acg final chapter 1-6+15

A creditor is any person who has an ownership interest in a business. True False

False

A high​ times-interest-earned ratio indicates difficulty in paying interest expense. True False

False

A single step income statement shows subtotals for gross profit and operating income. True False

False

Accrued revenue represents the receipt of cash before the revenue has been earned. True False

False

A company decides to ignore a very small error in its inventory balance. This is an example of the application of the​ ________. A. conservatism B. consistency principle C. materiality concept D. disclosure principle

C. materiality concept

Which of the following can be an effect of a transaction that increased an asset of a corporation for the accounting equation to​ balance? A. there is an equal decrease in equity B. there is an equal decrease in a liability account C. there is an equal decrease in another asset D. both liabilities and equity decrease

C. there is an equal decrease in another asset

order of accounting cycle

1. start with beginning balances 2. journalize new transactions 3. post journal entries to accounts 4. compute unadjusted account balances and trial balance 5. complete unadjusted worksheet 6. journalize and post adjusting entries 7. make adjusted trial balance 8. prepare balance sheet, income statement, retained earnings 9. journalize and post closing entries 10. make post-closing trial balance

Which of the following statements is true of a trial​ balance? A. A trial balance presents data in debit and credit format. B. A trial balance is prepared after the balance sheet. C. A trial balance shows the total amounts of assets and​ liabilities, but not equity. D. A trial balance has the same format as a balance sheet.

A. A trial balance presents data in debit and credit format.

Which of the following line items will appear on the income statement of a merchandiser but not of a service​ company? A. Cost of Goods Sold B. Salaries Expense C. Supplies Inventory D. Depreciation Expense

A. Cost of Goods Sold

Which of the following accounts has a balance equal to net income immediately before it is​ closed? A. Income Summary B. Retained Earnings C. Net Income D. Dividends

A. Income Summary

Which of the following is true of net sales​ revenue? A. It is calculated by deducting sales discounts and sales returns and allowances from sales. B. It is calculated by adding sales discounts to sales. C. It is calculated by subtracting cost of goods sold from sales. D. It is calculated by adding sales discounts and sales returns and allowances to sales.

A. It is calculated by deducting sales discounts and sales returns and allowances from sales.

The employees of Sinclair​ Services, Inc. worked the last two weeks of December. They received their paychecks on January 2. Which of the following accounts should appear on the balance sheet as of December​ 31? A. Salaries Payable B. Salaries Expense C. Accounts Payable D. Prepaid Expense

A. Salaries Payable

Get Fit Now gains a client who prepays $ 540 for a package of six physical training sessions. Get Fit Now collects the $ 54 in advance and will provide the training later. After four training​ sessions, what should Get Fit Now report on its income statement assuming it uses the accrual basis accounting​ method? A. Service revenue of $ 360 B. Service revenue of $ 540 C. Unearned service revenue of $ 360 D. Cash of $ 180

A. Service revenue of $ 360

The accountant of Barnes Architectural Services failed to make an adjusting entry to record​ $7,000 of depreciation expense. Which of the following statements is​ true? A. The total expenses will be understated. B. The total revenue will be understated. C. The total revenue will be overstated. D. The total expenses will be overstated.

A. The total expenses will be understated.

Under the perpetual inventory​ system, discounts taken on an invoice by the buyer would be​ ________. A. credited to Merchandise Inventory B. debited to Merchandise Inventory C. credited to Cost of Goods Sold D. debited to Cost of Goods Sold

A. credited to Merchandise Inventory

The matching principle is also called the​ ________. A. expense recognition principle B. revenue recognition principle C. adjusting entry concept D. time period concept

A. expense recognition principle

In a multi step income​ statement, which of the following items is excluded from the calculation of operating​ income? A. interest expense B. administrative expense C. sales revenue D. selling expense

A. interest expense

Which of the following inventory valuation methods minimizes income tax expense during a period of rising inventory​ costs? A. last ​in, first out B. weighted average C. specific identification D. first in, first out

A. last ​in, first out

To fill in the unadjusted trial balance columns in a​ worksheet, the account balances before adjustments are copied directly from the​ ________. A. ledger B. chart of accounts C. balance sheet of previous year D. adjusted trial balance

A. ledger

Dalton Delivery Service is hired on October​ 31, 2016 to perform​ services, beginning on November​ 1, 2016. The delivery services will be performed for six months at a rate of​ $3,000 per month. ​ Dalton's fiscal year ends on December 31. What amount of service revenue should be recorded as an adjusting entry on December​ 31, 2016? A. 0 B. ​$9,000 C. ​$6,000 D. ​$3,000

C. ​$6,000

A company has​ $120,000 in current​ assets; $600,000 in total​ assets; $90,000 in current​ liabilities, and​ $140,000 in total liabilities. Calculate the current ratio of the company.​ (Round your answer to two​ decimals.) A. 0.86 B. 1.33 C. 1.75 D. 1.71

B. 1.33

Which of the following statements is true of a good merchandise inventory control​ system? A. It eliminates the need to examine inventory purchases for damage. B. It often prevents the company from a stockout. C. It eliminates the need for authorization of merchandise purchases. D. It ensures that a physical count of inventory is not required.

B. It often prevents the company from a stockout.

An income statement includes​ ________. A. Common​ Stock, Retained​ Earnings, and Dividends B. Service Revenue and Utilities Expense C. Furniture and Cash D. Land and Salaries Payable

B. Service Revenue and Utilities Expense

Closing entries are journalized and posted​ ________. A. after preparing the post closing trial balance B. after preparing the financial statements C. before posting the adjusting entries D. throughout the accounting period

B. after preparing the financial statements

Which of the following transactions will affect the balance of Retained​ Earnings? A. issued common stock for cash B. paid rent expense for the month C. purchased land for cash D. collection on account

B. paid rent expense for the month

Which of the following remains the same regardless of the inventory costing method used by a​ company? Assume the cost of inventory is rising. A. ending merchandise inventory B. purchases C. cost of goods sold D. net income

B. purchases

What part of the​ Liberty's annual report is written by the company and could present a biased view of financial conditions and​ results? A. Balance Sheet B. ​Management's Discussion and Analysis of Financial Condition and Results of Operations​ (MD&A) C. ​Auditor's Report D. Income Statement

B. ​Management's Discussion and Analysis of Financial Condition and Results of Operations​ (MD&A)

The gross profit percentage is one of the most carefully watched measures of​ ________. A. liquidity B. solvency C. marketability D. profitability

D. profitability

Which of the following is the correct journal entry for a return of goods that were purchased on account under the periodic inventory​ system? A. Accounts Payable Merchandise Inventory B. Merchandise Inventory Accounts Payable C. Accounts Payable Purchase Returns and Allowances D. Purchase Returns and Allowances Accounts Payable

C. Accounts Payable Purchase Returns and Allowances

Which of the following is the correct formula to calculate the debt​ ratio? A. Debt ratio​ = Total liabilities - Total assets B. Debt ratio​ = Total liabilities​ + Total assets C. Debt ratio​ = Total liabilities​ / Total assets D. Debt ratio​ = Total liabilities * Total assets

C. Debt ratio​ = Total liabilities​ / Total assets

Which of the following organizations is responsible for the creation and governance of accounting standards in the United​ States? A. Securities and Exchange Commission B. American Institute of Certified Public Accountants C. Financial Accounting Standards Board D. Institute of Management Accountants

C. Financial Accounting Standards Board

A merchandiser had sales returns and allowances of​ $400, sales discounts of​ $700, cost of goods sold of​ $14,000, and all other expenses of​ $4,400. The merchandiser uses a perpetual inventory system. The second entry in the closing process would include​ ________. A. a credit to Income Summary for​ $18,400 B. a debit to Income Summary for​ $4,400 C. a debit to Income Summary for​ $19,500 D. a debit to Income Summary for​ $18,400

C. a debit to Income Summary for​ $19,500

A reversing entry is​ ________. A. a special journal entry used to make the adjustments that took place after preparing the trial balance B. a journal entry used to close the temporary accounts after preparation of financial statements C. a special journal entry that eases the burden of accounting for transactions in the next period D. a journal entry prepared at the end of an accounting period to match assets with liabilities

C. a special journal entry that eases the burden of accounting for transactions in the next period

Reversing entries are used in conjunction with​ ________. A. GAAP B. Unearned Revenue and Prepaid Rent C. accrual type adjustments D. closing entries

C. accrual type adjustments

Which of the following entries will be necessary to close the Insurance Expense account at the end of the​ year? A. debit Insurance Expense and credit Common Stock B. debit Insurance Expense and credit Income Summary C. debit Income Summary and credit Insurance Expense D. debit Retained Earnings and credit Insurance Expense

C. debit Income Summary and credit Insurance Expense

Inventory turnover measures​ ________. A. the​ days' sales in inventory ratio B. the time period for inventory to become obsolete C. how rapidly merchandise inventory is sold D. how rapidly merchandise inventory is purchased

C. how rapidly merchandise inventory is sold

The asset​ account, Office Supplies had a beginning balance of​ $5,300. During the accounting​ period, office supplies were​ purchased, on​ account, for​ $4,900. A physical​ count, on the last day of the accounting​ period, shows​ $2,300 of office supplies on hand. What is the amount of Supplies Expense for the accounting​ period? A. ​$4,900 B. ​$3,000 C. ​$7,900 D. ​$2,700

C. ​$7,900

Beginning Merchandise Inventory 15 units at​ $92 March 10 Sold 12 units June 10 Purchased 45 units at​ $98 October 30 Sold 39 units What is the amount of the​ company's Merchandise​ Inventory, as disclosed in the December​ 31, 2017 balance sheet as per the periodic FIFO inventory costing​ method? A. ​$588 B. ​$9,016 C. ​$882 D. ​$552

C. ​$882

Coleman, Inc. provides the following data from its income statement for​ 2017: Net Sales ​$500,000 Cost of Goods Sold ​(200,000) Gross Profit ​$300,000 Calculate the gross profit percentage.​ (Round your answer to two decimal​ places.) A. ​100.00% B. ​150.00% C. ​60.00% D. ​40.00%

C. ​60.00%

Zebra, Inc. cost of goods sold for the year is $ 2 800 000​, and the average merchandise inventory for the year is $ 133000. Calculate the inventory turnover ratio of the company.​(Round your answer to two decimal​ places.) A. 4.75 times B. 9.53 times C. 10.53 times D. 21.05 times

D. 21.05 times

What do closing entries​ accomplish? A. Zero out the​ revenues, expenses, and dividends B. Transfer​ revenues, expenses, and dividends to the Retained Earnings account C. Bring the Retained Earnings account to its correct ending balance D. All of the above

D. All of the above

Which account does a merchandiser use that a service company does not​ use? A. Sales Revenue B. Cost of Goods Sold C. Merchandise Inventory D. All of the above

D. All of the above

Under the perpetual inventory​ system, the journal entries to record sales returns​ (the original sale was on​ account) would​ be: A. Accounts Receivable Sales Sales Cost of Goods Sold B. Accounts Payable Merchandise Inventory Merchandise Inventory Cost of Goods Sold C. Cost of Goods Sold Merchandise Inventory Merchandise Inventory Accounts Payable D. Sales Returns and Allowances Accounts Receivable Merchandise Inventory Cost of Goods Sold

D. Sales Returns and Allowances Accounts Receivable Merchandise Inventory Cost of Goods Sold

When a company uses the perpetual inventory​ method, which of the following would be the entry to adjust inventory to lower of cost or ​market? A. debit Loss on Inventory and credit Merchandise Inventory B. debit Merchandise Inventory and credit Inventory Adjustment C. debit Merchandise Inventory and credit Cost of Goods Sold D. debit Cost of Goods Sold and credit Merchandise Inventory

D. debit Cost of Goods Sold and credit Merchandise Inventory

To match expenses against revenues means to​ ________. A. subtract expenses incurred during one period from revenues earned during the previous period B. add expenses incurred during one period from revenues earned during the previous period C. add expenses incurred during one period from revenues earned during that same period D. subtract expenses incurred during one period from revenues earned during that same period

D. subtract expenses incurred during one period from revenues earned during that same period

An​ invoice, with payment terms of​ 2/10, n/30, was issued on April 28 for​ $235.00. If the payment was made on May​ 12, the amount of payment will be​ ________. (Round your answer to the nearest​ cent.) A. ​$211.50 B. ​$233.00 C. ​$230.30 D. ​$235.00

D. ​$235.00

A company purchased 100 units for​ $30 each on January 31. It purchased 170 units for​ $25 each on February 28. It sold 170 units for​ $70 each from March 1 through December 31. If the company uses the first ​in, first out inventory costing​ method, what is the amount of Cost of Goods Sold on the income statement for the year ending December​ 31? (Assume that the company uses a perpetual inventory​ system.) A. ​$4,250 B. ​$7,250 C. ​$3,000 D. ​$4,750

D. ​$4,750

A company purchased 400 units for​ $20 each on January 31. It purchased 200 units for​ $30 each on February 28. It sold a total of 270 units for​ $90 each from March 1 through December 31. If the company uses the last ​in, first out inventory costing​ method, calculate the amount of ending inventory on December 31.​ (Assume that the company uses a perpetual inventory​ system.) A. ​$23,100 B. ​$9,900 C. ​$330 D. ​$6,600

D. ​$6,600

Beginning Inventory 10 units at​ $74 June 10 Purchased 20 units at​ $81 December 30 Sold 20 units December 31 Replacement cost​ $83 The company maintains its records of inventory on a perpetual basis using the FIFO inventory costing method. Calculate the amount of ending Merchandise Inventory at December​ 31, 2017 using the lowerof cost or market rule. A. ​$830 B. ​$2,490 C. ​$1,660 D. ​$810

D. ​$810

Assume MetAmbit Corporation had a net income of​ $2,300 for the year ending December 2016. Its beginning and ending total assets were​ $33,500 and​ $18,000, respectively. Calculate​ MetAmbit's return on assets​ (ROA). (Round your percentage answer to two decimal​ places.) A. ​4.47% B. ​12.78% C. ​6.87% D. ​8.93%

D. ​8.93%

Which of the following items is a measure of a​ company's ability to collect​ receivables? A. account receivable balance B. inventory turnover ratio C. current ratio D. ​days' sales in receivables

D. ​days' sales in receivables

Avalon Event Planning​ Services, Inc. records deferred expenses and deferred revenues using the alternative treatments. It makes adjusting entries as needed to bring its books to the full accrual basis once a year at the end of the year. On October​ 1, it paid​ $3,600 for insurance for a one year period. At the end of the​ year, it will make an adjusting entry that debits Insurance Expense for​ $1,200. True False

False

If a company fails to make an adjusting entry for accrued​ revenues, the net income will be overstated. True False

False

In a vertical analysis of the income​ statement, each line item is shown as a percentage of net income. True False

False

In an accounting​ cycle, an analysis of transactions is performed at the end of each accounting period. True False

False

On the income​ statement, a service company reports the cost of merchandise inventory that has been sold to customers. True False

False

Purchase discounts are calculated on the amount of the merchandise purchased including freight costs. True False

False

The current ratio is calculated using the values from the income statement. True False

False

The higher the debt​ ratio, the lower the risk. True False

False

The horizontal analysis of the balance sheet shows the changes in net sales and net income. True False

False

The income from continuing operations helps investors make predictions about the​ company's past performance. True False

False

The inventory turnover ratio measures the average number of days that inventory is held by a company. True False

False

The last two columns generally found on the right side of the worksheet are the income statement columns. True False

False

The process of transferring data from the ledger to the journal is called posting. True False

False

Under the periodic inventory​ system, purchases, purchase​ discounts, and purchase returns and allowances are recorded in the Merchandise Inventory account as and when they occur. True False

False

Using the LIFO method of inventory valuation will always produce the same results whether a company uses perpetual or periodic inventory costing methods. True False

False

Vertical analysis involves comparing each figure in the financial statements with a corresponding figure of the previous year. True False

False

When a company uses the perpetual inventory​ system, there is no need to conduct a physical count of inventory. True False

False

A reduction in the amount of cash received from a customer for early payment is known as a sales discount. True False

True

A small increase in the gross profit percentage may indicate an important rise in income. True False

True

An accounts receivable turnover that is too high may indicate that credit is too​ tight, causing the loss of sales to good customers. True False

True

An overstatement of ending merchandise inventory in the current period results in an understatement of cost of goods sold in the current period. True False

True

Horizontal analysis is the study of percentage changes in comparative financial statements. True False

True

In a period of rising​ costs, the last ​in, first out ​(LIFO) method results in higher cost of goods sold and lower net income than the first ​in, first out (FIFO) method. True False

True

The current ratio is calculated as total current assets divided by total current liabilities. True False

True

The horizontal analysis of the balance sheet is based on the comparative balance sheet. True False

True

The post closing trial balance shows the updated Retained Earnings balance. True False

True

The​ times-interest-earned ratio measures the number of times earnings before interest and taxes can cover interest expense. True False

True

Under the terms FOB​ destination, title to the merchandise will pass to the purchaser when the goods are received by the purchaser. True False

True

FOB destination point

buyer takes ownership at the delivery destination point and the seller pays the freight

FOB shipping point

buyer takes ownership of the goods at the shipping point and the buyer pays the freight