Financial Accounting all chapters and problems

The financial statement effects of recording an allowance for estimated sales returns are that: (Select all that apply.)

equity decreases assets decrease net income decreases

Net income ______ retained earnings.

increases

The number of shares authorized is set forth in the company's:

articles of incorporation

Return on assets is calculated as net income divided by

average total assets.

One of the purposes of adjusting net income for changes to certain balance sheet accounts is to

convert items included in net income to cash.

A sales allowance ____ the amount owed by the customer for merchandise that is _____ by the customer.

decreases; retained

Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank are

deposits outstanding.

When we recognize depreciation, we allocate a portion of the asset's cost to each year in which the asset

provides benefits to the company.

The formula for calculating declining balance depreciation is the depreciation rate per year times

the book value at the beginning of the year.

Common types of analysis that help assess a specific company's performance include comparisons:

to the same industry over time between companies

Which of the following statements is correct regarding the adjusting entry to record interest accrued on a note payable?

Interest on the note payable is classified as an expense since it is a cost of borrowing.

T/F Risk ratios and profitability ratios represent common ratios used for analysis.

True

Which of the following are current liabilities?

Accounts payable Wages payable Note payable due in 3 months

The amount of cash owed to a company by its customers from the sale of goods or services is referred to as

Accounts receivable

Expense should be recorded to recognize the the cost of using long-lived assets, such as equipment, during the accounting period.

Depreciation

_______ is an allocation of the cost of buildings, vehicles, and equipment to expense over time as they are used.

Depreciation

Which of the following items requires separate disclosure after income from continuing operations?

Discontinued operations

The types of accounts which affect retained earnings are

Expenses and revenues

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased

Revenues cause retained earnings to

Increase

The statement of cash flows provides information about the cash inflows and cash outflows of an entity. For financing activities, a cash _________ occurs when cash is borrowed from a creditor, and a cash _________ occurs when a loan is repaid.

Inflow Outflow

Because prices change over time, costs reported for these accounts tend to differ among inventory cost methods.

Inventory Cost of Goods Sold

Which of the following are common financing activities?

Issuing common stock Purchasing treasury stock Payment of cash dividends Borrowing money

Which of the following are cash inflows from financing activities?

Issuing stock to investors for cash Issuance of bonds Borrowing from bank

A corporation's accumulated, undistributed net income or loss is referred as

Retained Earnings

For accounting purposes, depreciation is

an allocation of a cost of an asset

Preferred stock:

is useful for raising capital without reducing common stockholders' control. has preference as to dividends. generally does not have voting rights.

The journal entry to record employer payroll taxes affects ______.

liabilities and stockholders' equity

Deferred revenue should be classified as a(n)________ on the balance sheet. (Enter one word per blank)

liability

In order to determine cash flows from financing activities, we need to examine changes to

long-term liability and stockholders' equity accounts

X-Co issued 1,000 shares of its 5%, $10 par value, cumulative preferred stock for $100 cash per share. The journal entry to record this event includes:

$90,000 credit to Additional paid-in capital. $100,000 debit to Cash. $10,000 credit to Preferred stock.

Inventory is classified as

A Current Asset

Which of the following are common controls over cash receipts? (Select all that apply.)

- having two different employees take custody of the checks and make the deposit - opening mail daily and making a detailed list of checks received

Sales return

A customer returns merchandise purchased during the month and receives a refund of the full sales price.

A company that expects that some of its customers will not pay the agreed upon sales price must utilize the

Allowance Method

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold.

Book

When recording an adjustment for the cost of using equipment during the current accounting period, which two accounts are affected?

Equipment expense & accumulated depreciation

True or false: A corporation is owned by debt and equity holders.

False

Which of the following must employers by law withhold from their employees' pay?

Federal income taxes

Which of the following are not required payroll withholdings?

Federal unemployment tax (FUTA) Charitable contributions State unemployment tax (SUTA)

The definition of inventory includes which of the following items?

Items used currently in the production of goods to be sold Items held for resale Items currently in production for future sale

Common-size analysis is another term used for a ____ analysis

Vertical

Which ratio indicates the portion of each sales dollar above its cost of goods sold?

Which ratio indicates the portion of each sales dollar above its cost of goods sold?

The _____ ratio provides a more conservative measure of a company's ability to pay its current liabilities from current sources. Listen to the complete question

acid test

Which of the following accounts normally have a credit balance?

common stock and retained earnings

The Sarbanes-Oxley Act applies to

companies that are required to file with the SEC.

Treasury stock is reported in the financial statements as

contra equity account

The formula for the inventory turnover ratio is

cost of goods sold divided by average inventory.

A periodic inventory system measures cost of goods sold by

counting inventory at the end of the period.

At the end of the year, companies must record estimated contra revenues for estimated sales returns and allowances and sales discounts pertaining to

current year sales only.

Which of the following are common noncash items requiring adjustment to net income under the indirect method?

depreciation expense amortization expense

The two reasons why companies may issue incorrect financial statements are fraud and

errors

The ______ method of reporting cash flows from operating activities begins with net income.

indirect

The estimated selling price of inventory less any costs of completion, disposal, and transportation is referred to as:

net realizable value

Common stock that has not been assigned a par value is referred to as:

no-par stock

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ______ reduction to net income.

noncash

Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights:

preference in distribution of assets during dissolution of corporation first right to specified amount of dividends

If an adjusting entry's debit is to an expense account, then the credit must be to which of the following? (Select all that apply.)

prepaid expense liability

One of the most important internal controls for cash is the bank

reconciliation

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through

recording of adjusting entries

Changes to current assets and current liabilities require adjustment of net income under the indirect method because

related cash may be higher or lower than the accrued amount included in net income

After the adjusting entries have been completed, the ending balance in the Supplies account represents the cost of supplies ______.

remaining at the end of the accounting period

Diva, Inc. declared and paid $10,000 of dividends in 2018. The dividends result in a reduction of

retained earnings.

When an asset is no longer useful, but cannot be sold, it is called an asset _______

retirement

Consistent with the _____ recognition principle, companies record revenue at the time goods are provided to customers.

revenue

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides

revenue

Liabilities are classified as

revenues and expenses. operating and investing. current and long-term. operating and nonoperating. current and long-term.

_______ value is the amount the company expects to receive for the asset at the end of its service life

risidual

Internal control consists of plans to (Select all that apply.)

safeguard company assets & provide accurate and reliable accounting information.

A corporation is owned by its _______

shareholders

A corporate charter:

specifies the shares of stock to be issued. names the board of directors. describes the business activities.

The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the

straight line method

The employer's portion of FICA tax remitted to the taxing authority is:

the same as the employee's portion

uncollectible accounts are not anticipated or are immaterial.

uncollectible accounts are not anticipated or are immaterial.

A company issues 100,000 shares of $1 par value common stock for $17 per share. To record this transaction, the company would credit Additional Paid-in Capital for: $100,000. $1,600,000. $1,700,000. $1,800,000.

$1,600,000.

How is treasury stock reported in the financial statements?

As a contra equity account.

The cost of estimated accounts receivable that will not be collected is referred to as a

Bad Debt Expense

True or False: If a state has an unemployment tax program, no FUTA tax must be paid.

False

A cash discount representing a reduction in the amount to be paid by a credit customer if the customer pays within a specified period of time is also referred to as a(n)______ discount.

Sales

To perform a vertical analysis of an income statement, you would divide each line item on the statement by ______.

Sales

When a customer returns a product for a refund, in which account is the entry recorded?

Sales Return

The sum of cash, current investments, and accounts receivable divided by current liabilities equals the

acid-test ratio

A frequent reason for a stock split is to

cause the market price per share to decline

A prepayment that is originally recorded as an asset will be ______.

allocated to future accounting periods based on the cost of the asset used during the period

Meller purchases inventory on account. As a results, Meller's

assets will increase

A trade discount is a reduction from the list price, which is used to:

change prices without publishing a new catalog disguise real prices from competitors give quantity discounts to customers

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for

designing an internal control system.

Gerald Corporation purchases inventory FOB shipping point. The shipping costs are $300. The shipping costs are

included in Gerald's inventory.

Average days in inventory is calculated as 365 days divided by the

inventory turnover ratio.

Cash flows from _______ activities are both outflows and inflows of cash related to the acquisition and disposal of long-term assets.

investing

________ of _______ refers to the ability of reported earnings to reflect a company's true earnings, as well as the usefulness of reported earnings to predict future earnings.

quality of earnings

The estimated selling price of inventory less costs necessary to sell the inventory is referred to as net .

realizable value

The average collection period equals 365 days divided by ______.

receivables turnover

Otto Inc. retires old equipment with a book value of $2,400. Otto should

recognize a loss of $2,400

Straight-line deprecation is calculated as the depreciable cost divided by

the estimated service life of the asset.

Payroll withholdings are

the items subtracted from an employee's gross pay to arrive at take-home pay.

The LIFO inventory method assumes that the units sold are

the most recent units purchased.

The average collection period is calculated as 365 divided by

the receivable turnover ratio.

The lower of cost and net realizable value method causes losses in the value of inventory to be recognized in the period when

the value declines below cost.

The advantages to the corporate form of business include

transferability of ownership. ease of raising capital.

When the direct write-off method is used, an entry for bad debt expense is required

when the account receivable is determined to be uncollectible.

A company issues 100,000 shares of $1 par value common stock for $17 per share. To record this transaction, the company would credit Common Stock for: $100,000. $1,600,000. $1,700,000. $1,800,000.

$100,000.

Neue Inc. reports sales revenue of $200,000; in addition, its accounts receivable balance decreased by $15,000. Neue's cash flows from sales were:

$215,000

On January 1, year 1, London Corp. purchases equipment for $400,000. The equipment has a 5-year service life and a $50,000 residual value. London uses the double-declining-balance method of depreciation. What is the book value at the end of year 1?

$240,000

On January 1, year 1, Mark Corp. purchases equipment for $300,000. The equipment has a 10-year service life and a $50,000 residual value. Mark uses the double-declining-balance method of depreciation. What is depreciation expense for year 1?

$60,000

Stockit, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. Stockit has repurchased 10,000 of its own shares. The number of shares authorized equals ______ shares.

1,000,000

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ________ _______

Net income

A formal, signed credit agreement between a lender and a borrower is called a(n) _____ by the lender.

Note Receivable

Which of the following are cash outflows from financing activities?

Payment of dividends Repayment of note payable Repay borrowing from bank

Which of the following are detective controls?

Performance reviews Reconciliations Audits

By law, an employer is required to pay which of the following amounts as payroll taxes?

Social Security contributions Medicare contributions Federal unemployment tax

The number of shares issued represents the number of shares:

Sold

The types of expenditures that can occur subsequent to an asset's acquisition are

additions. repairs and maintenance. improvements.

In recording an accrual adjusting entry to account for revenues earned but not yet collected, ______.

an asset is increased since cash will be collected at a later date

The direct write-off method is not normally an acceptable method under GAAP because it fails to report _____.

assets and expenses correctly

The lower of cost and net realizable value method was developed to

avoid reporting inventory at an amount that exceeds the benefits it provides.

Prepaid rent appears in the _____

balance sheet because it is an asset

Preferred stock carries priority over common stock:

both for dividends and at dissolution

A trade discount is recognized

by reducing the revenue amount recorded.

Which of the following represents the first step in preparing a statement of cash flows in the correct order?

calculate the net cash flows from operating activities

The feature that distinguishes loss _______ from other liabilities is the uncertain outcome. (Enter one word per blank)

contingencies

After the adjusting entries have been completed, the balance in the Rent Expense account represents the:

cost of rent for the accounting period

The formula to calculate the depreciation for the units-of-production method or activity-based depreciation, is ((cost - residual value)/total estimated production) x ______.

current-year activity or production

In a double-entry accounting system, the _____ epresents the left side of the account

debit

No-par value stock is common stock that:

has not been assigned a par value

Preferred stockholders:

have the right to receive dividends only in the years the board of directors declares dividends.

An asset that has no physical substance is referred to as a(n)

intangible asset.

Companies use accelerated depreciation for tax purposes because

it reduces taxable income in the early years of the asset's life and provides better cash flows.

An asset that can quickly be turned into cash has the characteristic of

liquidity

______ refers to a company having enough cash or convertible assets to pay its current liabilities.

liquidity

Stockit, Inc. issued 100,000 shares of the 1,000,000 shares authorized. Stockit has repurchased 10,000 of its shares. The number of shares authorized represents the:

maximum number of shares Stockit is allowed to sell.

The most common source of occupational fraud is:

misuse of company resources

The two most common sources of occupational fraud are:

misuse of company resources financial statement manipulation

Disadvantages of the corporate form of business are

more paperwork additional taxation.

Receivable turnover equals:

net credit sales divided by average net receivables

The profit margin is calculated by dividing

net income by net sales.

The FIFO inventory method assumes that units remaining in ending inventory are them ________ units purchased. (Enter one word per blank)

newest

Gains and losses on the sale of long-term assets represent common _________ items needing adjustment under the indirect method

nonoperating

A formal credit arrangement between a creditor and debtor is called a(n)

note receivable.

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

payment on account Payment of salaries purchase of supplies Interest paid on bonds payment on account payable

A small amount of cash on hand to pay for minor purchases is commonly referred to as a(n)

petty cash

A discontinued operation is a business, or a component of business, that the organization

plans to discontinue has already discontinued

Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____.

prepaid expenses; assets

Two types of control activities are

preventive and detective controls

Which of the following are profitability ratios?

price-earnings ratio return on assets gross profit ratio

Which of the following are profitability ratios?

profit margin return on equity

The group of ratios that measure the earnings or operating effectiveness of a company are referred to as _____ ratios

profitability

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer.

A loss that is judged to be probable and for which the amount is reasonably estimable should be

recorded

Net cash flows provided by operating activities will be ______ when using the direct method compared to the indirect method.

the same

Total depreciation recorded over an asset's service life is:

the same regardless of the depreciation method used

James Corporation sells $1,000 goods on account. Sales returns were $40, and sales allowances were $50. Sales discounts for the period were $30. Net sales are

880

Roberts Inc. sells common stock for $10 million and pays dividends of $1 million. Net cash inflows from financing activities will be:

9 million

Sales allowance

A customer receives a partial refund of the sales price after the customer discovers a flaw in the merchandise. The customer keeps the merchandise.

In a bank reconciliation, which of the following will require a journal entry by the company?

Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books

Which of the following items are expensed? - Costs related to maintaining equipment -Major repair that increases future benefits -Successful legal defense of a patent -Replacing a major component

Costs related to maintaining equipment

Stockholders' equity accounts normally have a _______ balance

Credit

When a business provides services to a customer, and the customer promises to pay later, this is referred to as

Credit Sales

Cannery Company pays health insurance for its employees of $1,000 for the pay period. The journal entry to record this fringe benefit includes which of the following?

Credit accounts payable $1,000 Debit Salaries Expense $1,000

West Company pays health insurance for its employees of $2,000 for the pay period. The journal entry to record this fringe benefit includes which of the following?

Credit accounts payable $2,000 Debit Salaries Expense $2,000 Payroll tax expense is FUTA and/or SUTA, which are required taxes & The amount is not paid to employees, but is paid directly to the insurance company.

On March 1, 2018, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2018, and the payment date is April 1, 2018. The journal entry required on April 1, 2018, will include which of the following entries?

Credit cash $3,000. Debit dividends payable $3,000.

Preferred stock has a mixture of attributes of both equity and _________

Debt or liability

Which of the following is a ratio used to evaluate a company's solvency?

Debt to equity

Which of the following ratios are used to evaluate a company's ability to pay long-term debts?

Debt to equity ratio Times interest earned ratio

Straight-line, declining-balance, and activity-based refer to methods commonly used to _________ property, plant, and equipment.

Depreciate

Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?

Depreciation expense originally reduced net income, but it is a non-cash expense.

What is the first issue that needs to be addressed in order to properly report tangible and intangible assets?

Determining the amounts to be included in the assets' initial cost

Which of the following describes the acceptable methods that may be used to report cash flows from operating activities on the statement of cash flows?

Direct method Indirect method

For internal record keeping, most companies carry their inventory using the _____ basis.

FIFO

True or false: The entry for a sale to customers is different depending on whether the customer pays with cash or a check.

False

True or false: The times interest earned formula is net income divided by interest expense.

False

True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.

False

FICA is the acronym for the

Federal Insurance Contribution Act.

Using a percentage of each period's net credit sales to estimate bad debt expense is a(n) approach to measuring bad debts. (Enter only one word per blank.)

Income Statement

Which of the following statements is true?

Income statement accounts are temporary accounts, while balance sheet accounts are permanent accounts.

Which of the following stages of equity financing would come last for most public companies? Investment by the founders of the business. Initial public offering. Outside investment by "angel" investors and venture capital firms. Investment by friends and family.

Initial Public Offering

The times interest earned formula is calculated as earnings before interest and taxes divided by ________ _______

Interest expense

Items held for sale in the normal course of business are referred to as __________

Inventory

Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year?

Inventory Accounts receivable Accounts payable

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (Select all that apply.)

Inventory Cost of goods sold

__________ capital is the amount of money paid into a company by its owners.

Invested

Dividends payable is a(n) ______ account with a normal _______ balance and is recorded on the declaration date.

Liability Credit

The adjusting entry for a deferred revenue includes a debit to a(n) _________ account and a credit to a(n)______ account

Liability, Revenue

The most important advantage to the corporate form of business is

Limited Liability

The advantages of a corporation compared to a sole proprietorship or partnership include: Lower total taxes. The ability of stockholders to make operating decisions for their company. Limited liability. Less paper work.

Limited liability.

The current ratio, acid-test ratio, and average collection period are ratios that provide information about a company's:

Liquidity

Which term best describes a company having a suitable amount of cash or easily-convertible assets to pay incurred current liabilities?

Liquidity

What are the two classifications for liabilities?

Long-term Current

The direct write-off method violates which accounting concept?

Matching expenses to the related revenues

Which of these payroll taxes are paid by the employer and the employee? (Check all that apply.)

Medicare Social Security

Which of the following methods are not used for inventory costing? (Select all that apply.)

NIFO, simple average

Total revenues minus discounts, returns, and allowances are referred to as ___________ revenues.

Net

What is the formula to compute the return on assets?

Net income divided by average total assets.

What is the formula for the profit margin ratio?

Net income divided by net sales.

cumulative preferred stock

Preferred stock on which undeclared dividends accumulate until paid; common stockholders cannot receive dividends until cumulative dividends are paid.

Which of the following items are included in the numerator for the current ratio but are excluded from the numerator of the quick or acid-test ratio?

Prepaid expenses Inventory

Monroe Corporation is considering the purchase of new equipment. The equipment will cost $35,000 today. However, due to its greater operating capacity, Monroe expects the new equipment to earn additional revenues of $5,000 by the end of each year for the next 10 years. -Assuming a discount rate of 10% compounded annually, calculate the present value of annuity

Present value: 30,722.85 Should Monroe make the purchase? No

The _______ margin measures the income earned on each dollar of sales.

Profit

Which of the following would result in a cash outflow from investing activities?

Purchase of a machine for cash.

Which of the following are cash outflows from investing activities?

Purchase of building purchase of land purchase of long-term investments

Which inventory account includes the cost of components that will become part of the finished product but have not yet been used in production.

Raw materials inventory

Preparation of a bank_________ helps maintain control of cash accounts.

Reconciliation

Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzel-mania, Inc., for $40,000 on January 1. The market interest rate for bonds of similar risk and maturity is 7%. Salt Foods receives interest semiannually on June 30 and December 31.

Record the investment in bonds Investments Debit: 40000 Cash Credit: 40000

Which of the following are errors in accounting for cash?

Recording a cash collection of $4,000 but depositing $3,000 into the bank. The bank processing a check for $210 as $120. Recording a check for $168 for $186 in the cash account.

Which of the following are expenditures for assets subsequent to acquisition?

Repairs and maintenance Improvements Additions

Which of the following items are capitalized?

Replacing a major component Successful legal defense of a patent Major repair that increases future benefits

Which accounts require a credit entry to increase the account?

Retained earnings Accounts payable

Which of the following cash transactions are classified as cash inflows from investing activities?

Sale of equipment Sale of investments Sale of building

Which of the following are classified as cash inflows from investing activities?

Sale of land Sale of equipment

Which of the following is a discount in the amount to be paid if the customer pays within a specified time period?

Sales discount

The Public Company Accounting Reform and Investor Protection Act of 2002 is known as the

Sarbanes-Oxley Act.

Which is a significant noncash activity?

Signing a note payable in exchange for land.

A company's ability to pay its long-term debt is referred to as:

Solvency

The financial statement that provides information about cash receipts and cash disbursements for the period is the

Statement of cash flows

Margot, a prospective investor, wants to know how much cash Ziegler Inc. has on December 31. Margot can find the information in Ziegler's: (Select all that apply.)

Statement of cash flows & balance sheet

At year end, CurlZ Inc.'s inventory consists of 100 bottles of CleanZ with a cost of $1, and a selling price of $0.80 per bottle. It also has 100 boxes of DyeZ with a cost of $10, and a selling price of $11 per box. Using the lower of cost and net realizable value method, the year-end Inventory balance should include which of the following amounts?

The cost of $1,000 for the DyeZ boxes. The selling price of $80 for the CleanZ bottles.

Which of the following is an important criteria used to determine the reporting of a contingent liability?

The likelihood of future payment or loss

What are the two criteria used to determine whether a contingent liability is reported in the financial statements?

The likelihood of payment The ability to estimate the amount of payment

Common shareholders usually have all of the following rights except: To participate in the day-to-day operations. To share in the distribution of assets. To elect board of directors. To receive dividends when declared.

To participate in the day-to-day operations.

A common-size balance sheet presents each line item as a percentage of _____ _____

Total Assets

A common-size balance sheet will list each line item as a percentage of

Total assets

Which of the following does not differ among the different depreciation methods?

Total depreciation recognized over the asset's service life.

Which of the following items are intangible assets?

Trademarks, patent, copyright, & goodwill

Shares of stock that are repurchased are referred to as ________ stock.

Treasury

The contra account used to record a company's repurchase of its own common stock is the _______ stock account.

Treasury

The journal entry to record the declaration of a dividend includes ______.

a debit to Dividends a credit to Dividends payable

The declaration of a dividend results in ______.

an increase in Dividends an increase in liabilities

Using the perpetual inventory system, what is the effect of a sale of inventory on assets?

assets decrease by the cost of the inventory assets increase by the sales price of the inventory

Adam Corporation uses the cash-basis of accounting. Adam Corporation should record expenses when:

paid

Ronald Corporation purchases inventory with terms FOB destination. The shipping costs are $300. The shipping costs are

paid by the supplier.

Receipts, Inc.'s Sales were $200,000 while its Accounts receivable was $23,000 at the beginning of the year and $27,000 at the end. All sales were credit sales. Receipts' receivables turnover equals:

8.0

Which of the following is the formula for the current ratio?

Current assets divided by current liabilities.

Lester Corp. sells merchandise to a customer for $1,000. The company also collects state and local sales taxes of 6% and 4%, respectively. At the time of sale, Lester should record the following credit amounts.

Debit

Claire provides $100 of services to customers on account with terms 2/10, n/30. The Service Revenue account is credited for $100. If the customer pays within 10 days, Claire will record which of the following?

Debit Cash $98 Credit Accounts Receivable $100 Debit Sales Discount $2

Kim Corporation sells goods to a customer on account for $1,000, terms 2/10, n/30. When the customer pays on the 20th day, Kim will record which of the following?

Debit Cash for $1,000

Josh Corporation uses the perpetual inventory system. Josh sells goods to a customer on account for $2,000. The cost of goods sold is $1,500. What is the entry required to record the expense of the inventory sold?

Debit Cost of Goods Sold $1,500; credit Inventory $1,500

Clark uses the perpetual inventory system. Clark sells goods to a customer on account for $1,000. The cost of the goods sold was $700. Which of the following entries are required?

Debit Cost of Goods Sold $700; credit Inventory $700 Debit Accounts Receivable $1,000; credit Sales Revenue $1,000

Bell provides $500 of services to customers on account with terms 3/10, n/30. The Service Revenue account is credited for $500. If the customer pays within 10 days, Bell will record which of the following?

Debit Sales Discount $15

Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries?

Debit accumulated depreciation $40,000 Debit equipment $50,000 Debit loss on exchange $30,000 Credit equipment $120,000

Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries?

Debit accumulated depreciation $40,000 Debit loss on exchange $10,000 Credit equipment $90,000 Debit equipment $40,000

Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries?

Debit accumulated depreciation $70,000 Credit gain on exchange of asset $30,000 Credit equipment $90,000 Debit equipment $50,000

Mark records a journal entry with a debit to Bad debt Expense and a credit to Accounts Receivable. Mark is utilizing the:

Direct write-off method

Which of following accounting practices are conservative?

Estimating a larger allowance for uncollectible accounts Depreciating an asset over a shorter estimated service life

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n)____________ in the period the benefit expires.

Expense

The adjusting entry for a prepaid expense includes a debit to a(n) ______ account and a credit to a(n) ____ account.

Expense (Prepaid expense); Asset (Prob: Cash)

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption?

FIFO

Which of the following methods are available for costing inventory? (Select all that apply.)

FIFO,LIFO, special identification, and weighted-average

Which of these payroll taxes are paid only by the employer? (Check all that apply.)

FUTA SUTA

True or false: Adjusting entries ensure that assets in the balance sheet are reported at amounts that have been used up or expired during the period.

False

True or false: When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.

False

Which of the following payroll-related taxes must the employer pay by law?

Federal Insurance Contributions Act amounts Unemployment taxes

Which of the following are employer payroll costs?

Federal and state unemployment taxes Employer portion of Medicare tax

Cash flows from _______ activities include both inflows and outflows of cash from the external funding of a business.

Financing

Issuing stock to owners is classified as a(n) ______ activity

Financing

Repayments of formal, long-term debt contracts are classified as ______ activities.

Financing

The FIFO method assumes that units sold are the ______ units aquired.

First

Under what circumstances are accelerated depreciation methods most appropriate?

For an asset that will provide greater benefits in earlier years of its life. For an asset that will be used less in the later years of its life

An intentional error by an employee that results in theft is referred to as a ______.

Fraud

When a person intentionally deceives another person or company for personal gain, this is referred to as

Fraud

Published financial statements may be incorrect because of (Select all that apply.)

Fraud & Errors

Which of the following may be classified as contingent liabilities?

Frequent flyer program awards Future litigation losses Product warranties

Additional benefits such as health insurance, retirement benefits, or life insurance that are paid by the employer are called

Fringe benefits

Dusty would like to buy a new car in 6 years. He currently has $15,000 saved. He's considering buying a car for around $19,000 but would like to add a Turbo engine to increase the car's performance. This would increase the price of the car to $23,000. -If Dusty can earn 9% interest, compounded annually, how much will he have in six years?

Future value: 1.67 x 15000 = 25200 Will he be able to afford the car in 6 years? yes

The allowance method is required by

GAAP

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

GAAP-basis accounting.

profit ratio indicates the portion of each dollar of sales above the cost of goods sold.

Gross

Net sales revenue minus cost of goods sold is

Gross profit

Which of the following led to the passage of the Sarbanes-Oxley Act of 2002?

High profile accounting scandals during the early 2000s

Trend analysis and time-series analysis refer to ______ analysis.

Horizontal

Where is a note receivable reported in the balance sheet?

In either current or noncurrent assets, as appropriate.

The cost of goods not yet sold is recorded in the ______ account, whereas the cost of goods that are sold to customers is recorded in _____.

Inventory; cost of goods sold

The amount of money paid into a company by its owners is referred to as:

Invested capital

The purchase and sale of long-term assets and current investments are classified as _______ Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as ________ activities.

Investing activities Financing activities

Which statement is true about the straight-line method of depreciation?

It allocates an equal amount of depreciation to each year the asset is used.

Mark wants to determine whether a specific company has become more profitable over time. Mark should compare the company's performance to:

Its prior years performance

Clothing Frontiers began operations on January 1 and engages in the following transactions during the year related to stockholders' equity. - January 1 Issues 700 shares of common stock for $50 per share. - April 1 Issues 110 additional shares of common stock for $54 per share.

Jan 1: Debit Cash $35,000 and Credit common stock for $35,000

Long-term tangible assets include

Land, equipment, and buildings

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land?

Legal fees to secure title Costs to remove an old building Title insurance Grading the land

A(n) ________ is a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events. (Enter one word per blank)

Liability

Gross Profit is

Net Sales Revenue minus Cost of Goods Sold.

Noncash items, nonoperating items, and changes in current assets and liabilities are necessary adjustments to _________ _________ to prepare the operating section for the indirect format of the statement of cash flows.

Net income

Which of the following is an example of a cash inflow from a financing activity?

Receipt of cash from the issuance of common stock.

Which of these are liquidity ratios?

Receivables turnover Average collection period Current ratio

Salt Foods purchases forty $1,000, 7%, 10-year bonds issued by Pretzel mania, Inc., for $37,282 on January 1. The market interest rate for bonds of similar risk and maturity is 8%. Salt Foods receives interest semiannually on June 30 and December 31.

Record the investment in bonds: Debit - Investments 37282 Credit - Cash 37282 Record the receipt of the first interest payment Debit - Cash ($1400) & Investments ($91) Credit - Interest Revenue ($1491)

Which of following accounting practices are conservative?

Recording contingent litigation Depreciating assets over a shorter service life

Net revenues is calculated as total revenues minus which of the following items?

Sales returns Sales allowances Sales discounts

High profile accounting scandals in the early 2000s prompted the passage of the:

Sarbanes-Oxley Act

The LIFO inventory method assumes that the units that remain in ending inventory are

The oldest units that remain

If a company issues par-value stock, the amount credited to common stock will be: -The total market value of all the shares issued. -The par value per share times the number of shares issued. T-he difference between the market and the par value per share times the total number of shares issued. -The amount the board of directors chooses to assign to the shares.

The par value per share times the number of shares issued.

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700, Medicare $1,450, federal income tax $18,000 and state income tax $3,850. The journal entry to record wages paid includes a ______.

$100,000 debit to Salaries expense Reason: The credit to Cash is $70,000. Gross pay of $100,000 less $30,000 withholdings (6,700 + 1,450 + 18,000 + 3,850).

Ace Electric's income statement reports Sales of $100,000; Cost of goods sold of $46,000, Operating expenses of $34,000, Interest expense of $15,000, Income tax expense of $2,000, and Net income of $3,000. If you were to perform a vertical analysis of this income statement, you would divide each of these income statement line items by

$100,000. Divide each thing by sales 4 vertical analysis

Carola Inc. issues common stock for $20 million and pays dividends of $2 million. Net cash inflows from financing activities will be:

$18 million

During the current period, Schmidt Corp. sold equipment for $1,000, purchased new equipment for $10,000, paid an accounts payable balance of $2,500, and sold an investment costing $2,000 for $2,800. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$6,200 net outflow.

On October 1, 2018, Perry Corporation signed a 12-month, 8% interest-bearing promissory note for $10,000. Assume that all appropriate adjusting journal entries were made at 12/31. The journal entry required when the note matures on October 1, 2019 would include a debit to interest expense for

$600

Just In Thyme, Inc. has the following end of year equity balances: Common stock of $20,000; Additional paid-in capital of $30,000; and Retained earnings of $50,000. If Just In Thyme repurchases $10,000 of its stock, the total stockholders' equity balance would equal ______.

$90000

Pine Corporation provides $1,000 of services on account with terms 2/10, n/30. If the customer takes the discount and pays within 10 days, Pine will receive

$980

Relay Corporation provides services with a normal price of $105,000 and a trade discount of $5,000. Terms are 1/10, n/30 and the customers pay within 10 days. The net service revenue is

$99,000

Which of the following formulas is used in horizontal analysis to determine the percentage increase or decrease between two years?

(Current-year amount -- Prior-year amount)/Prior-year amount

The formula to calculate an activity-based depreciation rate is:

(cost - residual value)/estimated total production.

The formula for straight-line depreciation is

(cost - residual value)/service life.

Which of the following would be referred to as "accruals?" (Select all that apply.)

- Goods and services provided, not yet collected - Expenses incurred, not yet paid

The adjusting entry for an accrued revenue always includes:

- a debit to an asset account - a credit to a revenue account

List the four steps in preparing a statement of cash flows in the correct order.

- calculate the net cash flows from operating activities - determine the net cash flows from investing activities - determine the net cash flows from financing activities - combine operating, investing, financing activities

On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes: (Select all that apply.)

- credit to Prepaid Insurance - debit to Insurance Expense

When a company records an adjusting entry for services previously recorded as Deferred Revenue, it records which two of the following?

- credit to Revenue - debit to Deferred Revenue

Which of the following are long-term liabilities?

-20-year mortgage payable -Note payable due in 3 years x Common stock x Note payable due in 3 months

Which of the following steps are necessary to reconcile the bank balance and the cash account balance.

-Adjust the company's cash balance -Adjust bank's cash balance -Record items that reconcile the company's cash balance

What would cause a bank statement not to agree with the cash balance in the accounting records?

-Deposits outstanding that have been recorded on the company's records, but not on the bank's. -The bank made an error in recording a deposit made by the company. -The company made an error in recording a deposit. -The bank paid interest that the company has not recorded.

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated?

-Opening the mail and deposit of checks in the bank -Depositing checks into the bank and recording receipts in the accounting records

List the steps for a bank reconciliation in the correct order. (Drag the items to put them in the proper order with the first step on top.)

1. Adjust bank's balance 2.Adjust the company's balance 3. Update the company's cash by recording items in the previous step.

Select the section of the statement of cash flows in which each of these items would be reported using the indirect method. (Financing, operating, or investing) 1. Purchase of a patent 2. Depreciation expense 3. Decrease in accounts receivable 4. Issuance of a note payable 5. Increase in inventory 6. Collection of notes receivable 7. Purchase of equipment. 8. Exchange of long-term assests 9. Decrease in accounts payable 10. Payment of dividends

1. Investing activities 2. Operating activities 3. Operating activities 4. Financing activities 5. Operating activities 6. Investing activities 7. Investing activities 8. noncash activities 9. Operating activities 10. Financing activities

Bagel, Inc. issued 50,000 shares of the 100,000 authorized. It has since repurchased 5,000 of its shares. The number of shares outstanding equals ______ shares.

45,000

Petite Fashions issued 500,000 of its 2 million shares of authorized common stock. At the end of the accounting period, 450,000 shares are outstanding. How many shares of treasury stock does Petite Fashions have? 1.5 million shares. 450,000 shares. 50,000 shares. 0 shares.

50,000 shares.

Which of the following transactions are classified as a stock dividend?

A distribution of additional shares of a corporation's stock to current shareholders of the corporation.

A company purchases inventory or supplies and promises to pay within 30 to 45 days. No formal agreement is signed. This transaction is recorded as a(n)

Accounts Payable

basis accounting helps measure and report revenues and expenses in a way that clearly represents the net income of the company.

Accrual

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as

Accrual based Accounting

________ occur when the cash flow occurs after either the expense is incurred or the revenue is earned. (Enter only one word.)

Accruals

Which of the following are significant noncash activities? (Select all that apply.)

Acquiring equipment by issuing a long-term note. Acquiring land by issuing common stock.

- update the accounts to their proper balances. - are needed before financial statement preparation.

Adjusting Entries (Select all that apply.)

Which of the following describes the requirement to pay FUTA.

An employer must pay FUTA taxes even if the employer pays SUTA taxes

A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document?

Articles of incorporation Corporate charter

Raven receives a 3-year note receivable from a customer for goods sold. How should Raven report this note receivable in its financial statements?

As a non-current asset

Adjusting entries ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the period.

Assets

The correct order from the largest number of shares to the smallest number of shares is: Issued, outstanding, and authorized. Outstanding, issued, and authorized. Authorized, issued, and outstanding. Issued, authorized, and outstanding.

Authorized, issued, and outstanding.

Company A has an accounts receivable turnover of 8.0. Company B has an accounts receivable turnover of 10.0. Which of the following is true?

Company B collects its receivables faster than Company A.

The Sales Returns and Sales Allowances accounts are classified as

Contra Revenue Accounts

Limited liability and ease of raising outside capital are advantages of this business form:

Corporation

Which of the following items should be capitalized as land improvements?

Cost of fences Cost of parking lots Cost of sidewalks

What is the formula for the inventory turnover ratio?

Cost of goods sold divided by average inventory.

Clarion purchases land and prepares it for use. Which of the following items should be capitalized as land improvements?

Cost of lawn sprinkler system Cost of sidewalks Cost of driveways

Notes payable is classified as a liability that has which of the following effects?

Creates interest expense on the income statement

On March 1, 2018, Fresh Corp. declared a dividend of $3,000. The record date is March 20, 2018, and the payment date is April 1, 2018. The journal entry required on March 1, 2018, will include which of the following entries?

Credit dividends payable $3,000. Debit dividends $3,000.

Adrian Corp. sells goods on account for $100,000 on May 1. On May 15, the customer returns $40,000 of the merchandise. The customer has not yet paid for any of the goods. What will Adrian record on May 15? (Select all that apply.)

Credit to Accounts Receivable. Debit to Sales Returns.

The bank will show a customer's deposit on bank statements as a ______.

Credit, bc a withdrawl decreases

Lester Corp. sells merchandise to a customer for $1,000. The company also collects state and local sales taxes of 6% and 4%, respectively. At the time of sale, Lester should record the following credit amounts.

Credit: Sales revenue of $1,000. sales taxes payable of $100

Deferred revenues and sales tax payable typically are reported as _______ liabilities.

Current / Short-term

Mathematically, the current ratio is expressed as current assets divided by

Current Liabilities

Warner Corp. sells goods on account for $10,000 on April 2. On April 20, the customer returns $3,000 of the merchandise. The customer has not yet paid for any of the goods. What is the entry Warner will make on April 20 when the goods are returned?

Debit Sales Returns; credit Accounts Receivable.

Zeiger Corporation sells goods to a customer on account for $2,000, terms 2/10, n/30. When the customer pays on the 12th day, Zeiger records which of the following?

Debit cash $2,000

Gosling Corp. has 100,000 shares of common stock authorized, 80,000 shares issued, and 20,000 shares of treasury stock. Gosling declares a dividend of $0.10 share. Which of the following entries is required at the date of declaration?

Debit dividends $6,000.

On April 1, 2018, Rawlings declares a dividend of $0.30 per share. Rawlings has 100,000 shares authorized, and 40,000 issued and outstanding. The date of record is April 28, and the payment date is May 15. Which of the following entries is included in the journal entry on May 15?

Debit dividends payable $12,000. Reason: 40,000 x $.30 = $12,000

On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required March 1, 2019 at the maturity date includes which of the following entries?

Debit interest expense $2,000 Credit cash $106,000 Debit note payable $100,000 Debit interest payable $4,000

On October 1, 2018, Logan Corporation signed a 6-month, 8% interest-bearing promissory note for $10,000. The journal entry required at December 31, 2018 would include which of the following?

Debit interest expense $200 Reason: $10,000 x 8% (annual rate) x 3/12

On September 1, 2018, Kale Corporation signed a 6-month, 12% interest-bearing promissory note for $100,000. The journal entry required at December 31, 2018 would include which of the following?

Debit interest expense $4,000

Rimland Corporation has employee salary expense of $10,000 on April 30, 2018. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following?

Debit payroll tax expense $1,385

Lambert Corporation has employee salary expense of $100,000 on May 31. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following entries?

Debit payroll tax expense $13,850 Credit FICA payable $7,650 Credit FUTA payable $6,200

On November 1, 2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following?

Debit to Cash $100,000 Credit to Note Payable $100,000 Reason: Interest expense is not recorded until time has elapsed

Using the indirect method to report cash flows from operating activities, a(n) _________ n the accounts receivable from the prior period is added to net income in the _______ activities section of the statement of cash flows.

Decrease Operating

______ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.

Deferred

Additional shares issued to existing owners without an exchange of cash may be in the form of ______ stock or _______ stock .

Dividend and split

DEALER

Dividends, Expenses, Assets :::: Liabilities, Owner's Equity, and Revenue

Preferred stock generally (has/does not have) ______ voting rights and (has/does not have) ______ preference as to dividends.

Does not have: Has

The disadvantages of a corporation compared to a sole proprietorship or partnership include: Double taxation. The ability to raise capital. Limited liability. The ability to transfer ownership.

Double taxation.

Match the source of capital with the account in which it is recognized.

Earned capital------Retained earnings Invested capital-----Common stock

Which of the following are payroll withholdings that are subtracted from gross pay to arrive at take-home pay?

Employee contributions to retirement plans Health insurance paid by the employee Federal income taxes

York Inc. records a year-end adjustment for estimated sales returns and allowances. As a result of this entry, York's financial statements will change as follows: (Select all that apply.)

Equity decreases Assets decrease

Choose the correct formula for calculating interest.

Face amount x annual interest rate x fraction of the year

True or false: The debt to equity ratio is calculated as total liabilities divided by common stock.

False

The statement of cash flows provides summary information about cash _____ and cash _______ during the year.

Inflows & outflows

A company's plans to safeguard company assets and enhance the reliability and accuracy of accounting information are referred to as

Internal

What type(s) of transactions are typically measured only at the end of the accounting period?

Internal transactions

Which of the following gains and losses would be included in other gains and losses in calculating income from continuing operations?

Loss due to employee strike Loss due to the write-down of receivables Loss due to business restructuring

Which of the following are nonoperating items that require adjustments under the indirect method?

Losses on the sale of long-term assets Gains on the sale of long-term assets

Companies that produce the inventory they sell are referred to as __________

Manufacturers

What type of company purchases raw materials and makes goods to sell?

Manufacturers

The profit margin ratio is defined as ______ ______ divided by net sales

Net income

The starting point for preparing the operating activities section using the indirect method is:

Net income

Which of the following items will require a journal entry following a bank reconciliation? (Select all that apply.)

Notes collected by the bank NSF checks

Which of the following pre-payments requires an adjusting entry at the end of the year?

On November 1, the company pays rent for the next six months.

How do temporary accounts differ from permanent accounts?

Only temporary accounts are cleared out at the end of the accounting period.

(P) Ch.11______ activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

Operating

Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as

Operating activities

When adjusting the bank balance in a bank reconciliation, which item must be subtracted from the bank balance?

Outstanding checks

The correct order from the smallest number of shares to the largest number of shares is: Issued, outstanding, and authorized. Outstanding, issued, and authorized. Authorized, issued, and outstanding. Issued, authorized, and outstanding.

Outstanding, issued, and authorized.

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period.

Owed

Which of the following are external transactions?

Paying salaries to employees Borrowing money from the bank Purchasing inventory from suppliers

Maddy works at Burgers R Us. Her boss tells her that if she stays with the company for five years, she will receive a bonus of $6,000. -With an annual discount rate of 8%, calculate the value today of receiving $6,000 in five years

Present Value: 4,083.48

__________ inventory includes the cost of components that will become part of the finished product but have not yet been used in production.

Raw Materials

Net credit sales revenue divided by average accounts receivables equals the _____ turnover.

Receivables

Which of the following statements regarding the statement of cash flows are correct?

Reports cash receipts The final financial statement that is typically prepared Reports cash disbursements

Which of the following are provisions included in the Sarbanes-Oxley Act?

Require auditors to retain work papers for 7 years. Require that audit firms are hired by the audit committee of the board of directors.

Which of the following gains and losses would be included in other gains and losses in calculating income from continuing operations?

Restructuring costs Gains from sale of long-term assets

A corporation's accumulated income that has not been distributed as dividends to shareholders is referred to as earnings.

Retained

Earned capital increases ____.

Retained Earnings

The sales discount account is a contra ________Account

Revenue

If sales returns are incorrectly treated as expenses, what are the effects on the financial statements? (Select all that apply.)

Revenues are overstated. Expenses are overstated.

The rights of common stockholders typically include which of the following?

Right to distribution of assets in liquidation. Right to vote for corporate directors. Right to dividends when declared.

Which of the following are included in the rights of common stockholders?

Right to vote on certain matters.

________ value is the amount the company expects to receive for the asset at the end of its service life.

Risidual

The term used to describe the amount the company expects to receive for an asset at the end of its service life is

Risidual value

Which of the following expenditures are classified as repairs and maintenance for a vehicle owned by the company? (Select all that apply.)

Routine oil change Engine tune-up (They both maintain given level of benefits)

When adjusting the company's cash account balance in a bank reconciliation, which items reduce the company's cash account balance? (Select all that apply.)

Service charges Charges for NSF checks

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

Service revenue for $1,800

Another common term for stockholders' equity is:

Shareholders equity

convertable preferred stock

Shares can be converted for common stock

Shareholders' equity is another common term for _________ equity. (Do not use shareholders)

Stockholders

Which of the following are commonly used depreciation methods?

Straight-line Activity-based Declining-balance

Match the type of depreciation method with the reporting basis.

Straight-line: commonly used for financial statement purposes MACRS: commonly used for tax reporting

Select the accounts that increase with a debit.

Supplies Accounts receivable Advertising expense

Taggert Company paid $1,800 for a 6-month insurance premium on December 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period? (Select all that apply.)

Taggert will credit Prepaid Insurance for $300 on Dec. 31. Taggert will debit Insurance Expense for $300 on Dec. 31. Taggert will debit Prepaid Insurance for $1,800 on Dec. 1.

Closing entries move the balances from the ______ accounts into the Retained Earnings account.

Temporary

Which of the following ratios provides the most conservative measure of a firms ability to pay its current liabilities.

The acid-test ratio

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:

The amount of the sales or services still owed to the customer.

Common current liabilities include:

The current portion of long-term debt Sales tax payable Deferred revenues

A company makes a sale on terms 2/10, n/30. What does this mean? (Select all that apply.)

The customer may take a 2% discount off the price if paid within 10 days. If payment is not made in 10 days, the net amount is due in 30 days.

Which of these are the same as horizontal analysis?

Time-series analysis Trend analysis

A bank statement may not agree with the amount of cash recorded by the company in the cash account because of ______ differences and errors

Timing

Which of the following will cause differences between the bank statement balance and the accounting balance for cash?

Timing differences and errors

What is the primary purpose of a bank reconciliation?

To ensure the bank balance per reconciliation is equal to the company balance per reconciliation

Shares of stock previously sold by the corporation that are repurchased are called

Treasury Stock

When a company repurchases its own securities, the stock is recorded in which account?

Treasury stock

(P) Ch. 11 True or False: Collection on account and sale of services for cash are considered cash inflows, while payment on account and payment of salaries are considered cash outflows from operating activities.

True

True or false: Repairs and maintenance expenditures that do not increase the future benefit of the asset are expensed.

True

True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.

True

True or false: When goods are sold, the cost of the goods is transferred from the Inventory account to the Cost of Goods Sold account.

True

A contingent liability is an existing _______ situation that might result in a loss depending on the outcome of a future event.

Uncertain

Berta Company's inventory value has declined during the current period. Berta does not expect to sell its inventory during the current year. Berta should recognize the loss in the period when the inventory

Value declines

Which of the following tends to be the source of the most commonly reported contingent liability?

Warranties

Which of the following accounts would be found in the balance sheet of a manufacturing company?

Work in process

Which of the following accounts are typically reported in the balance sheet of a manufacturing company?

Work in process Raw materials Finished goods

What type of entry may be most frequently used to manipulate earnings?

Year-end adjustments

redeemable preferred stock

a corporation reserves the right to buy an issue of stock back from its shareholders, with the intent to retire the stock

In an adjusting entry for expenses incurred but not yet paid ______.

a liability is increasing since cash will be paid in the future due to the expense incurred

A retirement or abandonment of an asset is different from a sale of an asset because

a loss must be recognized for the remaining book value. no cash is received.

The weighted average cost method assumes that ending inventory consists of

a mixture of all the goods available for sale.

A trade discount is

a percentage reduction from list price.

On August 1, 2021, Trico Technologies, an aeronautic electronics company, borrows $21 million cash to expand operations. The loan is made by FirstBanc Corp. under a short-term line of credit arrangement. Trico signs a six-month, 9% promissory note. Interest is payable at maturity. Trico's year-end is December 31.

a. Record Issuance of the note b. Record the adjusting entry for interest c. Record the repayment of the note at maturity

An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n)

account receivable.

A(n) ________ payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash. (Enter only one word.)

accounts

Grant's income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using the indirect format, the loss should be

added to net income.

In a bank reconciliation, a deposit outstanding is

added to the bank balance

A sales return occurs when a customer returns a product for a full refund, whereas a sales _______ is when the customer keeps the product and obtains a partial refund.

allowance

A partial adjustment to the amount owed by the customer for goods that were not returned, but did not fully meet the customer's expectations is referred to as a sales

allowance.

The gain or loss on disposal of an asset is calculated as:

amount received less the book value of asset sold

When cash from operating activities is presented using the indirect method, net income must be adjusted for increases and decreases in balance sheet accounts that relate to

amounts presented in the income statement.

Because the future benefits of research and development costs are uncertain, FASB requires that research and development costs be treated as

an expense on the income statement.

Payroll withholdings ______. (Select all that apply.)

are amounts subtracted from employees' gross earnings to determine their net pay decrease the amount of cash an employee receives

When a business incorporates, it must file its ______ with the state in which it incorporates.

articles of incorporation

A prepayment such as "Prepaid Insurance" is originally recorded as a(n)__________ when an insurance policy is purchased and will later be expensed in the period used.

asset

Norbert Inc. delivered goods and services during December. Payment is expected during the first week of January. The related adjusting entry should consist of a debit to a(n) ____ account and a credit to a(n) _____ account.

asset; revenue

With the direct write-off method, the journal entry to write-off an uncollectible account includes a debit to _____ and a credit to _____.

bad debt expense; accounts receivable

Where is inventory reported in the financial statements?

balance sheet as a current asset

A corporation may repurchase its shares of stock because management

believes the market price of the stock is undervalued.

The formula for calculating the double-declining-balance method is

book value at beginning of year x 2/estimated service life

The original cost of an asset minus accumulated depreciation is

book value.

Preferred stock tends to have attributes of

both bonds and common stock.

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______

capitalized

The amount of cash in the balance sheet reflects the

cash in the balance sheet ending date

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as

closing entries

The receivables turnover ratio offers an indication of how quickly a company is able to

collect its accounts receivable.

The two roles of financial accounting are to:

communicate information to external parties for decision making purposes. &measure business activities of the company.

A transaction or event in which the outcome is uncertain is referred to as a(n) __________

contingency

An ______ liability is an existing uncertain situation that might result in a loss depending on the outcome of a future event.

contingent

Product warranties, effects of environmental problems, and lawsuits are examples of transactions or events that give rise to _______ liabilities.

contingent

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal income tax $58, and state income tax $10. Assuming that John gets paid in cash, ABC would record a journal entry that includes a ______.

credit to State and Federal Income Tax Payable of $68 credit to FICA (Social Security and Medicare) Payable of $45.90 credit to Cash of $486.10 debit to Wages Expense of $600

The portion of a long-term liability that will be paid within the next year is referred to and reported as the:

current portion of long-term debt

The income statement approach for estimating bad debts focuses on

current year's credit sales.

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following?

debit inventory

When adjusting the bank balance in a bank reconciliation, which item must be added to the bank balance?

deposits outstanding

Answer Mode Multiple Choice QuestionYour Answer incorrect The adjusting entry for equipment depreciation includes a debit to _____ and a credit to _____.

depreciation expense; accumulated depreciation

is a business, or a component of a business, that the organization has already discontinued or plans to discontinue.

discontinued operations

An item that requires separate disclosure on the income statement after income from continuing operations is

discontinued operations.

Differences between the bank statement balance and the cash account balance in the accounting records are primarily caused by timing differences and

errors

The key factor in classifying items as repairs and maintenance is that

future benefits are not provided beyond those originally anticipated from the asset.

Which of the following nonoperating items require adjustments to net income under the indirect method?

gains from sale of long-term assets losses from sale of long-term assets

An accelerated depreciation method is appropriate when the asset will provide

greater benefits in the earlier years of the asset's life.

A classified balance sheet ______.

groups asset and liabilities into current and long-term categories

An adjusting entry is necessary to record interest expense at year-end because the interest:

has already been incurred

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be ______ than cost of goods sold determined using the FIFO inventory assumption.

higher

The issues that are important for tangible and intangible assets, include determining:

how to expense the cost of the asset over its life how to record the disposal of the asset what amounts to include in the cost

Norma Inc. uses the perpetual inventory system. When the company records a sale, it should make entries to:

increase an asset and increase revenue decrease an asset and increase an expense

Obtaining a note payable for cash results in a(n) ______.

increase in assets and an increase in liabilities

Purchasing inventory on account:

increases liabilities increases assets

In a LIFO inventory system, inventory costs shown in the balance sheet may be distorted because they may represent costs

incurred several years earlier.

Which of the following methods for reporting cash flows from operating activities begins with net income and works backward to calculate net cash flow from operating activities?

indirect method

Margot Inc, which uses the perpetual inventory system, purchases 500 units of inventory to be held for resale. Margot should debit the purchase to:

inventory

Treasury Stock

is shares of stock no longer outstanding. is a contra-equity account. reduces stockholders' equity. Reason: Treasury stock is the number of shares repurchased. The number of shares in treasury are subtracted from the shares issued, not authorized, to arrive at the number of shares outstanding.

The FASB requires research and development costs to be expensed because

it is difficult to determine whether costs will result in future benefits.

An increase in accounts receivable indicates that the company collected _____ cash than the amount of ______.

less; sales revenue

A probable future sacrifice of economic benefits arising from present obligations of an entity to transfer assets or provide services as a result of past transactions or events is a(n)

liability. Liabilities expense. loss. asset.

The cost of land improvements are capitalized separately from land because land improvements tend to have a ______ useful life

limited

In a corporation, the stockholders' potential loss is

limited to the amount of the investment.

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be than ending inventory determined using the FIFO inventory assumption.

lower

The ______ method of valuing inventory was developed to avoid reporting inventory at an amount that is ______ than the benefits it can provide.

lower of cost and net realizable value; greater

A common reason for companies repurchasing their own shares is that they

may want to redistribute corporate cash without paying dividends.

Stock splits have the following effects on stockholders' equity

no change to total stockholders' equity

Depreciation expense and amortization expense represent ________ items requiring adjustments to net income under the indirect method.

noncash

The statement of cash flows classifies items as

operating, investing, financing

A decrease in accounts payable represents a cash ______ from operating activities, whereas a decrease in accounts receivable represents a cash _____ from operating activities.

outflow; inflow

Kilian Company's inventory balance at the end of the current year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered, the effect of this error on financial statements in the following year will be:

overstated net income

The direct write-off method is normally not permitted for U.S. GAAP reporting because if related credit sales occurred in the prior year, it: (Select all that apply.)

overstates assets in the prior year overstates net income in the prior year

The formula (current-year amount -- prior-year amount)/prior-year amount calculates the _______ used in horizontal analysis.

percentage increase or decrease

Which type of ratios do investors and creditors use most frequently in making financial decisions?

profitability ratios

The ability of reported earnings to reflect the company's true earnings is referred to as:

quality of earnings

At the end of the year, Kunze Corporation estimates that $1,600 worth of merchandise sold during the current year will be returned by customers during the subsequent year. Kunze Corporation must

record the estimated returns at the end of the year.

The contra revenue accounts sales returns and sales allowances

reduce revenues.

Which of the following are examples of fringe benefits provided by employers to their employees?

reduced or no-cost company-provided services payment of insurance premiums on employees behalf contributions to retirement and other savings accounts

Costs of periodically servicing equipment is an example of:

repair and maintenance

The key provisions of the Sarbanes-Oxley Act include

restricting activities of auditors to prevent conflicts of interest. requiring that corporate executives certify financial statements. requiring documentation and assessing effectiveness of internal controls.

When comparing the financial statements of two different companies, a financial analyst would use which two categories of ratios?

risk ratios profitability ratios

The estimated use the company expects to obtain from an asset before disposing of it is referred to as the _________ life of the asset.

service

The service life or useful life of an asset is

the amount of use that the company expects to obtain from the asset before disposing of it

Accounts receivable are typically classified as current assets because

they will be converted to cash within 1 year.

What is the effect of recording a sale of inventory under the perpetual inventory system on the financial statements? (Assume that the sales price is higher than the cost of inventory)

total assets increase stockholders' equity increases net income increases

The debt to equity ratio is calculated as

total liabilities divided by total stockholders' equity.

Weighted-average unit cost is determined by dividing cost of goods available for sale by

total quantity available for sale.

The allowance method estimates

uncollectible accounts.

The post-closing trial balance helps to verify that: (Select all that apply.)

we prepared and posted closing entries correctly the accounts are ready for next period's transactions

FOB destination means title to the goods passes

when they arrive at the destination.

_________ ________ adjustments that increase or decrease earnings should be investigated with more skepticism..

year end

At year end, CurlZ, Inc.'s inventory consists of 200 bottles of CleanZ at $1 per bottle and 100 boxes of DyeZ at $10 per box. The net realizable values are $1.20 per bottle for CleanZ and $8 per box for DyeZ. Using the lower of cost and net realizable value method, CurlZ should report its inventory at:

$1000

Wyanot Company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. The journal entry to record this transaction includes:

$110,000 debit to Cash. $10,000 credit to Additional paid-in capital - preferred. $100,000 credit to Preferred stock.

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the LIFO method, cost of goods sold will be

$1760

Blog Inc., has net sales of $50,000, cost of goods sold of $30,000, and selling expenses of $5,000. Its gross profit is ______.

$20,000

Jingle Company signs a 6-month, $20,000 note. Stated interest rate is 8% payable at the maturity date. Interest incurred on the note is calculated as

$20,000 x 0.08 x 6/12

During the current period, Kunze Corp. disposed of old equipment for $2,000, purchased new equipment for $20,000, collected an accounts receivable balance of $2,500, and purchased an investment for $3,000. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$21,000 net outflow.

Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, cost of goods sold will be

$2540

The list price in Boyton's catalog indicates that Product A sells for $3,000, with a trade discount of 5%. Boyton sells the goods to a customer who qualifies for the trade discount. At what amount should Boyton record the sale and related account receivable?

$2850

Prather Inc. has sales of $100,000, sales returns of $5,000, cost of goods sold of $60,000, and selling expenses of $3,000. Calculate gross profit.

$35,000

On August 1, 2019, a firm prepaid $53,520 for 2 years' rent of an office building. On March 1, 2020, the firm prepaid $34,800 for 2 years' rent of a warehouse. The rent agreements on both buildings went into effect on the dates the rents were prepaid. What amount will be shown for prepaid rent on the December 31, 2020 balance sheet?

$35,910

Fog Corporation sells $5,000 goods on account. Salaries expense was $3,000. Sales returns were $100, and sales discounts were $300. Net sales were

$4,600

Beginning inventory is $60,000. Purchases of inventory during the year are $100,000. Cost of goods sold is $120,000. What is ending inventory?

$40,000

On January 1, year 1, LaRose Corp. purchases equipment for $100,000. LaRose uses the double-declining-balance method of depreciation. The asset has a 5-year service life and a $10,000 residual value. What is depreciation expense for year 1?

$40,000

If an adjusting entry's credit is to a liability account, then the debit must be to ______.

expense

Which of the following payroll-related costs are incurred by employees?

federal and state income tax employee investments in retirement plans

(P) Ch.11 The three classifications on the statement of cash flows are cash flows from (Select all that apply.) Ch.11 Transactions reported on the statement of cash flows that do not increase or decrease cash, but that result in significant investing and financing activities are referred to as _______ activities

financing activities. investing activities. operating activities. noncash

Under the allowance method, companies estimate _____ uncollectible amounts and report those estimates in the _____ year.

future; current

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also sells its own common shares for $12 million and pays cash dividends of $5 million. Which of the following are cash outflows from financing activities?

repayment of notes payable payment of cash dividends

Noncash investing and financing activities are either: (Select all that apply.)

reported directly after the statement of cash flows reported in the notes to the financial statements

A distribution of a company's accumulated prior earnings is a(n) ______.

Dividend

Amounts that are subtracted from an employee's gross pay are referred to as

Payroll withholdings

The ending balance in cash is reported in which financial statement(s)?

The balance sheet and statement of cash flows

Who is responsible for providing an opinion on management's assessment of internal control?

The company's auditors

Bern Company has 100 units costing $200 in beginning inventory. During the year, the company purchases 900 additional units for $1,980. At the end of the year, 200 units remain unsold. If Bern Company utilizes the LIFO method, ending inventory will be

$420

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20, Medicare $8.70, federal Income tax $58, and state income tax $10. What is John's net pay?

$486.10 Reason: Net pay=$600-$37.20-$8.70-$58-$10=$468.10.

At the beginning of the accounting period, the balances of temporary accounts

Are zero

Which of the following is a solvency ratio?

Debt-to-equity

Recording sales returns and allowances in a separate contra-revenue account helps managers:

Keep track of the amounts

The distinction between land and land improvements is that

Land has an indefinite life

Separation of duties, physical, proper authorization, employee mangement and E-commerce controls are examples of ______ controls.

Preventative

Rhodes borrowed $5,000 by signing a 5-year note with an interest rate of 8%. On the date the note is signed, Rhodes should

credit notes payable $5,000.

Sales to customers in which the customers pay within 30 to 60 days are referred to as (Select all that apply.)

credit sales. sales on account.

Abby Fashions sells a suit to a customer for $600 on account. The day after the sale, the customer discovers that the jacket has a small stain on the back. Abby Fashions grants the customer a $60 credit. Abby Fashions will record:

credit to accounts receivable $60 debit to Sales Allowances $60

Prepaid expenses should be ______ by the cost of the asset used during the accounting period.

decreased

FOB shipping point means title to the goods passes

when they are shipped.

Who has final responsibility for internal controls?

Management

refers to a company's ability to pay its long-term liabilities

Solvency

In accounting, expenditures recorded as assets are said to be _____.

capitalized

_______ portion of long-term debt is the amount that will be paid within the next year. (Enter only one word.)

current

Taxes collected for taxing authorities are recognized as

current liabilities

Deferred revenue is classified as

liability

On January 1, 2018, Bank & Rupp, Inc. issued 100,000 shares of $1 par value common stock and 1,000 shares of $50 par value, 6%, cumulative preferred stock. No dividends were declared in 2018. In 2019, Bank & Rupp declared and paid dividends to both common and preferred stockholders. A $1 dividend was paid to common stockholders. Assuming all shares originally issued are outstanding, the total dividend paid to the preferred stockholders equals

$6000 Reason: Since the preferred stock is cumulative, $6,000 (=1,000 shares x $50 par x 6% x 2 years) must be paid to preferred stockholders before the common stockholders may receive a $1 dividend.

Adam Company has 100 units costing $300 in beginning inventory. During the year, the company purchases 900 units for a total cost of $2,880. At the end of the year, a physical count reveals that 200 units remain in ending inventory. If the company uses the FIFO method, the cost of ending inventory will be

$640

Wok N Roll, Inc. began on January 1, 2018 by issuing 100,000 shares of $1 par value common stock and 1,000 shares of $100 par value, 5%, cumulative preferred stock. No dividends were declared in 2018 or 2019. In 2020, Wok N Roll declared and paid dividends to common and preferred stockholders. A $0.50 dividend was paid to common stockholders. Assuming all shares originally issued are outstanding, the total dividend declared and paid in 2020 equals:

$65,000 Reason: Cumulative preferred stock receives 1,000 shares x $100 par x 5% x 3 years and common stock receives 100,000 shares x $0.50.

Gammy Corporation provides services with a normal price of $800,000 and a trade discount of $100,000. Terms are 2/10, n/30 and the customers pay within 10 days. The net service revenue is

$686,000.

Beginning inventory is $20,000. Purchases of inventory during the year are $100,000. Ending inventory is $50,000. What is cost of goods sold?

$70,000

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. What is the net pay to employees?

$70,000 Reason: Net pay=$70,000=$100,000-6,700-1,450-18,000-3,850

Accounts receivable should be classified as a(n)

(Current)asset.

Select the section of the statement of cash flows in which each of these items would be reported using the indirect method. (Financing, operating, or investing) 1. Purchase of a patent 2. Depreciation expense 3. Decrease in accounts receivable 4.Issuance of a not payable 5. Increase in inventory 6. Collection of notes receivable 7. Purchase of equipment 8. Exchange of long-term assests 9. Decrease in accounts payable 10. Payment of dividends

1. Investing activities 2. Operating activities 3. Operating activities 4.Financing activities 5. Operating activities 6. Investing activities 7. Investing activities 8. Noncash activities 9. Operating activities 10. financing activities

AnuU, Inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. AnuU repurchased 10,000 of these shares. The number of shares issued equals ______ shares.

100,000

In a perpetual inventory system, when a company sells inventory on account, how many entries are required?

2

What is the formula to compute the average days in inventory?

365 days/inventory turnover ratio

Matt plans to start his own business once he graduates from college. He plans to save $3,000 every six months for the next five years. If his savings earn 10% annually (or 5% every six months), determine how much he will save by the end of the fifth year.

37,733.70

Which of the following items are included in cash?

Balance in checking accounts Currency and coins Checks from customers

The allocation of the cost of a tangible fixed asset is referred to as ______, whereas the allocation of the cost of an intangible asset is referred to as _____

Blank 1: depreciation Blank 2: amortization

The original cost of the asset less the accumulated depreciation is the _______ _______ of the asset

Book Value

Joann is preparing a statement of cash flows as part of a homework assignment. She hopes to find a check figure that will help her assess the accuracy of her results. What should Joann do to quickly find a check figure?

Calculate the change in the beginning and ending balance of cash

The term ________ means to record an expenditure as an asset.

Capitalize

The asset that is most easily stolen and susceptible to fraud is_______

Cash

A bank reconciliation reconciles the bank statement with the company's

Cash account in the balance sheet

Which of the following sections will be identical in every detail under the direct and indirect methods.

Cash flows from investing activities Cash flows from financing activities

Adjustments to net income in calculating operating cash flows include:

Changes in current assets and current liabilities Nonoperating items Noncash items

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Collection of interest Collection from customers

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land?

Commissions Legal fees to secure title Costs to remove an old building

Vertical analysis is also commonly known as ________ - size analysis.

Common

The two components of stockholders' equity are

Common stock and retained earnings

Sales Returns and Sales Allowances are_________ ________ accounts and require a debit entry to increase the account.

Contra Revenue

Preferred stock is called preferred because it usually has two preferences over common stock. These preferences relate to: Dividends and voting rights. Par value and dividends. The preemptive right and voting rights. Dividends and distribution of assets if the corporation is dissolved.

Dividends and distribution of assets if the corporation is dissolved.

A periodic performance review is an example of a(n)______ control

Internal or detective

Which of these is a solvency ratio?

Times interest earned

On September 1, ABC Company borrowed $50,000 on a 6%, 9-month note payable to XYZ National Bank. Given no previous adjusting entries have been recorded, ABC's adjusting entry at December 31 would include a ______.

debit to Interest expense of $1,000 Reason: Interest expense=$50,000 x 0.06 x (4/12)=$1,000. The interest rate, 6%, is an annual rate, not a 9-month rate. In the current year, 4/12 of 6% will be expensed and the remaining 5/12 (for a total of 9/12) will be expensed in the following year.

Kilroy Corporation provides services to a customer for $1,000. The customer complained that there was a slight defect in the service. Kilroy granted the customer a $50 credit. Kilroy will record this adjustment to the sales price with a:

debit to Sales Allowances $50.

The journal entry to retire old equipment that is not fully depreciated includes a:

debit to loss credit to equipment debit to accumulated depreciation

The bank will show a customer's withdrawal as a _____.

debit, because a withdrawal decreases its liability from the bank's point of view

When a company finds out that an NSF check was written to the company, the company must ______ the balance in the cash account.

decrease

Ophelia Inc. just learned that Patton Inc., one of its customers with an outstanding accounts receivable balance, filed for bankruptcy. Assuming that the company utilizes the allowance method, Ophelia should record a(n):

decrease in Accounts Receivable

The declaration and payment of a cash dividend ultimately causes a(n):

decrease in Retained earnings. decrease in stockholders' equity. decrease in Cash.

Stock dividends have the following effects on stockholders' equity

decrease in retained earnings no change to total stockholders' equity increase in common stock

The effect on the accounting equation of declaring a dividend that will be paid at a later date includes a(n):

decrease in stockholders' equity. increase in liabilities.

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account.

decrease; increase

In a bank reconciliation, an outstanding check is ______.

deducted from the bank balance

The allocation of the cost of a tangible asset over its service life is referred to as ________

depreciation

The Accounts Receivable account is reduced when the seller:

determines that a specific customer account will not be collectible

Kilian Company's inventory balance at the end of the year does not include $10,000 of inventory that was stored in a separate warehouse and accidentally excluded from the physical count. If the error is not discovered until the following year, the financial statement effect in the current year will be:

understated assets, retained earnings, and net income

Taxes subtracted from employees' pay and remitted to the government on their behalf are called

withholding taxes.