Accounting 100 Final Exam

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The benefits to leasing include each of the following:

1) reduced risk of obsolescence. 2) little or no down payment. 3) shared tax advantages.

A company would minimize its depreciation expense in the first year of owning an asset if it used:

a high estimated life, a high salvage value, and straight-line depreciation.

Which of the following would not be an example of good cash management?

invest temporary excess cash in stock of a small company.

Under the equity method, the Stock Investments account is increased when the

investee company reports net income

Purchased two warehouses with cash

investing

Purchasing resources that a company needs in order to operate is called a(n) ________ activity.

investing

Clark LLC sells an old piece of equipment for $4000

investing activity

Jones Corp buys shares in another company for $2000

investing activity

When a company holds stock of several different corporations, the group of securities is identified as a(n)

investment portfolio

A ledger:

is a collection of the entire group of accounts maintained by a company

A trial balance:

is a list of accounts with their balances at a given time

A revenue account:

is increased by credits

If a stock investment is sold at a gain, the gain

is reported in the Other Revenue and Gain section of the income statement.

The balance in retained earnings is not affected by:

issuance of common stock

When a customer pays for a purchase with a national credit card, the ________ takes care of the collection process

issuer

If the trial balance has total debits equal to total credits, then

it is possible there are errors in the trial balance.

If an investor owns less than 20% of the common stock of another corporation as an investment

it is presumed that the investor has relatively little influence on the investee.

The responsibility for an asset's ________ should be kept separate from the physical custody of that asset.

recordkeeping

An investment in which there is no chance that the party will default on the promise to pay the principle and interest is a(n) ________ investment.

risk-free

Internal control is used in a business to enhance the accuracy and reliability of its accounting records and to:

safeguard its assets

Examples of Physical Control

safes, vaults, safety deposit boxes, locks on buildings and storage cabinets, passkey access to computers, alarms, time clocks, security cameras

Suppose that a company did not make an adjusting entry to record revenue earned but not yet billed to customers. The result of this error would be to

understate assets, net income, and stockholders' equity.

Which of the following should be reported as separate items on the balance sheet?

trade receivables and other receivables

Which of the following steps is NOT included in preparing a trial balance?

transferring journal amounts to ledger accounts

Posting:

transfers journal entries to ledger accounts

Which of the following is a debt security?

treasury bills

What is a list of accounts and their balances at a given time called?

trial balance

A bond is issued at a discount if the market interest rate is higher than the contractual interest rate

true

A bond is issued at a premium is the contractual interest rate is higher than the market interest rate.

true

A service organization should record a debit to Accounts Receivable when it performs a service on account.

true

A stock dividend increases the total par value (common stock)

true

A stock dividend increases total paid-in capital

true

Amounts received from issuing stock are not revenues

true

Determining the transaction price is the third step in the revenue recognition process

true

Net income flows into the retained earnings statement

true

The contractual interest rate is the rate used to determine the amount of cash interest the borrower pays and the investor receives.

true

The face value is the amount of principal the issuing company must pay at the maturity date.

true

The income statement lists expenses, while the cash flow statement deals only with cash flows

true

To record the sale of goods for cash in a perpetual inventory system:

two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory

The production supervisor at Company ABC

internal user

Going Concern Assumption

business will remain in operation for the foreseeable future

One feature of a cash register is that the sale total is usually clearly visible to the customer. How does this help prevent fraud?

by discouraging the sales clerk from entering a lower amount in the cash register and pocketing the difference

How is the quality of earnings ratio computed?

by dividing net cash provided by operating activities by net income

How is the profit margin computed?

by dividing net income by net sales

How is the gross profit rate computed?

by dividing the amount of gross profit by net sales

Current assets are listed:

by order of expected conversion to cash

Which of the following items does NOT result in an adjustment in the Inventory account under a perpetual inventory system? a) A purchase of merchandise b) A return of merchandise 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

Under the direct write-off method, the effect when a specific account is written off is: I. Net Income decreases II. Net Realizable Value decreases III. Cash decreases IV. Total assets decrease a. I b. I, II, IV c. I, IV d. I, II, III, IV

c. I, IV

5. Which of the following is FALSE regarding the allowance for doubtful accounts? I. The normal balance is a credit II. It is used in the direct write-off method III. It is not closed at the end of the year IV. This account increases total assets a. II only b. I, II, IV c. II, IV d. I, II, III

c. II, IV

Which of the following is FALSE regarding the allowance for doubtful accounts? I. The normal balance is a credit II. It is used in the direct write-off method III. It is not closed at the end of the year IV. This account increases total assets

c. II, IV

1) Regarding the handling of cash, which of the following is NOT true? a. The clerk rings up sales and sends cash to the cashier b. The supervisor checks the register and sends cash register tape to accounting department c. The cashier sends the cash to the accounting department d. The accounting department reconciles the register tape and the deposit slip

c. The cashier sends the cash to the accounting department (need to separate physical custody from record keeping!)

When goods are purchased for resale by a company using a periodic inventory system: a. purchase returns are debited to Purchase Returns and allowances b. purchases on account are debited to inventory c. purchases on account are debited to Purchases d. freight costs are debited to Purchases

c. purchases on account are debited to Purchases

To record the sale of goods for cash in a perpetual inventory system: a. only one journal in necessary to record cost of goods sold and reduction of inventory b. only one journal entry is necessary to record the receipt of cash and the sales revenue c. two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory d. two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the cost of goods sold and sales revenue

c. two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory

Which of the following would affect gross profit rate? (Assume sales remains constant) a.) An increase in advertising expense b.) A decrease in depreciation expense c.) An increase in cost of goods sold d.) A decrease in insurance expense

c.) An increase in cost of goods sold

Although the ________ refers to a company using the same accounting principles from period to period, companies may change their inventory cost flow methods.

consistency principle

When will the carrying value of bonds equal the market price?

on the date of issuance

When journalizing a transaction, a short explanation is written

on the line following each journal entry.

Monetary Unit Assumption

only items that can be expressed in money are included in the accounting records

Collected cash by selling goods to a customer

operating

Paid salaries of 100,000

operating

Rodgers, Inc. receives $3500 from a customer

operating activity

Parts of the Fraud Triangle

opportunity, financial pressure, and rationalization

Which of the following affects the cash balance per bank?

outstanding checks

________ would be deducted from the balance per bank in a bank reconciliation.

outstanding checks

When a company performs a service for which it has not been paid, it will create a(n)

account receivable

How is the account Allowance for Doubtful Accounts classified?

contra account to Accounts Receivable

What does a high accounts receivable turnover ratio indicate?

customers are making payments very quickly

The 12/31/2018 Allowance for Doubtful Account balance is a credit of $600. During the year, a customer accounts were written off for $650. The estimated uncollectible amount at 12/31/2019 is $1,800. What is bad debt expense for 2019?

$1,850 estimated uncollectible amount + difference bw allowance for doubtful account and how much was written off 1800 + (650-600)

Net credit sales for the month are $800,000. the accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage-of-receivables basis. If allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment?

$12,000

Net credit sales for the month are $800,000. The accounts receivable balance is $160,000. The allowance is calculated as 7.5% of the receivables balance using the percentage-of-receivables basis. If Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment?

$12,000 (160,000 * 0.075)

A bank reconciliation for Widgets Inc. included the following items: $30 bank service charge; NSF check of $275; bank error of $30; collection of note receivable for $2,300, plus $35 interest. Based on the information, Widgets Inc. will adjust cash by what amount?

$2,030

Able Towing Company purchased a tow truck for $60,000 on January 1, 2022. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $12,000. On December 31, 2024, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2024) and the salvage value to $2,000. What was the depreciation expense for 2024?

$12,100 (60,000-12,000)/ 10= 4800*2= 9600 60,000-9600-2000= 48400 48400/4= 12100

Wells Company's delivery truck, with a cost of $56,000 was destroyed by fire. At the time of the fire, the balance of the Accumulated Depreciation account amounted to $38,000. The company received $32,000 reimbursement from its insurance company. The gain or loss as a result of the fire was

$14,000 gain

White & Co., LLC, purchased a piece of equipment in the beginning of 2018 originally costing $120,000 with a salvage value of $15,000 and an expected useful life of 10 years. It was depreciated on the straight line basis. On January 1 2021, the company decided the remaining useful life of the equipment was 5 years. What is the new depreciation expense the company will record?

$14,700

On April 1st 2020, Heckman Co. sold a machine for $15,000 cash. The machine had been purchased on January 1, 2016 for $30,000, had a useful life of 8 years, was depreciated on a straight line basis, and had a $2,000 salvage value. What was the total amount of accumulated depreciation at the time of the sale?

$14,875

Pat's Garage installed a new parking lot. The paving cost $10,000 and the lights to illuminate the new parking area cost $5,000. These additions require that

$15,000 should be debited to land improvements.

Sweet Shirley Company has $3,500,000 of bonds outstanding. The unamortized premium is $50,400. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?

$15,400 gain

Frosty's, a new hair salon, purchased three merchandise inventory items: first purchase $115; second purchase $135; third purchase $120. Using FIFO costing, if the company sells two units for $400, what is the gross profit for the period?

$150

A corporation has 4,000 shares of 4% cumulative preferred stock with a par value of $50 issued and outstanding. The shares have a fair value of $120. The company has issued dividends for the last three years and does not issue any in the current period, but should have. If the company declares a dividend next year, how much in total will the preferred stockholders receive?

$16,000

A corporation has 4,000 shares of 4% cumulative preferred stock with a par value of $50 issued and outstanding. The shares have a fair value of $120. The company has issued dividends for the last three years but do not issue any in the current period. If the company declares a dividend next year, how much in total will the preferred stockholders receive?

$16,000

What is the loss on disposal of a plant asset that cost $100,000, had accumulated depreciation of $24,000, and was sold for $60,000?

$16,000

At the beginning of January 2022, a company reported inventory of $4,000. During the month, the company made purchases at a total net cost of $17,800. On January 31, 2022, a physical count of inventory reported $4,200 on hand. Find the cost of goods sold for the month.

$17,600

Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2022. The machine was purchased for $80,000 on January 1, 2018, and was depreciated on a straight-line basis for 10 years assuming no salvage value. If the machine was sold for $26,000, what was the amount of the gain or loss recorded at the time of the sale?

$18,000 loss 80,000/10=8000 8000*4.5= 36,000 80000-36,000=44,000 44,000-26,000=18,000

$1850

5 basic principles of cash managment

1) Increase the speed of receivables collection 2) Keep inventory levels low 3) monitor payment of liabilities 4) plan the timing of major expenditures 5) invest idle cash

Keck Industries is planning to issue $7 million in bonds with a six-year maturity date and an annual rate of 5.4 percent. How much will they pay in interest over the life of the bonds?

$2,268,000

Sigma Motors has assets of $5,000,000, liabilities of $1,200,000, and retained earnings of $1,500,000. What is the amount for common stock?

$2,300,000

Wilmington Sports has the following account balances at year end. What are the total intangible assets on the balance sheet? Land: $2.5 million Trademarks: $1.5 million Copyrights: $800,000 R&D: $800,000

$2,300,000

In 2022, Moreno Cheeses had a net income of $42,390, paid preferred dividends of $6,000, and had 18,000 shares of common stock outstanding. What was their earnings per share for 202

$2.02

In 2022, Rigby Construction had net income $32,000; net sales $200,000; and average share outstanding 12,000. There were no preferred dividends. What was the company's 2022 earnings per share?

$2.67

On January 1, 2017, Valentine Corporation purchased 25% of the common stock outstanding of Betz Corporation for $200,000. During 2017, Betz Corporation reported net income of $80,000 and paid cash dividends of $48,000. The balance of the Stock Investments—Betz account on the books of Valentine Corporation at December 31, 2017, is

$208,000.

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31. This count did not take into consideration the following facts: Rogers Consignment store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.q

$215,000

Corrieten Company purchased equipment and incurred these costs: Cash price $24,000 Sales taxes 1,200 Insurance during transit 200 Installation and testing 400 Total costs$25,800 What amount should be recorded as the cost of the equipment?

$25,800.

Stellar Corporation produced and sold 5,200 digital recorders during 2022. It reported $250,000 cash provided by operating activities. In order to maintain production at 5,200 recorders, Stellar invested $15,300 in equipment. Stellar paid $1,100 in dividends. What is Stellar's free cash flow?

$233,600

Torres Travel's stockholders' equity at the beginning of March 2022 was $200,000. During the month, the company earned net income of $50,000 and paid dividends of $10,000. At the end of March 2022, what is the amount of stockholders' equity?

$240,000

Sheldon has the following year-end account balances: Accounts Receivable, $5,000; Supplies, $12,000; Equipment, $18,000; Accounts Payable, $17,000; Stockholders' Equity, $43,000. The Cash account balance was not available at year-end. Given the account balances listed, the balance in the Cash account should be

$25,000

A firm has a Net Income of 7,000. Accounts Receivable increased by 4,000, Accounts payable decreased by 2,000, depreciation expense was 3,000, interest expense was 4500, and there was a gain on disposal of an asset for 500. What is the net cash provided by operating activities?

$3,500 net income + depreciation expense - accounts receivable - accounts payable - gain on disposal of an asset

Maggie Sharrer Company borrows $88,500 on September 1, 2022, from Sandwich State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2022?

$3.540

Which of the following would be a current liability?

A net negative balance in a bank account

In 2017, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2017, Allowance for Doubtful Accounts had a credit balancer of $18,000. During 2017, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should 10% of the balance in receivables. If the accounts receivable balance at December 31 was $200,000 what is the required adjustment to allowance for doubtful accounts at december 31, 2017?

$32,000

In 2022, Patterson Wholesale Company had net credit sales of $750,000. On January 1, 2022, Allowance for Doubtful Accounts had a credit balance of $18,000. During 2022, $30,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $200,000, what is the required adjustment to Allowance for Doubtful Accounts at December 31, 2022? $20,000. $75,000. $32,000. $30,000.

$32,000.

Switzer, Inc. has 8 computers which have been part of the inventory for over two years. Each computer cost $600 and originally retailed for $900. At the statement date, each computer has a net realizable value of $400. What value should Switzer, Inc., report for the computers at the end of the year?

$3200

Martha Beyerlein Company incurred $150,000 of research and development costs in its laboratory to develop a patent granted on January 2nd, 2022. On July 31st, 2022, Beyerlein paid $35,000 for legal fees in a successful defense of the patent. The total amount debited to Patents through July 31st, 2022, should be

$35,000

Pierce Company incurred $150,000 of research and development costs in its laboratory to develop a new product. It spent $20,000 in legal fees for a patent granted on January 2, 2022. On July 31, 2022, Pierce paid $15,000 for legal fees in a successful defense of the patent. What is the total amount that should be debited to Patents through July 31, 2022?

$35,000.

A company has the following accounts: Buildings and Equip: $34 million Accumulated Dep.: $4 million Copyrights: $2.5 million Patents: $3 million Land: $6 million The total net amount reported under Property, Plant, and Equipment would be

$36,000,000

At the beginning of the year, Tektron Company had total assets of $600,000 and total liabilities of $300,000. If the total assets increased $100,000 and the total liabilities decreased $70,000, what is the amount of stockholders' equity at the end of the year?

$470,000

A company reported $50,000 net cash provided by operating activities. It invested $1,000 in equipment and paid $1,000 in dividends. Its free cash flow was

$48000

During the year, a company's inventory decreased by $20,000. If the company's cost of goods sold for the year was $400,000, find the amount for the cost of goods purchased.

$380,000

If beginning inventory is $60,000, cost of goods purchased is $380,000, sales revenue is $800,000 and ending inventory is $50,000, how much is cost of goods sold under a periodic system?

$390,000

Brown & Co. issued 40 $1,000, 5-year bonds with a stated rate of 10% with interest due semiannually. What is the value of the bonds if the market rate is 8%?

$43,244.20

Brown & Co. issued 40 $1,000, 5-year bonds with a stated rate of 10% with interest due semiannually. What is the value of the bonds if the market rate is 8%? 5 years, 8% 5 years, 4% 1 0 years, 8%. 10 years, 4% PV of 1 0.68058 0.82193 0.46319 0.67556 PV of annuity 3.99271. 4.45182. 6.71008. 8.11090

$43,244.20

Becky Sherrick Company has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%, the amount to be credited to Sales Revenue is

$4300

The Daily Grind sells coffee makers. Its inventory of coffee makers without timers cost $20,000 and has a net realizable value of $10,000. Its inventory of coffee makers with timers cost $35,000 and has a net realizable value of $35,000. What amount should be reported for Daily Grind's inventory?

$45,000

Calculate the free cash flow of Bradley Inc. using the following numbers: Net cash provided by operating activities = $788,000 Cash from sales of common stock = $60,000 Capital Expenditures= $312,000 Cash dividends paid = $20,000 Stock dividend = $90,000 Depreciation expense = $85,000 Cash paid for purchase of treasury stock = $34,000

$456,000 net cash provided by operating activities- capital expenditures - cash dividends paid

Pierson Industries has a beginning retained earnings balance of $42,500. An adjusted trial balance shows total expenses of $97,300 and revenue of $104,800. If dividends for the year were $3,500, determine the ending retained earnings balance for the year.

$46,500

QT Incorporated uses the accrual basis of accounting. QT purchases a piece of equipment on July 1 of the current year for $40,000. If the company expects to use the equipment consistently for four years, how much depreciation expense will QT record in its December 31 financial statements?

$5000

Hughes Company has a credit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is:

$55,000.

Last month a company had net sales revenues of $10,000; Cost of goods sold of $4,000; other operating expenses of $3,000; non-operating expenses of $1,000; no non-operating revenues, gains or losses; and income taxes of $500. The gross profit was

$6,000

A computer company has $3,000,000 in research and development costs. Before accounting for these costs, the net income of the company is $2,400,000. What is the amount of net income or loss after these R & D costs are accounted for?

$600,000 loss

The following information is available for Kreator Korporation for the year ended December 31, 2019 Collection of principal on long-term loan to a supplier $20,000 Purchase of equipment for cash 12,500 Proceeds from the sale of long-term investment at book value 17,350 Issuance of common stock for cash 30,000 Depreciation expense 20,000 Redemption of bonds payable at carrying (book) value 32,150 Payment of cash dividends 8,000 Net income 45,000 Purchase of land by issuing bonds payable 26,000 In addition, the following information is available from the comparative balance sheet for Kreator at the end of 2019 and 2018: 2019 2018 Cash $150,000 $87,000 Accounts receivable (net) 10,000 17,000 Prepaid insurance 21,000 14,000 Total current assets 181,000 118,000 Accounts payable $30,000 $32,000 Salaries and wages payable 8,000 7,000 Total current liabilities 38,000 39,000 Which of the following is the net cash provided by cash flows from operations?

$63,000

Granite Monuments reported $69,000 net cash provided by its operating activities. It invested $2,000 in new equipment and paid $3,000 in dividends. What was Granite Monuments' free cash flow?

$64,000

Which statement about users of accounting information is incorrect?

(a) Management is considered an internal user. (b) Taxing authorities are considered external users. (c) Present creditors are considered external users. (d) Regulatory authorities are considered internal users. --> d is false, regulatory authorities are external users

Use the same information as in Question 11 (the question above) , except that Hughes has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. In this situation, the amount of bad debt expense that should be reported for the year is:

$65,000.

A company makes a credit sale of $750 on June 13, terms 2/10, n/30, on which it grants a return of $50 on June 16. What amount is received as payment in full of June 23?

$686

Kersee Company on June 15 sells merchandise on account to Soo Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received?

$686 --> because payment is made within the discount period of 10 days, the amount received is $700 ($1,000 - $300 return) minus the discount the $14 ($700 * 2%), for a cash amount of $686

Kersee Company on June 15 sells merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received?

$686. (1000-300)=700 700*0.02=14 700-14= 686

An analysis and aging of the accounts receivable of Raja Company at December 31 reveal the following data: Accounts receivable $800,000 Allowance for doubtful accounts balance before adjustment (credit) 12,000 Amounts expected to become uncollectible 65,000 How much is the cash (net) realizable value of the accounts receivable at December 31, after adjustment?

$735,000

An analysis and aging of the accounts receivable of Raja Company at December 31 reveal these data: Accounts receivable $800,000 Allowance for doubtful accounts per books before adjustment (credit) 50,000 Amounts expected to become uncollectible 65,000 What is the cash realizable value of the accounts receivable at December 31, after adjustment?

$735,000.

The book value, after three years, of a plant asset which cost $100,000, has useful life of ten years, and a salvage value of $20,000, depreciated using straight line method, is

$76,000 100,000-(((100,000-20,000)/10)*3)

An art gallery has two vases that have not sold for more than two years. Each vase cost $130 and originally retailed for $250. Each vase has a current net realizable value of $90. What will the art gallery report as a loss for the year?

$80

A company purchased land for $70,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at

$82,000

Paulson Oil account balances at January 31st include: Cash $70,000, Accounts Receivable $100,000, Common Stock $120,000 and Accounts Payable $50,000. During the month of February, the company collected $25,000 of its account receivable and paid $10,000 of its accounts payable. What is Paulson's cash balance on their February 28th trial balance?

$85,000

In the first year of operation, Joey's Catering Services recognized $105,000 in service revenue, $33,000 of which was on account and still outstanding at year-end. The company incurred operating expenses of $10,700. Of these expenses, $8500 were paid in cash; $2200 was still owed on account at year-end. In the beginning of the first year, the company prepaid $24,000 cash for the first 3 years in the company's building. In addition, the company prepaid $18,000 for two years of insurance coverage starting next year. Joey's Catering Service used the accrual method of accounting, What was the company's net income for Year 1?

$86,300

If net sales are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, what is the gross profit?

$90,000

If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, the gross profit is

$90,000

Kneiser Inc. had cash receipts for the month of March totaling $102,313.40. Kneiser Inc. is located in Tennessee where the sales tax rate is 7%. How much revenue did Kneiser Inc. recognize for its sales in March?

$95,620.00

Kant Enterprises purchased a truck for $11,000 on January 1, 2021. The truck will have an estimated salvage value of $1,000 at the end of 5 years. If you use the units-of-activity method, the balance in accumulated depreciation at December 31, 2022, can be computed by the following formula:

($10,000 ÷ Total estimated activity) × Units of activity for 2021 and 2022.

Which statement is incorrect concerning the adjusted trial balance?

(a) An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made. (b) The adjusted trial balance provides the primary basis for the preparation of financial statements. (c) the adjusted trial balance does not list temporary accounts --> CORRECT (d) The company prepares the adjusted trial balance after is has journalized and posted the adjusting entries.

Which of these statements about accrual basis of accounting is false?

(a) Companies record revenue only when they receive cash and record expense only when they pay out cash --> this is cash basis accounting (b) Companies record events that change their financial statements in the period in which events occur, even if cash was not exchanged. (c) Companies recognize revenue in the period in which the performance obligation is satisfied. (d) This basis in accordance with GAAP

Which of the following should not be included in the physical inventory of a company? (a) Goods held on consignment from another company. (b) Goods shipped on consignment to another company. (c) Goods in transit from another company shipped FOB shipping point. (d) All of the above should be included.

(a) Goods held on consignment from another company.

Petty Cash Fund

-a cash fund used to pay relatively small amounts (using checks for these payments is impracticable) -they are authorized and legitimate

Which of the following did not result from SOX?

(a) Top management must now certify the accuracy of financial information (b) Penalties for fraudulent activity increased (c) Independence of auditors increased (d) tax rates on corporations increased --> SOX was created to reduce unethical corporate behavior and decrease the likelihood of future corporate scandals, not to address tax rates

Which of the following is not one of the sections of a cash budget?

(a) cash receipts section (b) cash disbursements section (c) financing section (d) cash from operations section - ANSWER

Witte Hall Co incurs the following costs related to the purchase of the land for its new residence hall. Which of the costs would NOT be included in the cost of the land?

(a) closing costs (b) real estate broker commission (c) parking lot costs -- ANSWER (d) accrued property taxes

Which of the following statements about a periodic inventory system is true?

(a) companies determine cost of goods sold only at the end of the accounting period --> CORRECT ANSWER (b) Companies continuously maintain detailed records of the cost of each inventory purchased and sale (c) The periodic system provides better control over inventories than a perpetual system (d) The increased use of computerized systems has increased the use of the periodic system

Which of the following was not a result of the Sarbanes-Oxley Act?

(a) companies must file financial statements with the internal revenue service --ANSWER (b) all publicly traded companies must maintain adequate internal controls (c) the public company oversight board was created to establish auditing standards and regulate auditor activity (d) corporate executives and boards of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so

All of the following can be advantages of the corporate structure, EXCEPT:

(a) continuous life (b) limited liability of owners (c) government regulations -- ANSWER (d) ability to acquire capital

Adjustments for unearned revenues:

(a) decrease liabilities and increase revenues

Which of the following control activities is not relevant when a company uses computerized (rather than manual) accounting system?

(a) establishment of responsibility (b) segregation of duties (c) independent internal verification (d) all of these are still relevant to a computerized system -- ANSWER

Adjusting entries are made to ensure that:

(a) expenses are recognized in the period in which they are incurred (b) revenues are recorded in the period in which the performance obligation is satisfied (c) balance sheet and income statement accounts have correct balances at the end of the accounting period (d) all of the above --> CORRECT ANSWER

What types of business activities are the following?

(a) issuing shares of common stock --> financing activity (b) selling goods on account --> operating activity (c) buying delivery equipment --> investing activity (d) buying inventory --> operating activity

Which of the following statements about a journal is false?

(a) it contains only revenue and expense accounts --> contains all accounts (b) it provides a chronological record of transactions (c) it helps to locate errors because the debit and credit amounts for each entry can be readily compared (d) it discloses in one place the complete effect of a transaction

All of the following are required steps in the accounting cycle except:

(a) journalizing and posting closing entries (b) preparing an adjusted trial balance (c) preparing a post-closing trial balance (d) prepare financial statements from the unadjusted trial balance ----> CORRECT ANSWER, statements are prepared from the adjusted trial balance

A company can accelerate its cash receipts by all of the following except:

(a) offering discounts for early payment (b) accepting national credit cards for customer purchases (c) selling receivables to a factor (d) writing off receivables --> ANSWER

Each of the following is a major type (or category) of adjusting entry except:

(a) prepaid expenses (b) accrued revenues (c) accrued expenses (d) unearned expenses --> unearned expenses are not a major type of adjusting entry

which of the following would not be an example of good cash management?

(a) provide discounts to customers to encourage early payment (b) invest temporary excess cash in stock of a small company -- ANSWER - stock of small companies is often not easily convertible to cash (c) carefully monitor payments so that payments are not made early (d) employ just in time inventory methods to keep inventory low

Under a perpetual inventory system when goods are purchased for resale by a company:

(a) purchases on account are debited to inventory --> CORRECT (b) purchases on account are debited to purchases (c) purchase returns are debited to purchase returns and allowances (d) freight costs are debited to freight - out

Which of the following is NOT a right of common stockholders

(a) receive dividends (b) preemptive right (c) vote in the election of board of directors (d) share in assets upon liquidation before creditors -- ANSWER

If a company is concerned about extending credit to a risky customer, it could do any of the following except:

(a) require the customer to pay cash in advance (b) require the customer to provide a letter of credit or a bank guarantee (c) contact references provided by the customer, such as banks and other supplierrs (d) provide the customer a lengthy payment period to increase the chance of paying --> ANSWER -- a longer payment period increases customers chances of not paying

which sales accounts normally have a debit - balance?

(a) sales discounts (b) sales returns and allowances (c) both a & b --> CORRECT (d) neither a nor b

which of the following statements about promissory notes is incorrect?

(a) the party making the promise to pay is called the maker (b) the party to whom payment is made is called the paypee (c) a promissory note is not a negotiable instrument --> ANSWER -- promissory notes are negotiable (d) a promissory note is more liquid than an account receivable

NSF Check

-a check that is not paid by a bank because of insufficient funds in a bank account -"not sufficient funds" check -it creates an account receivable for the depositor and reduces cash in the bank account

The control features of a bank account do not include

(a)having bank auditors verify the correctness of the bank balance per books --ANSWER (b) minimizing the amount of cash that must be kept on hand (c) providing a double record of all bank transactions (d ) safeguarding cash using a bank as a depository

The multiple step income statement for a merchandising company shows each of these features except:

(a_) gross profit (b) cost of goods sold (c) a sales section (d) an investing activities section ---> CORRECT

Which of the following is not a reason adjusting entries are necessary? (a) Some items may be unrecorded (b) Some events are not recorded daily due to efficiency (c) Some entries were recorded incorrect initially (d) Some costs expire with time rather than recurring daily transactions

In periods of rising prices, LIFO will produce: (a) higher net income than FIFO. (b) the same net income as FIFO. (c) lower net income than FIFO. (d) higher net income than average-cost.

What are the three components of the fraud triangle? List them and give a short description of each.

- Opportunity: The workplace environment must provide opportunities that an employee can exploit. - Financial Pressure: Personal financial issues, lead a lifestyle that they cannot afford. - Rationalization: Employees justify the fraud that they commit. For example, they may feel that they are underpaid

Establishment of Responsibility

- assign responsibility to specific employees - "control most effective when only one person is in charge of a task" -often requires limiting access to authorized personnel and identifying that personnel -automated systems usually use identifying passcodes to maintain this principle

Purchasing Activities

- companies should assign related purchasing activities to different individuals -purchasing activities= ordering merchandise, approving orders, receiving goods, authorizing payment, and paying for goods and services

Sales Activities

- companies should assign related sales activities to different people -sales activities= making a sale, shipping the goods to a customer, billing the customer, receiving payment from customer

Data Analytics and Internal Controls

- data analytics has made it possible to continuously monitor employees, so types of activities/ trends are quickly identified and investigated

Segregation of Duties

- different individuals should be responsible for related activities - responsibility for record keeping for an asset should be separate from the physical custody of that asset -"the work of one employee should provide a reliable basis for evaluating work of another employee"

Information and Communication

- the internal and external reporting process - includes an assessment of the technology environment

Control Features of a Bank

- the use of a bank contributes significantly to good internal control over cash - bank reconciliation -electronic funds transfer system -bank statements

Mail receipts

-Mail receipts should be opened by two people, a list prepared, and each check endorsed "For Deposit Only." -Each mail clerk signs the list to establish responsibility for the data. -Original copy of the list, along with the checks, is sent to the cashier's department. -Copy of the list is sent to the accounting department for recording. Clerks also keep a copy.

Which of the following statements is true?

A note receivable is a written promise to pay an amount owed.

Limitations of Internal Control

-costs should not exceed benefit- ex: if a retail company has a problem with stealing but it is too much money to hire a security guard, they wont. instead they will find a less costly solution -human element -size of the business

Documentation Procedures

-documents provide evidence that transactions and events have occurred -all documents should be accounted for -company should use prenumbered documents, ensures that transactions are only recorded once - company has to send documents to the accounting department immediately

risk assessment

-identification of various factors that create risk for the business, determination of how to handle them -influenced by the size and nature of the company

Cash Disbursement Controls

-internal control over cash disbursements is more effective when companies pay by check or electronic funds transfer (EFT) rather than by cash -exception: petty cash

Monitoring

-internal control systems monitored periodically -deficiencies need to be reported to BOD of firm

Ethics are the principles of conduct that are used to judge whether decisions are

-moral or immoral -right or wrong -honest or dishonest

Imprest System

-operation of a petty cash fund steps: 1) establishing the fund 2) making payments from the fund 3) replenishing the fund

Sarbanes-Oxley Act

-passed by congress in 2002 - purpose: to establish strict accounting and reporting rules -goal: to make senior managers more accountable and to improve and maintain investor confidence.

control activities

-policies and procedures that address the specific risks the company faces -backbone of the company's efforts to address the risks it faces -the activities used vary by company, depends on their risks

Cash controls

-procedures which monitor the process of receiving and distributing cash -reason: cash is the asset most susceptible to fraudulent activities

Physical Controls

-relate to the physical safeguarding of assets and enhance the accuracy and reliability of the accounting records

Management of Cash

-responsibility of company's treasurer

Which of the following financial statements would be included in an annual report?

-retained earnings statement -statement of cash flows -income statement

Bank Statements

-the company with receive this from the bank each month, it shows its bank transactions and balances -they are prepared from the bank's perspective, so every deposit the bank receives is an increase in the bank's liabilities

Electronic Funds Transfer (EFT)

-the transfer of funds among parties without the use of paper -disbursement systems that use wire, telephone, or computers to transfer cash -EFT transactions normally result in better internal control

Lake Coffee Company reported net sales of $180,000, net income of $54,000, beginning total assets of $200,000, and ending total assets of $300,000. What was the company's asset turnover?

0.72 net sales/ average total assets net sales= 180,000 average total assets= (300000+200000)/2

Which of the following is true about the Double Declining Balance Method of Depreciation? Results in higher amounts of depreciation in the earlier years of the assets life Requires the subtraction of salvage value from the cost of the asset in order to calculate the yearly depreciation Results in the same amount of accumulated depreciation as Straight-line depreciation at the end of the assets useful life Results in the same amount of yearly depreciation

1 and 2

Which of the following are results of the Sarbanes-Oxley Act?

1) All publicly traded companies must maintain adequate internal controls. 2) The Public Company Accounting Oversight Board was created to establish auditing standards and regulate auditor activity. 3) Corporate executives and boards of directors must ensure that controls are reliable and effective, and they can be fined or imprisoned for failure to do so.

3 types of occupational fraud

1) Asset Misappropriation 2) Corruption 3) Financial Statement Fraud

Which of the following is true of a partnership?

A partnership must have more than one owner

Which of these statements about Visa credit card sales is correct?

1) The credit card issuer conducts the credit investigation of the customer. 2) The retailer is not involved in the collection process. 3) The retailer receives cash more quickly than it would from individual customers.

Which of these statements about promissory notes is correct?

1) The party making the promise to pay is called the maker. 2) The party to whom payment is to be made is called the payee. 3) a promissory note is more liquid than an account receivable.

What are the five primary components of internal control?

1) a control environment 2) risk assessment 3) control activities 4) information and communication 5) monitoring

Accounting cycle in order

1) analyse transactions 2) journalize the transactions 3) post to the ledger 4) create a trial balance 5) journalize and post adjusting entries 6)prepare an adjusted trial balance 7) prepare financial statements 8) journalize and post closing entries 9) prepare post-closing trial balance

Human Resource Controls

1) bond employees who handle cash- the firm should obtain insurance protections against the possibility of an employee stealing 2) rotate employees' duties and require employees to take vacations 3) conduct thorough background checks

sections of the cash budget

1) cash receipts 2) cash disbursements 3) financing

Which of the following are included in the cash receipts section of a cash budget? Select all that apply.

1) cash sales 2) collections from customers 3) receipts of interest and dividends

6 principles of control activities

1) establishment of responsibility 2) segregation of duties 3) documentation procedures 4) physical controls 5) independent internal verification 6) human resource controls

Corporations invest in other companies for all of the following reasons except

1) house excess cash until needed 2) generate earnings 3) meet strategic goals

Which of the following statements are true?

1) if an intangible asset has a finite life, it should be amortized. 2) The amortization period of an intangible asset can exceed 20 years. 3) Goodwill is recorded only when a business is purchased

The control features of a bank account do inclue:

1) minimizing the amount of cash that must be kept on hand. 2) providing a double record of all bank transactions. 3) safeguarding cash by using a bank as a depository.

A company can accelerate its cash receipts by all of the following:

1) offering discounts for early payment. 2) accepting national credit cards for customer purchases. 3) selling receivables to a factor.

How does internal control help sustainability reporting?

1) prevents the unauthorized use of data 2) provide reasonable assurance that the info is accurate, valid, and complete 3) report info that is consistent with overall sustainability practices

What are notes or accounts receivable that result from sales transactions often called?

trade receivables

If a company is concerned about extending credit to a risky customer, it could do any of the following:

1) require the customer to pay cash in advance. 2) require the customer to provide a letter of credit or a bank guarantee. 3) contact references provided by the customer, such as banks and other suppliers.

Internal control is used in a business to:

1) safeguard its assets. 2) enhance the accuracy and reliability of its accounting records. 3) ensure compliance with laws and regulations.

Why are the principles of control activities important?

1) they help ensure that a company's financial statements are supported by internal controls 2) they apply to most companies 3) they are relevant to manual AND computerized accounting systems

Why is reconciling the bank account needed?

1) time lags 2) errors

Which of the following control activities is not relevant when a company uses a computerized (rather than manual) accounting system?

All of these control activities are relevant to a computerized system.

Treasury Stock: Companies often buy back some of their stock from investors. These repurchased shares are called treasury stock. Why would a company buy back their own stock?

1. Employee stock compensation plans 2. Increase trading of the company's stock in the securities market. Buying treasury stock signals that management believes the stock is underpriced, which they hope will enhance its market value 3. Additional shares available for use in acquiring other companies 4. Reduce the number of shares outstanding, thus increasing EPS.

Explain the process that a company goes through to correctly implement the allowance method.

1. Estimate uncollectible accounts receivable you will have based on your outstanding receivables 2. Record estimated uncollectable accounts by increasing Bad Debt Expense and adding to your Allowance for Doubtful Accounts with an adjusting entry at the end of each period. 3. Remove amounts from your Allowance for Doubtful Accounts and credit your Accounts Receivable that will no longer be collected (write off as uncollectable, as they become uncollectable).

Give a few examples of when a company would issue a note. Why a note instead of just an account receivable?

1. When lending money, usually to another company who needs funds 2. In the settlement of an Accounts Receivable 3. When the transaction is such that it is out of your normal realm of business. The client may be riskier than normal or the amount larger than normal.

Justice Enterprises has current assets of $593 million and current liabilities of $316 million. What is their current ratio?

1.88:1

Corn Flake Corporation reported net income of $300,000. Interest expense was $40,000 and income taxes were $100,000. The times interest earned ratio was

11 times

Jefferson Company purchased a piece of equipment on January 1, 2022. The equipment cost $60,000 and has an estimated life of 8 years and a salvage value of $8,000. What was the depreciation expense for the asset for 2023 under the double-declining-balance method?

11,250 depreciation rate- 2/8= 0.25 60,000*0.25=15000 60,000-15,000= 45,000 45,000*0.25= 11,250

The following information is available for Tye Company at December 31: Beginning inventory $80,000; Ending inventory $120,000; Cost of goods sold $1,200,000; and Sales revenue $1,600,000. Tye's inventory turnover is ________ times.

Solve for the Time Interest Earned ratio using the information below. Round to one decimal Jacobson Corporation Net Income $900,000 Sales revenue 2,775,000 Total Assets (average) 3,860,000 Interest Expense 85,000 Income Tax Expense 70,000

12.4 times

. Barcelona Company owns 40% interest in the stock of ABX Corporation. During the year, ABX pays $40,000 in dividends to Barcelona, and reports $300,000 in net income. Barcelona Company's investment in ABX will increase Barcelona net income by

120,000

Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales revenue of $475,000. Carlos's days in inventory is ________ days.

121.7

Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of $285,000, and sales of $475,000. Carlos's days in inventory is:

121.7 days

Cuso Company purchased equipment on January 1, 2021, at a total invoice cost of $400,000. The equipment has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2022, if the straight-line method of depreciation is used?

156,000

Norton Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each. The ending inventory under lower-of-cost-or-market is:

16,000

A frozen yogurt business has current assets of $25,000 and current liabilities of $10,000. Its current ratio is

2.5:1.

Companies can amortize a patent for a period that cannot exceed ________ years.

Val-Tek has current assets of $1,700,000 and current liabilities of $900,000. If they pay $100,000 owed to a creditor, what will their new current ratio be?

2:1

During the year ended December 31, 2014, Bjornstad Corporation had the following results: sales revenue $267,000; cost of good sold $107,000; net income $92,400; operating expenses $55,400; net cash provided by operating activities $108,950. What was the company's profit margin?

34.6%

Which statement about an account is true?

An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity exams

McComb Inc. earns $1,350,000 and pays cash dividends for $450,000 during 2017. SFX Corporation owns 70,000 of the 210,000 outstanding shares of McComb. How much revenue from investment should SFX report in 2017?

450,000 (70,000/210,000)= .33 .33* 1,350,000= answer

Prall Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable turnover of 7. What is its average collection period (days)?

Prall Corporation sells its goods on terms of 2/10, n/30. It has a receivables turnover ratio of 7.00. What is its average collection period (days)?

52 --> average collection period = (365/accounts receivable turnover ratio (7) = 52

If $400,000 bonds are issued on January 1 and pay $24,000 interest annually, what is the rate of interest?

Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. How much is the accounts receivables turnover?

6.4 and 57 days --> accounts receivable turnover = net credit sales ($800,000)/ average net accounts receivable [($100,000 + $150,000)/2] = 6.4 The average collection period = (365/6.4) = 57 days

6.4 and 57 days.

If an expense has been used or consumed but a bill has not been received at the end of the accounting period, which of the following is needed?

An adjusting entry should be made recognizing the expense.

The carrying value of bonds is another term for

book value

Which of the following accounting entries would you MOST expect to accompany a $9,000 decrease in cash, and why? -$9,000 increase in Unearned Service Revenue, because unearned service revenue is a liability and any decrease in a firm's assets should be offset by an equal increase in the firm's liabilities plus stockholders' equity. -A $9,000 increase in Common Stock, because common stock is part of stockholders' equity and any decrease in a firm's assets should be offset by an equal increase in the firm's liabilities plus stockholders' equity. -A $9,000 increase in Service Revenue, because service revenue is a liability and any decrease in a firm's assets should be offset by an equal increase in the firm's liabilities plus stockholders' equity. -A $9,000 increase in Equipment, because cash is an asset, so an equal but opposite change to another asset account such as Equipment will offset the increase to the Cash account.

A $9,000 increase in Equipment, because cash is an asset, so an equal but opposite change to another asset account such as Equipment will offset the increase to the Cash account.

Which of the following items in a cash drawer at November 30 is not cash?

A NSF check.

Are there any strategic opportunities for companies when it comes to choosing a depreciation method?

A company can use different depreciation methods for tax and books. Accelerated depreciation methods help a company save on tax in the early years!

________ risk is a threat of nonpayment from a single large customer that could adversely affect the financial health of a company.

A concentration of credit

On December 1, 2019 Jackson Co. declared a 12% stock dividend on its 125,000 shares of $5 par value common stock. The fair value of the stock at the time was $20. The entry Jackson Co. made to correctly account for his dividend on the date of declaration was...

A credit to Paid in Capital in Excess of Par Value of $225,000

In which of the following scenarios would a Sales and Returns and Allowances account NOT be debited? A) A customer utilizes a prompt payment incentive. B) A customer returns goods that are not in accordance with specifications. C) A customer receives a credit for merchandise of inferior quality. D) A customer returns defective merchandise.

A customer utilizes a prompt payment incentive.

Packer Co. repurchases 3,000 shares of its own $0.50 par value common stock at its market value of $15 per share. The entry to correctly record this transaction using the cost method includes...

A debit to Treasury Stock for $45,000

Packer Co. repurchases 3,000 shares of its own $0.50 par value common stock at its market value of $15 per share. The entry to correctly record this transaction using the cost method is..

A debit to Treasury Stock for $45,000

What is a deposit slip and when is it used?

A document that accompanies checks and cash when making a bank deposit to provide documentation of the deposit.

Which of the following is a difference between the financial statements of a merchandising company and a service company? A) A service firm has an asset titled Supplies, but a merchandising firm does not. B) A merchandising firm has an asset titled Cost of Goods Sold, but a service firm does not. C) A merchandising firm has an expense titled Cost of Goods Sold, while a service firm does not. D) A merchandising firm uses a multiple step income statement while a service firm uses a single step income statement. You selected C : A merchandising firm has an expense titled Cost of Goods Sold, while a service firm does not. got it correct

A merchandising firm has an expense titled Cost of Goods Sold, while a service firm does not.

Which of these statements about promissory notes is incorrect?

A promissory note is not a negotiable instrument.

Which of the following is an example of a control that provides reasonable assurance and why?

A retail store installs security cameras to prevent shoplifting because it deters some shoplifters but does not reduce sales by innocent customers.

Which of the following statements are true? Select all that apply. A) An inventory count is generally more accurate when goods are not being sold or received during the counting. B) No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period. C) Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand. D) Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.

A) An inventory count is generally more accurate when goods are not being sold or received during the counting. B) No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period. C) Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand.

On July 1, 2020, Grainger Co. purchased a truck for $97,000 with a fair value of $98,000. The expected useful life of this truck is 8 years with a salvage value of $5,000. What is the correct journal entry to account for the depreciation expense incurred in 2020 using the straight line method? A. Depreciation Expense 5,750 Accumulated Depreciation 5,750 B. Depreciation Expense 11,500 Accumulated Depreciation 11,500 C. Depreciation Expense 12,250 Accumulated Depreciation 12,250 D. Depreciation Expense 6,125 Accumulated Depreciation 6,125

A. Depreciation Expense 5,750 Accumulated Depreciation 5,750

Acer Manufacturing has prepared the following current assets section on the balance sheet. what amount counts as cash and cash equivalents

ADD cash in bank, cash on hand, treasury bills, money market fund, petty cash fund, commercial paper

Which of the following statements about accounting information is true?

Accounting communicates financial information about a business enterprise to both internal and external users.

Which of the following statements is true? -If the accounting information is neutral, it increases its materiality. -Neutral accounting information helps to compare methods of different companies. -If the accounting information is neutral, it enhances timeliness. -Accounting information should be neutral to enhance faithful representation

Accounting information should be neutral to enhance faithful representation.

Hunter's Paradise sells merchandize on account to Outdoor Haven for $3,280, terms 2/10, n/30. What should the journal entry be to record this transaction for Hunter's Paradise?

Accounts Rec- Outdoor Haven 3280 Sales Rev 3280

Gemini Group utilizes the voucher system. What would be the role of an invoice from a supplier in the system?

Accounts payable would use it to prepare a voucher.

Which of the following statements about accounts receivable is true?

Accounts receivable represent purchases by customers on credit.

Which of the following statements about accrual-basis accounting is true? A) Accrual-basis accounting is optional under generally accepted accounting principles. B) Accrual-basis accounting recognizes expenses when they are incurred. C) Accrual-basis accounting recognizes revenues when they are received in cash. D) Accrual-basis accounting follows the fiscal year assumption.

Accrual-basis accounting recognizes expenses when they are incurred.

Which of the following statements is true regarding the forms of business organizations?

Advantages of a corporation include limited liability and the relative ease to raise funds

Anders Industries currently holds two debts: an $11,000 debt due in 12 months and a $16,000 debt due in 18 months. Anders prepares a classified balance sheet using an 18-month operating cycle. How should these debts be classified?

All $27,000 in debt should be classified as current liabilities.

An employee has received a vendor invoice and knows that the company needs to write a check to pay the invoice. Which of the following individuals will the employee send information to about this transaction?

An employee in the accounts payable department, who will record a voucher in the voucher register.

Who should prepare a bank reconciliation?

An employee who has no other responsibilities related to cash.

Which of the following would affect the gross profit rate?

An increase in cost of goods sold

Which of the following costs is capitalized to the Patent account?

Application fee paid to obtain Patent

Which of the following costs is capitalized to the Patent account? -Sales and marketing expenses to promote the new Patent -Unsuccessful litigation costs to defend the Patent -Application fee to obtain Patent -Research & development costs incurred to develop the Patent

Application fee paid to obtain Patent

Which of the following is an example of the internal control principle of segregation of duties?

Argon Labs allows scientists to order and receive expensive lab equipment after receiving approval from a supervisor. Invoices are paid by the purchasing department.

Which of the following is an example of the internal control of establishment of responsibility?

Argon Labs limits access to payroll information to the employees who process payroll data.

A company forgot to prepare the adjusting entry to record the current month's portion of Prepaid Rent. What is the resulting impact on the financial statements?

Assets will be overstated and net income will be overstated.

Which accounts normally have debit balances?

Assets, dividends, and expenses

Which of the following is an example of the internal control of segregation of duties?

At Leo Enterprises, the accountant is in a separate department from the fixed-asset manager.

When is a physical inventory usually taken?

At the end of the company's fiscal year or when a limited number of goods are being sold or received

B. $14,875

Bascom Inc. purchased a machine on January 1, 2019 for $40,000. In addition, Bascom paid $7,000 for transportation costs and $3,000 for installation fees. The machine has a useful life of 7 years, an estimated 100,000 hours of use, and a salvage value of $2,000. What is the depreciation expense for 2019 using the Units of Activity Method. The following is the actual annual usage of the machine: 2018: 30,000 hours 2019: 45,000 hours 2020: 25,000 hours The entry to record depreciation in 2019 using the Units of Activity Method will include a: A. Debit to Accumulated Depreciation for $21,600 B. Debit to Depreciation Expense for $21,600 C. Credit to Accumulated Depreciation for $36,000 D. Credit to Depreciation Expense for $36,000

B. Debit to Depreciation Expense for $21,600

Which of the following is true about the Double Declining Balance Method of Depreciation? I. Results in higher amounts of depreciation in the earlier years of the assets life II. Requires the subtraction of salvage value from the cost of the asset in order to calculate the yearly depreciation III. Results in the same amount of accumulated depreciation as Straight-line depreciation at the end of the assets useful life IV. Results in the same amount of yearly depreciation A. I only B. I, III C. I, II, IV D. I, II, III, IV

B. I, III

The Return on Assets ratio tells us: A. How efficiently a company uses its assets to generate sales B. The amount of income generated by each dollar of assets C. How much net income each dollar of sales provides D. None of the above

B. The amount of income generated by each dollar of assets

Goldman Sachs is looking to purchase additional ownership in Facebook when it goes public, with the intent of owning the shares for many years.

Balance sheet

Which financial statement reports assets, liabilities, and stockholders' equity?

Balance sheet

Which statement presents information at a specific point in time?

Balance sheet

Genesis Company buys a $900 machine on credit. This transaction will affect the:

Balance sheet only --> when equipment is purchased on credit, assets are increased and liabilities are increased (these are both balance sheet accounts)

7. Which of the following are false regarding goodwill? I. It is typically the smallest intangible asset on the balance sheet II. It is a physical asset III. It occurs when there is an economic exchange for part of a business IV. Good customer relations is an example of an attribute that could be part of goodwill A. I, IV B. II, III C. I, II, III D. All of the above are false

C. I, II, III

Witte Hall Co incurs the following costs related to the purchase of the land for its new residence hall. Which of the costs would NOT be included in the cost of the land? A. Closing Costs B. Real Estate Broker Commission C. Parking Lot Costs D. Accrued Property Taxes

C. Parking Lot Costs

Bonds that the issuing company can retire at a stated dollar amount prior to maturity.

Callable bonds

How will Nantucket Law Firm record the following transaction on July 8th? Paid $320 for supplies that had been purchased on June 12th. The correct account name that should be entered in the second row of the journal entry form in order to correctly record this transaction is

Cash

On June 16th, Sanderson, Inc. declared and paid a cash dividend in the amount of $5,000. Which account name should be entered in the second row of the journal entry form shown here?

Cash

Good Stuff Retailers accepted $50,000 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 Good Stuff Retailers will include a credit to Sales Revenue of $50,000 and a debit(s) to:

Cash $48,000 and Service Charge Expense $2,000.

Schleis Co. holds Murphy inc's $10,000, 120-day, 9% note. the entry made by Schleis Co. when the note is collected, assuming no interest has previously been accrued is:

Cash 10,300 Notes Receivable 10,000 Interest Revenue. 300

Schleis Co. holds Murphy Inc.'s $10,000, 120-day, 9% note. The entry made by Schleis Co. when the note is collected, assuming no interest has previously been accrued, is:

Cash 10300 Notes Receivable 10,000 Interest Revenue 300

Which of the following are ways financial statements are related?

Cash from the Balance Sheet is on the Statement of Cash Flows Retained Earnings from the Retained Earnings Statement is on the Balance Sheet Net Income from the Income Statement is on the Statement of Retained Earnings

Garcia Corporation paid $0.12 per share in dividends in 2018 to its common shareholders. Garcia Corporation had 5,000,100 authorized shares, with 2,600,000 issued, and 56,000 shares of treasury stock. Due to the entry to record the dividend payment, which of the following statements is true?

Cash is decreased by $305,280

Which of the following statements correctly describes the reporting of cash?

Cash is listed first in the current assets section.

Which of the following statements is true about investments classified as trading securities?

Changes in market value are reflected as part of net income.

Which of the following was not a result of the Sarbanes-Oxley Act?

Companies must file financial statements with the Internal Revenue Service.

Andy Accountant works for Tech Corp. A check for $840 was written for computer equipment, but Andy posted the amount as $480 in the check register. Which of the following is the correct adjusting entry in the journal?

Computer Equipment 360 cash 360

On July 1, Cooper Corporation received $20,000 from Smith Industries in exchange for services performed. What accounting entries should Cooper make to record this event, and why?

Cooper should record a $20,000 increase in revenue along with a $20,000 increase in cash, because this way the firm's retained earnings will increase by the same amount as its assets.

Which of the following statements about credits is true?

Credits decrease assets and increase liabilities.

Which measure shows a company's ability to pay current liabilities?

Current ratio ==> liquidity ratio Current ratio = current assets/current liabilities

All of the following are required steps in the accounting cycle except: A) journalizing and posting closing entries B) preparing an adjusted trial balance C) preparing a post-closing trial balance D) reversing entries

D) reversing entries

Which account will have a zero balance after closing entries have been journalized and posted? A) Prepaid Insurance B) Supplies C) Accumulated Depreciation D) Service Revenue

D) service revenue

D. $14,700

Which of the following costs is capitalized to the Patent account? A. Research & development costs incurred to develop the Patent B. Unsuccessful litigation costs to defend the Patent C. Sales and marketing expenses to promote the new Patent D. Application fee paid to obtain Patent

D. Application fee paid to obtain Patent

An impairment occurs when A. The book value falls materially below the fair value B. The book value is equal to the fair value C. A temporary decline in fair value occurs D. The fair value falls materially below the book value

D. The fair value falls materially below the book value

Upon receiving the monthly bank statement, John Smith, controller of Cannon Incorporated, noted an NSF check for $325 from Robbins Company. Which adjusting entry will Smith make to update the relevant accounts?

Debit Accounts Receivable - Robbins Company $325; credit Cash $325

On November 1, 2022, Cherry Industries, which uses a calendar year as its fiscal year, signs a $12,000, 7%, six-month note payable. Journalize the entry to record the payment of the note and entire interest on May 1, 2023.

Debit Notes Payable $12,000 Debit Interest Expense $280 Debit Interest Payable $140 Credit Cash $12,420

On July 1, the Fisher Shoe Store paid $18,000 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, which of the following is an adjusting entry that should be made by the company?

Debit Rent Expense $3,000; credit Prepaid Rent $3,000

Debit to Depreciation Expense for $21,600

MacIntyre Company acquired 15,000 shares of its own stock with a par-value of $0.15 per share for $18.00 per share. The journal entry for this transaction includes which of the following

Debit to Treasury Stock for 270,000 number of shares * price per share

Debit: Depreciation Expense 5,750 Credit:Accumulated Depreciation 5,750

Mazzeo Company acquires 80 Dodd's 10%, 5 year, $1,000 bonds on January 1, 2017 for $80,000. The journal entry to record this investment includes a debit to

Debt Investments for $80,000.

Starship Co. has two transactions in November. What are the aggregate effects of the following two transactions on the basic accounting equation (Assets = Liabilities + Equity)? I.Starship pays its Accounts Payable balance of $100 to Gordon Co. in cash II.Starship collects $100 in cash from a customer to settle an account receivable

Decrease Assets, decrease Liabilities

Queenan Company computes depreciation on delivery equipment at $1,000 for the month of June. The adjusting entry to record this depreciation is as follows:

Depreciation Expense - $1000 Accumulated Depreciation -Equipment $1000

Depreciation Expense 5,750 Accumulated Depreciation 5,750

What is free cash flow?

Describes the cash remaining from operations after adjustment for capital expenditures and dividends

Which of the following are principles of sound accounts receivable management? Select all that apply.

Determine which customers should be extended credit. Monitor collections. Establish a payment period.

________ is often the most critical part of managing receivables.

Determining who gets credit and who does not

Describe the primary irregular item that can alter net income numbers, and may cause net income to deviate from sustainable income.

Discontinued Operations: the disposal of a significant component of a business

Which of the following is NOT a way financial statements are related?

Dividends from the Retained Earnings Statement is on the Balance Sheet

Queenan Company computes depreciation on delivery equipment at $1,000 for the month of June. The adjusting entry to record this depreciation is as follows:

Dr. Depreciation Expense 1,000 Cr. Accumulated Depreciation - Equipment 1,000

Dr. Depreciation Expense 5,750 and Cr. Accumulated Depreciation 5,750

Monica Geller earned a salary of $2,800 for the last week of December. She will be paid on January 3rd of the following year. The ajusting entry for Monica's employer on December 31sr is:

Dr. Salaries and Wages Expense $28000 CR. Salaries and Wages payable $2800

Please explain why preferred stock dividends are subtracted from net income when calculating EPS.

EPS is meant to capture the return that a common stock shareholder would realize on a per share basis.

________ may be limited in a small business environment because of the inability to

Effective internal control; segregate duties.

Which of the following would be a consequence of company policies that do not require authorization on purchases?

Employees may make personal purchases with company funds.

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Expense recognition principle

perpetual inventory system

FIFO cost of goods sold will be the same as in a periodic inventory system.

Neutrality is an ingredient of:

Faithful Representation-Yes Relevance-No

A Trademark is amortized over a period of 20 years or its useful life, whichever is shorter

False

Assets-Liabilities does not always have to equal equity

False

Companies amortize the cost of a patent over a 10-year life or its useful life, whichever is longer.

False

Copyrights last for the life of the creator plus 80 years.

False

The cash-basis of accounting does not mislead investors in regards to financial performance

False

What are the elements of the fraud triangle ?

Rationalization Financial pressure Opportunity

South Isles Water Park has high revenue from May to September, moderate revenue in April and October, and low revenue from November to March. If the water park wants to build a new water slide, a project costing $147,000, which of the choices would be best for them to choose for this major cash expenditure?

February

What organization issues U.S. accounting standards?

Financial Accounting Standards Board?

What does a current ratio of 1.20:1 mean?

For every dollar of current liabilities, a company has $1.20 of current assets

One difference between accounting in the United States and the European Union is that the U.S. follows ________, whereas the European Union follows

GAAP; IFRS

On January 1, 2019, Heckman Corp issued $500,000 of 10%, 10-year bonds with interest payable annually (due on 1/1) to Lettenberger Inc. The market interest rate was 9% on January 1, 2019, when the bonds were issued. Heckman uses the effective interest method to amortize any discounts or premiums resulting from a bond issuance. Heckman Corp issues financial statements at year end on 12/31. On December 31, 2019, after a year of amortization has been recorded, the carrying value of the bond is $529,976. On January 1, 2021, Heckman redeems the bond for 95. The gain or loss on the redemption of the bonds is...? (Round all calculations to a whole number).

Gain of 52,674

Explain where each of these items would appear on a multiple-step income statement: (ie: operating expense or revenues) Gain on disposal of plant assets Cost of goods sold Depreciation expense Sales returns and allowances

Gain on disposal of plant assets- other revenues and gains Cost of goods sold- cost of goods sold (directly after revenues) Depreciation expense- operating Expenses Sales returns and allowances-revenue section (contra revenue)

Ginni founded Waggstooth Manor Doggie Day Care and after a year in business, formed a partnership with her husband, Warren. Their friend, Phoebe, is a shareholder with Networth Bank. In terms of personal liability, who is at greater risk? Why?

Ginni and Warren, because both partners have unlimited personal liability, regardless of who owns a larger percentage of the company.

Reconciling Items per Bank

Given bank balance: 1)ADD deposits in transit 2) LESS outstanding checks (No. 93579) 3) ADD OR LESS bank errors

Reconciling Items per Books

Given book balance: 1) ADD other deposits (ex: EFT's) 2) LESS other payments (ex: service charges, NSF checks) 3) ADD OR LESS book errors

Trubisky Co. owns a quarterback academy that he operates. Lately, many of the quarterback prospects have been attending Rodgers Co. quarterback academy instead of his. Trubisky doesn't think he has enough prospects to continue operations over the next year. Which assumption is violated in this scenario?

Going Concern Assumption

All of the following can be advantages of the corporate structure, EXCEPT: -Government Regulations -Ability to acquire capital -Limited Liability of Owners -Continuous Life

Government Regulations

Hanson Technology is a computer manufacturer. For years, Hanson has relied on the JIT inventory method. However, due to numerous recent stockouts by Hanson's suppliers, Hanson's management has decided to transition to the traditional inventory method. How will Hanson's inventory levels change as a result of this switch?

Hanson's levels of finished goods, work in process, and raw materials will all increase.

David just finished compiling his firm's retained earnings statement for the month ended May 31. What should he do with the figure he calculates at the bottom of this statement?

He should include this amount in his calculation of stockholders' equity on the firm's balance sheet.

Courtney Murray, the CEO of Oreos Corp, is required to take a monthly vacation every fiscal year. Which control activity is this, and explain how this can help a company detect fraud.

Human Resource Control - The company can now rotate someone in to check Courtney's work and to make sure that fraud has not been committed.

Which of the following are consequences if a firm decides to use a stock dividend? I. Total retained earnings will be lower than if they used a stock split. II. The total retained earnings will increase. III. The par value per share will decrease IV. The total paid-in capital will increase.

I & IV

Frieler Inc. decides to issue bonds to raise capital. Frieler Inc. is an established business and the bondholder purchased the bond due to the company's high credit rating. However, to make the bonds more enticing Frieler Inc. decides to allow bondholders to convert them to common stock if they wish. What type of bonds are these? I. Unsecured bonds II. Secured bonds III. Convertible bonds IV. Callable bonds

I and III

Which of the following items are added to accrual basis net income when using the indirect method of preparing a statement of cash flows to find net cash provided/used by operating activities? I. Amortization Expense II. Gain on Disposal of Plant Assets III. Increases in Inventory IV. Increase in Accounts Receivable V. Cash Dividends

I only

Which of the following are false regarding goodwill? I. It is typically the smallest intangible asset on the balance sheet II. It is a physical asset III. It occurs when there is an economic exchange for part of a business IV. Good customer relations is an example of an attribute that could be part of goodwill

I, II, III

Which of the following are false regarding goodwill? It is typically the smallest intangible asset on the balance sheet It is a physical asset It occurs when there is an economic exchange for part of a business Good customer relations is an example of an attribute that could be part of goodwill

I, II, III

In order to complete a statement of cash flows using the indirect method, which sources of information do you need? I. Comparative Balance Sheets II. Comparative Income Statement III. Transaction data to determine how cash was provided or used during the period IV. Previous Years Statement of Cash Flows

I, III

In order to prepare a statement of cash flows using the indirect method, which sources of information do you need? I. Comparative Balance Sheets II. Comparative Income Statement III. Transaction data to determine how cash was provided or used during the period IV. Previous Years Statement of Cash Flows

I, III

Which of the following is true about the Double Declining Balance Method of Depreciation? I. Results in higher amounts of depreciation in the earlier years of the assets life II. Requires the subtraction of salvage value from the cost of the asset in order to calculate the yearly depreciation III. Results in the same amount of accumulated depreciation as straight-line depreciation at the end of the assets useful life IV. Results in the same amount of yearly depreciation

I, III

When an employer records an accrual entry for their portion of payroll taxes: I. Net income will decrease II. Total assets will decrease III. Current Ratio will decrease IV. Cash will remain the same

I, III, IV

When an employer records an accrual entry for their portion of payroll taxes: I. Net income will decrease II. Total assets will decrease III. Debt to Asset Ratio will increase IV. Cash will remain the same

I, III, IV

Presti Corp has 300,000 shares of common stock issued and outstanding with a par value of $9. On October 1, 2019, the corporation issues a 3-1 stock split. Which of the following statements are true? I. 100,000 shares will now be issued and outstanding II. The par value of the stock will drop to $3 III. The total par value of the issued common stock will increase IV. Total stockholders equity will be unaffected

II, IV

Which of the following are true? I. Bonds redeemed at a value greater than the book value will have no effect on net income II. Convertible bonds are bonds that can be converted into cash at any time before the maturity date III. Bond premiums are added to the book value of bonds payable on the Balance Sheet IV. Amortization of a bond discount decreases net income

III & IV only

Which of the following are true? I. Bonds redeemed at a value greater than the book value will have no effect on netincome II. Convertible bonds are bonds that can be converted into cash at any time before the maturity date III. Bond premiums are added to the book value of bonds payable on the BalanceSheet IV. Amortization of a bond discount decreases net income

III & IV only

Which of the following are classified as financing cash flow activities? I. Receiving dividends II. Selling equipment III. Issuing a bond IV. Paying dividends

III, IV

Which accounts are closed as part of the period-end financial reporting process? I. retained earnings II. unearned sales revenue III. dividends IV. interest expense V. sales revenue

III, IV, V

Which of the following is a key characteristic of risk assessment to prevent fraud?

Identifying factors that create risk and developing a plan to manage the risks.

On September 1, Pike Products purchases $5,000 of supplies from Indigo Industries, with the understanding that Pike will provide payment within 60 days. When posting the journal entries related to this transaction, Pike's accounting staff debits Supplies for $5,000 and debits Cash for $5,000. Which of the following statements best describes the results of this posting?

In Pike's general ledger, the ending balance for the Supplies account will be correct. However, the ending balance for the Cash account will be too high, while the ending balance for the Accounts Payable account will be too low.

Martin Industries owns a parcel of land adjacent to its factory. In approximately 18 months, Martin intends to build a parking lot on this parcel. Martin prepares a classified balance sheet and has an operating cycle of less than one year. How would classification of this parcel be different if Martin had a two-year operating cycle?

In the first case, it is classified as a long-term investment, while with a two-year cycle it is classified as property, plant, and equipment.

Investing activities

Include cash transactions that involve the purchase or disposal of investments and property, plant, and equipment and lending money and collecting the loans.

Operating activities

Includes cash effects of transactions that create revenue and expenses. They thus enter into the determination of net income.

Financing activities

Includes obtaining cash from the issuance of debt and repayment of the amounts borrowed and obtaining cash from stockholders repurchasing shares and paying dividends

During 2012, Timberland Inc. assets decreased $50,000 and its liabilities decreased $90,000. Therefore, it's stockholders' equity:

Increased $40,000

When a bond is issued at a premium...

Interest expense over the life of the bond will be lower than interest paid

________ are a good choice for investing temporarily idle cash.

Interest-paying U.S. government securities

What is the purpose of having at least two mail clerks present when mail receipts are opened?

It increases internal controls to ensure that one clerk cannot divert checks for personal use.

Why must uncollectible accounts be estimated?

It is not possible to know which accounts will not be collected.

How is depreciation accounted for if disposal of a plant asset occurs during the year?

It is recorded for the fraction of the year to the date of the disposal.

Jake's Hardware Store sells most of their merchandise on credit to customers. Jake's has been having difficulty maintaining their minimum cash balance, so they have started offering incentives to customers who pay off their purchases within 10 days. How does this help maintain a higher cash balance?

It reduces the average collection period.

Property, plant, and equipment of Barnes Corp includes office furniture, computer equipment, and buildings. Each asset has accumulated $2,000 in depreciation since purchase. How should Barnes reflect this on its classified balance sheet to provide the best disclosure?

It should itemize the assets at cost, and subtract from each the $2,000 depreciation per asset.

Based on the net income of the shop, the sales staff at Francesca's Fashions receive performance bonuses. In periods of declining prices, which inventory costing method would bring the sales staff the most benefit?

LIFO

Bonuses based on the net income of the company are a part of the benefit package at McElroy's Tackle Hut. In periods of declining prices, which of the following would bring the sales staff the most benefit?

LIFO costing method

How to compare different ratios across businesses?

Liquidity ratio: higher current ratios mean that a company has higher liquidity Solvency ratio: higher debt to asset ratios indicate a lower solvency Profitability ratios: cannot be compared across companies using earnings per share because of the wide variations in the number of shares a common stock of different companies

A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, he land will be idle. The land should be reported as:

Long term investment --> land or buildings not currently used in operations are considered long term investments

In periods of rising prices, LIFO will produce:

Lower net income than FIFO

Martin and Jennifer are both interested in learning more about a company's cash. Martin wants to know what the company's cash balance was at the end of their fiscal year. Jennifer wants to know how the company gained and used cash over the past accounting period. Which financial documents should they look at?

Martin should look at the balance sheet, and Jennifer should look at the statement of cash flows.

The characteristic of information that evaluates whether is is large enough to impact a decision is:

Materiality

Michael is preparing the company's cash budget. When preparing the cash disbursements section, he includes inventory, labor, overhead, selling expenses, administrative expenses, depreciation, dividends, and income taxes. What error did Michael make? Will cash disbursements be too high or too low as a result of this mistake?

Michael included depreciation in his estimate, which would make cash disbursements too high.

Miller Technology produces tablet computers. Currently, Miller has a high raw material inventory and a low finished goods inventory. Based on these inventory levels, which of the following assumptions can you make?

Miller is preparing to set up production

A(n)________ requires a journal entry by the depositor.

NSF check

What happens if the amount of uncollectible account expense is overstated at year end?

Net Accounts Receivable will be understated.

The gross profit rate is equal to:

Net sales - cost of goods sold/ net sales

Michael Co. accepts a $1,000, 3-month, 12% promissory note in settlement of an account with Tani Co. The entry to record this transaction is:

Notes Receivable 1000 Accounts Receivable 1000

Explain the differences between accounts receivable and notes receivable? How do they differ in terms of the counter-party, the expected time to collection, and interest?

Notes Receivable are more formalized in the fact that they are a written promise to pay. Notes are usually outstanding for a longer period of time than Accounts Receivable. Notes Receivable always include a built-in interest rate.

Valente Company received a $10,000, 12%, 1-year note from Andrea Foley on June 1st, as full payment on her account. Which of the following is the correct journal entry?

Notes Receivable. 10,000 Accounts Receivable 10,000

Which of the following statements about receivables is true?

Receivables represent one of a company's most liquid assets.

Identify the example of poor internal control.

One person should be responsible for handling related activities.

Which of the following would cause the Potter Company's May 31st trial balance to not balance?

Only the credit portion of a journal was posted.

Witte Hall Co incurs the following costs related to the purchase of the land for its new residence hall. Which of the costs would NOT be included in the cost of the land? -Accrued Property Taxes -Parking Lot Costs -Closing Costs -Real Estate Broker Commission

Parking Lot Costs

Two or more individuals joining together to combine economic resources and skill sets.

Partnership

Companies can use free cash flow to:

Pay additional dividends Acquire property, plant, and equipment Pay off debts

Which types of accounts will appear in the post-closing trial balance?

Permanent accounts

Capital Café at Grainger Hall uses internal controls. For example, at the end of the night, all cashiers must drop their cash bag in a safe. This control activity is an example of:

Physical Controls

Preferred Stock: Explain how preferred stock is different from common stock.

Preferred stock has contractual provisions that give it preference or priority over common stock in certain areas. Typically, preferred stockholders have a priority in relation to dividends and assets in the event of liquidation. Sometimes they do not have voting rights.

Decreases as assets and decreases liabilities. Which is not a part of the recording process?

Preparing an income statement

Indicates the level of full and transparent information provided to users of the financial statements.

Quality of Earnings

Which of the following is an example of an accrual? A) Record Rent Expense that was prepaid. B) Record Revenues that were received in cash in an earlier period. C) Record Wage Expense that is incurred and paid in the same period. D) Record Revenues that will be received in cash in a subsequent period.

Record Revenues that will be received in cash in a subsequent period.

What is an advantage or corporations relative to partnerships and sole proprietorships?

Reduced legal liability for investors -- investors are not personally liable for debts of the business

Which of the following statements is false?

Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.

Generally speaking, adjusting entries satisfy which of the following accounting principles and assumptions?

Revenue Recognition, Expense Recognition

Which accounts normally have credit balances?

Revenues, liabilities, and retained earnings

Discuss the roles of the Securities and Exchange Commission (SEC), the Financial Accounting Standards Board (FASB), the International Accounting Standards Board (IASB), and the Public Company Accounting Oversight Board (PCAOB).

SEC= = oversees US markets and standard setting bodies FASB = primary standard setting body in the US IASB = the standard setting body that issues the IFRS standards PCAOB = determine auditing standards and review performance of auditing firms

Colleen Mooney earned a salary of $400 for the last week of September. She will be paid on October 1. The adjusting entry for Colleen's employer at September 30 is:

Salaries and wages expense 400 Salaries and wages payable 400

If bonds are issued at a discount, how will the following change each period over the life of the bond using the effective interest method to amortize the discount: -Interest Paid -Interest Expense Recognized -Bond Carrying Value

Same; increase; increase

Bonds that have specific assets of the issuer pledge as collateral for the bonds

Secured Bonds

Which account will have a zero balance after a company has journalized and posted closing entries?

Service Revenue

Which of the following is NOT a right of common stockholders -Share in assets upon liquidation before creditors -Preemptive right -Vote in the election of board of directors -Receive dividends

Share in assets upon liquidation before creditors

Individually owned, easy to set up, but the owner has personal liability

Sole Proprietorship

What are the three forms of business organizations?

Sole proprietorship, Partnership, Corporation

The CEO of Apple is considering handing out the company's first dividend and wants to know if they have enough cash on hand to do so.

Statement of cash flows

On January 14, Welsford Agency purchased supplies of $500 on account. The entry to record the purchase will include a debit to

Supplies and a credit to Accounts Payable.

Which of the following events is not recorded in the accounting records?

Termination of an employee is not a recordable event.

In 2021, Garret Market remained fully open while conducting inventory, but in 2022 Garrett closed during inventory. In 2023, Garrett remained open but sold only a small selection of items during inventory. Based on this information, in which years did Garrett have the most and least accurate inventories?

The 2022 inventory was the most accurate, while the 2021 inventory was the least accurate.

Can the Allowance for Doubtful Accounts Account ever have a debit balance? Explain why or why not.

The Allowance account can have a debit balance. This happens when you do not estimate enough uncollectable accounts and you end up writing off more than what you estimated. This happens by debiting the Allowance account for more than you had in its credit balance and thus the account is left with a debit balance. You will later need to overcompensate for this debit balance by crediting an extra amount, and recording a larger bad debt expense for the previous

The Return on Assets ratio tells us

The amount of income generated by each dollar of assets

The Return on Assets ratio tells us:

The amount of income generated by each dollar of assets

Jimenez Transportation purchased five new transportation vehicles in 2021. They plan to pay these vehicles off in even installments over the next 8 years. On the 2022 year-end financial statements, how would the amount Jimenez plans to pay off in 2023 differ from the amount they plan to pay off in 2024?

The amount they plan to pay off in 2023 would be classified as a current liability, and the amount they plan to pay off in 2024 would be classified as a long-term liability.

If the credit terms on a sales invoice read "2/10, n/30", what does this mean?

The buyer should pay within the discount period and recognize a savings.

Which of the following cash differences after totaling a cash register and comparing it to the cash register tape would cause the company the most concern and likely initiate an investigation?

The cash register contained $874 from sales and the cash register tape documented $1,142 in sales. largest difference

When reconciling the company's bank statement to their books, an employee identified several checks that the company wrote that were paid by the bank. In addition, the employee found that one check that was written by a customer and deposited several days ago was not added to the company's bank statement balance. What is one potential difference between these checks?

The checks that were paid are canceled checks, whereas the check that was not added to the account was an NSF check.

If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty?

The company purchased another company.

In late August, a company provided one of its customers with services worth $500; however, the company did not send the customer a bill for those services until early September. What journal entry should the company make in August to denote this delivery of services?

The company should debit Accounts Receivable for $500 and credit Service Revenue for $500.

Which of the following transactions that needs to be reconciled between the bank statement and the books is likely the result of time lag?

The company wrote a check and mailed it to a vendor the day before the end of the bank statement cycle. The check appears on the books but not the bank statement.

What is the difference between the contractual interest rate and the market interest rate?

The contractual interest rate is used to determine the actual amount of cash interest the issuer pays and the investor receives, whereas the market interest rate is the general rate investors demand for loaning funds.

What is one difference between the current ratio and the times interest earned ratio?

The current ratio measures a company's ability to meet short-term obligations, and the times interest earned ratio measures a company's ability to meet long-term obligations.

Which of the following shipments was shipped FOB destination? A) The customer paid $11,390 for purchased goods with a $200 purchase discount and $120 for freight costs. B) The customer paid $32,540 for purchased goods and received a 3% purchase discount. C) The customer paid $41,720 for purchased goods and $365 for freight costs. D) The customer returned $2,800 in purchased goods with freight costs paid by the supplier. You selected D : The customer returned $2,800 in purchased goods with freight costs paid by the supplier. got it wrong the correct Answer is B : The customer paid $32,540 for purchased goods and received a 3% purchase discount.

The customer paid $32,540 for purchased goods and received a 3% purchase discount.

Which of the following describes the standard form of a journal entry?

The debit account is entered first at the extreme left margin.

Describe the differences between the direct write-off method and the allowance method for accounts receivable. Explain how the direct write-off method can be misleading. Also, what are the typical journal entries for each method?

The direct write-off method only adds a bad debt expense when the receivable actually becomes uncollectable. The allowance method estimates the amount of bad debt expense there will be based on all of the receivables a company has. The direct write-off method can be misleading because it only shows actual losses and does not provide an accurate estimation for users to see the actual amounts the company expects to receive.

What does the periodicity assumption state?

The economic life of a business can be divided into artificial time periods

What is the periodicity assumption?

The economic life of a business can be divided into artificial time periods.

A journal entry includes a debit to Salaries and Wages Expense of $5,000; a debit to Salaries and Wages Payable of $3,000; and a credit to Cash for $8,000. Which explains this entry?

The entry reflects $5,000 payment of wages and salaries for the current period and $3,000 for wages and salaries accrued previously.

An impairment occurs when

The fair value falls materially below the book value

An impairment occurs when:

The fair value falls materially below the book value

What section of a statement of cash flows indicates the cash spent on new equipment during the past accounting period?

The investing activities section --> this section provides information about property, plant, and equipment

Which quality of an asset makes it more appropriate for the fair value principle rather than the historical cost principle?

The market price of the asset is readily available and reliable

All else equal, if interest is payable semi-annually compared to annually...

The present value of the lump sum will be less and the present value of the interest payments will be greater

Indicate which one of these statements is true.

Totals of major classes of assets can be shown in the balance sheet, with asset details disclosed in the notes to the financial statements.

When writing the title of an account, how is it formatted? Why?

The title is capitalized to indicate that it is a specific account name.

Adaptive Practice Ch 3: The Accounting Information System Question Number Q 3.34: As of June 30, Martinez Manufacturing has the following account balances: Cash $830 Notes Payable $540 Accounts Receivable $280 Equipment $190 Service Revenue $330 Unearned Service Revenue $230 When creating a trial balance, Martinez's accounting staff accidentally enters a Cash balance of $803 and an Unearned Service Revenue balance of $203. What effect will this error have on the firm's trial balance?

The total debit balance and total credit balance will be equal, but both values will be $27 too low.

Which of the following is true about computing interest?

There are various ways of calculating interest correctly.

During the month of June, Arlen Inc. incurred $2,500 in expenses. What effect will these expenses have on the firm's accounts for the month if the expenses were paid with cash?

These expenses will necessitate that Arlen record a $2,500 debit to an expense account and an offsetting $2,500 credit to an asset account.

Which of the following is true about unearned revenues? A) They are earned but not yet received or recorded. B) They are received and recorded as liabilities before they are earned. C) They are earned and already received and recorded. D) They are earned and recorded as liabilities before they are received.

They are received and recorded as liabilities before they are earned.

Which of the following statements concerning notes receivable is true?

They can be transferred to another party by endorsement.

What does the term "bonding" mean when it refers to employees?

They have been insured against theft of assets.

What would be the best option for Sporting Apparel which is a large national retail chain that sells athletic clothing, accessories, and equipment?

They should employ internal auditors who in addition to providing audits could evaluate and improve the control systems for the company.

After preparing its financial statements for February, Gordon Industries realizes that its income statement shows total revenues that are $500 too low and total expenses that are $500 too high. What, if any, effect will this discovery have on Gordon's retained earnings statement for the month?

This discovery means that Gordon's actual retained earnings as of February 28 will be $1,000 greater than the amount shown on the firm's retained earnings statement.

Which of the following is true in journalizing? -Titles of accounts must appropriately describe the content of the account. -The date of the transaction is not shown in a complete journal entry. -The credit account is entered first and indented. -The journal entry shows the new balance in the accounts affected by the transaction.

Titles of accounts must appropriately describe the content of the account.

What is one reason that a large national company would maintain multiple bank accounts?

To have more than one source for short-term loans.

Which of the following are reasons a corporation may acquire treasury stock?

To increase earnings per share. To have additional shares available to acquire other companies To reissue the shares within the company under compensation plans.

Which of the following is nota reason a corporation may acquire treasury stock?

To increase its total assets and total stockholders' equity

An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made

True

Copyrights give the owner the exclusive right to reproduce and sell an artistic or publish work.

True

The company prepares the adjusted trial balance after it has journalized and posted the adjusting entries.

True

Trademark or trade-name is a word, phrase, jingle, or symbol that distinguishes or identifies a particular enterprise or product.

True

Of the companies described below, which would be said to have the highest quality of earnings for the past several years? A) Two years ago, Orange Corporation recorded a non-recurring gain of $12 million related to the sale of a subsidiary. Since that time, the company's financial statements have shown small but steady yearly earnings growth. B) Two years ago, Blue Corporation recorded a large increase in fourth-quarter revenues due to an aggressive end-of-the-year sales effort. In the first quarter of the following year, the company saw a $20 million drop in income due to an exceptionally high amount of merchandise returns. C) Three years ago, Brown Corporation recorded a one-time gain of $25 million from the sale of stock that it held as an investment. In the year immediately before the stock sale, the company's financial statements showed a $6 million drop in earnings, and in the three years since the stock sale, its financial statements have varied widely from year to year. D) Three years ago, Green Corporation recorded large spikes in quarterly revenues in relation to multi-year contract sales. The following year, Green was forced to revise these numbers because regulators determined the company was not properly spreading revenue from these sales throughout the applicable contract periods.

Two years ago, Orange Corporation recorded a non-recurring gain of $12 million related to the sale of a subsidiary. Since that time, the company's financial statements have shown small but steady yearly earnings growth.

What is another name for Bad Debt Expense?

Uncollectible Accounts Expense

Chandler Bind, a lawyer, recently received a cash payment to represent his client in court. The trial does not take place until next year. What type of adjusting entry is caused by this situation?

Unearned revenue

Bonds that are issued against the general credit of the borrower.

Unsecured Bonds

Discuss why financial statements need to be useful, and explain how relevance and faithful representation play a part in providing useful information.

Useful financial statements help investors and creditors make decisions, which drives the financial community and in turn the overall economy. Relevant information has predictive value and makes a difference in business decisions Faithfully represented information accurately depicts what actually happened in that time period, therefore it is complete and neutral information

What is the primary criterion by which accounting information can be judged?

Usefulness for decision making is the primary criterion by which accounting information is judged

Expresses each item within a financial statement as a percentage of a base amount

Vertical Analysis

Weston Industries and Riley Enterprises are manufacturing companies. Currently, Weston has a high raw materials inventory and a low finished goods inventory. Riley has a low raw materials inventory and a high finished goods inventory. Based on these inventory levels, which of the following assumptions can you make?

Weston is preparing to increase production, while Riley is preparing to decrease production.

When a company borrows money from a bank on a long-term basis, this action is called

a financing activity.

Wells Enterprises holds a debt that is due 20 months from now. Wells prepares a classified balance sheet and has an operating cycle of less than one year. How would classification of this debt be different if Wells used a two-year operating cycle?

With the shorter cycle it is classified as a long-term liability while with a two-year cycle it is classified as a current liability.

After conducting a financial transaction, a company's accounting staff records a $1,000 decrease in a particular asset. In order for the accounting equation to balance, the accounting staff could also record which of the following things?

a $1,000 increase in a different asset

A trial balance will not balance if

a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.

In a bank reconciliation, an adjusting entry on the company's books is required for

a bank service charge

Four companies were sued by customers for injuries sustained from faulty products. All four companies settled out of court for $400,000. For which of the following companies is this event the LEAST material?

a company with assets totaling $36 billion

If a company is experiencing a threat of nonpayment from a single large customer that could threaten the financial health of the company, the company has

a concentration of credit risk

The accounting department should only have access to ________ since its function is to

a copy of the list of checks; record the change in cash.

An owner who wants to have limited liability should form which type of business enterprise?

a corporation

Meadows Manufacturing follows the accrual basis. An accrual results when ____________ and a deferral results when

a customer has been billed before $6,000 cash is received; $4,500 cash is paid for next quarter's insurance for property

Fraud

a dishonest act by an employee that results in personal benefit to the employee at a cost to the employer

Mason Corporation purchased a piece of land 5 years ago when the price of land was low. It plans to develop the land into a new facility when their current facility reaches its production limit, which it estimates will be in 4 years. On their classified balance sheet, Mason Corporation would classify this land as

a long-term investment.

Bad debt expense is?

a necessary risk of doing business on a credit basis

Voucher System Controls

a network of approvals by authorized individuals, acting independently, to ensure that all disbursements by check are proper

A receivable that is evidenced by a formal instrument and that normally requires the payment of interest

a note receivable

A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is:

a note receivable.

Internal Control

a process designed to provide reasonable assurance regarding the achievement of company objectives related to operations, reporting, and compliance

Generally Accepted Accounting Principles (GAAP) are:

a set of standards and rules recognized as a general guide for financial reporting

What is the meaning of the term concentration of credit risk?

a threat of nonpayment from a single large customer that could threaten the financial health of the company

What is a note receivable?

a written promise by the maker to the payee to pay a specified amount of money at a definite time

What is a note payable?

a written promissory note

If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, what is cost of goods sold under a periodic inventory system? a) $390,000 b) $370,000 c) $330,000 d) $420,000

a) $390,000 (60,000 + 380,000 - 50,000)

Please state where the following expenses/losses show up on the multi-step income statement a. Advertising Expense b. Interest Expense c. Depreciation Expense d. R&D Expense e. Casualty Loss f. Income tax expense

a. Advertising Expense - Operating Expense b. Interest Expense - Other Expenses and Losses c. Depreciation Expense - Operating Expense d. R&D Expense - Operating Expense e. Casualty Loss - Other Expenses and Losses f. Income tax expense - Last line item before net income

1. What are the five components of internal control?

a. Control Environment b. Risk Assessment c. Control Activities d. Information and Communication e. Monitoring

List the six principles of control activities and give examples of each:

a. Establishment of Responsibility: Control is most effective when only one person is responsible for a given task. (assigning a cashier to a register) b. Segregation of Duties: The work of one employee should. Without a duplication of effort, provide a reliable basis for evaluation the work of another employee. (The person who maintains and reconciles the accounting records should not be able to obtain custody of checks). c. Documentation Procedures: Pre-numbered documents and all documents should be accounted for. (numbered checks). d. Physical Controls: Safeguarding of assets. (safe, locks, and cameras) e. Independent Internal Verification: Internal review of data prepared by employees. (internal auditor) f. Human Resource Controls: Bond employees who handle cash, rotate employees, background checks. (send and employee on vacation to check his or her work)

The control features of a bank do NOT include: a. Having bank auditors verify the correctness of the bank balance per books b. Minimizing the amount of cash that must be kept on hand c. Providing a double record of all bank transactions d. Safeguarding cash by using a bank as a depository

a. Having bank auditors verify the correctness of the bank balance per books

Which of the following is an operating activity? a. Payment of cash to lenders for interest b. Receipt of cash for the sale of common stock c. Payment of cash dividends for the sale of common stock d. None of the above

a. Payment of cash to lenders for interest

Which of the following is NOT true about banks? a. They work with management to reconcile the company's accounts b. They are a significant internal control for the cash account c. The bank always provides the company with the company's bank statement d. The only way a company finds out about "not sufficient funds" is from the bank

a. They work with management to reconcile the company's accounts

A(n) ________ is another name for a trade receivable.

accounts receivable

What is another name for trade receivables?

accounts receivable

________ are usually part of trade receivables.

accounts receivable

Which ratio is used to calculate how quickly a company is collecting its debts?

accounts receivable turnover

Which ratio is used to calculate the average collection period in days?

accounts receivable turnover

Receivables are frequently classified as:

accounts receivable, notes receivable, and other receivables

Receivables are frequently classified as:

accounts receivable, notes receivable, and other receivables.

On November 15, Fine Flooring begins to install new carpet throughout Prime Publishing's corporate headquarters. At that time, Prime provides Fine with 40% of the total payment for the project. Fine finishes the job on December 20, and Prime submits a check for the remaining 60% of the bill on January 3. In this situation, both

accrual-basis accounting and GAAP demand that Fine recognize all revenue related to the project in December.

If a check written and paid by the bank for $638 is incorrectly recorded on the company's books at $683, the appropriate treatment on the bank reconciliation would be to

add $45 to the book's balance.

Lorna just finished compiling her company's income statement for the month ended March 31. Her next step in preparing the company's financial statements should be to

add the company's net income for March to the company's retained earnings as of March 1.

Restricted Cash example

add warranty claims and cleanup cost

deposit in transit

added to cash balance per bank

Collection of note by bank

added to cash balance per books

In a bank reconciliation, deposits in transit are

added to the bank balance

In a bank reconciliation, deposits in transit are:

added to the bank balance.

Which of the following would be classified as "other receivables"?

advances to employees

Free cash flow describes the net cash provided by operating activities after adjusting for

both capital expenditure and dividends paid

Which of the following explains the process of depreciation? A) valuing an asset at its fair value B) writing down an asset to its fair value each accounting period C) allocating the cost of an asset to expense over its useful life in a rational and systematic manner D) increasing the value of an asset over its useful life to reflect its book value

allocating the cost of an asset to expense over its useful life in a rational and systematic manner

Accounting activities

always include identifying and reporting economic events.

Which of the following items in a cash drawer at November 30 is not cash?

an NSF check

Who prepares the bank reconciliation statement?

an employee who has no other responsibilities related to cash

Irregularities involve

an unethical misstatement.

The first step in the recording process is to

analyze the transaction

Which of the following activities is most important for determining the nature of a transaction's effects on specific accounts? A) analyzing financial documents B) analyzing a ledger posting C) analyzing source documents D) analyzing a journal entry

analyzing source documnets

The interest rate for a three-month loan would normally be stated in terms of a(n) ________ rate of interest.

annual

The interest rate for a three-month loan is normally stated as a(n) _______ rate.

annual rate

Closing entries and a post-closing trial balance are steps in the accounting cycle that occur

annually

Capital expenditures

are the costs incurred to increase the operating efficiency or useful life of a plant asset

How is Bad Debt Expense reported on the income statement?

as an operating expense

Trade receivables and other receivables should be reported

as separate items on the balance sheet

Fly High Pilot Training Academy owns several planes used for instruction to new pilots. It follows accrual basis accounting. When it acquires a new plane it will record it as a(n)

asset and estimate its contribution to future operations on an annual basis.

Which of the following measures provides an indication of how efficient a company is in employing its assets?

asset turnover.

What is the usual order of accounts in the general ledger?

assets, liabilities, revenues, and expenses

The presence of ________ increases internal control when mail receipts are processed.

at least two mail clerks

The accounts receivable turnover is needed to calculate which of the following?

average collection period

A company makes a credit sale of $750 on June 13, terms 2/10, n/30, on which it grants a return of $50 on June 16. What amount is received as payment in full on June 23? a) $700 b) $686 c) $685 d) $650

b) $686 ((750-50) * .98)

Bufford Corporation had reported the following amounts at December 31, 2022: sales revenue $184,000, ending inventory $11,600, beginning inventory $17,200, purchases $60,400, purchase discounts $3,000, purchase returns and allowance $1,100, freight-in $600, and freight-out $900. Calculate the cost of goods available for sale. a. $69,400 b. $74,100 c. $56,900 d. $197,700

b. $74,100

What are the two main purposes of reconciling the bank account? a. Checking for errors and NSF checks b. Checking for errors and recognizing time lags c. Recognizing time lags and checking for outstanding checks d. Checking for NSF checks and outstanding checks

b. Checking for errors and recognizing time lags

Which example below is NOT a correct example of the control principle listed? a. Segregation of duties - Requiring separate people to record and have custody of cash b. Documentation procedures - Requiring a background check for new hires c. HR Controls - Forcing employees to take vacations d. Establishment of responsibility - individuals each have unique passwords e. Physical control - Safety deposit box for cash

b. Documentation procedures - Requiring a background check for new hires

Under the direct write-off method, the effect when a specific account is written off is: I. Net Income decreases II. Net Realizable Value decreases III. Cash decreases IV. Total assets decrease

b. I, II, IV

When an account is written off as uncollectible under the allowance method: I. Net realizable value decrease II. The allowance for doubtful account decreases III. Only balance sheet accounts are affected IV. Bad debt expense increases a. I, II, III b. II, III c. I, II, IV d. I, IV c. I, II, IV d. I, IV

b. II, III

Which example below is NOT a correct example of the control principle listed? a.Segregation of duties - Requiring separate people to record and have custody of cash b.Documentation procedures - Requiring a background check for new hires c.HR Controls - Forcing employees to take vacations d.Establishment of responsibility - individuals each have unique passwords e.Physical control - Safety deposit box for cash

b.Documentation procedures - Requiring a background check for new hires

A necessary risk of doing business on a credit basis is

bad debt expense

Differences between the ________ and the balance in the company's general ledger are caused by time lags, errors by the bank, and errors by the company.

balance on the bank statement

Deposits in transit would be added to the ________ on a bank reconciliation.

balance per bank

In a bank reconciliation, outstanding checks would be subtracted from the ________ section.

balance per bank

Where should both the gross amount of receivables and the allowance for doubtful accounts be reported?

balance sheet

Which financial statement summarizes the financial position of a company?

balance sheet

Tonelli Trucking buys a $65,000 truck on credit. Which financial statement will be affected by this transaction?

balance sheet only

The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is:

bank service charges

A patent that has a legal life of 20 years and a useful life of less than 20 years should

be amortized over its useful life.

Why are deposits in transit and outstanding checks reconciling items?

because of time lags

In selecting a depreciation method, a company should choose the method that

best measures the plant asset's contribution to revenue over its useful life.

The equity method should generally be used to account for an investment in stock when the level of ownership is

between 20% and 50%

You would add $450 to the ________ balance when a check correctly written and paid by the bank for $384 is incorrectly recorded on the company's books for $834.

book

If a company wants to reserve the right to purchase their issued bonds back from the bondholder, they should issue ________ bonds.

callable

A note receivable is a negotiable instrument that

can be transferred to another party by endorsement.

Additions to plant assets are:

capital expenditures

A company that is wholly owned by another company and provides financing to purchasers of its owner company's goods is called a ________ finance company.

captive

The net amount expected to be received in cash from receivables is termed the ________ realizable value.

cash

Accounts and notes receivable are reported in the current assets section of the balance sheet at:

cash (net) realizable value

Accounts and notes receivable are reported in the current assets section of the balance sheet at:

cash (net) realizable value .

Which of the following is not one of the sections of a cash budget?

cash from operations section

which statement correctly describes the reporting of cash?

cash is listed first in the current assets section

Which statement correctly describes the reporting of cash?

cash is listed first in the current assets section.

Effective ________ is the result of a well-managed cash budget.

cash management

Restricted Cash

cash that is not available for general use but rather is restricted for another purpose -reported separately on the balance sheet as "restricted cash" -ex: landfill companies maintain a fund of restricted cash to ensure they will have adequate funds to cover closing costs at the end of landfills useful life -classified as a current or noncurrent asset

The correct order of presentation in a classified balance sheet for the following current assets is:

cash, accounts receivable, inventory, prepaid insurance

A bank statement lists all ________ and ________, as well as additions and deductions from the bank balance that the company has not recorded.

checks paid; deposits received

Stockholders' equity represents

claims of owners

In their financial statements, Gordon Electronics groups all their current assets together, all their property, plant, and equipment together, all their current liabilities together, all their long-term liabilities together, and all their stockholders' equity together. This is an example of a

classified balance sheet

Which enhancing qualities of useful financial information are similar in that they both require the use of the same accounting principles and methods?

comparability and consistency

Includes all changes in stockholders' equity during a period except those resulting from investments by stockholders and distributions to stockholders.

comprehensive income

Bonds that can be converted into common stock at the bondholder's option.

convertible bonds

Tend to be large in size, ownership is easy to transfer, easy to raise capital, and owners have no personal liability

corporation

According to the historical cost principle, if an asset costs $50,000 when it was purchased, it would be reported at its ________ over the time the asset is held.

cost

Depreciation is a process of:

cost allocation

In 2022, Spencer Realty considered conducting a survey of every home to determine which homes may be put on the market within the next year. This information would be included in their financial statements as a predictor of potential future revenue. The cost of the survey would be $2.6 million, and the results would not differentiate potential business for Spencer Realty compared to other realtor companies. If Spencer Realty decided to not conduct the survey, that decision is likely based on which concept?

cost constraint

If a company purchases plastic that they will melt and form into milk jugs that they will then sell to milk plants, the cost of the plastic will be categorized as what type of expense?

cost of good sold

Cost of goods available for sale consists of two elements: beginning inventory and:

cost of goods purchased

To find the book value of a plant asset, you find the difference between the

cost of the asset and the accumulated depreciation to date.

A company receives $198, $13 of which is for sales tax. The journal entry to record the sale would include a

credit to Sales Tax Payable for $13

A company receives a discount for paying for merchandise purchased within the discount period. How will the amount of the discount be recorded in a perpetual inventory system?

credited to Inventory

If the cost method is used to account for an investment in common stock, dividends received should be

credited to the Dividend Revenue account.

Consolidated financial statements are useful to all of the following except

creditors of subsidiary companies.

When there is a change in estimated depreciation:

current and future years' depreciation should be revised.

From a liquidity standpoint, which is more desirable for a company to have?

current assets exceed current liabilities

In a classified balance sheet, assets are usually classified as:

current assets; long-term assets; property, plant, and equipment; and intangible assets

How does a company classify a net negative balance in its bank account?

current liability

Based on the key assumptions of financial reporting, which of the following should be excluded from financial reports?

customer satisfaction and complaint reports

Which of the following should be excluded from the financial statements because it would not follow the monetary unit assumption?

customer satisfaction reports

Which of the following is not an enhancing quality of useful information? a. Comparability b. Consistency c. Verifiability d. Accountability e. Timeliness f. Understandability

d. Accountability

Which of the following is NOT a basic principle of cash management? a. Increase speed of receivables collection b. Monitor payment of liabilities c. Plan timing of major expenditures d. Always invest idle cash in the company

d. Always invest idle cash in the company (cash on hand earns nothing, want to make a liquid and risk-free investment)

Which of these would cause inventory turnover to increase the most? a. Increasing the amount of inventory on hand b. Keeping the amount of inventory on hand constant but increasing sales c. Keeping the amount of inventory on hand constant but decreasing sales d. Decreasing the amount of inventory on hand and increasing sales

d. Decreasing the amount of inventory on hand and increasing sales

The payee receives more interest if 360 days are used instead of 365 when calculating interest on a promissory note with the maturity date stated in terms of

days

Assets, expenses, and dividends normally have a _________ balance

debit

A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $4 in cash. In recording the check:

debit Cash Over and Short for $2.

Lloyd's Landscaping Service purchased $3,500 worth of landscaping supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $1,000 on hand. What adjusting entry should be made on June 30?

debit Supplies Expense $2,500; credit Supplies $2,500

A check is written to replenish a $100 petty cash fund when the fund contains receipts of $94 and $2 in cash. In recording the check:

debit cash over and short for $2 --> shortage of $2

Maria Mancini, an accountant for Smith Corporation, opens all mail from Greene National Bank. When she receives a ________ for a(n) ________, cash is reduced.

debit memorandum; NSF check

Which of the following entries will be used when a merchandiser sells goods on account? Assume the merchandiser expects payment within 30 days. Select all that apply.

debit to Accounts Receivable credit to Sales Revenue

Bent Corporation issues 500, 10-year, 6%, $4,000 bonds dated January 1, 2022, at 96. The journal entry to record the issuance will show a

debit to Cash for $1,920,000.

Jordan Corporation issues 100, 5-year, 8%, $2,000 bonds dated January 1, 2022, at 96. The journal entry to record the issuance will show a

debit to Cash for $192,000

A retailer acquires merchandise for resale. How would this be recorded in a perpetual inventory system?

debited to the Inventory account

A business ________ Accounts Receivable (asset account) and _________ Service Revenue (shareholder account) when it has performed a service but has not yet received payment

debits; credits

Companies can borrow money if they need a source of outside funds. Borrowing money is called

debt financing.

Adjustments for prepaid expenses:

decrease assets and increase expenses

To keep the accounting equation in balance, an increase in an asset may be coupled with a(n)

decrease in another asset

Adjustments for unearned revenues:

decrease liabilities and increase revenues

The payment of a liability for supplies previously purchased

decreases both cash and accounts payable.

The entry to recognize the bad debt expense ________ when the allowance method is used.

decreases current assets

Which of these would cause inventory turnover to increase the most

decreasing the amount of inventory on hand and increasing sales

Which of these would cause inventory turnover to increase the most? A) keeping the amount of inventory on hand constant but decreasing sales B) decreasing the amount of inventory on hand and increasing sales C) increasing the amount of inventory on hand D) keeping the amount of inventory on hand constant but increasing sales

decreasing the amount of inventory on hand and increasing sales

Outstanding checks

deduct from cash balance per bank

Bank service charge

deducted from cash balance per books

When viewing a bank statement, it is vital to remember that a bank considers a ________ as a ________ to an account.

deposit; credit

In 2022, Wagner Industries purchased a piece of equipment with an estimated useful life of 10 years. Each year, Wagner expenses 1/10 of the equipment's cost. This is an example of

depreciation

Which of the following should be disclosed in the balance sheet or the notes to the financial statements?

depreciation and amortization methods used, balances of major classes of assets, and amount of depreciation and amortization expense for the period.

Correctly calculating interest can be done in...

different ways

A note that is not paid in full at its maturity is called a ________ note.

dishonored

When a company uses prenumbered checks and requires an approved invoice for each check, it is using which internal control?

documentation controls

The use of prenumbered checks in disbursing cash is an application of the principle of:

documentation procedures

When can interest be included in the acquisition cost of a plant asset?

during the construction period of a self-constructed asset

Which is an indicator of profitability?

earnings per share ==> profitability ratio eps = net income - preferred dividends/weighted average shares outstanding

Economic Entity Assumption

economic entity can be separately identified and accounted for

Although some risks are inherent, what means of cash disbursements is the most effective and efficient?

electronic funds transfer (EFT)

A note receivable can be transferred to another party by

endorsement.

What do flowcharts help companies do?

enhance the understanding of the flow of documents, the processing steps, and the internal control procedures

A voucher system is a series of prescribed control procedures that are designed to

ensure that disbursements by check are proper.

The first step in transferring journal entry amounts to ledger accounts involves

entering in the appropriate ledger account the date and debit amount shown in the journal.

One advantage large companies enjoy is their ability to employ ________, who assist top management in the evaluation of

internal auditors; control systems.

Bellswood Jewelers uses an ID card scanner and six-digit code to allow entry into their jewelry vault. The six-digit code is the same for all employees. However, use of the ID card allows the system to identify who entered the vault. One day, a salesperson sees another salesperson's ID card lying unattended in the break room, and the employee uses the card to enter the vault and steal jewelry worth $36,840. Which principle of control activities was violated in this scenario?

establishment of responsibility

Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:

establishment of responsibility

When a company allows only designated personnel to handle cash receipts, it is applying the internal control principle of

establishment of responsibility

Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:

establishment of responsibility.

A cash budget would always ________ depreciation expense.

exclude

Which of the following is an example of a deferral? A) expensing a part of the cost of a building B) recording an expense in the same period in which it was paid C) expensing wages and salaries that will not be paid until the next period D) recording revenues that have been earned on account

expensing a part of the cost of a building

A Shareholder of Company ABC

external user

A bank interested in lending ABC money

external user

A customer interest in the company ABC's products

external user

A stock split decreases total retained earnings

false

A stock split increases total paid-in capital

false

Amounts paid out as dividends are expenses

false

Companies following GAAP should record expenses at the time they pay out the cash

false

Periodicity assumption assumes that company will continue for many future periods

false

The adjusted trial balance does not list temporary accounts.

false

The adjusted trial balance provides the primary basis for the preparation of only the balance sheet.

false

The contractual interest rate is the rate investors demand for loaning funds.

false

The market value of a bond is equal to its maturity value.

false

Borrowed $1,000,000 via an interest-bearing note

financing

Issued shares of equity for cash

financing

Adams Corp issues dividends of $3000 to its shareholders

financing activity

What are the three primary business activities?

financing, operating, investing

Example of Human Resource Controls

forcing employees to take a vacation

Notes receivable are written promises that are considered

formal instruments of credit.

A company that is concerned with identifying circumstances or events that have materiality and including the relevant information in their financial documents will be successful at complying with which principle in financial reporting?

full disclosure principle

Which principle would a company be violating if it withheld information that would make a difference to users of financial statements?

full disclosure principle

A $800,000 bond was retired at 98 when the carrying value of the bond was $824,000. The entry to record the retirement would include a

gain on bond redemption of $40,000.

What is the entire group of accounts maintained by a company called?

general ledger

Banks and financial institutions often purchase debt securities to

generate earnings

The main purpose of operating activities is to

generate revenue to increase profits.

Which of the following should not be included in the physical inventory of a company?

goods held on consignment from another company

________ is shown on a multiple-step but not on a single-step income statement.

gross profit

The CFO at Company ABC

internal user

The control features of a bank account do not include:

having bank auditors verify the correctness of the bank balance per books.

Mary Moore, ________ for Dexter Company, goes to the bank daily to make deposits.

head cashier

cash budget

helps users determine if the company will be able to meet its projected cash needs

The benefits to leasing include each of the following except:

higher resale value.

Eric Hansen is a receiving clerk who has just been denied a raise. He has approached his subordinate, who is the new storeroom clerk, about diverting inventory to sell for personal gain. This example of the ________, which may lead to

human element; collusion.

Fred is in the pre-employment verification phase Honesty Enterprises conducts for potential hires. Honesty will require Fred to provide a urine sample and will also check his references. Which principle of control activities is Honesty Enterprises exercising?

human resources controls

Analysis of an ethical case is done by

identifying all of the stakeholders and how alternatives impact each.

How must each transaction be recorded in the double-entry system?

in at least two different accounts

Where is the loss on disposal of a plant asset reported in the financial statements?

in the Other Expenses and Losses section of the income statement

Meyer Media produced several screenplays that they turned into movies. Each screenplay they use has a copyright. In which section of the financial statements should they report these copyrights?

in the intangible assets section of the balance sheet

Where is bad debt expense reported on the income statement?

in the operating expenses section

Management is considering purchasing a $10,000 piece of equipment but is worried about their expenses for the year.

income statement

Debits:

increase assets and decrease liabilities

Adjustments from accrued revenues:

increase assets and increase revenues

The effects of the basic accounting equation of performing services for cash are to :

increase assets and increase stockholders' equity

Adjustments for accrued liabilities:

increase liabilities and increase expenses.

During 2017, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity

increased $40,000

Physical controls do not include:

independent bank reconciliations

Example of Establishment of Responsibility

individuals each have unique passwords

Hiller Company uses the FIFO method of inventory costing because it wants to maintain a high current ratio during periods of

inflation

When a bond is issued at a premium...

interest expense over the life of the bond will be lower than the interest paid

Which of the following would be recorded in an income statement under "other revenues and gains"?

interest revenue

________ controls enhance the accuracy and reliability of the accounting records.

internal

Independent Internal Verification

it is the review of data prepared by employees: 1) companies should verify data periodically or on a surprise basis 2) an employee who is independent of the personnel responsible for the information should make the verification 3) discrepancies and exceptions should be reported to management

: A company should record its monthly transactions in the _______, transfer each amount to the _______, which then becomes part of the

journal; ledger; financial statements

When a bond is issued for more than its face value, the market rate of interest is ________ the interest rate stated on the bond.

less than

Salaries and Wages Expense should have been accrued on December 31st, but the entry was not made. The result of this oversight is that

liabilities are understated.

Periodicity Assumption

life of a business can be divided into artificial time periods

A ratio companies use to assess the ________ of receivables is the accounts receivable turnover.

liquidity

Evaluating the ________ of receivables is one of the five steps in sound management of accounts receivable.

liquidity

What is the accounts receivable turnover often used to analyze?

liquidity

Liabilities are classified on the balance sheet as current or

long-term

Reconciling the bank account

make the balance per books and the balance per bank agree with the correct/true amount

In a promissory note, the party making the promise to pay is the

maker

What are the two key parties to a promissory note?

maker and the payee

Segregation of Related activities

making different individuals responsible for related activities, purchasing and sales activities

The principles of internal control do not include:

management responsibility

By computing the present value of the principal paid at maturity and all interest payments to be made over the term of the bond, you can obtain the ________ of bonds.

market price

Which of the following would be reported on the balance sheet as a cash equivalent? Select all that apply.

money market fund 60-day certificate of deposit money market savings certificate

Which of the following is considered a cash equivalent?

money market funds

Slush Funds

money used for unauthorized and hidden payments "under the table"

Every year, the fraud prevention task force at Hula International reviews the employee handbook and company procedures to ensure that they are still applicable and up-to-date. This action is part of the _________ component of the internal control system.

monitoring

When the date of a note is stated in ________, the time factor in computing interest is the number of months divided by 12.

months

When calculating interest on a promissory note with the maturity date stated in terms of days, the payee receives ____ interest if 360 days are used instead of 365.

Gross profit will result if:

net sales are greater than cost of goods sold

What does the label NSF mean for a check?

no sufficient funds

A receivable that is evidenced by a formal instrument and that normally requires the payment of interest is

note receivable

A written promise by the maker to the payee to pay a specified amount of money at a definite time is called a

note receivable

Michael Co. accepts a $1,000, 3-month, 12% promissory note in settlement of an account with Tani Co. The entry to record this transaction is:

notes receivable $1000 accounts receivable $1000

Fran Company's ending inventory is understated by $4,000. What are the effects of this error on the current year's cost of goods sold and net income, respectively?

overstated and understated --> because inventory is too low, cost of goods sold will be too high (overstated) and since cost of goods sold (an expense) is too high, net income will be too low (understated).

Which of the following errors on a firm's adjusted trial balance would cause errors in the firm's retained earnings statement but would not affect its income statement nor cause its balance sheet or its adjusted trial balance to be out of balance? A) overstatement of both the Unearned Service Revenue amount by $200 and the Dividends amount by $200 B) overstatement of the Unearned Service Revenue amount by $200 and understatement of the Dividends amount by $200 C) understatement of the Unearned Service Revenue amount by $200 and overstatement of the Dividends amount by $200 D) none of these errors would lead to the scenario described above.

overstatement of both the Unearned Service Revenue amount by $200 and the Dividends amount by $200

The maker and the ____ are the two key parties to a promissory note.

payee

A ________ inventory system requires a physical count of goods on hand to compute the cost of goods sold.

periodic

Considerations that affect the selection of an inventory costing method do not include:

perpetual versus periodic inventory system

Which of the following choices contains only items that should be reported as cash on the balance sheet?

petty cash, cash on hand, cash in banks

On the balance sheet, cash is comprised of cash on hand, cash in banks, and

petty cash.

Printing check amounts by machine in indelible ink is an example of

physical controls.

A company that has current assets of $4.37 million and current liabilities of $2.86 million has working capital that is

positive

Examples of things paid for by Petty cash fund

postage due, working lunches, taxi fares

Which of the following has an asset-expense relationship? A) accrued expense adjusting entries B) liability accounts C) prepaid expense adjusting entries D) revenue accounts

prepaid expense adjusting entries

An adjusted trial balance is created after

preparing all adjusting entries.

From an accounting standpoint, the acquisition of a long-lived asset such as a building can be thought of as a long-term

prepayment for the use of the asset.

Usually excluded items that a company thinks are unusual or non-recurring

pro forma income

Bank Reconciliation

process of comparing the bank's balance with the company's balance

Earnings per share is considered a measure of a company's

profitability

The purpose of the post-closing trial balance is to:

prove the equality of the permanent account balances that are carried forward into the next accounting period.

If a company is concerned about extending credit to a risky customer, it could do any of the following except:

provide the customer a lengthy payment period to increase the chance of paying.

When goods are purchased for resale by a company using a periodic inventory system:

purchases on account are debited to purchases

Cash equivalents are highly liquid investments that are both

readily convertible and very close to their maturity dates.

The net amount expected to be received in cash from receivables is termed the cash ________ value.

realizable

Example of Independent Internal Verification

reconciliation of the electronic journal with the cash in the point- of - sale terminal

The Fair Value Adjustment account

relates to the entire portfolio of securities held by the company.

Over-the counter Receipts

require an intricate system to handle them- segregation of duties between the cashier, clerk, accountant, and supervisor

Employee fraud can be minimized by

requiring a voucher for all cash disbursements above an incidental amount.

Which of the following would help companies enforce the principle of establishing responsibility?

requiring identifying passcodes in order to carry out activities

Example of Segregation of Duties

requiring separate people to record and have custody of cash

Example of Documentation Procedures

requiring the original detailed receipt from employees for things such as travel cost, or requiring usage of company card for these costs

Crawford Fishing had a net income of $35,640 in 2022. They decided to pay $3,000 in dividends and keep the rest to help expand their production line. The profit that they keep to reinvest in the business is reported as

retained earnings

Net income will result during a time period when:

revenues exceed expenses

The corporate officers at KLM Distributors require the head of the information services department to attend monthly conferences related to emerging technology and potential for fraud. Which aspect of internal control is KLM addressing?

risk assessment

To find the asset turnover ratio, divide net ________ total assets.

sales by average

Which of the following is a contra revenue account? A) Sales Discounts B) Inventory C) Sales Revenue D) Freight-out

sales discounts

Which of the following will reduce Accounts Receivable?

sales returns

Which of the following is NOT a contra revenue account? A) Sales Allowances B) Sales Returns C) Sales Discounts D) Sales Revenue

sales revenue

________ has a normal credit balance.

sales revenue

Gross profit will result if

sales revenues are greater than cost of goods sold.

same; increase; increase

Food Universe, a chain of local grocery stores, utilizes ________ to discourage ________, but this only provides reasonable assurance of loss prevention.

security cameras; shoplifting

In a small-town retail store, the sales clerk is responsible for counting the cash in the cash register and comparing it to the cash register tape. The clerk then takes the cash and tape to the accountant, who verifies the count, prepares the deposit slip for the bank, and records the entry in the journal. Which cash receipt control is the company most in violation of with their current system?

segregation of duties

Insuring that the custodian of an asset does NOT have access to accounting records for that asset is an example of

segregation of duties

Which of the following is not an element of the fraud triangle?

segregation of duties

Which of the following is an example of an electronic funds transfer?

sending payroll data directly to banks for direct deposit to employee accounts

When checks are received in the mail by a retail company, which of the following internal controls provides assurance that the employees will not engage in undetected fraud?

separation of handling cash and recordkeeping

Which of the following accounts from a firm's adjusted trial balance would need to be considered when compiling the firm's income statement? A)Accounts Receivable B)Service Revenue C)Accounts Payable D)Retained Earnings

service revenue

Cash equivalents

short term, highly liquid investments that are 1) readily convertible and 2) investments with maturities of 3 months or less ex: treasury bills, commercial paper, money market funds

. The ability of an investing company to affect the operating and financial activities of another company, even though the investor holds less than 50% of the stock, is known as

significant influence

Mary Smith is the treasurer for Mill Company. What is her role in the voucher system?

signing checks

________ ratios measure the ability of a company to survive over a long period of time.

solvency

measure the ability of the company to survive over a long period of time

solvency ratio

A small business owner has two employees but each employee has a separate cash register drawer. This situation can be viewed as

supporting establishment of responsibility

A quality of earnings ratio:

that is less than 1 indicates that a company might be using aggressive accounting tactics --> to inflate revenue

If the estimated useful life of equipment changes, then this change requires

that the amount of the periodic depreciation be changed in the current year and in future years.

Niles Industries is a merchandising company. It currently holds $6,000 in consignment goods for Martin Corporation. In addition, it has $4,000 in FOB shipping point goods in transit to Delta Enterprises and $5,000 in FOB destination goods in transit to Troy Manufacturing. Finally, Niles has $7,000 in FOB destination goods in transit from Gregg Supply. For which group of goods does Niles hold the title?

the $5,000 in goods in transit to Troy Manufacturing

The element of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is...

the auditor's opinion

The operating cycle of a company is

the average time required to go from purchasing inventory to receiving cash from its sale.

Which of the following are similar in that they both receive a copy of the deposit slip at the end of a clerk's shift? Select all that apply

the bank and the accounting department

What is a T-account?

the basic form of an account that aligns information in three parts

Home and Hardware uses cash registers to ring up all customer purchases. In this situation, what will Home and Hardware use to verify their cash increases from sales?

the cash register tape

An investor knows the total assets and total liabilities of a company, but they are not sure how much of the assets and liabilities are current versus long-term. Based on this, the investor could calculate

the company's solvency but not their liquidity.

The lower-of-cost-or-market rule for inventory is an example of the application of:

the conservatism convention

. If 10% of the common stock of an investee company is purchased as an investment, the appropriate method of accounting for the investment is

the cost method

Entries from Bank Reconciliation

the depositor (company) must record each reconciling item used to determine the adjusted cash balance per books

the LIFO reserve is:

the difference between the value of the inventory under LIFO and the value under FIFO

The element of a corporation's annual report that describes the corporations accounting methods is..

the notes to the financial statements

When the due date of a note is stated in months, what is the time factor in computing interest?

the number of months divided by 12

Which of the following economic events is an accounting transaction?

the purchase of new computers

Which of these statements about Visa credit card sales is incorrect?

the retailer must wait to receive payment from the issuer

Which of these statements about Visa credit card sales is incorrect?

the retailer must wait to receive payment from the issuer.

. In recognizing a decline in the fair value of short-term stock investments, an Unrealized Loss account is debited because

the securities have not been sold.

What does the freight term "FOB destination" mean?

the seller pays the freight costs

: Gemini Group utilizes the voucher system. Which employee would sign the checks?

the treasurer

Why have some companies been forced to restate their financial statements?

they too broadly interpreted which types of investments could be treated as cash equivalents- the companies made themselves more liquid

control environment

think about the "tone at the top" does the company value integrity?

A note receivable can be transferred ________ by endorsement.

to another party

Why should a bank reconciliation be prepared?

to explain any difference between the company's balance per books and the balance per bank

Why might receivables be sold?

to generate cash quickly

What is the reason for requiring a voucher on all cash disbursements above an incidental amount?

to minimize employee fraud

What is the primary purpose of the statement of cash flows?

to provide information about cash receipts and cash payments

McGinnis Construction is a cash-basis company with a fiscal year-end of June 30. McGinnis' employees earn a normal weekly wage of $12,500 during a five-day work week. June 30 falls on a Thursday for the current year. McGinnis also performed services of $40,900 during the last four days of June, but they are not paid in full until July 8. As a result of operations, there will be an ________ of McGinnis' net income for the most recent fiscal year of

understatement; $30,900.

If a supplier does not offer a discount for early payment, a company should

use the full payment period before paying bills.

Occupational Fraud

using your own occupation for personal gain through the misuse or misapplication of the company's resources or assets

An employee is filling out a voucher with the appropriate information about a liability. Which of the following documents does the employee most likely need to complete this task?

vendor invoice

If a company spends $12 million dollars for a warehouse, when should the cost be written off?

ver the useful life of the warehouse

Which of the enhancing qualities of useful financial information is most related to the fundamental quality of faithful representation?

verifiability

In April, Keller Associates carries out a two-week consulting project for Apex Industries. The total bill for the project is $25,000, and payment is due on May 31. Apex sends Keller a check for $25,000 on May 15. Keller deposits the check on May 18 and recognizes all revenue related to the Apex project as of that date. In this scenario, Keller has A

violated the revenue recognition principle because this principle requires that all revenue related to the Apex project be recognized in April.

If the allowance method is used to account for uncollectible accounts, when is bad debt expense debited?

when management estimates the amount of uncollectibles

A department store uses a perpetual inventory system. At year-end, the balance in the merchandise inventory account is $2 million. Assuming that the inventory records have been maintained properly, a year-end physical inventory

will probably indicate less than $2 million in merchandise on hand.

Which of the following items would most likely be paid from a petty cash fund?

working lunches for employees

A company can accelerate its cash receipts by all of the following except:

writing off receivables.

When recording the cost of land, companies should record more than just the land's purchase price. List some costs that should be included.

· Closing costs · Building removal - salvaged materials · Demolition costs · Attorney fees · Accrued taxes

What are the four phases of the product life cycle and what trends in cash flows are seen with each phase?

· Introductory and growth phases- negative investing and operating cash flows, and high financing cash flows · Maturity phase - cash flows from investing and operating become positive, financing cash flows begin to decrease · Decline phase - cash flows from operating begin to decrease, financing may become negative

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