Accounting 1 Final (CH 1-10)
An accountant has debited an asset for $1,000 and credited a liability account for $500. What can be done to complete the recording of the transaction? D) Credit a different asset account for $500
D) Credit a different asset account for $500
The amount of stock that may be issued according to the corporation's charter is referred to as the A) authorized stock. B) issued stock. C) unissued stock. D) outstanding stock.
A) authorized stock.
Investing activities include A) collecting cash on loans made. B) obtaining cash from creditors. C) obtaining capital from owners. D) repaying money previously borrowed.
A) collecting cash on loans made.
Leyland Realty Company received a check for $18,000 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $18,000. Financial statements will be prepared on July 31. Leyland Realty should make the following adjusting entry on July 31: A) debit Unearned Rent Revenue, $3,000; credit Rent Revenue, $3,000. B) debit Rent Revenue, $3,000; credit Unearned Rent Revenue, $3,000. C) debit Unearned Rent Revenue, $18,000; credit Rent Revenue, $18,000. D) debit Cash, $18,000; credit Rent Revenue, $18,000
A) debit Unearned Rent Revenue, $3,000; credit Rent Revenue, $3,000.
One of the accounting concepts upon which adjustments for prepayments and accruals are based is: A) expense recognition. B) cost. C) monetary unit. D) economic entity
A) expense recognition.
An adjusting entry is not required for A) outstanding checks. B) collection of a note by the bank. C) NSF checks. D) bank service charges.
A) outstanding checks.
Under the allowance method, Bad Debt Expense is recorded A) when an individual account is written off. B) when the loss amount is known. C) for an amount that the company estimates it will not collect. D) several times during the accounting period.
C) for an amount that the company estimates it will not collect.
Liabilities are classified on the balance sheet as current or A) deferred. B) unearned. C) long-term. D) accrued.
C) long-term.
When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when A) a sale is made. B) an account becomes bad and is written off. C) management estimates the amount of uncollectibles. D) a customer's account becomes past due.
C) management estimates the amount of uncollectibles.
The term legal capital is a descriptive term for A) stockholders' equity. B) par value. C) residual equity. D) market value.
B) par value.
Which accounts normally have credit balances? C) Revenues, liabilities, and retained earnings
C) Revenues, liabilities, and retained earnings
Debts and obligations of a business are referred to as A) assets. B) equities. C) liabilities. D) expenses
C) liabilities.
Wang Company had the following transactions during 2016: What is Wang's 2016 net income using cash basis accounting? A) $1,600 B) $2,800 C) $13,000 D) $2,200
A) $1,600
Jackson Company recorded the following cash transactions for the year: Paid $135,000 for salaries. Paid $60,000 to purchase office equipment. Paid $15,000 for utilities. Paid $6,000 in dividends. Collected $275,000 from customers. What was Jackson's net cash provided by operating activities? A) $125,000 B) $65,000 C) $140,000 D) $119,000
A) $125,000
Sassy Saxophones has the following inventory data: Assuming that a periodic inventory system is used, what is the amount allocated to ending inventory on a LIFO basis? A) $18,320 B) $18,370 C) $38,480 D) $38,530
A) $18,320
A machine with a cost of $640,000 has an estimated salvage value of $40,000 and an estimated useful life of 5 years or 15,000 hours. It is to be depreciated using the units-of-activity method of depreciation. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours? A) $200,000. B) $120,000. C) $133,333. D) $173,333.
A) $200,000.
Nilson Company gathered the following reconciling information in preparing its August bank reconciliation: The adjusted cash balance per books on August 31 is A) $33,280. B) $32,080. C) $18,400. D) $19,680.
A) $33,280.
Equipment was purchased for $85,000 on January 1, 2016. Freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used? A) $33,400. B) $16,700. C) $14,300. D) $28,600.
A) $33,400.
Use the following data to determine the total amount of working capital. Koonce Office Supplies Balance Sheet December 31, 2017 A) $360,000 B) $390,000 C) $130,000 D) $180,000
A) $360,000
A company sells a plant asset that originally cost $360,000 for $120,000 on December 31, 2017. The accumulated depreciation account had a balance of $180,000 after the current year's depreciation of $30,000 had been recorded. The company should recognize a A) $60,000 loss on disposal. B) $40,000 gain on disposal. C) $120,000 loss on disposal. D) $120,000 gain on disposal.
A) $60,000 loss on disposal.
Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: A) Accounts Receivable Cash B) Cash Accounts Receivable C) Miscellaneous Expense Accounts Receivable D) No adjusting entry is necessary.
A) Accounts Receivable Cash
Which of the following statements is correct? A) Due to its liquid nature, cash is the easiest asset to steal. B) A good system of internal control will ensure that employees will not be able to steal cash. C) It takes two or more employees working together to be able to steal cash. D) All of these answer choices are correct.
A) Due to its liquid nature, cash is the easiest asset to steal.
Why do generally accepted accounting principles require the application of the revenue recognition principle? A) Failure to apply the revenue recognition principle could lead to a misstatement of revenue. B) It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. C) Recording revenue when cash is received is an objective application of the revenue recognition principle. D) Accounting software has made the revenue recognition easy to apply.
A) Failure to apply the revenue recognition principle could lead to a misstatement of revenue.
Trademarks would appear in which balance sheet section? A) Intangible assets B) Investments C) Property, plant, and equipment D) Current assets
A) Intangible assets
Moss County Bank agrees to lend the Sadowski Brick Company $500,000 on January 1. Sadowski Brick Company signs a $500,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30? A) Interest Expense 15,000 Interest Payable 15,000 B) Interest Expense 15,000 Cash 15,000 C) Interest Payable 15,000 Cash 15,000 D) Interest Payable 15,000 Interest Expense 15,000
A) Interest Expense 15,000 Interest Payable 15,000
Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? A) Reduced legal liability for investors B) Harder to transfer ownership C) Lower taxes D) Most common form of organization
A) Reduced legal liability for investors
A very small company would have the most difficulty in implementing which of the following internal control activities? A) Separation of duties. B) Limited access to assets. C) Periodic independent verification. D) Sound personnel procedures.
A) Separation of duties.
When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory? A) To check the accuracy of the perpetual inventory records B) To determine cost of goods sold for the accounting period C) To compute inventory ratios D) All are a purpose of taking a physical inventory when a perpetual inventory system is used.
A) To check the accuracy of the perpetual inventory records
Jason Hansen has invested $600,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Hansen stand to lose? A) Up to his total investment of $600,000. B) Zero. C) The $600,000 plus any personal assets the creditors demand. D) $400,000.
A) Up to his total investment of $600,000.
An accounting time period that is one year in length is called: A) a fiscal year. B) an interim period. C) the time period assumption. D) a reporting period.
A) a fiscal year.
When expenses exceed revenues, which of the following is true? A) a net loss results B) a net income results C) assets equal liabilities D) assets are increased
A) a net loss results
The acquisition of land by issuing common stock is A) a noncash transaction that is not reported in the body of a statement of cash flows. B) a cash transaction and would be reported in the body of a statement of cash flows. C) a noncash transaction and would be reported in the body of a statement of cash flows. D) only reported if the statement of cash flows is prepared using the direct method.
A) a noncash transaction that is not reported in the body of a statement of cash flows.
Two individuals at a retail store work the same cash register. You evaluate this situation as A) a violation of establishment of responsibility. B) a violation of separation of duties. C) supporting the establishment of responsibility. D) supporting internal independent verification.
A) a violation of establishment of responsibility.
If a check correctly written and paid by the bank for $628 is incorrectly recorded on the company's books for $682, the appropriate treatment on the bank reconciliation would be to A) add $54 to the book's balance. B) subtract $54 from the book's balance. C) deduct $54 from the bank's balance. D) deduct $628 from the book's balance.
A) add $54 to the book's balance.
Under the allowance method, writing off an uncollectible account A) affects only balance sheet accounts. B) affects both balance sheet and income statement accounts. C) affects only income statement accounts. D) is not acceptable practice.
A) affects only balance sheet accounts.
With an interest-bearing note, the amount of assets received upon issuance of the note is generally A) equal to the note's face value. B) greater than the note's face value. C) less than the note's face value. D) equal to the note's maturity value
A) equal to the note's face value.
Generally, the most important category on the statement of cash flows is cash flows from A) operating activities. B) investing activities. C) financing activities. D) significant noncash activities.
A) operating activities.
The order of presentation of activities on the statement of cash flows is A) operating, investing, and financing. B) operating, financing, and investing. C) financing, operating, and investing. D) financing, investing, and operating.
A) operating, investing, and financing.
Prepaid expenses are: A) paid and recorded in an asset account before they are used or consumed. B) paid and recorded in an asset account after they are used or consumed. C) incurred but not yet paid or recorded. D) incurred and already paid or recorded.
A) paid and recorded in an asset account before they are used or consumed.
Most business enterprises in the United States are A) proprietorships and partnerships. B) partnerships. C) corporations. D) government units
A) proprietorships and partnerships.
Using accrual accounting, expenses are recorded and reported only: A) when they are incurred whether or not cash is paid. B) when they are incurred and paid at the same time. C) if they are paid before they are incurred. D) if they are paid after they are incurred.
A) when they are incurred whether or not cash is paid.
A current liability is a debt that can reasonably be expected to be paid A) within one year, or the operating cycle, whichever is longer. B) between 6 months and 18 months. C) out of currently recognized revenues. D) out of cash currently on hand.
A) within one year, or the operating cycle, whichever is longer.
Manufactured inventory that has begun the production process but is not yet completed is A) work in process. B) raw materials. C) merchandise inventory. D) finished goods.
A) work in process.
Alpha First Company just began business and made the following four inventory purchases in June: physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is A) $1,456 B) $1,508 C) $1,848 D) $1,824
B) $1,508
A company purchased factory equipment for $450,000. It is estimated that the equipment will have a $45,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be A) $180,000. B) $108,000. C) $162,000. D) $97,200.
B) $108,000.
Conway Company purchased merchandise inventory with an invoice price of $12,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Conway Company pays within the discount period? A) $12,000 B) $11,760 C) $10,800 D) $11,040
B) $11,760
Financial information is presented below: The amount of net sales on the income statement would be B) $150,000
B) $150,000
Tidwell Company's goods in transit at December 31 include sales made Which items should be included in Tidwell's inventory at December 31? A) (2) and (3) B) (1) and (4) C) (1) and (3) D) (2) and (4)
B) (1) and (4)
The following information is available for Bradshaw Corporation and Newell Corporation: Based on this information, what is the amount of Bradshaw's earnings per share (rounded to two decimals) for 2017? A) $2.76 B) $2.50 C) $1.25 D) $1.32
B) $2.50
Mitchell Corporation bought equipment on January 1, 2017. The equipment cost $300,000 and had an expected salvage value of $50,000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is A) $300,000. B) $250,000. C) $50,000. D) $41,667.
B) $250,000.
A plant asset cost $192,000 and is estimated to have a $24,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be A) $16,080. B) $27,000. C) $23,625. D) $18,375.
B) $27,000.
Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. A) $19,000 B) $28,000 C) $21,000 D) $12,000
B) $28,000
On January 15, Nifty Company sells merchandise on account to Martinez Associates for $5,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $1,000 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received? A) $4,000 B) $3,880 C) $3,850 D) $2,800
B) $3,880
Use the following data to determine the total amount of working capital. Eddie Auto Supplies Balance Sheet December 31, 2017 A) $606,000 B) $351,000 C) $381,000 D) $261,000
B) $351,000
Based on the following data, what is the amount of current assets? B) $390,000
B) $390,000
Barnes Company showed the following balances at the end of its first year: What amount did Barnes Company show as total credits? A) $42,100 B) $41,400 C) $40,700 D) $42,800
B) $41,400
Financial information is presented below: Gross profit would be B) $42,000
B) $42,000
Equipment with a cost of $300,000 has an estimated salvage value of $20,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours? A) $75,000. B) $70,000. C) $75,600. D) $72,500.
B) $70,000.
Crawford Company started the year with $60,000 in its Common Stock account and a credit balance in Retained Earnings of $44,000. During the year, the company earned net income of $48,000 and declared and paid $20,000 of dividends. In addition, the company sold additional common stock amounting to $28,000. As a result, the amount of its retained earnings at the end of the year would be A) $160,000. B) $72,000. C) $132,000. D) $100,000.
B) $72,000.
During February 2017, its first month of operations, the owner of Schwenn Enterprises invested cash of $100,000. Schwenn had cash sales of $20,000 and paid expenses of $35,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28? A) $15,000 credit B) $85,000 debit C) $120,000 debit D) $65,000 credit
B) $85,000 debit
If Hostell Company has net sales of $500,000 and cost of goods sold of $350,000, Hostell's gross profit rate is A) 70%. B) 30%. C) 43%. D) 100%.
B) 30%.
When an account becomes uncollectible and must be written off A) Allowance for Doubtful Accounts should be credited. B) Accounts Receivable should be credited. C) Bad Debt Expense should be credited. D) Sales Revenue should be debited.
B) Accounts Receivable should be credited.
n 2017, Blanchard Corporation has plant equipment that originally cost $120,000 and has accumulated depreciation of $48,000. A new processing technique has rendered the equipment obsolete, so it is retired. Which of the following entries should Blanchard use to record the retirement of the equipment? A) Loss on Disposal of Plant Assets 72,000 Equipment 72,000 B) Accumulated Depreciation-Equipment 48,000 Loss on Disposal of Plant Assets 72,000 Equipment 120,000 C) Loss on Disposal of Plant Assets 72,000 Accumulated Depreciation-Equipment 72,000 D) Plant Equipment 120,000 Accumulated Depreciation-Equipment 48,000 Loss on Disposal of Plant Assets 72,000
B) Accumulated Depreciation-Equipment 48,000 Loss on Disposal of Plant Assets 72,000 Equipment 120,000
Moss County Bank agrees to lend the Sadowski Brick Company $500,000 on January 1. Sadowski Brick Company signs a $500,000, 6%, 9-month note. The entry made by Sadowski Brick Company on January 1 to record the proceeds and issuance of the note is A) Interest Expense 22,500 Cash 477,500 Notes Payable 500,000 B) Cash 500,000 Notes Payable 500,000 C) Cash 500,000 Interest Expense 22,500 Notes Payable 522,500 D) Cash 500,000 Interest Expense 22,500 Notes Payable 500,000 Interest Payable 22,500
B) Cash 500,000 Notes Payable 500,000
Mohling Company typically sells subscriptions on an annual basis, and publishes eight times a year. The magazine sells 60,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscriptions? A) Subscriptions Receivable 600,000 Subscription Revenue 600,000 B) Cash 600,000 Unearned Subscription Revenue 600,000 C) Subscriptions Receivable 75,000 Unearned Subscription Revenue 75,000 D) Prepaid Subscriptions 600,000 Cash 600,000
B) Cash 600,000 Unearned Subscription Revenue 600,000
Tomlinson Packaging Corporation began business in 2017 by issuing 50,000 shares of $5 par common stock for $8 per share and 5,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market value of $10. On its December 31, 2017 balance sheet, Tomlinson Packaging would report A) Common Stock of $500,000. B) Common Stock of $250,000. C) Common Stock of $400,000. D) Paid-in Capital of $330,000.
B) Common Stock of $250,000.
A corporation purchases 30,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders' equity? A) Increase by $300,000. B) Decrease by $750,000. C) Increase by $750,000. D) Decrease by $300,000.
B) Decrease by $750,000.
For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation? A) Check for $63 recorded by the company as $36. B) Deposit of $600 recorded by the bank as $60. C) A returned $300 check recorded by the bank as $30. D) Check for $75 recorded by the company as $57
B) Deposit of $600 recorded by the bank as $60.
Which of the following bank reconciliation items would not result in an adjusting entry? A) Service charge. B) Deposits in transit. C) NSF check of customer. D) Collection of a note by the bank.
B) Deposits in transit.
Moss County Bank agrees to lend the Sadowski Brick Company $500,000 on January 1. Sadowski Brick Company signs a $500,000, 6%, 9-month note. What entry will Sadowski Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30? A) Notes Payable 522,500 Cash 522,500 B) Notes Payable 500,000 Interest Payable 22,500 Cash 522,500 C) Interest Expense 22,500 Notes Payable 500,000 Cash 522,500 D) Interest Payable 15,000 Notes Payable 500,000 Interest Expense 7,500 Cash 522,500
B) Notes Payable 500,000 Interest Payable 22,500 Cash 522,500
Crowder Corporation recorded the return of $200 of goods originally sold on credit to Discount Industries. Using the periodic inventory approach, Crowder would record this transaction as: A) Inventory 200 Accounts Receivable 200 B) Sales Returns and Allowances 200 Accounts Receivable 200 C) Accounts Payable 200 Sales Returns and Allowances 200 D) Accounts Receivable 200 Sales Returns and Allowances 200
B) Sales Returns and Allowances 200 Accounts Receivable 200
Stockholders of a corporation directly elect B) The board of directors
B) The board of directors
Which of the following is not an internal control activity for cash? A) The number of persons who have access to cash should be limited. B) The functions of record keeping and maintaining custody of cash should be combined. C) Surprise audits of cash on hand should be made occasionally. D) All cash receipts should be recorded promptly.
B) The functions of record keeping and maintaining custody of cash should be combined.
Which one of the following is not an ownership right of a stockholder in a corporation? A) To vote in the election of directors. B) To declare dividends on the common stock. C) To share in assets upon liquidation. D) To share in corporate earnings.
B) To declare dividends on the common stock.
Under the direct write-off method of accounting for uncollectible accounts A) the allowance account is increased for the actual amount of bad debt at the time of write-off. B) a specific account receivable is decreased for the actual amount of bad debt at the time of write-off. C) balance sheet relationships are emphasized. D) bad debt expense is always recorded in the period in which the revenue was recorded.
B) a specific account receivable is decreased for the actual amount of bad debt at the time of write-off.
The right to receive money in the future is called a(n) A) account payable. B) account receivable. C) liability. D) revenue
B) account receivable.
The current portion of long-term debt should A) be paid immediately. B) be reclassified as a current liability. C) be classified as a long-term liability. D) not be separated from the long-term portion of debt.
B) be reclassified as a current liability.
All leases are classified as either A) capital leases or long-term leases. B) capital leases or operating leases. C) operating leases or current leases, D) long-term leases or current leases
B) capital leases or operating leases.
Receivables are A) one of the most liquid assets and thus are always considered current assets. B) claims that are expected to be collected in cash. C) shown on the income statement at cash realizable value. D) always the result of revenue recognition.
B) claims that are expected to be collected in cash.
Inventory costing methods place primary reliance on assumptions about the flow of A) good. B) costs. C) resale prices. D) values.
B) costs.
An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3,200 debit balance, the adjustment to record bad debts for the period will require a A) debit to Bad Debt Expense for $9,000. B) debit to Bad Debt Expense for $12,200. C) debit to Bad Debt Expense for $5,800. D) credit to Allowance for Doubtful Accounts for $9,000.
B) debit to Bad Debt Expense for $12,200.
The following totals for the month of April were taken from the payroll records of Noll Company. The entry to record accrual of employer's payroll taxes would include a A) debit to Payroll Tax Expense for $2,480. B) debit to Payroll Tax Expense for $11,660. C) credit to FICA Taxes Payable for $18,360. D) credit to Payroll Tax Expense for $2,480.
B) debit to Payroll Tax Expense for $11,660.
In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is A) added to net income. B) deducted from net income. C) ignored because it does not affect cash. D) not reported on a statement of cash flows.
B) deducted from net income.
The expense recognition principle matches: A) customers with businesses. B) expenses with revenues. C) assets with liabilities. D) creditors with businesses.
B) expenses with revenues.
The proprietorship form of business organization A) must have at least two owners in most states. B) generally receives favorable tax treatment relative to a corporation. C) combines the records of the business with the personal records of the owner. D) is classified as a separate legal entity.
B) generally receives favorable tax treatment relative to a corporation.
A company would be expected to generate small amounts of cash from operations during the A) introductory phase. B) growth phase. C) maturity phase. D) decline phase.
B) growth phase.
A debit balance in the Allowance for Doubtful Accounts A) is the normal balance for that account. B) indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. C) indicates that actual bad debt write-offs have been less than what was estimated. D) cannot occur if the percentage of receivables method of estimating bad debts is used.
B) indicates that actual bad debt write-offs have exceeded previous provisions for bad debts.
The partnership form of business organization A) is a separate legal entity. B) is a common form of organization for service -type businesses. C) enjoys an unlimited life. D) has limited liability
B) is a common form of organization for service -type businesses.
The relationship between current assets and current liabilities is important in evaluating a company's A) profitability. B) liquidity. C) market value. D) solvency.
B) liquidity.
Of the items below, the one that appears first on the statement of cash flows is A) noncash investing and financing activities. B) net increase (decrease) in cash. C) cash at the end of the period. D) cash at the beginning of the period.
B) net increase (decrease) in cash.
A corporation has the following account balances: Common Stock, $1 par value, $80,000; Paid-in Capital in Excess of Par Value, $2,700,000. Based on this information, the A) legal capital is $2,780,000. B) number of shares issued is 80,000. C) number of shares outstanding is 2,780,000. D) average price per share issued is $3.48.
B) number of shares issued is 80,000.
If a company is given credit terms of 2/10, n/30, it should A) hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time. B) pay within the discount period and recognize a savings. C) pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill. D) recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.
B) pay within the discount period and recognize a savings.
Ratios that measure the income or operating success of a company for a given period of time are A) liquidity ratios. B) profitability ratios. C) solvency ratios. D) trending ratios.
B) profitability ratios.
If accounts receivable have increased during the period A) revenues on an accrual basis are less than revenues on a cash basis. B) revenues on an accrual basis are greater than revenues on a cash basis. C) revenues on an accrual basis are the same as revenues on a cash basis. D) expenses on an accrual basis are greater than expenses on a cash basis.
B) revenues on an accrual basis are greater than revenues on a cash basis.
When stock is issued in exchange for a noncash asset, the value recorded for the shares issued is best determined by A) the book value of the noncash asset. B) the market value of the shares. C) the par value of the shares. D) the contributed capital of the shares.
B) the market value of the shares.
The following information was taken from Hobson Company cash budget for the month of June If the company has a policy of maintaining an end-of-the-month cash balance of $150,000, the amount the company would have to borrow is A) $66,000. B) $30,000. C) $0 D) $90,000.
C) $0
Baker Bakery Company just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for June is A) $1,456 B) $1,508 C) $1,824 D) $1,848
C) $1,824
The following is selected information from C Corporation for the fiscal year ending October 31, 2017. Based on the accrual basis of accounting, what is C Corporation's net income for the year ending October 31, 2017? A) $132,000 B) $116,000 C) $106,000 D) $140,000
C) $106,000
The interest charged on a $300,000 note payable, at the rate of 6%, on a 90-day note would be A) $18,000. B) $9,000. C) $4,500. D) $1,500.
C) $4,500.
Pearson Company bought a machine on January 1, 2017. The machine cost $180,000 and had an expected salvage value of $30,000. The life of the machine was estimated to be 5 years. The book value of the machine at the beginning of the third year would be A) $180,000. B) $150,000. C) $120,000. D) $60,000.
C) $120,000.
Use the following data to determine the total dollar amount of assets to be classified as investments. Carne Auto Supplies Balance Sheet December 31, 2017 A) $0 B) $320,000 C) $180,000 D) $280,000
C) $180,000
Andrea's Fashions sold merchandise for $190,000 cash during the month of July. Returns that month totaled $4,000. If the company's gross profit rate is 40%, Andrea's will report monthly net sales revenue and cost of goods sold of A) $190,000 and $114,000. B) $186,000 and $74,400. C) $186,000 and $111,600. D) $190,000 and $111,600.
C) $186,000 and $111,600.
Olympus Climbers Company has the following inventory data: A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for July is A) $930. B) $990. C) $2,010. D) $2,070.
C) $2,010.
In the first month of operations, the total of the debit entries to the Cash account amounted to $7,000 and the total of the credit entries to the Cash account amounted to $4,000. The Cash account has a C) $3,000 debit balance
C) $3,000 debit balance
Trumpeting Trumpets has the following inventory data: Assuming that a periodic inventory system is used, what is the cost of goods sold on a FIFO basis? A) $18,320 B) $18,370 C) $38,480 D) $38,530
C) $38,480
During January 2017, its first month of operation, Osborn Enterprises earned net income of $6,800 and paid dividends to the owners of $2,000. At January 31, the balance in Retained Earnings will be A) $0. B) $6,800 credit. C) $4,800 credit. D) $2,000 debit.
C) $4,800 credit.
Jack's Copy Shop bought equipment for $240,000 on January 1, 2016. Jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2017, Jack decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2017? A) $80,000. B) $32,000. C) $40,000. D) $60,000.
C) $40,000.
Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the amount of bad debt expense for that period? A) $55,000 B) $11,000 C) $66,000 D) $44,000
C) $66,000
Sampson Company's accounting records show the following for the year ending on December 31, 2017. Using the periodic system, the cost of goods purchased is A) $702,220. B) $697,820. C) $681,020. D) $719,020.
C) $681,020.
Clark Company developed the following reconciling information in preparing its September bank reconciliation: Using the above information, determine the cash balance per books (before adjustments) for the Clark Company. A) $41,055. B) $65,100. C) $7,455. D) $63,000
C) $7,455.
Kinsler Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Kinsler Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? A) Bad Debts Expense17,500 Allowance for Doubtful Accounts 17,500 B) Bad Debts Expense 5,000 Allowance for Doubtful Accounts 5,000 C) Bad Debts Expense 12,500 Allowance for Doubtful Accounts 12,500 D) Bad Debts Expense 10,000 Accounts Receivable 10,000
C) Bad Debts Expense 12,500 Allowance for Doubtful Accounts 12,500
Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt? A) Only Jack is personally liable for the debt, since he has been the managing partner during that time. B) Only Jill is personally liable for the debt of the business, since Jack has been working and she has not. C) Both Jack and Jill are personally liable for the business debt. D) Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity
C) Both Jack and Jill are personally liable for the business debt.
Which of the following statements concerning taxation is accurate? A) Partnerships pay state income taxes but not federal income taxes. B) Corporations pay federal income taxes but not state income taxes. C) Corporations pay federal and state income taxes. D) Only the owners must pay taxes on corporate income.
C) Corporations pay federal and state income taxes.
Which of the following is not an advantage of the corporate form of business organization? A) No personal liability B) Easy to transfer ownership C) Favorable tax treatment D) Easy to raise funds
C) Favorable tax treatment
If Norben Company issues 6,000 shares of $5 par value common stock for $210,000, the account A) Common Stock will be credited for $210,000. B) Paid-in Capital in Excess of Par Value will be credited for $30,000. C) Paid-in Capital in Excess of Par Value will be credited for $180,000. D) Cash will be debited for $180,000.
C) Paid-in Capital in Excess of Par Value will be credited for $180,000.
Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system? A) A purchase of merchandise. B) A return of merchandise inventory to the supplier C) Payment of freight costs for goods shipped to a customer D) Payment of freight costs for goods received from a supplier
C) Payment of freight costs for goods shipped to a customer
Which of the following is an example of a deferral adjusting entry? A) Accrued expense B) Accrued revenue C) Prepaid expense D) All of these choices are correct.
C) Prepaid expense
A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate? A) Ability to raise capital for expansion B) Desire to limit the owner's personal liability C) The prestige of operating as a corporation D) The ease in transferring shares of the corporation's stock
C) The prestige of operating as a corporation
Which of the following methods of computing depreciation is production based? A) Straight-line. B) Declining-balance. C) Units-of-activity. D) None of these answer choices are correct.
C) Units-of-activity.
Which one of the following questions is most likely asked by an internal human resources director for the company? A) Which product line is most profitable? B) What price for our product will maximize the company income? C) What average pay raise is affordable for employees this year? D) Should any product lines be eliminated
C) What average pay raise is affordable for employees this year?
Bad Debt Expense is considered A) an avoidable cost in doing business on a credit basis. B) an internal control weakness. C) a necessary risk of doing business on a credit basis. D) avoidable unless there is a recession.
C) a necessary risk of doing business on a credit basis.
In preparing a statement of cash flows, a conversion of bonds into common stock will be reported in A) the financing section. B) the "extraordinary" section. C) a separate schedule or note to the financial statements. D) the stockholders' equity section.
C) a separate schedule or note to the financial statements.
An account consists of A) a title, a debit balance, and a credit balance. B) a title, a left side, and a debit balance. C) a title, a debit side, and a credit side. D) a title, a right side, and a debit balance.
C) a title, a debit side, and a credit side.
In order to determine net cash provided by operating activities, a company must convert net income from an accrual basis to a cash basis under A) the direct method only. B) the indirect method only. C) both the direct method and the indirect method. D) neither the direct nor the indirect method.
C) both the direct method and the indirect method.
Bonds that may be exchanged for common stock at the option of the bondholders are called A) options. B) stock bonds. C) convertible bonds. D) callable bonds.
C) convertible bonds.
Depreciation is a process of A) asset devaluation. B) cost accumulation. C) cost allocation. D) asset valuation.
C) cost allocation.
Sales taxes collected by a retailer are recorded by A) crediting Sales Tax Revenue. B) debiting Sales Tax Expense. C) crediting Sales Taxes Payable. D) debiting Sales Taxes Payable.
C) crediting Sales Taxes Payable.
The current ratio is C) current assets divided by current liabilities
C) current assets divided by current liabilities
On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is: A) debit Rent Expense, $24,000; credit Prepaid Rent, $4,000. B) debit Prepaid Rent, $4,000; credit Rent Expense, $4,000. C) debit Rent Expense, $4,000; credit Prepaid Rent, $4,000. D) debit Rent Expense, $24,000; credit Prepaid Rent, $20,000
C) debit Rent Expense, $4,000; credit Prepaid Rent, $4,000.
Greese Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: A) debit Supplies Expense, $2,500; credit Supplies, $2,500. B) debit Supplies, $4,500; credit Supplies Expense, $4,500. C) debit Supplies Expense, $4,500; credit Supplies, $4,500. D) debit Supplies, $2,500; credit Supplies Expense, $2,500.
C) debit Supplies Expense, $4,500; credit Supplies, $4,500.
An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $2,400 credit balance, the adjustment to record bad debts for the period will require a A) debit to Bad Debt Expense for $9,000. B) debit to Allowance for Doubtful Accounts for $6,600. C) debit to Bad Debt Expense for $6,600. D) credit to Allowance for Doubtful Accounts for $9,000.
C) debit to Bad Debt Expense for $6,600.
The entry to record the return of goods from a customer would include a C) debit to Sales Returns and Allowances.
C) debit to Sales Returns and Allowances.
When an account is written off using the allowance method, accounts receivable A) is unchanged and the allowance account increases. B) increases and the allowance account increases. C) decreases and the allowance account decreases. D) decreases and the allowance account increases.
C) decreases and the allowance account decreases.
An employee assigned to counting computer monitors in boxes should A) estimate the number if there is a large quantity to be counted. B) read each box and rely on the box description for the contents. C) determine that the box contains a monitor. D) rely on the warehouse records of the number of computer monitor
C) determine that the box contains a monitor.
The receipt of cash n advance from a customer C) increases assets and liabilities
C) increases assets and liabilities
A business organized as a corporation A) is not a separate legal entity in most states. B) requires that stockholders be personally liable for the debts of the business. C) is owned by its stockholders. D) has tax advantages over a proprietorship or partnership.
C) is owned by its stockholders.
Financing activities involve A) lending money. B) acquiring investments. C) issuing debt. D) acquiring long-lived assets.
C) issuing debt.
After a business transaction has been analyzed and entered in the journal, the next step in the recording process is to transfer the information to A) the company's bank. B) stockholders' equity. C) ledger accounts. D) financial statements.
C) ledger accounts.
The primary purpose of the statement of cash flows is to A) provide information about the investing and financing activities during a period. B) prove that revenues exceed expenses if there is a net income. C) provide information about the cash receipts and cash payments during a period. D) facilitate banking relationships.
C) provide information about the cash receipts and cash payments during a period.
Unearned Rent Revenue is A) a contra account to Rent Revenue. B) a revenue account. C) reported as a current liability. D) debited when rent is received in advance.
C) reported as a current liability.
Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates A) documentation procedures are violated. B) independent internal verification is violated. C) segregation of duties is violated. D) establishment of responsibility is violated.
C) segregation of duties is violated.
The normal balance of any account is the A) left side. B) right side. C) side which increases that account. D) side which decreases that account.
C) side which increases that account.
Depreciation is the process of allocating the cost of a plant asset over its useful life in a(n) A) equal and equitable manner. B) accelerated and accurate manner. C) systematic and rational manner. D) conservative market-based manner.
C) systematic and rational manner.
A retailer that collects sales taxes is acting as an agent for the A) wholesaler. B) customer. C) taxing authority. D) chamber of commerce.
C) taxing authority.
A change in the estimated useful life of equipment requires A) a retroactive change in the amount of periodic depreciation recognized in previous years. B) that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset. C) that the amount of periodic depreciation be changed in the current year and in future years. D) that income for the current year be increased.
C) that the amount of periodic depreciation be changed in the current year and in future years.
The left side of an account is A) blank. B) a description of the account. C) the debit side. D) the balance of the account.
C) the debit side.
The LIFO inventory method assumes that the cost of the latest units purchased are A) the last to be allocated to cost of goods sold. B) the first to be allocated to ending inventory. C) the first to be allocated to cost of goods sold. D) not allocated to cost of goods sold or ending inventory.
C) the first to be allocated to cost of goods sold.
Notes or accounts receivables that result from sales transactions are often called A) sales receivables. B) non-trade receivables. C) trade receivables. D) merchandise receivables.
C) trade receivables.
Significant noncash transactions would not include A) conversion of bonds into common stock. B) asset acquisition through bond issuance. C) treasury stock acquisition. D) exchange of plant assets.
C) treasury stock acquisition.
Using the following balance sheet and income statement data, what is the earnings per share? C)$2.80
C)$2.80
Charlene Cosmetics Company just began business and made the following four inventory purchases in June: A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is A) $1,639. B) $1,824. C) $1,764. D) $1,680
D) $1,680
A factory machine was purchased for $140,000 on January 1, 2017. It was estimated that it would have a $28,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. If the actual number of machine hours ran in 2017 was 4,000 hours and the company uses the units-of- activity method of depreciation, the amount of depreciation expense for 2017 would be A) $14,000. B) $22,400. C) $28,000. D) $11,200.
D) $11,200.
A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $294,000, what is the amount of the sales taxes owed to the taxing agency? A) $280,000 B) $294,000 C) $14,700 D) $14,000
D) $14,000
Quiet Phones Company has the following inventory data: A physical count of merchandise inventory on July 30 reveals that there are 48 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is A) $930. B) $990. C) $2,010. D) $2,070.
D) $2,070.
An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: What is the cash realizable value of the accounts receivable at December 31 after adjustment? A) $2,740,000 B) $3,000,000 C) $3,200,000 D) $2,940,000
D) $2,940,000
Which of the following methods will result in the highest depreciation in the first year? A) Sum-of-year's-digits. B)Time valuation. C)Straight-line. D)Declining-balance
D)Declining-balance
For 2017 Fielder Corporation reported net income of $32,000; net sales $400,000; and average share outstanding 16,000. There were no preferred dividends. What was the 2017 earnings per share? A) $0.08 B) $0.50 C) $25.00 D) $2.00
D) $2.00
Wilton sells softball equipment. On November 14, they shipped $4,000 worth of softball uniforms to Paola Middle School, terms 2/10, n/30. On November 21, they received an order from Douglas High School for $2,400 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $400 of defective merchandise. Wilton has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30? A) $6,400 B) $6,000 C) $4,000 D) $3,600
D) $3,600
Piper Pipes has the following inventory data: Assuming that a periodic inventory system is used, what is the cost of goods sold on a LIFO basis? A) $18,320 B) $18,370 C) $34,480 D) $38,530
D) $38,530
Use the following data to determine the total dollar amount of assets to be classified as property, plant, and equipment. Eddie Auto Supplies Balance Sheet December 31, 2017 A) $1,029,000 B) $774,000 C) $834,000 D) $564,000
D) $564,000
Sampson Company's accounting records show the following for the year ending on December 31, 2017. Using the periodic system, the cost of goods purchased is A) $660,420. B) $708,420. C) $717,220. D) $691,620.
D) $691,620.
Financial information is presented below: The profit margin would be D) .10
D) .10
What causes the balance on the bank statement to differ from the ca sh balance in the general ledger? A) Time lags. B) Errors by the bank. C) Errors by the company. D) All of these answer choices are correct.
D) All of these answer choices are correct.
Of a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements? A) Failure to make an adjustment does not affect the financial statements. B) Expenses will be overstated and net income and stockholders' equity will be under-stated. C) Assets will be overstated and net income and stockholders' equity will be understated. D) Assets will be overstated and net income and stockholders' equity will be overstated.
D) Assets will be overstated and net income and stockholders' equity will be overstated.
Which accounts normally have debit balances? D) Assets, expenses and revenues.
D) Assets, expenses and revenues.
Which of the following represents the largest number of common shares? A) Treasury shares. B) Issued shares. C) Outstanding shares. D) Authorized shares.
D) Authorized shares.
Bonding involves all of the following except A) The company obtains insurance protection against misappropriation of assets by a dishonest employee. B) The insurance company screens employees before they are added to the policy. C) The company informs employees that the insurance company will vigorously prosecute all offenders. D) Employees do not commit inappropriate acts because of the threat of prosecution and their loyalty to the employer.
D) Employees do not commit inappropriate acts because of the threat of prosecution and their loyalty to the employer.
Which one of the following would not be considered an advantage of the corporate form of organization? A) Limited liability of stockholders. B) Separate legal existence. C) Continuous life. D) Government regulation.
D) Government regulation.
Of the following companies, which one would not likely employ the specific identification method for inventory costing? A) Music store specializing in organ sales B) Farm implement dealership C) Antique shop D) Hardware store
D) Hardware store
S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $20,000 by issuing 8,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $2.40 per share. Given this information, the best journal entry for E. Corp. to record for this transaction is D) Legal Expense 19,200 Common Stock 8,000 Paid-in Capital in Excess of Par - Common 11,200
D) Legal Expense 19,200 Common Stock 8,000 Paid-in Capital in Excess of Par - Common 11,200
Which one of the following affects cash during a period? A) Recording depreciation expense. B) Declaration of a cash dividend. C) Write-off of an uncollectible account receivable. D) Payment of an accounts payable.
D) Payment of an accounts payable.
Which of the following would not create a cash flow? A) Sale of equipment at book value. B) Purchase of a delivery truck. C) Payment of a cash dividend. D) The company converts bonds into common stock.
D) The company converts bonds into common stock.
Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period? A) To allow the collection department to schedule work for the next accounting period. B) To determine the gross realizable value of accounts receivable. C) The IRS rules require the company to make the estimate. D) To match bad debt expense to the period in which the revenues were earned.
D) To match bad debt expense to the period in which the revenues were earned.
Treasury stock is A) stock issued by the U.S. Treasury Department. B) stock purchased by a corporation and held as an investment in its treasury. C) corporate stock issued by the treasurer of a company. D) a corporation's own stock, which has been reacquired and held for future use.
D) a corporation's own stock, which has been reacquired and held for future use.
The balance in the Accumulated Depreciation account represents the A) cash fund to be used to replace plant assets. B) amount to be deducted from the cost of the plant asset to arrive at its fair market value. C) amount charged to expense in the current period. D) amount charged to expense since the acquisition of the plant asset
D) amount charged to expense since the acquisition of the plant asset
A gain or loss on disposal of a plant asset is determined by comparing the A) replacement cost of the asset with the asset's original cost. B) book value of the asset with the asset's original cost. C) original cost of the asset with the proceeds received from its sale. D) book value of the asset with the proceeds received from its sale.
D) book value of the asset with the proceeds received from its sale.
The account Allowance for Doubtful Accounts is classified as a(n) A) liability. B) contra account of Bad Debt Expense. C) expense. D) contra account to Accounts Receivable.
D) contra account to Accounts Receivable.
In a classified balance sheet, assets are usually classified as A) current assets; long-term assets; property, plant, and equipment; and intangible assets. B) current assets; long-term investments; property, plant, and equipment; and common stocks. C) current assets; long-term investments; tangible assets; and intangible assets. D) current assets; long-term investments; property, plant, and equipment; and intangible assets.
D) current assets; long-term investments; property, plant, and equipment; and intangible assets.
The primary difference between a periodic and perpetual inventory system is that a periodic system A) keeps a record showing the inventory on hand at all time. B) provides better control over inventories. C) records the cost of the sale on the date the sale is made. D) determines the inventory on hand only at the end of the accounting period.
D) determines the inventory on hand only at the end of the accounting period.
Intangible assets are the rights and privileges that result from ownership of long-lived assets that A) must be generated internally. B) are depreciated over their useful life. C) have been exchanged at a gain. D) do not have physical substance.
D) do not have physical substance.
A debit to an asset account indicates a(n) A) error. B) credit was made to a liability account. C) decrease in the asset. D) increase in the asset.
D) increase in the asset.
A current asset is A) the last asset purchased by a business. B) an asset which is currently being used to produce a product or service. C) usually found as a separate classification in the income statement. D) expected to be converted to cash or used in the business within a relatively short period of time.
D) expected to be converted to cash or used in the business within a relatively short period of time.
The statement of cash flows would disclose the payment of a dividend A) nowhere on the statement. B) in the operating activities section. C) in the investing activities section. D) in the financing activities section.
D) in the financing activities section.
Stan's Market recorded the following events involving a recent purchase of inventory: As a result of these events, the company's inventory A) increased by $115,248. B) increased by $118,200. C) increased by $115,836. D) increased by $115,848.
D) increased by $115,848.
A revenue account A) is increased by debits. B) is decreased by credits. C) has a normal balance of a debit. D) is increased by credits.
D) is increased by credits.
Earnings available to common stockholders is equal to A) total revenues B) net income + preferred dividends. C) preferred dividends-net income. D) net income-preferred dividends.
D) net income-preferred dividends.
Adjusting entries affect at least: A) one revenue and one expense account. B) one asset and one liability account. C) one revenue and one balance sheet account. D) one income statement account and one balance sheet account.
D) one income statement account and one balance sheet account.
A small neighborhood barber shop that is operated by its owner would likely be organized as a A) joint venture. B) partnership. C) corporation. D) proprietorship.
D) proprietorship.
The journal entry to record a credit sale ignoring cost of goods sold is A)Cash Sales Revenue B)Cash Service Revenue C)Accounts Receivable Sales Returns and Allowances D)Accounts Receivable Sales Revenue
D)Accounts Receivable Sales Revenue
When using the balance sheet approach, the balance in Allowance for Doubtful Accounts must be considered prior to the end of period adjustment when using which of the following methods? A) Net realizable method B) Direct write-off method C)Accrual method D)Allowance method
D)Allowance method
