Accounting 2103
A corporation purchased 1,000 shares of its own $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale?
$0
Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the first year.
$0.50 and $0.00
On June 1, Davis Inc. issued an $84,000, 5%, 120-day note payable to Garcia Company. Assume that the fiscal year of Garcia ends June 30. Using the 360-day year, what is the amount of interest revenue recognized by Garcia in the following year?
$1,062
The following units of an inventory item were available for sale during the year: Beginning inventory 10 units at $55 First purchase 25 units at $60 Second purchase 30 units at $65 Third purchase 15 units at $70 The firm uses the periodic inventory system. During the year, 60 units of the item were sold. The value of ending inventory using FIFO is
$1,375
The following lots of a particular commodity were available for sale during the year: Beginning inventory 5 units at $61 First purchase 15 units at $63 Second purchase 10 units at $74 Third purchase 10 units at $77 The firm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of cost of good sold for the year according to the average cost method?
$1,380
The following units of an inventory item were available for sale during the year: Beginning inventory 8 units at $47 First purchase 16 units at $55 Second purchase 28 units at $21 Third purchase 13 units at $63 The firm uses the periodic inventory system. During the year, 26 units of the item were sold. The value of ending inventory rounded to nearest dollar using average cost is: (Round average cost per unit to three decimal place.)
$1,598
The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year rounded to nearest dollar using the average cost method?
$1,685
Lee Company has the following information for the pay period of December 15 - 31: Gross payroll $16,000 Federal income tax withheld $4,000 Social security rate 6% Federal unemployment tax rate 0.8% Medicare rate 1.5% State unemployment tax rate 5.4% Assuming no employees are subject to ceilings for taxes on their earnings, Salaries Payable would be recorded for
$10,800
The following accounts were taken from the Adjusted Trial Balance columns of the work sheet: Accumulated Depreciation $ 3,200 Fees Earned 17,400 Depreciation Expense 1,300 Insurance Expense 400 Prepaid Insurance 4,800 Supplies 900 Supplies Expense 3,800 Net income for the period is
$11,900
A building with an appraisal value of $127,378 is made available at an offer price of $157,320. The purchaser acquires the property for $31,538 in cash, a 90-day note payable for $29,006, and a mortgage amounting to $58,756. The cost basis recorded in the buyer's accounting records to recognize this purchase is
$119,300
Assuming a 360-day year, when a $12,600, 90-day, 9% interest-bearing note payable matures, total payment will be ______ . Round your answer to the nearest whole dollar.
$12,884
Davis and Thompson have earnings of $850 each. The social security tax rate is 6% and the Medicare tax rate is 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer's total FICA tax for this payroll period?
$127.50
If total liabilities decreased by $46,000 during a period of time and stockholders' equity increased by $60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is a
$14,000 increase
Stockton Company Adjusted Trial Balance December 31 Cash 5,286 Accounts Receivable 2,702 Prepaid Expenses 732 Equipment 15,746 Accumulated Depreciation 1,260 Accounts Payable 1,743 Notes Payable 5,631 Common Stock 1,000 Retained Earnings 11,855 Dividends 464 Fees Earned 7,149 Wages Expense 2,281 Rent Expense 735 Utilities Expense 407 Depreciation Expense 167 Miscellaneous Expense 118 Totals 28,638 28,638 Determine the retained earnings ending balance.
$14,832
If total assets decreased by $88,000 during a period of time and stockholders' equity increased by $71,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is
$159,000
Equipment with a cost of $220,000 has an estimated residual value of $30,000 and an estimated life of 10 years or 19,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,100 hours?
$19,000
Assume that social security taxes are payable at a 6% rate and Medicare taxes are payable at a 1.5% rate with no maximum earnings, and that federal and state unemployment compensation taxes total 4.6% on the first $7,000 of earnings. If an employee earns $2,500 for the current week and the employee's year-to-date earnings before this week were $6,800, what is the total payroll taxes related to the current week?
$196.70
A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?
$2,000 gain
Thomas Martin receives an hourly wage rate of $40, with time and a half for all hours worked in excess of 40 hours during a week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $350; social security tax rate, 6.0%; and Medicare tax rate, 1.5%. What is the gross pay for Martin?
$2,080
Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the Merchandise Inventory account?
$20,580
Calculate the gross profit for Jefferson Company based on the following: Sales $764,000 Selling Expenses 42,500 Cost of Merchandise Sold 538,000
$226,000
After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $340,000 and Allowance for Doubtful Accounts has a balance of $51,000. What is the net realizable value of the accounts receivable?
$289,000
Gunnar Company gathered the following reconciling information in preparing its September bank reconciliation. Calculate the adjusted cash balance per books on September 30. Cash balance per books, 9/30 $2,750 Deposits in transit 200 Notes receivable and interest collected by bank 630 Bank charge for check printing 50 Outstanding checks 1,250 NSF check 290
$3,040
Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the third year.
$3.25 and $0.25
Nebraska Inc. issues 3,000 shares of common stock for $45,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for
$30,000
Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $800,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is
$32,000
A corporation has 50,000 shares of $28 par stock outstanding that has a current market value of $150 per share. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately
$37.50
The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. The company had no beginning inventory on May 1. Date Blankets Units Cost May 3 Purchase 5 $20 10 Sale 3 17 Purchase 10 $24 20 Sale 6 23 Sale 3 30 Purchase 10 $30 Assuming that the company uses the perpetual inventory system, determine the ending inventory value for the month of May using the FIFO inventory cost method.
$372
On January 1, $2,000,000, 5-year, 10% bonds, were issued for $1,960,000. Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the semiannual amortization amount is
$4,000
A sales invoice included the following information: merchandise price, $5,400; terms 1/10, n/eom; FOB shipping point with prepaid freight of $449 added to the invoice. Assuming that a credit for merchandise returned of $900 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller?
$4,904
The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is
$40,400
Anderson Co. issued a $42,761, 60-day, discounted note to National Bank. The discount rate is 11%. At maturity, assuming a 360-day year, the borrower will pay
$42,761
As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, stockholders invested an additional $73,000 and received $33,000 in dividends from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000 and liabilities were $270,000?
$45,000
On January 1, the Elias Corporation issued 10% bonds with a face value of $50,000. The bonds are sold for $46,000. The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, ten years from now. Elias records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 of the first year is
$5,400
Rodgers Company gathered the following reconciling information in preparing its May bank reconciliation. Calculate the adjusted cash balance per books on May 31. Cash balance per books, 5/31 $5,400 Deposits in transit 375 Notes receivable and interest collected by bank 650 Bank charge for check printing 40 Outstanding checks 2,400 NSF check 140
$5,870
Assuming a 360-day year, when a $50,000, 90-day, 9% interest-bearing note payable matures, total payment will be
$51,125
On May 1, Pierce Company purchased $60,000 of Stanton Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, Pierce received its first semiannual interest. On February 1, Pierce sold $50,000 of the bonds at 103 plus accrued interest. What are the total proceeds from the February 1 sale?
$52,000
The inventory data for an item for November are: Nov. 1 Inventory 20 units at $19 4 Sold 10 units 10 Purchased 30 units at $20 17 Sold 20 units 30 Purchased 10 units at $21 Using a perpetual system, what is the cost of the merchandise sold for November if the company uses FIFO?
$580
Stockton Company Adjusted Trial Balance December 31 Cash 7,530 Accounts Receivable 2,100 Prepaid Expenses 700 Equipment 13,700 Accumulated Depreciation 1,100 Accounts Payable 1,900 Notes Payable 4,300 Common Stock 1,000 Retained Earnings 12,940 Dividends 790 Fees Earned 9,250 Wages Expense 2,500 Rent Expense 1,960 Utilities Expense 775 Depreciation Expense 250 Miscellaneous Expense 185 Totals 30,490 30,490 Determine the total liabilities for the period.
$6,200
If a company values inventory at the lower of cost or market, which of the following is the value of merchandise inventory on the balance sheet? Apply the lower-of-cost-or-market method to inventory as a whole. Inventory Quantity Unit Cost Price Unit Market price Product C 420 $6 $5 Product D 370 12 14
$6,960
If the cost of an item of inventory is $60 and the current replacement cost is $75, the amount included in inventory according to the lower of cost or market is
$60
An employee receives an hourly rate of $15, with time and a half for all hours worked in excess of 40 during the week. Payroll data for the current week are as follows: hours worked, 48; federal income tax withheld, $120; social security tax rate, 6%; and Medicare tax rate, 1.5%; state unemployment compensation tax, 3.4% on the first $7,000; federal unemployment compensation tax, 0.8% on the first $7,000. What is the net amount to be paid to the employee?
$601.50
The accounts in the ledger of Monroe Entertainment Co. are listed below. All accounts have normal balances. Account Payable $449 Fees Earned $2,556 Accounts Receivable 889 Insurance Expense 586 Prepaid Insurance 2,123 Land 2,807 Cash 2,058 Wages Expense 579 Dividends 560 Common stock 6,597 Total assets are
$7,877
The balance in the office supplies account on January 1 was $7,000, supplies purchased during January were $3,000, and the supplies on hand at January 30 were $2,000. The amount to be used for the appropriate adjusting entry is
$8,000
On January 1 of the current year, the Barton Corporation issued 8% bonds with a face value of $95,000. The bonds are sold for $90,250. The bonds pay interest semiannually on June 30 and December 31, and the maturity date is December 31, five years from now. Barton Corporation records straight-line amortization of the bond discount. The bond interest expense for the year ended December 31 is
$8,550
Addison, Inc. uses a perpetual inventory system. The following is information about one inventory item for the month of September: Sep. 1 Inventory 20 units at $20 4 Sold 10 units 10 Purchased 30 units at $25 17 Sold 20 units 30 Purchased 10 units at $30 If Addison uses FIFO, the cost of the ending merchandise inventory on September 30 is
$800
A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to
$9,070
Computer equipment was acquired at the beginning of the year at a cost of $57,000 that has an estimated residual value of $9,000 and an estimated useful life of 5 years. Determine the second-year depreciation using the straight-line method.
$9,600
The calculation for annual depreciation using the units-of-output method is
(Depreciable cost / Estimated output) × Actual yearly output
-Services provided to customers on the last day of the month were not billed. -No adjustment was made for supplies used up during the month. -An attorney has earned 1/2 of a retainer fee that was received and recorded last month. No adjustment was recorded for the amount earned. -Interest earned on a note receivable was not recorded. -Property taxes are paid annually. The estimated monthly amount for the taxes was not recorded. -Wages are paid every Friday for the 5-day work week. The month ended on Monday and no adjustment was recorded. -A tenant paid 6 months' rent in advance when he moved in on the first day of the month. No entry was made on the last day of the month. -Depreciation on equipment was not recorded.
-Assets and stockholders' equity understated -Assets and stockholders' equity overstated -Liabilities overstated and stockholders' equity understated -Assets and stockholders' equity understated -Liabilities understated and stockholders' equity overstated -Liabilities understated and stockholders' equity overstated -Liabilities overstated and stockholders' equity understated -Assets and stockholders' equity overstated
The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 10,000 were subsequently reacquired. What is the number of shares outstanding?
30,000
Taking advantage of a 2/10, n/30 purchases discount is equal to a yearly savings rate of approximately
36%
When merchandise purchased on account is returned under the perpetual inventory system, the buyer would debit
Accounts Payable
The journal entry to record the conversion of a $6,300 accounts payable to a notes payable would be
Accounts Payable 6,300 Notes Payable 6,300
Emma Co. sold to Isabella Co. merchandise on account FOB shipping point, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the discount period
Accounts Payable—Emma Co., debit $15,450; Cash, credit $15,450
What is the major difference between a periodic and perpetual inventory system?
All of the answers are correct.
Which of the following is true in regards to a limited liability company
All of these choices are correct
Too much inventory on hand
All of these choices are correct.
Which statement is not true?
All receivables that are expected to be realized in cash beyond 265 days are reported in the non-current assets section.
Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?
Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000
When a company uses the allowance method of accounting for uncollectible receivables, which entry would not be found in the general journal?
Bad Debt Expense 500 Accounts Receivable, Bob Smith 500
The entry to record the issuance of common stock at a price above par includes a debit to
Cash
What is the first account that should be listed in the post closing trial balance?
Cash
Which of the following is not a characteristic of a corporation?
Cash dividends paid by a corporation are deductible as expenses by the corporation.
Office supplies were sold by Janer's Cleaning Service at cost to another repair shop, with cash received. Which of the following entries for Janer's Cleaning Service records this transaction?
Cash, debit; Office Supplies, credit
Which type of accountant typically practices as an individual or as a member of a public accounting firm
Certified Public accountant
Alma Corp. issues 1,000 shares of $10 par common stock at $14 per share. When the transaction is recorded, credits are made to
Common Stock, $10,000, and Paid-In Capital in Excess of Par, $4,000
Which of the following statements concerning taxation is accurate?
Corporations pay federal and state income taxes.
Zach Company owns 45% of the voting stock of Tomas Corporation and uses the equity method in recording this investment. Tomas Corporation reported a $11,900 net loss. Zach Company's entry would include a
Credit to the investment account for $5,355
If a fixed asset, such as a computer, was purchased on January 1 for $2,460 with an estimated life of 5 years and a salvage or residual value of $226, the journal entry for the monthly expense under straight-line depreciation is
Depreciation Expense 37.23 Accumulated Depreciation 37.23
Which of the following is not a business transaction
Erin pays her monthly personal credit card bill
The inventory costing method that reports the most current prices in ending inventory is
FIFO
If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are
FOB shipping point
Which of the accounts below would be closed by posting a debit to the account?
Fees Earned
Jarvis Corporation makes an investment in 100 shares of Saxton Company's common stock. The stock is purchased for $45 a share plus brokerage fees of $280. The entry for the purchase is
Investments—Saxton Company Stock 4,780 Cash 4,780
On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?
On June 1, $40,000 of treasury bonds were purchased between interest dates. The broker commission was $600. The bonds pay interest at 12%, which is paid semiannually on January 1 and July 1. How much interest revenue will be recorded on July 1?
If Dakota Company issues 3,500 shares of $5 par common stock for $63,000,
Paid-In Capital in Excess of Par will be credited for $45,500
All of the following are reasons to use an estimated method of costing inventory except
Purchase records are not maintained.
Basil Corporation issues for cash $1,000,000 of 8%, 10-year bonds, interest payable annually, at a time when the market rate of interest is 7%. The straight-line method is adopted for the amortization of bond discount or premium. Which of the following statements is true?
The carrying amount decreases from its amount at issuance date to $1,000,000 at maturity.
Which of the statements below indicates that a company earned a net income for the period?
The sum of the credits exceeds the sum of the debits in the Income Statement columns on the end-of-period spreadsheet.
Which of the following is not a role of accounting in business
To personally guarantee loans of the business
Which of the following accounts ordinarily appears in the post-closing trial balance?
Unearned Rent
Which of the following is not a characteristic of a corporation
a corporation's resources are limited to its individual owners' resources
When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at
a discount
All of the following are documents used for inventory control except
a petty cash voucher
A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement. An example of a credit memo is
a promissory note left for collection
Which of the following is not a difference between a retail business and a service business?
accounting equation
The operating expense recorded from uncollectible receivables can be called all of the following except
accounts receivable
Which of the following is not considered to be a liability
accounts receivable
An end-of-period spreadsheet includes columns for
adjusting entries
What effect will this adjustment have on the accounting records? Unearned Revenue 6,375 Fees Earned 6,375
all of these are true
A bank reconciliation should be prepared periodically because
any differences between the company's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected
The cash account in the company's ledger is a(n)
asset with a normal debit balance
The Valuation Allowance for Trading Investments account is found on the
balance sheet as an adjustment to the asset account
Notes receivable due in 390 days appear on the
balance sheet in the noncurrent assets section
Prior to the adjusting process, accrued expenses have
been incurred, not paid, and not recorded
The retained earnings statement shows
beginning and ending balance of retained earnings and all the changes in retained earnings as a result of net income (loss) and dividends
Those most responsible for the major policy decisions of a corporation are the
board of directors
The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed
book value
When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity, the bonds are
callable bonds
Expenditures that add to the utility of fixed assets for more than one accounting period are
capital expenditures
Investment in certificates of deposit and other securities that do not change in value are reported on the balance sheet as
cash and cash equivalents
Selling the bonds at a premium has the effect of
causing the interest expense to be lower than the bond interest paid
A list of the accounts used by a business is called the
chart of accounts
Accumulated Depreciation and Depreciation Expense are classified, respectively, as
contra asset, expense
A cash payment is recorded in the cash account as
credit
The arrangements between buyer and seller as to when payments for merchandise are to be made are called
credit terms
A $135 petty cash fund has cash of $18 and receipts of $120. The journal entry to replenish the account would include a
credit to Cash Over and Short for $3
Shores Sports rents canoes and kayaks. Below is the adjusted trial balance at December 31. Debit Credit Cash 1,500 Accounts Receivable 2,000 Interest Receivable 100 Prepaid Insurance 1,600 Notes Receivable (Long-Term) 2,800 Equipment 15,000 Accumulated Depreciation 3,000 Accounts Payable 2,400 Accrued Expenses Payable 3,920 Income Taxes Payable 2,700 Unearned Rent Fees 500 Common Stock 7,700 Dividends 2,000 Rent Fees Earned 37,000 Furniture Rental Revenue 1,200 Interest Revenue 100 Wages Expense 19,000 Depreciation Expense 1,800 Utilities Expense 320 Insurance Expense 700 Maintenance Expense 9,000 Income Tax Expense 2,700 58,520 58,520 The entry required to close the revenue accounts at the end of the period includes a
credit to Income Summary for $38,300
Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a
credit to Merchandise Inventory
On January 1, Gemstone Company obtained a $165,000, 10-year, 7% installment note from Guarantee Bank. The note requires annual payments of $23,492, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $11,550 and principal repayment of $11,942. The journal entry to record the issuance of the installment note for cash on January 1 would include a
credit to notes payable for $165,000
Merchandise inventory is classified on the balance sheet as a
current asset
The classified balance sheet will show which asset subsections?
current assets and property, plant, and equipment
Expenditures for research and development are generally recorded as
current operating expenses
Which side of the account increases the cash account?
debit
The journal entry to record the issuance of a note for the purpose of converting an existing account payable would be
debit Accounts Payable; credit Notes Payable
Allowance for Doubtful Accounts has a credit balance of $2,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates uncollectible receivables of $19,700. Which of the following entries records the proper adjustment for bad debt expense?
debit Bad Debt Expense, $17,600; credit Allowance for Doubtful Accounts, $17,600
Ruben Company purchased $100,000 of Evans Company bonds at 100. Ruben later sold the bonds at $104,500 plus $500 in accrued interest. The journal entry to record the sale of the bonds would be
debit Cash, $105,000; credit Investment-Evans Company Bonds, $100,000, Gain on Sale of Investments, $4,500, and Interest Revenue, $500
The adjusting entry to record the amortization of a discount on bonds payable is
debit Interest Expense, credit Discount on Bonds Payable
The journal entry for recording payment for the short-term lease of a fixed asset would
debit Rent Expense and credit Cash
The payment for the monthly rent will require which of the following entries?
debit Rent Expense and credit Cash
The balance in the prepaid rent account before adjustment at the end of the year is $32,000, which represents four months' rent paid on December 1. The adjusting entry required on December 31 is
debit Rent Expense, $8,000; credit Prepaid Rent, $8,000
copyrights accounts payable accounts receivable interest earned common stock
debit side credit side debit side credit side credit side
Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously written off would include a
debit to Accounts Receivable
An aging of a company's accounts receivable indicates that the estimate of uncollectible accounts totals $6,400. If Allowance for Doubtful Accounts has a $1,300 debit balance, the adjustment to record the bad debt expense for the period will require a
debit to Bad Debt Expense for $7,700
The Freeman Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1 at 96. The journal entry to record the issuance will show a
debit to Cash for $1,920,000
The entry to record the return of merchandise from a customer would include a
debit to Customer Refunds Payable
On February 12, Addison, Inc. purchased 6,000 shares of Lucas Company at $22 per share plus a $240 brokerage fee. On August 22, Lucas paid a $0.42 dividend per share. On November 10, 4,000 shares of Lucas stock were sold for $28 per share less a $160 brokerage fee. The journal entry to record the purchase would include a
debit to Investments for $132,240
On March 1, a company collects revenue in advance for the next twelve months and credits a liability account. The adjusting entry at year end on the work sheet would
decrease a liability account
A debit may signify a
decrease in liability accounts
Cash dividends
decrease stockholders' equity
The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to
decrease total assets and stockholders' equity
When the effective interest method is used, the amortization of the bond premium
decreases interest expense each period
The amount of the outstanding checks is included on the bank reconciliation as a(n)
deduction from the balance per bank statement
Accompanying the bank statement was a debit memo for an NSF check received from a customer. This item would be included on the bank reconciliation as a(n)
deduction from the balance per company's records
A check drawn by a company in payment of a voucher for $965 was recorded in the journal as $695. This item would be included in the bank reconciliation as a(n)
deduction from the balance per the company's records
If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents a(n)
deferral
The two methods of accounting for uncollectible receivables are the allowance method and the
direct write-off method
The income statement is prepared from
either the adjusted trial balance or the Income Statement columns of the end-of-period spreadsheet
The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the
equity method
Selling receivables is called
factoring
Interest on a note can be calculated without knowledge of the
fair value of the note
The adjusted trial balance verifies that total debits equals total credits before the adjusting entries are prepared.
false
Notes may be issued
for All of these choices are correct.
When callable bonds are redeemed below carrying value
gain on redemption of bonds is credited
Debtors are interested in the number of times interest charges are earned because they want to
have adequate protection against a potential drop in earnings jeopardizing their interest payments
A financial statement user would determine if a company was profitable or not during a specific period of time by reviewing the
income statement
Adjusting entries affect at least one
income statement account and one balance sheet account
Which of the following applications of the rules of debit and credit is true?
increase Equipment with a debit and the normal balance is a debit
Computer corporation is starting its computer programming business and has sold stock of $15,000. Identify how the accounting equation will be affected
increase in assets (cash) and increase in stockholders' equity
Wendell Company owns 28% of the common stock of Porter Company and accounts for the investment using the equity method. Assuming that Wendell Company purchased the stock several years ago, the balance in the investment account would be equal to the cost of the
investment plus Wendell's share of Porter's net income earned since the investment was purchased minus the total amount of dividends Wendell has received from Porter since the investment was purchased
Par value
is the monetary value assigned per share in the corporate charter
The ____ is where a transaction can first be found in the accounting records.
journal
Debts owed by a business are referred to as
liabilities
Fees payable would appear on the balance sheet as a(n)
liability
On December 31, Strike Company sold one of its batting cages for $20,000. The equipment had an initial cost of $310,000 and had accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year. What is the amount of the gain or loss on this transaction?
loss of $30,000
A $300,000 bond was redeemed at 98 when the carrying value of the bond was $292,000. The entry to record the redemption would include a
loss on bond redemption of $2,000
When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when
management estimates the amount of uncollectibles
The following are examples of external users of accounting information except
managers
Held-to-maturity securities
may be reported as current or noncurrent assets
A firm's internal control environment is not influenced by
monitoring policies
The higher the fixed asset turnover, the
more efficiently a company is using its fixed assets in generating sales
At the end of the fiscal year, the usual adjusting entry to prepaid insurance to record expired insurance was omitted. Which of the following statements is true?
net income for the year will be overstated.
On which financial statement will Income Summary be shown?
no financial statement
The receivable that is usually evidenced by a formal, written instrument of credit is a(n)
note receivable
Which of the following will be the same amount regardless of the cost flow assumption adopted?
number of items ordered
A fiscal year for a business
ordinarily begins on the first day of a month and ends on the last day of the following twelfth month
Which of the following would be subtracted from the balance per bank on a bank reconciliation?
outstanding checks
Which one of the following is not a factor that influences a business's control environment?
proofs and security measures
The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting
records revenues and expenses when they are incurred
The accumulated depletion account is
reported on the balance sheet as a deduction from the cost of the mineral deposit
The equity method of accounting for investments
requires the investment be increased by the reported net income of the investee
Companies may report comprehensive income on each of the statements below except
retained earnings statement
The monetary value charged to customers for the performance of services sold is called a
revenue
The gross increases in stockholders' equity attributable to business activities are called
revenues
In which of the following types of accounts are increases recorded by credits?
revenues and liabilities
Which of the following would not be included with the cash and cash equivalents on the balance sheet?
short-term receivables
Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items?
specific identification
Significant changes in stockholders' equity are reported in
statement of stockholders' equity
The most widely used depreciation method is
straight-line
All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair value concepts except
the ease of applying market values to assets and liabilities
All of the following statements regarding the ratio of liabilities to stockholders' equity are true except
the higher the ratio, the better able a business is to withstand poor business conditions and pay creditors
One potential advantage of financing corporations through the use of bonds rather than common stock is
the interest expense is deductible for tax purposes by the corporation
When a borrower receives the face amount of a discounted note less the discount, the amount is known as
the note proceeds
Which of the following is considered to be unearned revenue?
theater tickets sold for next month's performance
Which are the parts of the T account?
title, debit side, credit side
Proper payroll accounting methods are important for a business for all the reasons below except
to help a business with cash flow problems by delayed payments of payroll taxes to federal and state agencies
Which one of the statements below is not a purpose for the journal?
to show increases and decreases in accounts
An adjusting entry to accrue an incurred expense will affect total liabilities.
true
All of the following are needed for the calculation of straight-line depreciation except
units produced
A characteristic of a fixed asset is that it is
used in the operations of a business
The debit recorded in the journal to reimburse the petty cash fund is to
various accounts for which the petty cash was disbursed
A special form on which is recorded pertinent data about a liability and the particulars of its payment is called a(n)
voucher
In general, consolidated financial statements should be prepared
when a corporation owns more than 50% of the common stock of another company
A current liability is a debt that is reasonably expected to be paid
within one year
