Accounting final

Company was recently formed with a $5,000 investment in the company by stockholders. The company then borrowed $2,000 from a local bank, purchased $1,000 of supplies on account, and also purchased $5,000 of equipment by paying $2,000 in cash and signing a promissory note for the balance. Based on these transactions, the company's total assets are:

$11,000

At the end of last year, the company's assets totaled $860,000 and its liabilities totaled $740,000. During the current year, the company's total assets increased by $58,000 and its total liabilities increased by $24,000. At the end of the current year, stockholders' equity was

$154,000

On December 31, 2015, a company had assets of $16 billion and stockholders' equity of $8 billion. That same company had assets of $20 billion and stockholders' equity of $9 billion as of December 31, 2016. During 2016, the company reported total sales revenue of $9 billion and total expenses of $7 billion. What is the company's debt-to-assets ratio on December 31, 2016?

.55

FIFO, an inventory costing method, actually describes how to calculate the cost of:

Goods sold

When merchandise purchased on account is returned under the perpetual inventory system, the buyer would debit

Accounts Payable

Which of the following groups of accounts contains only those that normally have credit balances?

Accounts Payable; Retained Earnings; Service Revenue.

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer's account as uncollectible? ​

Bad debt expense

The proper journal entry to purchase a computer costing $975 on account to be utilized within the business would be

Office Equipment 975 Accounts Payable 975

Each year there is a ceiling for the amount that is subject to all of the following except

Federal Income Tax

Which of the following is a manufacturing business?

General Motors

Which of the following statements about financial accounting is true?

Produces reports for external users

Your company sells $50,000 of bonds for an issue price of $52,000. Which of the following statements is correct?

The bond sold at a price of 104, implying a premium of $2,000.

A company had total assets of $400,000 and a debt-to-assets ratio was 0.35. Which of the following statements is not true

The debt-to-assets ratio of 0.35 indicates that the company relies less on equity financing than on debt financing.

During the year, the company recorded services provided to customers on account. What effect will this transaction have on the debt-to-assets and times interest earned ratios?

The debt-to-assets ratio will decrease and the times interest earned will increase.

When an account receivable is written off under the direct write-off method, the accounting equation is kept in balance because

assets and equity both decrease by the same amount.

In the chart of accounts, the balance sheet accounts are normally listed in which order?

assets, liabilities, stockholders' equity

Deposits in transit have:

been recorded by the company but not yet by the bank.

Which of the following is included in the cost of land?

brokerage commission

If bonds payable are not callable, the issuing corporation

can repurchase them in the open market

Allowance for Doubtful Accounts is classified as a(n) ______ account and has a normal ______ balance

contra asset, credit

The interest rate specified in the bond indenture Is called the

contract rate

If a company did not extend credit to customers:

costs would decrease but so would sales revenue.

On June, 30, 2013, a company purchased a two-year insurance policy for $18,000, paying cash and debiting Prepaid Insurance for the entire two-year premium amount. The adjusting entry on December 31, 2013 includes a

credit to Prepaid Insurance $4,500.

A business pays biweekly salaries of $20,000 every other Friday for a ten-day period ending on that day. The adjusting entry necessary at the end of the fiscal period ending on the second Wednesday of the pay period includes a

credit to Salaries Payable of $16,000

The journal entry a company uses to record fully funded pension rights for its salaried employees at the end of the year is

debit Pension Expense; credit Cash

Company received a bill for $1,200 for running newspaper ads during the last two weeks of July; the bill will be paid on August 1. Advertising expense should be:

debited for $1,200 in July.

A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to

decrease an asset, decrease a liability

Company is paying a cash dividend. How does this transaction affect Company's accounting equation?

decrease in assets (Cash) and decrease in stockholders' equity (Dividends)

The stockholders' equity section of the balance sheet includes all of the following except:

dividends

Which of the following would be subtracted from the balance per books on a bank reconciliation?

error by the company in recording a check for $732 as $723

A check that you have written has cleared the bank when:

funds have been withdrawn from your bank account to cover the check

The write-off of a specific customer account receivable involves decreasing an asset account and:

increasing a contra-asset account

NSF checks from customers should be a(n) ______ on a bank reconciliation.

subtraction from the book balance

Bad Debt Expense is a:

temporary account so its balance is closed (zeroed out) at the end of the accounting period

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

the list price plus the sales tax

Which of the following should be shown on a statement of cash flows under the financing activities section?

the payment of cash to retire a long-term note

Which statement below is not a reason for a corporation to buy back its own stock?

to increase the shares outstanding

Which one of the statements below is not a purpose for the journal?

to show increases and decreases in accounts

All of the following accounts are increased with a debit except

unearned revenues

The debit recorded in the journal to reimburse the petty cash fund is to

various accounts for which the petty cash was disbursed

​"To maintain public confidence and trust in the financial reporting of companies" is the purpose of

​Sarbanes-Oxley

Which of the following accounts has a normal credit balance?

Unearned revenue

Blitz Company is selling a piece of land adjacent to its business premises. An appraisal reported the market value of the land to be $220,000. The Pass Company initially offered to buy the land for $177,000. The companies settled on a purchase price of $212,000. On the same day, another piece of land on the same block sold for $232,000. Under the cost principle, at what amount should the land be recorded in the accounting records of Pass Company?

$212,000

If a company's P/E ratio is 24 and the company's EPS is $1.50, then the company's stock price is:

$36.00

Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of sales discount allowable?

$500

If the cost of an item of inventory is $60 and the current replacement cost is $75, the amount included in inventory according to the lower of cost or market is

$60

During its first year of operations, Things Incorporated reported sales revenue of $386,000 but collected only $303,000 from customers. The amount to be reported as accounts receivable at the end of the year is

$83,000

Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. Determine the second-year depreciation using the straight-line method.

$9,600

A corporation uses the indirect method for preparing the statement of cash flows. A fixed asset has been sold for $25,000 representing a gain of $4,500. The value in the operating activities section regarding this event would be

(4,500)

A corporation has 50,000 shares of $25 par stock outstanding. If the corporation issues a 3-for-1 stock split, the number of shares outstanding after the split will be

150,000

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The number of authorized shares after these transactions are accounted for is:

20 million shares

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

296,000

Company reported net credit sales of $300,000 for the current year. The unadjusted credit balance in its Allowance for Doubtful Accounts is $500. The company has experienced bad debt losses of 1% of credit sales in prior periods. Using the percentage of credit sales method, what amount should the company record as an estimate of Bad Debt Expense?

3,000

On February 16, a company declares a 68¢ dividend to be paid on April 5. There are 950,000 shares of common stock issued and outstanding. The entry recorded by the company on April 5 includes a debit to:

A debit to Dividends Payable and a credit to Cash for $646,000

Which of the following business organizations has only one owner?

A sole proprietorship.

Which of the following is not a term for the value at which an asset is reported on a financial statement?

Accrual value.

Which of the following accounts is used to record a small stock dividend on common stock but is not used to record a large stock dividend on common stock?

Additional Paid-In Capital

Which of the following statements is not true?

Adjusting entries affect the cash account.

Which of the following is normally true?

Assets have debit balances and liabilities have credit balances.

A company has bonds outstanding with a face value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the journal entry to record this retirement includes a debit to

Bonds Payable for $100,000, a debit to Premium on Bonds Payable for $2,700, a credit to Cash for $99,000, and a credit to Gain on Bond Retirement for $3,700.

Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is

Cash flows from operations = Net income + Decrease in accounts receivable = $110,000 + ($40,000 - $32,000) = $118,000

Each account is assigned a number and this listing of all accounts is called a

Chart of accounts

Which of the following statements concerning taxation is accurate?

Corporations pay federal, and often state, income taxes.

Which of the following would appear in the debit column of an adjusted trial balance?

Dividends declared.

Which of the following statements about the multistep income statement is not correct?

Income before Income Tax Expense and Income from Operations are different if there are any peripheral revenues and expenses.

Which of the following statements about a multistep income statement is not correct?

Income from operations = Net income + Income tax expense Ð Other revenues (expenses), net

Which of the following is not used to calculate the times interest earned ratio?

Interest earned on investments

Which of the following accounts has a normal debit balance?

Inventory

Company receives a $6,000, 3-month, 6% promissory note from Customer in settlement of an open accounts receivable. What entry will Company make upon receiving the note?

Notes Receivable 6,000 Accounts Receivable 6,000

An asset was purchased for $120,000 on January 1, Year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the third-year depreciation expense using the revised amounts and straight-line method.

Rationale: Depreciation for the first two years = [($120,000 - $10,000) ÷ 10] × 2 = $22,000 Book value at the end of the fourth year = $120,000 - $22,000 = $98,000 Depreciation expense for the third year = ($98,000 - $2,000) / 4 = $24,000

Which of the following errors would most likely lead to an overstatement of net income in the current year?

Recording an expense when paid next year although it is incurred this year.

Which of the following account groups are nominal accounts?

Rent Revenue, Fees Earned, Miscellaneous Expense

Which principle of internal control states that you should not make one employee responsible for all parts of a transaction?

Separation of duties

How do stock splits and stock dividends impact Retained Earnings?

Stock splits have no effect on Retained Earnings and stock dividends decrease Retained Earnings

Which of the following is an example of a prepaid expense?

Supplies

The process of buying and selling inventory is known as inventory:

Turnover

A 6-month note is issued on November 1. If no previous accruals have been made, how many months of interest should be accrued at December 31?

Two

A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a(n)

Voucher

Outstanding checks written by the company should be a(n) ______ on the company's bank reconciliation.

addition to the bank balance

Your store buys ice cream at a cost of $1.50 a half gallon and sells it for $4 a half gallon. Selling, general, and administrative expenses are $0.75 per half gallon. Which of the following statements is correct?

Your gross profit per half gallon is $2.50.

In which of the following types of accounts are decreases recorded by debits?

liabilities

The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting

records revenues and expenses when they are incurred

Multiple-step income statements:

separate core results from peripheral results.

Corporations can raise large amounts of money because:

shares of stock in public companies can easily be bought and sold by investors.

Credit memos from the bank

show the bank has collected a note receivable for the customer

At what governmental level are corporate charters issued?

state