D105 INTERMEDIATE ACCOUNTING III
PA QUESTIONS WITH 100% CORRECT
ANSWERS!!
1 of 34
Term
A construction company leases dump trucks rather than purchasing
them outright. The accountant for the company evaluates the
leases, determines that they are finance leases, and then records
the
transaction on the income statement in the appropriate account.
Which account should the accountant use for this purpose?
Give this one a try later!
, Amortization Expense
Finance leases basically replace the need for purchasing outright. This
means that this cost should be amortized over the life of the loan
Depreciation Expense $2,000 ($10,000/5) (Total lease sum / years)
Expense the lease payments as they are incurred.
These are short term and are an operating lease so these need to be expensed
instead of amortized
Decrease of $51,000
-Purchase of investment stock
$ 43,000
-Purchase of equipment
$ 40,000
-Cash proceeds from sale of equipment
$ 32,000
($32,000-$40,000-$43,000)
Don't know?
2 of 34
Term
After the balance sheet date, but before the issue date, a company
discovers that one of its top selling products is defective and will
need to be recalled.
How should this situation be treated?
Give this one a try later!
, Retrospectively to all prior periods As a recognized
presented, including note subsequent event with
disclosures adjustments made to the
financial statements
As a nonrecognized subsequent As a nonrecognized subsequent
event with adjustments made to event that is disclosed in the
the financial statements financial statements
Don't know?
3 of 34
Term
A company switches from using the cash method to using the
accrual method to record revenue. As a result, sales are understated
by $20,000. Which entry should be made in the current period to
record this change?
Give this one a try later!
Debit Accounts Receivable for Debit Retained Earnings for $8,000;
$20,000; Credit Sales for Credit Accounts Receivable for
$20,000 $8,000
Debit Sales For $20,000; credit Debit sales for $20,000; credit cash
Accounts Receivables for $20,000 for $20,000
Don't know?
, 4 of 34
Term
The company is creating a Year 3 statement of cash flows using the
indirect method. The company issued 1,000 shares of common stock.
The company's information is as follows:
Comparative Balance Sheets
Assets
Year 3
Year 2
Year
1
Cash
$35,000
$30,000
$25,000
Accounts receivable
45,000
40,000
50,000
Prepaid expenses
20,000
30,000
25,000
Equipment
PA QUESTIONS WITH 100% CORRECT
ANSWERS!!
1 of 34
Term
A construction company leases dump trucks rather than purchasing
them outright. The accountant for the company evaluates the
leases, determines that they are finance leases, and then records
the
transaction on the income statement in the appropriate account.
Which account should the accountant use for this purpose?
Give this one a try later!
, Amortization Expense
Finance leases basically replace the need for purchasing outright. This
means that this cost should be amortized over the life of the loan
Depreciation Expense $2,000 ($10,000/5) (Total lease sum / years)
Expense the lease payments as they are incurred.
These are short term and are an operating lease so these need to be expensed
instead of amortized
Decrease of $51,000
-Purchase of investment stock
$ 43,000
-Purchase of equipment
$ 40,000
-Cash proceeds from sale of equipment
$ 32,000
($32,000-$40,000-$43,000)
Don't know?
2 of 34
Term
After the balance sheet date, but before the issue date, a company
discovers that one of its top selling products is defective and will
need to be recalled.
How should this situation be treated?
Give this one a try later!
, Retrospectively to all prior periods As a recognized
presented, including note subsequent event with
disclosures adjustments made to the
financial statements
As a nonrecognized subsequent As a nonrecognized subsequent
event with adjustments made to event that is disclosed in the
the financial statements financial statements
Don't know?
3 of 34
Term
A company switches from using the cash method to using the
accrual method to record revenue. As a result, sales are understated
by $20,000. Which entry should be made in the current period to
record this change?
Give this one a try later!
Debit Accounts Receivable for Debit Retained Earnings for $8,000;
$20,000; Credit Sales for Credit Accounts Receivable for
$20,000 $8,000
Debit Sales For $20,000; credit Debit sales for $20,000; credit cash
Accounts Receivables for $20,000 for $20,000
Don't know?
, 4 of 34
Term
The company is creating a Year 3 statement of cash flows using the
indirect method. The company issued 1,000 shares of common stock.
The company's information is as follows:
Comparative Balance Sheets
Assets
Year 3
Year 2
Year
1
Cash
$35,000
$30,000
$25,000
Accounts receivable
45,000
40,000
50,000
Prepaid expenses
20,000
30,000
25,000
Equipment
