales. During the current period, the business paid $9,000 to sa

> Ivanhoe Sports Authority purchased inventory costing $28,000 by signing a 7% short-term, one-year note payable. The purchase occurred on July 31, 2016. Ivanhoe pays annual interest each year on July 31. Journalize the company’s a. purchase of inventory;

> Shriver Corp. purchased five $1,000 7% bonds of Geotherm Corporation when the market rate of interest was 8%. Interest is paid semiannually, and the bonds will mature in five years. Using the PV function in Excel, compute the price Shriver paid (the presen

> At the end of the year, Blue Moon Properties’ statement of cash flows reported the following for investing activities: Requirement 1. For each item listed, make the journal entry that placed the item on Blue Moon&acirc

> During fiscal year 2016, Ellis Bakery reported a net income of $130.7 million. Ellis Bakery received $1.4 million from the sale of other businesses. Ellis Bakery made capital expenditures of $10.6 million and sold property, plant, and equipment for $7.5 m

> Translate into dollars the balance sheet of Ohio Leather Goods’ Greek subsidiary. When Ohio Leather Goods acquired the foreign subsidiary, a euro was worth $1.06. The current exchange rate is $1.36. During the period when retained earnings were earned, t

> Gamma, Inc., owns Cressida Corp. These two companies’ individual balance sheets follow: Requirements 1. Prepare a consolidated balance sheet of Gamma, Inc. It is sufficient to complete the consolidation work sheet. Use Exhibit 8-7 as

> Agani Financial paid $570,000 for a 45% investment in the common stock of Sonic, Inc. For the first year, Sonic reported net income of $260,000 and at year-end declared and paid cash dividends of $135,000. On the balance-sheet date, the fair value of Agan

> Without making journal entries, record the transactions of E8-36B directly in the Watson T-account, Equity-method Investment. Assume that after all the noted transactions took place, Watson sold its entire investment in Smith Software for cash of $1,000,

> Watson Corporation owns equity-method investments in several companies. Suppose Watson paid $1,300,000 to acquire a 30% investment in Smith Software Company. Smith Software reported net income of $680,000 for the first year and declared and paid cash divi

> During the most recent year, Ogden Co. bought 2,800 shares of Dublin common stock at $35, 590 shares of Chile stock at $45.50, and 1,000 shares of Russian stock at $70—all as available-for-sale investments. At December 31, Hoover’s Online reports Dublin

> Journalize the following long-term, available-for-sale investment transactions of Hammond Department Stores: a. Purchased 410 shares of Potter Fine Foods common stock at $31 per share, with the intent of holding the stock for the indefinite future. b. R

> Assume that on September 30, 2016, Baytex, Inc., purchased 5% bonds of Hartley Corporation at 97 as a long-term, held-to-maturity investment. The maturity value of the bonds will be $46,000 on September 30, 2021. The bonds pay interest on March 31 and Se

> Stockman Corp. purchased ten $1,000 6% bonds of Voltgo Corporation when the market rate of interest was 7%. Interest is paid semiannually, and the bonds, and the bonds will mature in eight years. Using the PV function in Excel, compute the price Stockman

> At the end of the year, Cityside Properties’ statement of cash flows reported the following for investment activities: Requirement 1. For each item listed, make the journal entry that placed the item on Cityside Proper

> During fiscal year 2016, Honey Bakery reported a net income of $132.4 million. Honey Bakery received $1.4 million from the sale of other businesses. Honey Bakery made capital expenditures of $10.0 million and sold property, plant, and equipment for $7.3 m

> Translate into dollars the balance sheet of North Carolina Leather Goods’ German subsidiary. When North Carolina Leather Goods acquired the foreign subsidiary, a euro was worth $1.06. The current exchange rate is $1.326. During the period when retained e

> Nutone, Inc., owns Othello Corp. The two companies’ individual balance sheets follow: Requirements 1. Prepare a consolidated balance sheet of Nutone, Inc. It is sufficient to complete the consolidation work sheet. Use Exhibit 8-7 as

> Ashcroft Financial paid $500,000 for a 30% investment in the common stock of Magic, Inc. For the first year, Magic reported net income of $220,000 and at year-end declared and paid cash dividends of $140,000. On the balance-sheet date, the fair value of A

> Without making journal entries, record the transactions of E8-25A directly in the Nelson T-account, Equity-method Investment. Assume that after all the noted transactions took place, Nelson sold its entire investment in Simpson Software for cash of $1,50

> Nelson Corporation owns equity-method investments in several companies. Suppose Nelson paid $1,500,000 to acquire a 40% investment in Simpson Software Company. Simpson Software reported net income of $670,000 for the first year and declared and paid cash

> During the most recent year, Michael Co. bought 3,800 shares of Canada common stock at $38, 640 shares of Brazil stock at $47.25, and 1,500 shares of Russian stock at $77— all as available-for-sale investments. At December 31, Hoover’s Online reports Can

> Journalize the following long-term, available-for-sale security transactions of Isley Department Stores: a. Purchased 400 shares of Howell Fine Foods common stock at $35 per share, with the intent of holding the stock for the indefinite future. b. Recei

> Assume that on September 30, 2016, Rentex, Inc., purchased 6% bonds of Morin Corporation at 97 as a long-term, held-to-maturity investment. The maturity value of the bonds will be $30,000 on September 30, 2021. The bonds pay interest on March 31 and Sept

> Assume Thomas Manufacturing Corporation completed the following transactions: a. Sold a store building for $600,000. The building had cost Thomas Manufacturing $1,300,000, and at the time of the sale, its accumulated depreciation totaled $700,000. b. L

> Kirby, Inc., one of the largest home improvement retailers, reported the following information (adapted) in its comparative financial statements for the fiscal year ended January 31, 2015: Requirements 1. Compute net profit margin ratio for the years

> Assume Doltron Co. paid $18 million to purchase Bailey Industries. Assume further that Bailey Industries had the following summarized data at the time of the Doltron Co. acquisition (amounts in millions): Bailey Industries’ current as

> 1. Midway Printers incurred external costs of $600,000 for a patent for a new laser printer. Although the patent gives legal protection for 20 years, it is expected to provide Midway Printers with a competitive advantage for only ten years. Assuming the

> Nero Mines paid $432,000 for the right to extract ore from a 425,000-ton mineral deposit. In addition to the purchase price, Nero Mines also paid a $150 filing fee, a $2,700 license fee to the state of Utah, and $92,150 for a geologic survey of the prope

> Carson Truck Company is a large trucking company that operates throughout the United States. Carson Truck Company uses the units-of production method to depreciate its trucks. Carson Truck Company trades in trucks often to keep driver morale high and to

> Assume that on January 2, 2016, Drake-Neiman purchased fixtures for $8,000 cash, expecting the fixtures to remain in service for five years. Drake-Neiman has depreciated the fixtures on a double-declining-balance basis, with $1,500 estimated residual val

> On January 1, 2013, Regal Manufacturing purchased a machine for $850,000. Regal Manufacturing expects the machine to remain useful for eight years and to have a residual value of $40,000. Regal Manufacturing uses the straight-line method to depreciate i

> Assume Franklin Security Consultants purchased a building for $430,000 and depreciated it on a straight-line basis over 40 years. The estimated residual value was $70,000. After using the building for 20 years, Franklin realized that the building will re

> Is the payment of the face amount of a bond on its maturity date regarded as an operating activity, an investing activity, or a financing activity? a. Operating activity b. Investing activity c. Financing activity

> The journal entry on the maturity date to record the payment of $2,500,000 of bonds payable that were issued at a $90,000 discount includes a. a debit to Discount on Bonds Payable for $90,000. b. a debit to Bonds Payable for $2,500,000. c. a credit to

> Amortizing the discount on bonds payable a. reduces the semiannual cash payment for interest. b. is necessary only if the bonds were issued at more than face value. c. increases the recorded amount of interest expense. d. reduces the carrying value o

> Using the facts in the preceding question, McIntosh’s entry to record the interest expense on July 1, 2016, will include a a. credit to Interest Expense. b. debit to Bonds Payable. c. credit to Discount on Bonds Payable. d. debit to Premium on Bonds

> Sweetwater Company sells $300,000 of 13%, 15-year bonds for 96.8507 on April 1, 2016. The market rate of interest on that day is 13.5%. Interest is paid each year on April 1. Using straight-line amortization, write the adjusting entry required at Decembe

> Sweetwater Company sells $300,000 of 13%, 15-year bonds for 96.8507 on April 1, 2016. The market rate of interest on that day is 13.5%. Interest is paid each year on April 1. Sweetwater Company uses the straight-line amortization method. The amount of in

> Sweetwater Company sells $300,000 of 13%, 15-year bonds for 96.8507 on April 1, 2016. The market rate of interest on that day is 13.5%. Interest is paid each year on April 1. The entry to record the sale of the bonds on April 1 would be as follows:

> What type of account is Discount on Bonds Payable, and what is its normal balance? a. Contra liability; Credit b. Adjusting account; Credit c. Contra liability; Debit d. Reversing account; Debit

> A bond with a face amount of $17,000 has a current price quote of 103.85. What is the bond’s price? a. $17,103.85 b. $176,545 c. $1,765.45 d. $17,654.50

> Maridell’s Fashions has a debt that has been properly reported as a long-term liability up to the present year (2016). Some of this debt comes due in 2016. If Maridell’s Fashions continues to report the current position as a long-term liability, the effe

> Myron, Inc., manufactures and sells computer monitors with a three-year warranty. Warranty costs are expected to average 7% of sales during the warranty period. The following table shows the sales and actual warranty payments during the first two years o

> An end-of-period adjusting entry that debits Unearned Revenue most likely will credit a. an asset. b. a liability. c. a revenue. d. an expense.

> What kind of account is Unearned Revenue? a. Asset account b. Revenue account c. Expense account d. Liability account

> Tennis Shoe Warehouse operates in a state with a 6.5% sales tax. For convenience, Tennis Shoe Warehouse credits Sales Revenue for the total amount (selling price plus sales tax) collected from each customer. If Tennis Shoe Warehouse fails to make an adju

> Failure to accrue interest expense results in a. an overstatement of net income and an understatement of liabilities. b. an overstatement of net income and an overstatement of liabilities. c. an understatement of net income and an overstatement of lia

> For the purpose of classifying liabilities as current or noncurrent, the term operating cycle refers to a. the time period between purchase of merchandise and the conversion of this merchandise back to cash. b. a period of one year. c. the average tim

> Consolidation of a foreign subsidiary usually results in a a. gain or loss on consolidation. b. foreign-currency translation adjustment. c. foreign-currency transaction gain or loss. d. LIFO/FIFO difference.

> What is the present value of bonds with a face value of $2,000, a stated interest rate of 6%, a market rate of 9%, and a maturity date six years in the future? Interest is paid semiannually. Use Excel. a. $1,010 b. $1,726 c. $2,456 d. $2,000

> Which of the following is not needed to compute the present value of an investment? a. The length of time between the investment and future receipt b. The rate of inflation c. The interest rate d. The amount of the receipt

> The present value of $2,000 at the end of four years at 8% interest is a. $6,624 b. $1,228. c. $1,470. d. $2,000.

> Return to Macrostore, Inc.’s bond investment in the preceding question. For the year ended December 31, 2017, Macrostore received cash interest of $5,000. What was the interest revenue that Macrostore earned in this year? a. $2,000 b. $5,000 c. $7,000

> On January 1, 2016, Macrostore, Inc., purchased $100,000 face value of the 5% bonds of Service Express, Inc., at 110. The bonds mature on January 1, 2021. For the year ended December 31, 2019, Macrostore received cash interest of a. $5,500. b. $7,000.

> Consolidation accounting a. combines the accounts of the parent company and those of the subsidiary companies. b. reports the receivables and payables of the parent company only. c. eliminates all liabilities. d. all of the above.

> The starting point in accounting for all investments is a. market value on the balance-sheet date. b. cost minus dividends. c. equity value. d. cost.

> Dividends received on an equity-method investment a. increase dividend revenue. b. increase the investment account. c. decrease the investment account. d. increase owners’ equity.

> Assume that Clear Networks owns the following long-term available-for-sale investments: Suppose that, before year-end, Clear sells the Harper stock for $74 per share. Journalize the sale. Number Cost per Year-end Fair Dividend Company of Shares Sh

> Assume that Clear Networks owns the following long-term available-for-sale investments: Clear’s income statement for the year should report a. gain on sale of investment of $14,600. b. investments of $72,850. c. dividend revenue of

> Assume that Clear Networks owns the following long-term available-for-sale investments: Clear’s balance sheet at year-end should report a. investments of $58,250. b. dividend revenue of $2,365. c. investments of $72,850. d. unreal

> Data World, Inc., reported sales revenue of $480,000, net income of $36,000, and average total assets of $300,000. Data World’s return on assets is a. 7.5%. b. 1.6%. c. 62.5%. d. 12.0%.

> Harper, Inc., was reviewing its assets for impairment at the end of the current year. Information about one of its assets is as follows: Harper should report an impairment loss for the current year of a. $0. b. $230,000. c. $25,000. d. $255,000.

> Suppose AmerEx pays $72 million to buy Lone Star Overnight. The fair value of Lone Star’s assets is $86 million, and the fair value of its liabilities is $21 million. How much goodwill did AmerEx purchase in its acquisition of Lone Star Overnight? a. $7

> A company purchased mineral assets costing $889,000 with estimated residual value of $70,000 and holding approximately 260,000 tons of ore. During the first year, 53,000 tons are extracted and sold. What is the amount of depletion for the first year? a.

> Hamilton Company purchased a machine for $11,800 on January 1, 2016. The machine has been depreciated using the straight-line method over a four-year life with a $1,600 residual value. Hamilton sold the machine on January 1, 2018, for $8,000. What gain o

> Hamilton Company purchased a machine for $11,800 on January 1, 2016. The machine has been depreciated using the straight-line method over a four-year life with a $1,600 residual value. Hamilton sold the machine on January 1, 2018, for $8,000. What is str

> Which of the following costs are reported on a company’s income statement and balance sheet? Income statement……………………………Balance sheet a. Cost of goods sold………...Accumulated depreciation b. Accumulated deprecation…………………………….Land c. Goodwill………………………………….

> Acton, Inc., uses the double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first year? a. Estimated residual value b. Expected useful life in years c. Original cost d. All the items

> Kline Company failed to record depreciation of equipment. How does this omission affect Kline’s financial statements? a. Net income is understated and assets are overstated. b. Net income is overstated and assets are understated. c. Net income is unde

> Tulsa Corporation acquired a machine for $27,000 and has recorded depreciation for two years using the straight-line method over a five-year life and $9,000 residual value. At the start of the third year of use, Tulsa revised the estimated useful life t

> At the beginning of last year, Brentwood Corporation purchased a piece of heavy equipment for $88,000. The equipment has a life of five years or 100,000 hours. The estimated residual value is $8,000. Brentwood used the equipment for 19,000 hours last yea

> Which statement about depreciation is false? a. Depreciation is a process of allocating the cost of an asset to expense over its useful life. b. A major objective of depreciation accounting is to allocate the cost of using an asset against the revenues

> Suppose you buy land for $3,000,000 and spend $1,500,000 to develop the property. You then divide the land into lots as follows: How much did each Hilltop lot cost you? a. $60,000 b. $50,000 c. $575,000 d. $240,000 Category 15 Hilltop lots.... 1

> Which of the following items should be accounted for as a capital expenditure? a. Costs incurred to repair leaks in the building roof b. Maintenance fees paid with funds provided by the company’s capital c. Taxes paid in conjunction with the purchase

> A capital expenditure a. is expensed immediately. b. is a credit like capital (owners’ equity). c. adds to an asset. d. records additional capital.

> An error understated Grand Company’s December 31, 2016, ending inventory by $27,000. What effect will this error have on net income for 2017? a. Understate b. No effect c. Overstate

> An error understated Bowerston Corporation’s December 31, 2016, ending inventory by $54,000. What effect will this error have on total assets and net income for 2016? Assets…………………….Net income a. No effect…………………Overstate b. No effect…………………No effect c.

> Crystal Aquarium Supplies had the following beginning inventory, net purchases, net sales, and gross profit percentage for the first quarter of 2016: By the gross profit method, the ending inventory should b

> Trudell, Inc., reported the following data: Trudell’s gross profit percentage is a. 51.0. b. 48.0. c. 49.0. d. 55.7. Freight in . Purchases Beginning inventory . Purchase discounts . $ 26,000 207,000 52,000 4,300

> Sales are $500,000 and cost of goods sold is $320,000. Beginning and ending inventories are $28,000 and $38,000, respectively. How many times did the company turn its inventory over during this period? a. 9.7 times b. 6.4 times c. 15.2 times d. 5.5 t

> Two financial ratios that clearly distinguish a discount chain such as Walmart from a high-end retailer such as Gucci are the gross profit percentage and the rate of inventory turnover. Which set of relationships is most likely for Gucci? Gross profit perce

> Patterson Company ended the month of March with inventory of $20,000. Patterson expects to end April with inventory of $13,000 after selling goods with a cost of $93,000. How much inventory must Patterson purchase during April in order to accomplish thes

> The following data come from the inventory records of Dapper Company: Based on these facts, the gross profit for Dapper Company is a. $224,000. b. $193,000. c. $150,000. d. $203,000. Net sales revenue.. Beginning inventory Ending inventory.. Ne

> The sum of ending inventory and cost of goods sold is a. gross profit. b. cost of goods available (or cost of goods available for sale). c. net purchases. d. beginning inventory.

> The word market as used in “the lower of cost or market” generally means a. liquidation price. b. original cost. c. retail market price. d. current replacement cost.

> The income statement for Good Heart Foods shows gross profit of $149,000, operating expenses of $124,000, and cost of goods sold of $218,000. What is the amount of net sales revenue? a. $342,000 b. $491,000 c. $367,000 d. $273,000

> In a period of rising prices, a. cost of goods sold under LIFO will be less than under FIFO. b. LIFO inventory will be greater than FIFO inventory. c. gross profit under FIFO will be higher than under LIFO. d. net income under LIFO will be higher than

> If Leading Edge Frame Shop uses the LIFO method, cost of goods sold will be a. $27,450. b. $32,850. c. $32,700. d. $32,400. Units Unit Cost Total Cost $18.00 Jun 1 4 Beginning inventory Purchase 2,400 1,500 $43,200 27,450 $18.30 9. Sale (1,800)

> If Leading Edge Frame Shop uses the FIFO method, the cost of the ending inventory will be a. $32,400. b. $27,450. c. $32,700. d. $38,250.

> When does the cost of inventory become an expense? a. When inventory is delivered to a customer b. When inventory is purchased from the supplier c. When payment is made to the supplier d. When cash is collected from the customer

> What was Riverview’s gross profit for January? a. $ − 0 – b. $5,200 c. $7,300 d. $2,100