Accounting Principles I Final Exam

Which of the following does not appear as a separate section on the cash budget? A)Cash sales. B)Financing. C)Cash disbursements. D)Cash receipts

A

A cash register tape shows cash sales of $8,000 and sales taxes of $400. The journal entry to record 143) this information is A) Cash 8,400 Sales Revenue 8,000 Sales Taxes Payable 400 B) Cash 8,000 Sales Revenue 8,000 C) Cash 8,000 Sales Tax Expense 400 Sales Revenue 8,400 D) Cash 8,400 Sales Tax Revenue 400 Sales Revenue 8,000

A

A payment of a portion of an accounts payable will A) not affect stockholders' equity. C) increase liabilities. B) not affect total assets. D) decrease net income.

A

An income statement A) presents the revenues and expenses for a specific period of time. B) reports the changes in assets, liabilities, and stockholders' equity over a period of time. C) reports the assets, liabilities, and stockholders' equity at a specific date. D) summarizes the changes in retained earnings for a specific period of time.

A

Cerner Corporation began business by issuing 300,000 shares of $5 par value common stock for $24 per share. During its first year, the corporation sustained a net loss of $50,000. The year-end balance sheet would show A) Common Stock of $1,500,000. B) total paid-in capital of $7,140,000. C) total paid-in capital of $5,700,000. D) Common Stock of $7,200,000.

A

Cost allocation of an intangible asset is referred to as A) amortization. B) depreciation. C) capitalization. D) accretion

A

Financial information is presented below: Operating expenses 42,000 Sales returns and allowances 12,000 Sales discounts 3,000 Sales revenue 165,000 Cost of goods sold 96,000. The profit margin would be A) .08. B) .06. C) .36. D) .18.

A

If a business pays rent in advance and debits a Prepaid Rent account, the company receiving the rent payment will credit A) unearned rent revenue. C) cash. B) prepaid rent. D) accrued rent revenue.

A

If a plant asset is retired and is fully depreciated, A) no gain or loss on disposal will be recorded. B) a loss on disposal will be recorded. C) phantom depreciation must be taken as though the asset were still on the books. D) a gain on disposal will be recorded.

A

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is A) deducted from net income. B) ignored because it does not affect cash. C) added to net income. D) not reported on a statement of cash flows.

A

Jahnke Corporation issued 8,000 shares of €2 par value ordinary shares for €11 per share. The 4) journal entry to record the sale will include A) a credit to Share Premium—Ordinary for €72,000. B) a debit to Cash for €16,000 C) a debit to Retained Earnings for €72,000. D) a credit to Share Capital—Ordinary for €88,000.

A

Net income will result during a time period when A) revenues exceed expenses. C) assets exceed revenues. B) expenses exceed revenues. D) assets exceed liabilities.

A

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) $3,880 B) $2,800 C) $4,000 D) $3,850

A

On September 14, 2022, Sampson Company sells merchandise valued at $24,000 on account to 67) Pacifica Inc. with terms 3/10, n/30. Both Sampson and Pacifica use the periodic inventory system. Pacifica remits payment to Sampson on September 23. Sampson's entry on that date is

A

One might infer from a debit balance in Allowance for Doubtful Accounts that A) more accounts have been written off than had been estimated. B) the direct method is being used. C) Bad Debt Expense has been overestimated. D) a posting error has been made.

A

Peninsula Company reported net income of $290,000 for the year. During the year, accounts 13) receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expenseof $45,000 was recorded. Net cash provided by operating activities for the year is A) $305,000. B) $290,000. C) $275,000. D) $257,000

A

Relevant accounting information A) is information that is capable of making a difference in a business decision. B) is information that has been audited. C) must be reported within the operating cycle or one year, whichever is longer. D) has been objectively determined.

A

The Income statement is A) required under IFRS with some differences as compared to GAAP. B) required under IFRS in the same format as under GAAP. C) required under IFRS but not under GAAP. D) required under GAAP but not under IFRS.

A

The Unearned Service Revenue account is classified as a(n) A) liability. B) asset. C) expense. D) revenue

A

The following information is related to December 31, 2021 balances. H Accounts receivable $1,400,000 H Allowance for doubtful accounts (credit) (120,000) H Cash realizable value 1,280,000 During 2022, sales on account were $390,000 and collections on account were $230,000. The company wrote off $22,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year-end indicated that bad debts should be estimated at $144,000. The change in the cash realizable value from the balance at 12/31/21 to 12/31/22 was A) $114,000 increase. B) $138,000 increase. C) $136,000 increase. D) $160,000 increase.

A

The following information was available for Camara Company at December 31, 2022: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $630,000; and sales $900,000.Camara's inventory turnover in 2022 was A)6.3 times. B)9.0 times. C)7.9 times. D)5.3 times

A

The payment of a cash dividend would be classified as a(n) A) financing activity. B) operating activity. C) investing activity. D) significant noncash activity.

A

The retained earnings statement shows all of the following except A) the time period following the one shown for the income statement. B) beginning retained earnings on the first line of the statement. C) the causes of changes in retained earnings during the period. D) the amounts of changes in retained earnings during the period.

A

The sales section of an income statement for a retailer would not include A) Cost of goods sold. B) Sales revenue. C) Net sales. D) Sales discounts.

A

The usual sequence of steps in the transaction recording process is A) analyze, journalize, post to the ledger. B) post to the ledger, journalize, analyze. C) journalize, post to the ledger, analyze. D) journalize, analyze, post to the ledger.

A

To adjust a company's LIFO cost of goods sold to FIFO cost of goods sold A)an increase in the LIFO reserve is subtracted from LIFO cost of goods sold. B)the ending LIFO reserve is subtracted from LIFO cost of goods sold. C)the ending LIFO reserve is added to LIFO cost of goods sold. D)a decrease in the LIFO reserve is subtracted from LIFO cost of goods sold.

A

Travis Corporation purchases merchandise on account from Jackson Company, terms 2/10, n/30. Travis and Jackson both use periodic inventory systems. If Travis pays within the discount period, Travis will A) credit the amount of the discount to Purchases Discounts. B) credit the amount of the discount to Inventory. C) debit the amount of the discount to Purchases. D) credit the amount of the discount to Cash.

A

Trumpeting Trumpets has the following inventory data: July 1 Beginning inventory 50 units at $120 5 Purchases 300 units at $112 14 Sale 200 units 21 Purchases 150 units at $115 30 Sale 140 units Assuming that a periodic inventory system is used, what is the cost of goods sold on a FIFO basis? A) $38,480 B) $18,370 C) $18,320 D) $38,530

A

Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited A) when an account is determined to be uncollectible. B) at the end of each accounting period. C) when a credit sale is past due. D) whenever a pre-determined amount of credit sales have been made.

A

Which of the following companies would most likely have the highest inventory turnover? A)A bakery. B)A piano manufacturer. C)An automobile manufacturer. D)An art gallery.

A

Which of the following expressions is incorrect? A) Operating expenses - Cost of goods sold = Gross profit B) Gross profit - Operating expenses = Net income C) Net income + Operating expenses = Gross profit D) Sales revenue - Cost of goods sold - Operating expenses = Net income

A

Which of the following statements about dividends is not accurate? A) The board of directors is obligated to declare dividends. B) Payment of dividends from legal capital is illegal in many states. C) Low dividends may mean high stock returns. D) Dividends are generally reported quarterly as a dollar amount per share.

A

Which of the following statements is not considered a disadvantage of the corporate form of organization? A) Limited liability of stockholders. B) Additional taxes. C) Government regulations. D) Separation of ownership and management.

A

Which of the following statements is true? A) By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance. B) Net income is not adjusted when computing earnings per share. C) The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period. D) Earnings per share is an internal measure and is not used by stockholders.

A

Whyte Clinic purchases land for $420,000 cash. The clinic assumes $4,500 in property taxes due on the land. The title and attorney fees totaled $3,000. The clinic had the land graded for $6,600. What amount does Whyte Clinic record as the cost for the land? A) $434,100 B) $426,600 C) $427,500 D) $420,000

A

Zoum Corporation had the following transactions during 2022: Issued $250,000 of par value common stock for cash. Recorded and paid wages expense of $120,000. Acquired land by issuing common stock of par value $100,000. Declared and paid a cash dividend of $20,000. Sold a long-term investment (cost $8,000) for cash of $6,000. Recorded cash sales of $800,000. Bought inventory for cash of $320,000. Acquired an investment in Zynga stock for cash of $42,000. Converted bonds payable to common stock in the amount of $1,000,000. Repaid a 6-year note payable in the amount of $440,000. What is the net cash provided by financing activities? A) $(210,000). B) $790,000. C) $(1,210,000). D) $230,000.

A

Financial information is presented below: Operating expenses 45,000 Sales returns and allowances 3000 Sales discounts 7000 Sales revenue 160,000 Cost of goods sold 96,000. Gross profit would be A) $61,000. B) $54,000. C) $64,000. D) $67,000.

B

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation? A)A returned $300 check recorded by the bank as $30. B)Deposit of $600 recorded by the bank as $60. C)Check for $75 recorded by the company as $57. D)Check for $63 recorded by the company as $36.

B

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000; the ending inventory for this period is correct. The amounts reflected in the current end of the period balance sheet are Asset Stockholders' Equity A) Overstated Overstated B) Correct Correct C) Overstated Correct D) Understated Understated

B

A company's total liabilities decreased by $105,000 and its stockholders' equity decreased by$35,000 during a period of time. By what amount and in what direction must the company's totalassets have changed during that same period? A) $70,000 decrease C) $70,000 increase B) $140,000 decrease D) $140,000 increase

B

A corporate board of directors does not generally A) select officers. C) declare dividends B) execute policy. D) formulate operating policies.

B

A legal document that indicates the name of the issuer, the face value of the bond and such other data is called A) a bond debenture. B) a bond certificate. C) a convertible bond. D) trading on the equity.

B

A loss on disposal of a plant asset is reported in the financial statements A) in the Other Revenues and Gains section of the income statement. B) in the Other Expenses and Losses section of the income statement. C) as a direct increase to the capital account on the balance sheet. D) as a direct decrease to the capital account on the balance sheet.

B

A merchandiser will earn an operating income of exactly $0 when A) net sales equals cost of goods sold. C) cost of goods sold equals gross margin. B) gross profit equals operating expenses. D) operating expenses equal net sales.

B

A promissory note A) cannot be factored (sold) to another party. B) may be used to settle accounts receivable. C) has the party to whom the money is due as the maker. D) is not a formal credit instrument.

B

Accrued expenses are A) paid and recorded in an asset account after they are used or consumed. B) incurred but not yet paid or recorded. C) incurred and already paid or recorded. D) paid and recorded in an asset account before they are used or consumed.

B

Adjusting entries are required A) when expenses are recorded in the period in which they are earned. B) because some costs expire with the passage of time and have not yet been journalized. C) when the company's profits are below the budget. D) None of these answer choices are correct.

B

An adjusted trial balance A) cannot be used to prepare financial statements. B) proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. C) is prepared after the financial statements are completed. D) is a required financial statement under generally accepted accounting principles.

B

Dominic's Salon has total receipts for the month of $40,280 including sales taxes. If the sales tax 147) rate is 6%, what are Dominic's sales for the month? A) $37,864.40 B) $38,000.00 C) $42,697.60 D) It cannot be determined.

B

Don's Pharmacy has collected $900 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Don's Pharmacy make to show the March remittance? A) Sales Tax Expense 900 Cash 900 B) Sales Taxes Payable 900 Cash 900 C) Sales Tax Expense 900 Sales Taxes Payable 900 D) No entry required.

B

During the year, Sarah's Pet Shop's merchandise inventory decreased by $50,000. If the company's cost of goods sold for the year was $750,000, purchases would have been A) $650,000. C) $800,000. B) $700,000. D) Unable to determine.

B

Equipment costing $20,000 is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a A) debit to Notes Payable. B) credit to Cash. C) credit to Notes Receivable. D) credit to Equipment

B

GAAP's, accounting and internal control procedures related to cash and the definition of cash equivalents, as compared to IFRS are A)essentially similar essentially different B)essentially similar essentially similar C)essentially different essentially different D)essentially different essentially similar

B

If bonds are issued at a discount, it means that the A) financial strength of the issuer is suspect. B) market interest rate is higher than the contractual interest rate. C) market interest rate is lower than the contractual interest rate. D) bondholder will receive effectively less interest than the contractual rate of interest.

B

In the month of May, Lopat Company Inc. wrote checks in the amount of $64,750. In June, checks in the amount of $88,606 were written. In May, $59,276 of these checks were presented to the bank for payment and $76,181 in June. What is the amount of outstanding checks at the end of June? A) $24,850. B) $17,899. C) $12,425. D) $5,474.

B

Inventory becomes part of cost of goods sold when a company A) receives payment from the customer. C) purchases the inventory. B) sells the inventory. D) pays for the inventory.

B

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actualsales. Which of the following qualities of useful information has Jackson most likely violated? A) Relevance C) Comparability B) Faithful representation D) Consistency

B

Management could determine the amounts due from customers by examining which of the following ledger accounts? A) Accounts Payable C) Supplies B) Accounts Receivable D) Service Revenue

B

Moon Corporation had the following accounts and balances: Accounts payable Accounts receivable BuildingsCash $30,000 Equipment 5,000 Land 75,000 Unearned service revenue 15,000 Total stockholders' equity $35,000 35,000 10,000? If the equipment was sold for $35,000, what would be the total of stockholders' equity? A) $90,000 B) $125,000 C) $115,000 D) $65,000

B

Nelson Corporation sells three different products. The following information is available on December 31: Inventory Item Units Cost per unit Net realizable value per unit X 300 $4.00 $3.50 Y 600 $2.00 $1.50 Z 1,500 $3.00 $4.00 After applying the lower-of-cost-or-net-realizable-value rule to each item, what will Nelson's total ending inventory balance be? A) $6,600 B) $6,450 C) $6,900 D) $7,950

B

Simonic Retailers accepted $80,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Simonic Retailers will include a credit to Sales Revenue of $80,000 and a debit to (or debits to) A) Accounts Receivable $76,800 and Service Charge Expense $3,200. B) Cash $76,800 and Service Charge Expense $3,200. C) Cash $76,800 and Interest Expense $3,200. D) Accounts Receivable $80,000

B

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is A)called the physical flow assumption. B)nonexistent; that is, there is no such accounting requirement. C)called the matching principle. D)called the consistency principle.

B

The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is A) sum-of-year's-digits. B) straight-line. C) units-of-activity. D) None of these answer choices are correct

B

The following totals for the month of April were taken from the payroll records of Noll Company. Salaries $120,000 FICA taxes withheld 9,180 Income taxes withheld 25,000 Medical insurance deductions 4,500 Federal unemployment taxes 320 State unemployment taxes 2,160 The entry to record accrual of employer's payroll taxes would include a A) credit 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) debit to Payroll Tax Expense for $2,480

B

The interest rate for a three-month loan would normally be stated in terms of which of the following rates of interest? A) Quarterly B) Annual C) Daily D) Monthly

B

The principle of establishing responsibility does not include A)one person being responsible for one task. B)independent internal verification. C)approval of transactions. D)authorization of transactions.

B

The specific identification method of inventory costing A)has no effect on a company's net income. B)may enable management to manipulate net income. C)always maximizes a company's net income. D)always minimizes a company's net income

B

The use of prenumbered checks is an example of A)independent internal verification. B)documentation procedures. C)segregation of duties. D)establishment of responsibility

B

Use the following data to determine the total amount of working capital.Koonce Office SuppliesBalance SheetDecember 31, 2022Cash$ 195,000Accounts payable$ 210,000Accounts receivable150,000Salaries and wages payable30,000Inventory 165,000Mortgage payable 240,000Prepaid insurance90,000 Total liabilities480,000Stock investments255,000Land270,000Buildings$315,000Common stock360,000Less: AccumulatedRetained earnings 750,000 depreciation(60,000)275,000Total stockholders' equity1,110,000Goodwill 210,000Total liabilities andTotal assets$1,590,000 stockholders' equity$1,590,000 A)$180,000 B)$360,000 C)$130,000 D)$390,000

B

Using accrual accounting, expenses are recorded and reported only A) if they are paid before they are incurred. B) when they are incurred whether or not cash is paid. C) if they are paid after they are incurred. D) when they are incurred and paid at the same time.

B

Using the following balance sheet and income statement data, what is the debt to assets ratio?Current assets$ 32,000Net income$ 42,000Current liabilities16,000Stockholders' equity78,000Average assets 160,000Total liabilities42,000Total assets 120,000Average common shares outstanding was 15,000. A) 13 percent B) 35 percent C) 26 percent D) 65 percent

B

Using the following balance sheet and income statement data, what is the total amount of working capital? A) $8,000 B) $16,000 C) $10,000 D) $32,000

B

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is a $6,000 credit before adjustment, what is the amount of bad debt expense for that period? A) $45,000 B) $39,000 C) $51,000 D) $6,000

B

When the T-account approach is used, the first entry to the Cash T-account is A) net income plus gains and minus losses. B) net income. C) the beginning Cash balance. D) the change in Cash from the beginning of the year to the end of the year

B

Which of the following is not a common cost flow assumption used in costing inventory? A)First-in, first-out B)Middle-in, first-out C)Last-in, first-out D)Average-cost

B

Which of the following is not one of the three forms of business organization? A) Proprietorships B) Investors C) Corporations D) Partnerships

B

Which of the following is not true of ordinary repairs? A) They primarily benefit the current accounting period. B) They increase the productive capacity of the asset. C) They maintain the expected productive life of the asset. D) They can be referred to as revenue expenditures.

B

Which of the following set of characteristics describes a corporation? A) Shared control, tax advantages, increased skills and resources B) Easier to transfer ownership and raise funds, no personal liability C) Simple to set up and maintains control with founder D) Harder to raise funds and gives owner control

B

Which one of the following is not an objective of a system of internal controls? A) Reduce the risks of errors. B) Fairness of the financial statements. C) Enhance the accuracy and reliability of accounting records. D) Safeguard company assets.

B

N3 Corporation has assets of $4,200,000, common stock of $1,092,000, and retained earnings of$665,000. What are the creditors' claims on their assets? A) $1,757,000 B) $3,773,000 C) $2,443,000 D) $4,627,000

C

A trial balance would only help in detecting which one of the following errors? A) A journal entry that is posted twice B) A transaction that is not journalized C) Offsetting errors made in recording the transaction D) A transposition error when transferring the debit side of journal entry to the ledger

D

Sparks Company received proceeds of $634,500 on 10-year, 8% bonds issued on January 1, 2019. The bonds had a face value of $600,000, pay interest annually on December 31, and have a call price of 102. Sparks uses the straight-line method of amortization. What is the amount of interest Sparks must pay the bondholders in 2019? A) $5,076 B) $50,760 C) $48,000 D) $48,960

C

Liquidity ratios measure a company's A) operating cycle. B) long-range solvency. C) short-term debt paying ability. D) revenue-producing ability.

C

M. Cornett is a corporation that sells breakfast cereal. Based on the accounts listed below, what are M. Cornett's total trade receivables? Income tax refund due $ 500 Advance due to the company from the company president 300 3-month note due from M. Cornett's main customer 2,000 Interest due this month on the above note 100 Due and unpaid from this month's sales 9,000 Due and unpaid from last month's sales 1,000 A) $10,000 B) $11,000 C) $12,000 D) $12,900

C

An adjusting entry can include a A) debit to a revenue and a credit to an asset. B) debit to an expense and a credit to a revenue. C) credit to an expense and a debit to a revenue. D) debit to an asset and a credit to a revenue.

D

Merando Industries employs a five-day workweek and a September 30 year-end. Normal weekly 52) wages amount to $36,000. If September 30 ends on a Wednesday, what is the appropriate journal entry at fiscal year-end? A) Dr Salaries and Wages ExpenseCr Salaries and Wages Payable 36,000 B) Dr Salaries and Wages Expense Cr Cash 21,600 C) Dr Salaries and Wages ExpenseCr Salaries and Wages Payable 21,600 D) Dr Salaries and Wages ExpenseCr Salaries and Wages Payable 7,200

C

A company receives $264, of which $24 is for sales tax. The journal entry to record the sale would include a A) debit to Cash for $240. B) debit to Sales Revenue for $264. C) credit to Sales Taxes Payable for $24. D) debit to Sales Taxes Expense for $24

C

A sales invoice is prepared when goods A) are sold for cash. C) are sold on credit. B) sold on credit are returned. D) are sold on credit or for cash.

C

Accrued revenues are A) recognized and already received and recorded. B) received and recorded as liabilities before they are recognized. C) performed but not yet received or recorded. D) recognized and recorded as liabilities before they are received.

C

Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants the most realistic cost of goods sold. Which inventory costing method should Ace consider using? A)Average-cost because all inventory costs will then represent an average amount. B)Specific identification is the most realistic method because it involves the actual costs. C)LIFO because the cost of goods sold represents the latest costs. D)FIFO because the cost of goods sold represents the earliest costs.

C

Atom Company just began business and made the following four inventory purchases in June: 90) June 1 150 units $ 990 June 10 200 units 1,344 June 15 200 units 1,368 June 28 150 units 1,062 $ 4,764 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is A) $1,320. B) $1,404. C) $1,326. D) $1,416

C

Conley Company purchased equipment for $120,000 on January 1, 2020 and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 5-year life and a $6,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2022 will be A) $28,800. B) $27,360. C) $17,280. D) $16,416

C

Depreciation is a process of A) asset devaluation. B) asset valuation. C) cost allocation. D) cost accumulation.

C

During the year, Salaries Payable decreased by $12,000. Using the direct method of reporting cash flows from operating activities, if Salaries Expense amounted to $450,000 for the year, the cashpaid to employees (including deductions from gross pay) is A) $450,000. B) $454,000. C) $462,000. D) $438,000.

C

Financial information is presented below: Operating expenses 28,000 Sales returns and allowances 7000 Sales discounts 3000 Sales revenue 150,000 Cost of goods sold 98000. The profit margin would be A) .30. B) .09. C) .10. D) .28.

C

If services are rendered for cash, then A) stockholders' equity will decrease. C) assets will increase. B) liabilities will increase. D) liabilities will decrease.

C

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory? A)LIFO method B)Average cost method C)FIFO method D)Need more information to answer

C

In reviewing the accounts receivable, the cash receivable value is $28,000 before the write-off of a $2,000 account. What is the cash receivable value after the write-off? A) $2,000 B) $26,000 C) $28,000 D) $30,00

C

La More Company had the following transactions during 2021: • Sales of $9,000 on account• Collected $4,000 for services to be performed in 2022• Paid $3,750 cash in salaries for 2021 • Purchased airline tickets for $500 in December for a trip to take place in 2022 What is La More's 2021 net income using accrual accounting? A) $9,250 B) $5,750 C) $5,250 D) $9,750

C

Sparks Company received proceeds of $634,500 on 10-year, 8% bonds issued on January 1, 2019. The bonds had a face value of $600,000, pay interest annually on December 31, and have a call price of 102. Sparks uses the straight-line method of amortization. What is the amount of interest expense Sparks will show with relation to these bonds for the year ended December 31, 2020? A) $50,760 B) $48,000 C) $44,550 D) $37,650

C

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method that A) must be used for financial statement purposes. B) is required by the SEC. C) is used for tax purposes. D) expenses an asset over a single year because capital acquisitions must be expensed in the year purchased.

C

The United States and the international standard-setting environment are primarily driven by meeting the needs of A) central government planners. B) academic researchers. C) investors and creditors. D) tax authorities.

C

The accounts of a business, before an adjusting entry is made to record accrued revenue, reflect an A) understated liability and an overstated revenue. B) understated expense and an overstated revenue. C) understated asset and an understated revenue. D) overstated asset and an understated revenue.

C

The following information is related to December 31, 2021 balances. H Accounts receivable $1,400,000 H Allowance for doubtful accounts (credit) (120,000) H Cash realizable value 1,280,000 During 2022, sales on account were $390,000 and collections on account were $230,000. The company wrote off $22,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year-end indicated that bad debts should be estimated at $144,000. Bad debt expense for 2022 is A) $24,000. B) $ 2,000. C) $46,000. D) $144,000

C

The reconciliation of the cash register tape with the cash in the register is an example of A)other internal controls. B)establishment of responsibility. C)independent internal verification. D)segregation of duties

C

The requirements for accounting for and reporting of inventories under IFRS, compared to GAAP, tend to be more A)detailed. B)rules-based. C)principles-based. D)full of disclosure requirements.

C

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using A)LIFO will have the lowest cost of goods sold. B)FIFO will have the highest cost of goods sold. C)FIFO will have the highest ending inventory. D)LIFO will have the highest ending inventory.

C

Under a perpetual inventory system A) increases in inventory resulting from purchases are debited to purchases. B) the account purchase returns and allowances is credited when goods are returned to vendors. C) accounting records continuously disclose the amount of inventory. D) there is no need for a year-end physical count.

C

Under a perpetual inventory system, acquisition of merchandise for resale is debited to A) the Supplies account. C) the Inventory account. B) the Cost of Goods Sold account. D) the Purchases account.

C

Under the allowance method, writing off an uncollectible account A) affects both balance sheet and income statement accounts. B) is not an acceptable practice. C) affects only balance sheet accounts. D) affects only income statement accounts

C

Use the following data to determine the total dollar amount of assets to be classified as property,plant, and equipment. Pretty Pet Supplies Balance Sheet December 31, 2022Cash$ 126,000Accounts payable$ 165,000Accounts receivable120,000Salaries and wages payable30,000Inventory210,000Note payable (due 2025) 270,000Short-term investments90,000Total liabilities465,000Land (held for future use)255,000Land285,000Buildings$339,000Common stock360,000Less: AccumulatedRetained earnings 750,000 depreciation(60,000)279,000Total stockholders' equity1,110,000Franchise 210,000Total liabilities andTotal assets$1,050,000 stockholders' equity$1,575,000 A)$774,000 B)$834,000 C)$564,000 D)$1,029,000

C

When the effective-interest method of amortization is used for a bond premium, the amount of interest expense for an interest period is calculated multiplying the A) carrying value of the bonds at the beginning of the period by the contractual interest rate. B) face value of the bonds at the beginning of the period by the effective interest rate. C) carrying value of the bonds at the beginning of the period by the effective interest rate. D) face value of the bonds at the beginning of the period by the contractual interest rate

C

Which accounting assumption requires that only those things that can be expressed in dollar values are included in the accounting records? A) Periodicity assumption C) Monetary unit assumption B) Historical cost principle D) Full disclosure principle

C

Which of the following is included in the cost of constructing a building? A) Cost of repairing vandalism damage incurred shortly after construction is complete. B) Cost of paving a parking lot. C) Interest incurred during construction. D) Cost of removing the demolished building existing on the land when it was purchased

C

Which of the following is not a quality associated with faithful representation? A) Complete B) Neutral C) Materiality D) All of these answer choices are correct.

C

Which of the following is not one of the main factors that contribute to fraudulent activity? A)Financial pressure. B)Opportunity. C)Incompatible duties. D)Rationalization.

C

Which of the following would be subtracted from net income using the indirect method? A) An increase in accounts payable. B) Depreciation expense. C) An increase in accounts receivable. D) A decrease in prepaid expenses.

C

Which of the following would not be classified as a long-term liability? A) Bonds payable B) Lease liabilities C) Current maturities of long-term debt D) Mortgage payable

C

Which of the statements below is not true? A) An adjusted trial balance can be used to prepare financial statements. B) An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. C) An adjusted trial balance is prepared before all transactions have been journalized. D) An adjusted trial balance should show ledger account balances.

C

All of the following statements regarding impairments are true except A) after an impairment write-down, depreciation is generally lower in subsequent periods. B) an impairment is a permanent decline in an asset's market value. C) immediate recognition of impairment write-downs is now required. D) impairments are generally recorded when the book value falls below the market value.

D

A $300 petty cash fund has cash of $55 and receipts of $240. The journal entry to replenish the account would include a A)credit to Petty Cash for $245. B)debit to Cash for $240. C)credit to Cash for $240. D)debit to Cash Over and Short for $5

D

A business organized as a separate legal entity is a A) Proprietor B) Partnership C) Government D) Corporation

D

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and appliesthe revenue recognition principle. When is the $1,000 considered to be recognized? A) December 1 B) December 5 C) December 10 D) November 30

D

A ledger A) contains only asset and liability accounts. B) should show accounts in alphabetical order. C) provides a chronological record of transactions. D) is a collection of the entire group of accounts maintained by a company.

D

A local retail shop has been operating as a sole proprietorship. The business is growing and nowthe owner wants to incorporate. Which of the following is not a reason for this owner to incorporate? A)The ease in transferring shares of the corporation's stock B)Desire to limit the owner's personal liability C)Ability to raise capital for expansion D)The prestige of operating as a corporation

D

A measure of profitability is A) working capital. B) the debt to assets ratio. D) earnings per share. C) the current ratio.

D

A retailer that collects sales taxes is acting as an agent for the A) chamber of commerce. B) wholesaler. C) customer. D) taxing authority.

D

An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: Accounts receivable $ 3,200,000 Allowance for doubtful accounts per books before adjustment (credit) 200,000 Amounts expected to become uncollectible 260,000 What is the cash realizable value of the accounts receivable at December 31 after adjustment? A) $3,000,000 B) $3,200,000 C) $2,740,000 D) $2,940,000

D

As interest is recorded on an interest-bearing note, the Interest Expense account is A) increased; the Notes Payable account is increased. B) increased; the Notes Payable account is decreased. C) decreased; the Interest Payable account is increased. D) increased; the Interest Payable account is increased.

D

At December 1, 2022, Orear Company's Accounts Receivable balance was $16,800. During December, Orear had credit sales of $45,000 and collected accounts receivable of $36,000. AtDecember 31, 2022, the Accounts Receivable balance is A) $25,800 credit. B) $61,800 debit. C) $16,800 debit. D) $25,800 debit.

D

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true? A) Salaries and Wages Expense for the year is overstated. B) Stockholders' equity at the end of the year is understated. C) Assets at the end of the year are understated. D) Liabilities at the end of the year are understated.

D

Barnes Company's trial balance reported the following balances at the end of its first year: 41) CashPrepaid insurance Accounts receivable Accounts payable Notes payable Common stock Dividends RevenuesExpenses $14,000 700 3,500 2,800 4,200 5,400 700 29,000 17,500 What amount did Barnes Company's trial balance show as total credits? A) $42,100 B) $42,800 C) $40,700 D) $41,400

D

Claims of owners are called A) liabilities. C) income payable. B) dividends. D) stockholders' equity.

D

Customarily, a trial balance is prepared A) after each journal entry is posted. C) only at the inception of the business. B) at the end of each day D) at the end of an accounting period.

D

Dividends in arrears on cumulative preferred stock A) are considered to be a current liability. B) are considered to be a non-current liability. C) only occur when preferred dividends have been declared. D) should be disclosed in the notes to the financial statements.

D

Dobler Company gathered the following reconciling information in preparing its June bank reconciliation: Cash balance per books, 6/30 $12,600 Deposits in transit 900 Notes receivable and interest collected by bank 2,220 Bank charge for check printing 75 Outstanding checks 4,500 NSF check 420 The adjusted cash balance per books on June 30 is A) $15,165. B) $14,820. C) $15,225. D) $14,325.

D

Douglas Company has a $60,000 note that carries an annual interest rate of 10%. If the amount of the total interest on the note is equal to $4,500, then what is the duration of the note in months? A) 4 months B) 12 months C) 6 months D) 9 months

D

Failure to record a liability will probably A) result in overstated total assets. B) result in overstated total liabilities and owner's equity. C) have no effect on net income. D) result in an overstated net income

D

How can a company improve its current ratio? A) Use excess cash to buy new equipment B) Nothing can ethically be done to improve the current ratio C) Collect accounts receivable D) Work with a creditor to reclassify some current debt into long-term debt

D

In a study session, a classmate makes this statement "Dividends are listed as expenses on theincome statement." What is your best response to this statement? A) You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? B) Dividends are deducted from retained earnings on the balance sheet. C) I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. D) Dividends represent a portion of corporate profits paid to the shareholders. They belong on the retained earnings statement.

D

Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000. If theyissue $150,000 of new stock, what will their new current ratio be? (rounded) A) 2.2:1 B) 2.1:1 C) 2.4:1 D) 2.6:1

D

Maximum benefit from independent internal verification is obtained when A)it is done at the time of the audit. B)it is made on a pre-announced basis. C)it is done by the employee possessing custody of the asset. D)discrepancies are reported to management.

D

Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? A) Bad Debt Expense 10,000 Allowance for Doubtful Accounts 10,000 B) Bad Debt Expense 7,500 Accounts Receivable 7,500 C) Bad Debt Expense 10,000 Accounts Receivable 10,000 D) Bad Debt Expense 7,500 Allowance for Doubtful Accounts 7,500

D

Notes to the financial statements A) need not be read in detail if an unqualified opinion accompanies the financial statements. B) are generally brief and few in number. C) are optional. D) help clarify information presented in the financial statements.

D

Posting A) transfers ledger transaction data to the journal. B) enters transaction data in the journal. C) normally occurs before journalizing. D) accumulates the effects of journalized transactions in the individual accounts.

D

Recording depreciation each period is necessary in accordance with the A) historical cost principle. B) asset valuation principle. C) going concern principle. D) expense recognition principle

D

Restricted cash should be reported A) always as a current asset. B) always as a noncurrent asset. C) separately on the income statement. D) separately on the balance sheet.

D

Stine Company purchased machinery with a list price of $96,000. They were given a 10% discount by the manufacturer. They paid $600 for shipping and sales tax of $4,500. Stine estimates that the machinery will have a useful life of 10 years and a residual value of $30,000. If Stine uses straight-line depreciation, annual depreciation will be A) $9,150. B) $6,108. C) $5,640. D) $6,150

D

The Dividends account A) appears on the income statement along with the expenses of the business. B) must show transactions every accounting period. C) is not a proper subdivision of stockholders' equity. D) is increased with debits and decreased with credits.

D

The following information is provided for Nguyen Company and Northwest Corporation. (in $ millions) Nguyen Company Northwest Corporation Net income 2022 $165 $420 Net sales 2022 1,650 4,900 Total assets 12/31/20 1,000 2,400 Total assets 12/31/21 1,050 3,000 Total assets 12/31/22 1,150 4,000 What is Nguyen's return on assets for 2022? A) 14.3% B) 15.7% C) 150.0% D) 15.0%

D

The manager of Weiser is given a bonus based on net income before taxes. The net income after taxes is $59,500 for FIFO and $49,000 for LIFO. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of LIFO? A)$21,000 B)$10,500 C)$15,000 D)$3,000

D

The procedure of transferring journal entries to the ledger accounts is called A) analyzing B) reporting C) journalizing D) posting

D

The statement of cash flows will not report the A) change in the cash balance for the current period. B) sources of cash in the current period. C) uses of cash in the current period. D) amount of checks outstanding at the end of the period.

D

Two sisters operate a bed and breakfast on the coast of Maine. As customers make reservations they are required to pay cash in advance equal to one-half of the rate for their stay. How should the sisters account for the cash received as reservations are made? A) Cash Service Revenue B) Cash Sales Revenue C) Unearned Service Revenue Service Revenue D) Cash Unearned Service Revenue

D

Under U.S. GAAP A) the statement of financial position is often called the statement of changes in financial position. B) debits are recorded on the right side and credits are recorded on the left side of an account. C) currency signs are generally used in the journal, ledger, trial balance, and financial statements. D) the rules of debits and credits, and the steps in the recording process are the same as under IFRS (International Financial Reporting Standards).

D

Under U.S. GAAP, A) component depreciation is not required. B) property, plant, and equipment may not be revalued. C) research and development costs are expensed as incurred. D) All of these answer choices are correct.

D

Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a(n) A) prepaid expense. C) liability. B) expense. D) revenue.

D

Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office SuppliesBalance SheetDecember 31, 2022Cash$ 195,000Accounts payable$ 210,000Accounts receivable150,000Salaries and wages payable30,000Inventory 165,000Mortgage payable 240,000Prepaid insurance90,000 Total liabilities$480,000Stock investments255,000Land270,000Buildings$315,000Common stock$360,000Less: AccumulatedRetained earnings 750,000 depreciation(60,000)255,000Total stockholders' equity1,110,000Goodwill 210,000Total liabilities andTotal assets$1,590,000 stockholders' equity$1,590,000 A)$435,000 B)$510,000 C)$855,000 D)$600,000

D

Which of the following controls would best help detect the removal of a blank check by an employee from the back of a company's checkbook for subsequent misappropriation of funds? A) An accounting policies manual. B) A review of the cash budget. C) Tracing any debit memorandums from the bank to the company's records. D) The use of prenumbered checks.

D

Which of the following is a true statement about closing the books of a corporation? A) Only revenues are closed to the Income Summary account. B) Expenses are closed to the Expense Summary account. C) Revenues, expenses, and the Dividends account are closed to the Income Summary account. D) Revenues and expenses are closed to the Income Summary account.

D

Which of the following is an appropriate internal control activity for cash? A)All payments should be made with currency, not checks. B)Banking facilities should be used as little as possible. C)Record keeping and custodianship over cash should be performed by the same person. D)The amount of cash on hand should be kept to a minimum.

D

Which of the following statements is not true about a 2-for-1 split? A) A stockholder with ten shares before the split owns twenty shares after the split. B) The market price probably will decrease. C) Par value per share is reduced to half of what it was before the split. D) Total contributed capital increases.

D

Which of the following statements is true? A) Publicly traded U.S. companies must provide an annual report to their shareholders when operating conditions change significantly. B) An unqualified independent auditor's report must be included in the annual report. C) Notes to the financial statements do not need to be included in the annual report because that information is only for internal users. D) None of these answer choices are correct.

D

Which of the following would not be considered an internal user of accounting data for a company? A) The controller of the company B) The president of the company C) Salesperson of the company D) Creditor of the company

D

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 thediscount period? A) $10,800 B) $11,040 C) $11,760 D) $12,000

c

The following information pertains to Benedict Company. Assume that all balance sheet amounts 1) represent average balance figures. Total assets 300,000 Stockholders' equity-common 150,000 Total stockholders' equity 200,000Sales revenue 100,000 Net income 25,000 Number of shares of common stock 6,000 Common dividends 5,000 Preferred dividends 7,000 What is the payout ratio for Benedict? A) 28% B) 48% C) 20% D) 5%

c