Financial Accounting I, MULTIPLE

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The manager of Brick Company is given a bonus based on income before income taxes. Net income, after taxes, is $5,600 for FIFO and $4,900 for LIFO. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of LIFO?

$200

During the year 2009, Rafael's Restaurant earned revenues of $250,000, had expenses of $50,000, purchased assets with a cost of $30,000, and paid dividends to the shareholders of $10,000. Net income for the year is:

$200,000

spice inc.'s unit selling price is $60, the unit variable costs are $35, fixed costs are $125000, and current sales are 10,000 units. how much will operating income change if sales increase by 8,000 units?

$200000 increase

Outstanding stock of the Apex Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 6%, $10 par non-cumulative preferred stock. In 2006, Apex declared and paid dividends of $2,000. In 2007, Apex declared and paid dividends of $6,000. How much of the 2007 dividend was distributed to preferred shareholders?

$3,000

nebraska inc. issues 3000 shares of common stock for $45000. the stock has a stated value of $10 per share. the journal entry to record the stock issuance would include a credit to common stock for?

$30000

Sampson Company's accounting records show the following for the year ending on December 31, 2014. Purchase Discounts $5,600 Freight-in 7,800 Purchases 350,010 Beginning Inventory 23,500 Ending Inventory 28,800 Purchase Returns and Allowances 6,400 Using the periodic system, the cost of goods sold is

$340,510. ----- [$23,500 + ($350,010 - $5,600 - $6,400 + $7,800)] - $28,800 = $340,510

Ending inventory is $10,000, beginning inventory is $20,000, and the cost of goods purchased is $25,000. How much is cost of goods sold?

$35,000 ----- Beginning balance ($20,000) plus purchases ($25,000) equals $45,000 in merchandise available, less ending inventory ($10,000) equals cost of goods sold of $35,000.

gross profit

Net sales less cost of goods sold

Sales Tax Payable

Normal Balance: Credit Type of Account: Liability Financial Statement: BS

Capital Stock

Normal Balance: Credit Type of Account: Owner's Equity Financial Statement: BS

Delivery Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Insurance Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Liability

Note payable is what type of account?

Sammy Seafood Supplier receives a $6000, 3-month, 12% promissory note from Carp Co. in settlement of an open accounts receivable. What entry will Sammy's make upon receiving the note?

Notes Receivable ........... 6,000 Accounts Receivable -- Care Company ...... 6,000

Which of the following would be added to the balance per books on a bank reconciliation?

Notes collected by the bank

Classified Balance Sheet

Organizes Assets and Liabilities into subgroups providing more info to decision makers

Which of the following would not be subtracted from the balance per books on a bank reconciliation?

Outstanding checks

Periodic Inventory System

Requires a physical count of goods on hand to compute cost of goods sold.

REVENUE RECOGNITION PRINCIPLE

Requires that companies recognize revenue in the accounting period in which the performance obligation is satisfied.

Assets

Resources a business owns. Provide future services or benefits. Cash, Supplies, Equipment, etc.

Which of the following would not be reported on the balance sheet as a cash equivalent?

Restricted cash

Monetary Unit Concept

Specifies which monetary unit is used to measure

Amount of financing provided by owners of the business and earnings

Stockholders' equity

in a period of rising prices, the FIFO method reports the highest net income, LIFO the lowest, and average cost falls in the middle.

inventories are reported in the current asset section of the balance sheet immediately below receivables.

it is not necessary to take a physical inventory under the retail method to determine the estimated cost of goods on hand at any given time.

False

T/F: A perpetual system would be used in a candy store.

True

T/F: After a transaction has been posted, the reference column in the journal should not be blank

False

T/F: Expenses increase stockholders' equity

False

T/F: Inventory is closed to income summary

True

T/F: The double-entry system is a logical method for recording transactions and results in equal debits and credits for each transaction

True

T/F: The origins of accounting are attributed to Luca Pacioli, a famous mathematician.

Source Documents provide...

The basic info processed by and accounting system

Expenses

The cost incurred to generate revenue, including the cost of the goods and services sold to customers as well as the cost of carrying out other business activities.

Inventoriable costs may be thought of as a pool of costs consisting of which two elements?

The cost of beginning inventory and the cost of goods purchased during the year

Bank Reconciliation - What is the effect? If the books are affected, how would the adjusting entries be written? The company recorded cash receipts of $930 on October 31 but this amount does not appear on the bank statement

This check is in transit. Write off on the bank for +$930

FOB destination

Title to goods transfers when the goods are delivered to the buyer

Current liabilities are obligations that the company is to pay within the coming year.

True

Notes Payable has a normal credit balance T or F

True

T/F: The list price is also known as the established retail price.

True

T/F: The overtime rate is one and one-half times the regular hourly rate.

True

Ken's Coffee Shop bought equipment for $48,000 on January 1, 2008. Ken estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2009, Ken decides that the business will use the equipment for 5 more years. What is the revised depreciation expense for 2009?

$6,400

Miner accrued interest on the above note for July.

$6000*6%=360/12=$30 Debit interest received for $30 Credit interest revenue for $30

As of June 31, 2008, Hobknob Club's assets are $700,000 and stockholder's equity is $75,000. What are the liabilities for Hobknob Club of June 31,2008?

$625,000

A credit sale of $700 is made on July 15, terms 2/10, net/30, on which a return of $50 is granted on July 18. What amount is received as payment in full on July 24?

$637 ----- ($700 - $50) × .98 = $637

Double Declining Depreciation

(1) compute the asset's straight line depreciation rate (2) double the straight line rate (3)compute depreciation expense by multiplying this rate by the asset's beginning of period book value

Worksheet

(Optional tool)10 Column spreadsheet used to draft unadjusted trial balance, adjusting entries, adjusted trial balance, and financial statements

Historical Cost Principle

(or cost principle) dictates that companies record assets at their cost.

Adjusting Entries are done at the end of an accounting period in order to...

-Assure the statement reflects Revenues earned and the Expense incurred in the appropriate period -Update liability and asset accounts to proper balance

Which one of the following is not necessarily a party to a check?

...

Financial information is presented below: Operating expenses $35,000 Sales returns and allowances 12,000 Sales discounts 3,000 Sales revenue 140,000 Cost of goods sold 85,000 The profit margin ratio would be

.04 ----- $140,000 - $12,000 - $3,000 = $125,000; ($125,000 - $85,000 - $35,000) ÷ $125,000 = .04

Under a perpetual inventory system, inventory shrinkage and lost or stolen goods are more readily determined.

True

Under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs.

True

Sarbanes Oxley applies to

U.S and international companies.

Which of the following statements is correct with respect to inventories?

Under FIFO, the ending inventory is based on the latest units purchased

97. Which of the following is the appropriate general journal entry to record the declaration of a cash dividends? A. Retained earnings Cash B. Cash Dividends payable Cash C. Paid-in capital Cash Dividends payable D. Cash Dividends Cash Dividends Payable

Credit terms of 1/10, n/30 mean A. only that payment in full is due 10 days after date of the invoice B. only that payment in full is due 30 days after date of the invoice C. if the invoice is paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in 20 days D. if the invoice is paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in 30 days

Purchases is a temporary _______ account. A. liability B. asset C. revenue D. expense

The amount of the trade discount taken by the customer is recorded as A. an expense B. revenue C. a liability D. trade discounts are not recorded

166. The maturity value of a $40,000, 9%, 40-day note receivable dated July 3 is a. $40,000. b. $44,000. c. $43,600. d. $40,400.

D Solution: $40,000 + ($40,000 × .09 × 40/360) = $40,400

88. The specific identification method of costing inventories is used when the

D) company sells a limited quantity of high-unit cost items.

57. The account Allowance for Doubtful Accounts is classified as a(n)

D) contra account to Accounts Receivable.

71. The Sales Returns and Allowances account is classified as a(n)

D) contra revenue account

68. A bank statement

D) shows the activities that increased or decreased the depositor's account balance.

36. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited

D) when an account is determined to be uncollectible.

The amount of the purchases for a period is presented in A. the Liabilities section of the balance sheet B. the Revenue section of the income statement C. The Cost of Goods Sold section of the income statement D. the Expenses section of the income statement

Executory contract

A contract which has not yet been fulfilled by one or both parties that promises action in the event of a specified future occurrence.

Which of the following is an incorrect statement about a corporation?

A corporation may be formed in writing, orally, or implied.

Treasury stock

A corporation's own stock that has been reacquired by the corporation and is being held for future use.

37. Sales revenue less cost of goods sold is called

A) gross profit.

62. Deposits in transit

A) have been recorded on the company's books but not yet by the bank.

When a seller grants credit for returned goods, the account that is credited is

Accounts recievable

net income

After gross profit is calculated, operating expenses are deducted to determine

The account, Supplies, will appear in the following debit columns of the worksheet.

All of these answer choices are correct

Which one of the following is not an external user of accounting information?

All of these answers choices are external users

Sales Discounts

An incentive to encourage customers to pay their accounts early

Current assets

Assets that are expected to be converted to cash or used within one year

Permanent(Real Account)

Assets, Liabilities and Equity

El Greco Co. made a credit sale to a customer with the terms of n/30. Upon payment by the customer, El Greco Co. should debit Cash and credit A. None of these answers are correct B. Sales Revenue C. Accounts Receivable and Sales Discounts D. Accounts Receivable

D. Accounts Receivable

Which of the following statements is true? A. Inventory is an expense account with a normal debit balance. B. Sales is a revenue account with a normal debit balance. C. Cost of Goods Sold is an expense account with a normal credit balance. D. Inventory is an asset account with a normal debit balance.

D. Inventory is an asset account with a normal debit balance.

Which of the following accounts is not a temporary account? A. dividends B. advertising expense C. sales D. accounts payable

D. accounts payable

73. The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called A. treasury stock B. issued stock C. outstanding stock D. authorized stock

D. authorized stock;

175. Which one of the following is not a principle of sound accounts receivable management? a. Determine to whom to extend credit. b. Delay cash receipts from receivables if necessary. c. Monitor collections. d. Determine a payment period.

56. Interest is usually associated with a. accounts receivable. b. notes receivable. c. doubtful accounts. d. bad debts.

89. Alma Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to: A. Common Stock $14,000. B. Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000. C. Common Stock $4,000 and Paid-in Capital in Excess of Stated Value $10,000. D. Common Stock $10,000 and Retained Earnings $4,000.

92. An alternative name for Bad Debt Expense is a. Deadbeat Expense. b. Uncollectible Accounts Expense. c. Collection Expense. d. Credit Loss Expense.

95. The allowance method of accounting for uncollectible accounts is required if a. the company makes any credit sales. b. bad debts are significant in amount. c. the company is a retailer. d. the company charges interest on accounts receivable.

99. Which of the following is not a prerequisite to paying a cash dividend? A. formal action by the board of directors B. market value in excess of par value per share C. sufficient cash D. sufficient retained earnings

A firm that sells goods that it purchases for re-sale is a A. service business B. merchandising business C. manufacturing business D. non-profit business

For which of the following is there no limit to the amount of wages subject to the tax? A. federal unemployment tax B. Medicare tax C. state unemployment tax D. Social Security tax

Freight - In is a(n) ___________ account. A. revenue B. expense C. asset D. liability

If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is a A. $900 debit B. $500 debit C. $500 credit D. $900 credit

In the general journal, reversing entries are dated as of A. the last day of the old fiscal period B. the first day of the new fiscal period C. any day during the month of the new fiscal period D. any time before the end of the fiscal period

On May 1, 2014, a firm purchased a 1-year insurance policy for $3,600 and paid the full premium in advance. The insurance expense associated with this policy for the year ending December 31, 2014, is A. $3,600 B. $2,400 C. $2,100 D. $1,200

71. Carson Company on July 15 sells merchandise on account to Tayler Co. for $2,000, terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $800 to Carson Company. On July 24 payment is received from Tayler Co. for the balance due. What is the amount of cash received? a. $1,200 b. $1,176 c. $1,160 d. $2,000

B Solution: [($2,000 − $800)] × .98 = $1,176

22. Freight costs incurred by a seller on merchandise sold to customers will cause an increase

B) in operating expenses for the seller.

21. The matching rule relates to credit losses by stating that bad debt expense should be recorded

B) in the period of the sale.

82. Gross profit equals the difference between

B) net sales revenues and cost of goods sold.

85. The authorized stock of a corporation A. must be recorded in a formal accounting entry. B. only reflects the initial capital needs of the company. C. is indicated in its by-laws. D. is indicated in its charter.

D. is indicated in its charter.;

Prepare the appropriate journal entries to record the following transactions The account of Jane smiley for $1400 was deemed to be ncollectable and is written off as a bad debt

Debit Allowance for doubtful accounts $1400 Credit Accounts receivable $1400

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18,500, and unexpired amounts per analysis of policies of $6,000?

Debit Insurance Expense, $12,500; Credit Prepaid Insurance, $12,500. `

A NSF check should appear in which section of the bank reconciliation?

Deduction from the balance per books.

Inventory is reported as a long-term asset on the balance sheet. T or F

F. Inventory is reported as a current asset on the balance sheet

The tax that is paid equally by the employer and employee is the

FICA Tax

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using

FIFO will have the highest ending inventory.

A stock split must be formally journalized.

False

Equipment has a normal credit balance T or F

False

In order to prevent a transaction from being recorded more than once, a company should maintain only one book of original entry.

False

In preparing a statement of cash flows, cash equivalents are subtracted from cash in order to compute the net change in cash during a period

False

Internal control is most effective when several people are responsible for a given task

False

Net income for the period is determined by subtracting total expenses and drawings from total revenues.

False

Payroll activities involve three functions: hiring employees, preparing the payroll, and paying the payroll.

False

Preferred dividends in areas should be recorded in a liability account.

False

The matching principle requires that assets be matched with liabilities T or F

False

The normal balance of an expense is a credit.

False

The periodicity assumption states that the business will remain in operation for the foreseeable future.

False

Under the double-entry system, revenues must always equal expenses.

False

Unearned Revenue has a normal debit balance T or F

False

When purchasing delivery equipment, sales tax and motor vehicles licenses should be charged to Delivery Equipment.

False

When the due date of a note is stated in months, the time factor in computing interest is the number of months divided by 360 days.

False

In determining the cost of goods purchased, Freight-out is added to purchases.

False. Freight- in is added to net purchases; Freight-out is a selling expense.

When a company has other revenues and gains, sales revenue less cost of goods sold and operating expenses equals net income (or loss).

False. The difference between the amounts is income (loss) from operations, not net income (or loss).

The terms 2/10, n/30 state that a 2% discount is available if the invoice is paid within the first 10 days of the next month.

False. The terms 2/10, n/30 state that a 2 % discount is available if the invoice is paid within 10 days of the invoice date otherwise the net balance, without cash discount, is due 30 days from the invoice date.

Which of the following items will increase inventoriable costs for the buyer of goods?

Freight charges paid by the purchaser

When using a periodic inventory system and the purchaser directly incurs the freight costs, which account is debited?

Freight-In ----- When the purchaser directly incurs the freight costs and is using a periodic inventory system, Freight-in is debited.

Assets

Future economic benefits

A company just starting business made the following four inventory purchases in June: June 1 150 units @ $5.20/unit = $ 780 June 10 200 units @ $5.85/unit = 1,170 June 15 200 units @ $6.30/unit = 1,260 June 28 150 units @ $6.60/unit = 990 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 (rounded to the nearest dollar) is A. $3,128 B. $1,073 C. $2,895 D. $1,305

B. $1,073

A company just starting business made the following four inventory purchases in June: June 1 150 units @ $5.20/unit = $ 780 June 10 200 units @ $5.85/unit = 1,170 June 15 200 units @ $6.30/unit = 1,260 June 28 150 units @ $6.60/unit = 990 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is A. $2,545 B. $2,895 C. $3,128 D. $1,305

B. $2,895

An account which is increased by a credit is A. a dividends account B. a liability account C. an expense account D. an asset account

B. a liability account

66. Those most responsible for the major policy decisions of a corporation are the A. management. B. board of directors. C. employees. D. stockholders.

B. board of directors.

Ending inventory=

BI+NP-COGS

144. When calculating interest on a promissory note with the maturity date stated in terms of days, the a. maker pays more interest if 365 days are used instead of 360. b. maker pays the same interest regardless if 365 or 360 days are used. c. payee receives more interest if 360 days are used instead of 365. d. payee receives less interest if 360 days are used instead of 365.

64. Which of the following would probably be the most significant type of a claim held by a company? a. notes receivable b. non-trade receivables c. accounts receivable d. interest receivable

184. The financial statements of the Belfry Manufacturing Company reports net sales of $500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days? a. 29.2 times b. 86.9 times c. 44.0 times d. 57.9 times

C Solution: $500,000 ÷ [($80,000 + $40,000) ÷ 2] = 8.3; 365 ÷ 8.3 = 44

147. The interest on a $6,000, 6%, 90-day note receivable is a. $360. b. $180 c. $90. d. $270.

C Solution: $6,000 × .06 × 90/360 = $90

91. A bank reconciliation should be prepared

C) to explain any difference between the depositor's balance per books with the balance per bank.

75. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 10,000 were subsequently reacquired. What is the number of shares outstanding? A. 10,000 B. 40,000 C. 30,000 D. 50,000

C. 30,000

79. The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to A. Organizational Expenses B. Goodwill C. Common Stock D. Cash

C. Common Stock

What type of account is Accounts Payable? A. Stockholder's Equity B. Expense C. Liability D. Asset

C. Liability

LIFO inventory method assumes that the cost of the latest units purchased are A. the last to be allocated to the cost of goods sold B. the first to be allocated to ending inventory C. the first to be allocated to cost of goods sold D. not allocated to cost of goods sold or ending inventory

C. the first to be allocated to cost of goods sold

Asset

Cash is what type of account?

Transactions in a journal are initially recorded in

Chronological order

Liabilities

Claims against assets (debts and obligations). Creditors - party to whom money is owed. Accounts payable, Notes payable, etc.

Accounting Information Systems

Collect and process data from transactions and events, organize data in useful forms, communicate crucial info to business decision makers

Which one of the following would NOT cause a bank to debit a depositor's account?

Collection of a note receivable.

Ledger

Collection of all accounts and their balances

Accrual-Basis Accounting

Companies record transactions in the period in which the events occur.

Suppliers

Companies that provide material, human, financial, and informational resources to other companies

Asset

Goodwill is what type of account?

Which one of the following would not be considered an advantage of the corporate form of organization?

Government regulation

Which one of the following is shown on a multiple-step but not on a single-step income statement?

Gross Profit

Income from operations

Gross profit less total operating expenses

A company just starting business purchased three merchandise inventory items at the following prices: 1st purchase $610; 2nd purchase $640; 3rd $680. If two items were sold during the period and the company used LIFO costing method, The gross profit for the period would be greater or less than if the FIFO costing method had been used?

Gross profit would be $70 less

Of the following companies, which one would not likely employ the specific identification method for inventory costing?

Hardware store

Stockholders' Equity

I get what is left over after creditors are happy - my claims to business assets

Which statement is correct regarding IFRS?

IFRS uses the same process for recording transactions as GAAP.

Accounting is an information measurement system that...

Identifies, records and communicates information about business activities by interpreting info and designing info systems to allow business to make better decisions

Calendar Year

January 1 to December 31

Asset

Land is what type of account?

Which one of the following is not an enhancing quality of useful information?

Materiality

Operating activities

Methods companies use to produce, promote, and sell its products and services.

When a note is accepted to settle an open account, Note Receivable is debited for the note's

face value.

The Sarbanes oxley act replaces generally accepted accounting principles in manufacturing

false

fifo

first in first out

The beginning balance of Supplies for Lu Inc. was $900. During the year, additional supplies were purchased for $450. At the end of the year, an inventory count indicates $700 of supplies on hand. The adjusting entry at December 31, is: A. debit Supplies Expense 650, credit Supplies 650 B. debit Supplies 650, credit Supplies Expense 650 C. debit Supplies 450, credit Supplies Expense 450 D. debit Supplies Expense 250, credit Supplies 250

A. debit Supplies Expense 650, credit Supplies 650

When a seller grants credit for returned goods, the account that is credited is

Accounts Receivable

Debits

increase assets and decrease liabilities.

When a company extends credit directly to customers...

it (1) maintains a separate account receivable for each customer and (2) accounts for bad debts from credit sales

If a period-end inventory amount is reported in error...

it can cause a misstatement in Cost of Goods Sold, Net Income, Gross Profit, and Current Assets

116. One might infer from a debit balance in Allowance for Doubtful Accounts that a. a posting error has been made. b. more accounts have been written off than had been estimated. c. the direct method is being used. d. Bad Debt Expense has been overestimated.

200. The sale or transfer of accounts receivable in order to raise funds is called a. pledging. b. factoring. c. leasing. d. collateralizing.

account number

the number assigned to an account

81. The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded a. in the same period as allowed for tax purposes. b. in the period of the sale. c. for an exact amount. d. in the period of the loss.

A firm appropriately wrote a check for $78 but entered the amount as payment of $87 in its records. On a bank reconciliation statement this error would be shown as A. a deduction of $9 from the book balance B. an addition of $9 to the book balance C. a deduction of $9 from the bank statement balance. D. an addition of $9 to the bank statement balance.

publicly held corporation

a corporation that may have thousands of stockholders and whose stock is regularly traded on a national securities exchange

In preparing a statement of cash flows, a conversion of bonds into common stock will be reported in

a separate schedule or note to the financial statements.

stockholders' equity statement

a statement that shows the changes in each stockholders' equity account and in total stockholders' equity during the year

periodic inventory system

a system in which detailed inventory records are not maintained and the cost of goods sold is determined only at the end of an accounting period through the taking of physical inventory.

A list of accounts and their blanches at a given time is called

a trial balance

A T-account is

a way of depicting the basic form of an account

legal capital

amount per share of capital stock that must be retained in the business for the protection of corporate creditors

Long-term debt

amounts borrowed from creditors that are scheduled to be repaid more than one year in the future.

Accounts receivable

amounts due to the company from customers arising from the sale of products or services on credit

liability

an amount owed by a business

credit

an amount recorded on the right side of a "t" account

The economic entity assumption requires that the activities of

an entity be kept separate from its owners' activities.

how is treasury stock shown on the balance sheet?

as a decrease in stockholders' equity

Internal control is defined, in part, as a plan that safeguards

assets

If expenses are paid in cash, then

assets will decrease

Accounts that normally have debit balances are

assets, owner's drawing, and expenses.

retained earnings restrictions

circumstances that make a portion of retained earnings currently unavailable for dividends

In the stockholders' equity section of the balance sheet, the classification of capital stock consists of:

common stock and preferred stock

Accounts receivable

company can receive cash in the future from customer purchases

Understating beginning inventory will understate

cost of goods sold

The principal difference between a merchandising and manufacturing income statement is the

cost of goods sold section

organization costs

costs incurred in the formation of a corporation

When listing accounts in the statement of cash flows worksheet, the accumulated depreciation account is shown

with accounts that have credit balances

The most appropriate form of endorsement of a check for business purposes is A. the blank endorsement B. the restrictive endorsement C. the full endorsement D. no endorsement

In preparing a bank reconciliation, outstanding checks are

deducted from the balance per bank.

If an adjusting entry for depreciation is not made

expenses will be understated

The expense recognition principle matches

expenses with revenues

The information for preparing a trial balance on a worksheet is obtained from

general ledger accounts

stockholders equity

includes retained earnings and paid in capital

The accumulated depreciation account

is a contra asset account with a credit balance.

Paid-in Capital in Excess of Par Value

is reported as part of paid-in capital on the balance sheet.

Postings from the purchases journal to the general ledger are made

monthly

133. Thompson Corporation's unadjusted trial balance includes the following balances (assume normal balances): Accounts receivable $1,492,000 Allowance for doubtful accounts $ 28,400 Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? a. $89,520 b. $61,120 c. $59,416 d. $91,224

B Solution: ($1,492,000 × .06) − $28,400 = $61,120

188. Windsor Corporation sells its goods on terms of 2/10, n/30. It has an accounts receivable turnover of 8. What is its average collection period (days)? a. 80 b. 30 c. 46 d. 36

C Solution: 365 ÷ 8 = 46

72. Stockholders' equity A. is usually equal to cash on hand B. includes paid-in capital and liabilities C. includes retained earnings and paid-in capital D. is shown on the income statement

C. includes retained earnings and paid-in capital

Units of Production

Charges a varying amount to expense for each period of an asset's useful life depending on its usage (Cost - Salvage Value) / Units of production= Dep/Unit Dep/Unit X Units produced in period =Dep Expense

Stockholders' equity

Common stock is what type of account?

External Users of Accounting

Creditors Investors

Merchandise inventory is a...

Current asset

87. If common stock is issued for an amount greater than par value, the excess should be credited to A. Retained Earnings. B. Cash. C. Legal Capital. D. Paid-in Capital in Excess of Par Value.

All of the following are examples of sales slips used in credit card transactions except A. sales invoices B. sales drafts C. sales vouchers D. sales receipts

An employee whose regular hourly rate is $10 and whose overtime rate is 1.5 times the regular rate worked 48 hours in one week. In the payroll register, the employer should record an overtime premium of A. $480 B. $240 C. $80 D. $40

Assuming a Medicare tax rate of 1.45% and monthly gross wages of $2,500, the amount recorded in Medicare Tax Payable for one quarter for the employee's payroll deduction is A. a debit for $36.25 B. a credit for $36.25 C. a debit for $108.75 D. a credit for $108.75

expenses;assets

Failure to adjust a prepaid expense account for the amount expired will cause__________to be understated and_______________to be overstated

Stockholders have the right to directly formulate operating policies for the company.

False

Supplies and supplies expense are both permanent accounts T or F

False

T/F: A check that has a full endorsement can be further endorsed by any bearer and therefore, is not as safe as a check with a blank endorsement.

False

T/F: A purchase allowance is when a business returns the goods.

False

T/F: Adjusting entries in the general journal do not require detailed explanations since the information about the entries is listed on the worksheet.

False

As a result of the revenue recognition project being undertaken by the FASB and IASB:

revenue recognition places more emphasis on when the performance obligation is satisfied.

A disadvantage of the corporate form of organization is

tax treatment.

The interest on a $10,000, 10%, 1-year note receivable is

$1000

Jim Lahey Corp. stockholders' equity at June 30 consists of the following: Preferred stock, 10% $50 par value; 20,000 shares issued and outstanding $1,000,000 Common stock, $10 par value; 500,000 shares authorized; 150,000 shares issued and outstanding 1,500,000 Retained Earnings 500,000 The book value per share of common stock is

$13.33

Eddie industries issues $1500000 of 8% bonds at 105, the amount of cash received from the sale is?

$1575000

Creditors

Financial institutions or individuals who provide loans.

Asset

Inventory is what type of account?

Bacher Company developed the following reconciling information in preparing its September bank reconciliation:

$2834

Which one of the following items would not be considered cash?

Postdated checks

revenue recognition principle

Recognition of revenue when the performance obligation is satisfied.

Account

Record of (+/-) in an asset, liability, equity, revenue or expense

Cash-Basis Accounting

Revenues are recorded when cash is received. Expenses are recorded when cash is paid. Cash-basis accounting is not in accordance with generally accepted accounting principles (GAAP).

accrued revenues

Revenues earned but not yet received

Net Sales

Sales revenue less sales returns and allowances and sales discounts

Which of the following characteristics do NOT apply to cash equivalents?

Sensitive to interest rate changes

Which of the following is not a right or preference associated with preferred stock?

The right to vote

average-cost method

The same unit cost is used to value ending inventory and cost of goods sold

Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company

True

Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period

True

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

True

An analysis and aging of the accounts receivable of Hugh Company at December 31 revealed the following data: Accounts Receivable................................................... $ 800,000 Allowance for Doubtful Accounts per books before adjustment (Cr.)............................................ 50,000 Amounts expected to become uncollectible.................... 56,000 The cash realizable value of the accounts receivable at December 31, after adjustment, is:

$744000

Inventory is reported in the current asset section of the balance sheet T or F

True

Period costs include selling and administrative expenses

True

Retained earnings restrictions are generally disclosed in the notes to the financial statements.

True

Salaries Expense is a temporary account T or F

True

Sales Returns & Allowances and Sales Discounts are subtracted from Sales in reporting Net Sales on the Income Statement. T or F

True

Sales Returns and Allowances is a contra--revenue account.

True

Sales Returns and allowances and sales discounts are subtracted from sales revenue in reporting net sales in the income statement.

True

Barnett Restaurant Equipment has a beginning merchandise inventory of $20,000. During the period, purchases were $60,000; purchase returns were $60,000; purchase returns, $2,000, and freight-in $5,000. A physical count of inventory at the end of the period revealed that $10,000 was still on hand. The cost of goods available for sale was ...

$83,000

if fixed costs are $200,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero dollar profit?

10,000

a corporation has 40,000 shares of $25 par value stock outstanding. if the corporation issues a 3-for-1 stock split, the number of shares outstanding after the split will be?

120,000 shares

T/F: A business pays the social security tax at the same rate and on the same taxable wages as its employees.

True

T/F: After all adjusting entries are posted, the balances of the general ledger accounts should match the amounts shown in the Adjusted Trial Balance section of the worksheet.

True

The major difference between the balance sheets of a service company and a merchandising company is inventory

True

The single-step statement is so named because only one step, subtracting total expenses from total revenues, is required in determining net income or net loss.

True

The time-period assumption assumes that the economic life of a business can be divided into artificial time periods. T or F

True

To record a sale, an asset account is debited and the revenue account Sales is credited. T or F

True

Treasury stock is a contra stockholders' equity account.

True

2. Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? A) B) C) D)

2. B

Financial information is presented below: Operating Expenses$ 60,000 Sales Revenue 225,000 Cost of Goods Sold 135,000 Gross profit would be

225000 - 135000 = $90,000

Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases and sales during the month of January were as follows: Date Purchases Sales Jan. 14 375 @ $14 17 250 @ $10 25 250 @ $11 29 260 @ $16 Partridge does not maintain perpetual inventory records. According to a physical count, 365 units were on hand at January 31. The cost of the inventory at January 31, under the LIFO method is:

365 × $9 = $3,285

a corporation has 50000 shares of $28 par value stock outstanding that has a current market value of $150. if the corporation issues a 4-for-1 stock split, the market value of the stock will fall toe approximately?

37.50

What percentage of companies worldwide have experienced fraud in a recent two-year period?

50%

the charter of a corporation provides for the issuance of 100,000 shares of common stock. assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. what is the number of shares outstanding?

50,000

Bank Reconciliation - What is the effect? If the books are affected, how would the adjusting entries be written? The bank returned a FSF check for the amount of $91

Write off in the books for -$91 Debit accounts receviable Credit Cash

treasury stock

a corporations own stock that has been issued, fully paid for, and reacquired but not retired

deficit

a debit balance in retained earnings

On July 7, 2014, Hidden Comera Enterprises performed cash services of $1,700. The entry to record this transaction would include

a debit to Cash of $1,700.

The purchase of supplies on account should result in

a debit to Supplies and a credit to Accounts Payable.

expense

a decrease in owner's equity resulting from the operation of a business

perpetual inventory system

a detailed inventory system in which the cost of each inventory item is maintained and the records continuously show the inventory that should be on hand.

liquidating dividend

a dividend declared out of paid-in capital

if fixed costs are $700000 and the unit contribution margin is $14, what amount of units must be sold in order to realize an operating income of $100000?

57,143

An accounting time period that is one year in length, but does not begin on January 1, is referred to as

a fiscal year

invoice

a form describing the goods or services sold, the quantity, and the price

journal

a form for recording transactions in chronological order

ledger

a group of accounts

general ledger

a ledger that contains all accounts needed to prepare financial statements

chart of accounts

a list of accounts used by a business

Using the indirect method, if equipment is sold at a gain, the

amount of the gain is deducted in the operating activities section

multiple-step income statement

an income statement in which numerous steps are involved before net income or net loss is reported.

sinking fund cash would be classified on the balance sheet as what?

an investment

77. The net amount expected to be received in cash from receivables is termed the a. cash realizable value. b. cash-good value. c. gross cash value. d. cash-equivalent value.

asset

anything of value that is owned

Account Receivable

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Computer Equipment

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Computer Supplies

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Merchandise Inventory

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Cost of Merchandise Sold

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Cost Principle

Accounting info based on actual cost

Stockholder's Equity is best depicted by the following:

Assets- Liabilities

On January 15, Nifty Company sells merchandise on account to Martinez Associates for $2,000 with terms 3/10, n/05. On January 20, Martinez returns merchandise worth $400 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?

$1,552

On Jan. 2, 2009, Fat Boy Slim Corp. issued 5,000 shares of 6% cumulative preferred stock at $100 par value. On dec. 31, 2012, Fat Boy Slim Corp. declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in the current year before any distribution is made to common stock? Remember 2009-2012

$120,000

The trial balance of Clooney Company had accounts with the following normal balances: Cash $5,000, Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Common Stock $42,000; Dividends $15,000; Equipment $61,000. In preparing a trial balance, the total in the debit column is

$131,000

a corporation issues 1500 shares of common stock for $32000. the stock has a stated value of $10 per share. the journal entry to record the stock issuance would include a credit to common stock for?

$15000

In preparing its August 31, 2013 bank reconciliation, Annie Corp. has available the following information: Balance per bank statement, 8/31/13 $21,650 Deposit in transit, 8/31/13 3,900 Return of customer's check not sufficient funds, 8/30/13 600 Outstanding checks, 8/31/13 2,750 Bank service charges for August 100 At August 31, 2013, Annie's adjusted cash balance is

$22800

$230,000 and $30,000

Hot Stuff Hot wings reported income of $50,000 for the year. During the year, accounts receivable increased by $18,000, accounts payable decreased by $7,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year was...

$25,000

Indrisano's Used Cars uses the specific identification method of costing inventory. During March, Indrisano purchased three cars for $12,000, $14,400, and $19,200, respectively. During March, two cars are sold for a total of $34,600. Indrisano determines that at March 31, the $14,400 car is still on hand. What is Indrisano's gross profit for March?

$34,600 - ($12,000 + $19,200) = $3,400

Bob Marley Corp. was organized on Jan. 2, 2012. During 2012, Bob Marley issued 20,000 shares at $12 per share, purchased 3,000 shares of treasury stock at $13 per share, and had net income of $150,000. What is the total amount of stockholder's equity at December 31, 2012.

$351,000

Farley Foods had beginning inventory of $15,000 at March 1, 2008. During the month the company made purchases of $40,000. The inventory at the end of the month is $17,300. What is cost of goods sold for the month of March?

$37,700

Kern Company sells merchandise on account for $6,000 to Block Company with credit terms of 2/10, n/30. Block Company returns $1,200 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

$4,704

The cash account shows a balance of $45,000 before reconciliation. The bank statement does not include a deposit of $2,500 made on the last day of the month. The bank statement shows a collection by the bank of $1,200 and a customer's check for $320 was returned because it was NSF. A customer's check for $450 was recorded on the books as $540, and a check written for $69 was recorded as $96. The correct balance in the cash account was

$45817

A company just starting business made the following four inventory purchases in June: Date Units Total cost of purchase June 1 150 units $ 390 June 10 200 units 585 June 15 200 units 630 June 28 150 units 510 $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the FIFO inventory method, the amount allocated to cost of goods sold for June is

$510 + [($630 ÷ 200) × 100] = $825; $2,115 - $825 = $1,290

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $64; Second purchase $76; Third purchase $68. If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be

$68

Fetherston Company's goods in transit at December 31 include: sales made purchases made (1) FOB destination (3) FOB destination (2) FOB shipping point (4) FOB shipping point Which items should be included in Fetherston's inventory at December 31?

(1) and (4)

At October 1, Arcade Fire Enterprises reported owner's equity of $70,000. During October, the owner made additional investments of $4,000 and the company earned net income of $14,000. If owner's equity at October 31 totals $80,000, what amount of owner drawings were made during the month?

(70000+4000+14000) - 80000 = $8,000

Collected Lox Company note in full. Assume interest was correctly accrued on August 31 and September 30.

**3Months of interest. 30*3=$90+6000=$6090 Debit cash 6090 Credit note received 6000 Credit interest received 90

a stock dividend results in:

-a decrease in retained earnings -an increase in paid-in-capital

upon receiving a stock dividend:

-a stockholder owns more shares -a stockholders interest has not changed

dividends can take the following forms:

-cash -property -script All of the above

a small stock dividend

-is less than 20%-25% of the corporations issued stock -is recorded at market value per share

if fixed costs are $240000, the unit selling price is $36, and the unit variable costs are $20, what is the break even sales (units)?

15,000 units

Net income is $15,000, operating expenses are $20,000, net sales total $75,000, and sales revenues total $95,000. How much is the profit margin?

20% ----- Net income ($15,000) divided by net sales ($75,000) equals profit margin of 20%.

if fixed costs are $240000, the unit selling price is $32, and the unit variable costs are $20, what are the old and new break-even sales (units) if the unit selling price increases by $4?

20000 units and 15000 units

The total assets of XYZ Company are $60,000. Common Stock is $20,000; Dividends are $1,000; Revenues are $40,000; and Expenses are $21,000. What is the amount of the company's total liabilities?

22,000

production and sales estimates for may for the robin co. are as follows: estimated inventory (units), May 1 18,500 desired inventory (unit), May 31 19,300 expected sales volume (units): Area W 6,000 Area X 7,000 Area Y 9,000 Unit sales price $20 the number of units expected to be sold in May is?

22,000

if fixed costs are %500000, the unit selling price is $55, and the unit variable costs are $30, what is the break-even sales (units) if fixed costs are increased by $80,000?

23,200 units

A company has the following accounts balances: Sales revenue $2,000,000; Sales Returns and Allowances $250,000; Sales Discounts $50,000; and Cost of Goods Sold $1,275,000. How much is the gross profit rate?

25% ----- Gross profit divided by net sales results in a gross profit rate of 25%. Net sales = $2,000,000 ‒ $250,000 ‒ $50,000 = $1,700,000 Gross profit = $1,700,000 ‒ $1,275,000 = $425,000 Gross profit rate = $425,000/$1,700,000 = 25%

Income from operations is gross profit less 1. operating expenses and other expenses and losses. 2. operating expenses plus other revenues and gains. 3. operating expenses.

a corporation has 60000 shares of $25 par value stock outstanding that has a current market value of $120. if the corporation issues a 5-for-1 stock split, the number of shares outstanding will be?

300,000

if sales are $425000, variable costs are 68% of sales, and operating income is $50000, what is the contribution margin ratio?

32%

The average collection period is computed by dividing

365 days by the accounts receivable turnover ratio

based on the following production and sales estimates for May, determine the number of units expected to be manufactured in May. Estimated inventory (units), May 1 20,000 Desired inventory (units), May 31 15,000 Expected sales volume (units): South Region 20,000 West region 40,000 North region 20,000 Unit sales price $10

75,000

In the month of May, Kijak Company Inc. wrote checks in the amount of $84,000. In June, checks in the amount of $114,000 were written. In May, $75,000 of these checks were presented to the bank for payment, and $99,000 in June. What is the amount of outstanding checks at the end of May?

84000 - 75000 = $9,000

179. The accounts receivable turnover is needed to calculate a. the average collection period in days. b. market risk. c. return on assets. d. current ratio.

192. Simonic Retailers accepted $90,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Simonic Retailers will include a credit to Sales Revenue of $90,000 and a debit(s) to a. Cash $86,400 and Service Charge Expense $3,600. b. Accounts Receivable $86,400 and Service Charge Expense $3,600. c. Cash $86,400 and Interest Expense $3,600. d. Accounts Receivable $90,000.

A Solution: 90,000 × .04 = $3,600

Corporation

A form of business organization that is characterized by a large number of owners who are not involved in managing the day-to-day operations of the company.

Securities and Exchange Commission (SEC)

A government agency formed by the 1934 Act, having primary responsibility for enforcing the Federal securities laws and regulating the securities industry. It protected investors, listened to complaints, issued licenses and penalized fraud.

Board of directors

A group of people elected by the stockholders to represent shareholders interests and oversee management.

Chart of Accounts

A list of all the accounts used by an enterprise

common stock

A part of owners' equity in a corporation.

Which of the following statements is correct?

A perpetual inventory system provides better control over inventories than does a periodic inventory system.

Liability

A probable future economic sacrifice resulting from a past or current event.

Liability

A probable future economic sacrifice resulting from a past or current event. forced to transfer assets, company owes ex: ends in payable are liabilities: unearned revenue

Assets

A resource owned by the company, expected to provide future economic benefits. ex. computer

10. Under a perpetual inventory system

A) accounting records continuously disclose the amount of inventory.

A company shows a balance in Salaries Payable of $38,000 at the end of the month. The next payroll amounting to $48,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries? A. Debit Salaries Expense for 10,000, debit Salaries Payable for 38,000 and credit Cash for 48,000 B. debit Salaries Expense for 48,000 and credit Cash for 48,000 C. debit Salaries Expense for 10,000 and credit Cash for 10,000 D. debit Salaries Expenses for 48,000 and credit Salaries Payable for 48,000

A. Debit Salaries Expense for 10,000, debit Salaries Payable for 38,000 and credit Cash for 48,000

What type of account is Wages Payable? A. Liability B. Revenue C. Asset D. Expense

A. Liability

The journal entry to record a credit sale is

AR sales revenue

What activities and responsibilities are not associated with management's functions?

Accountability

Time Period Assumption

Accountants divide the economic life of a business into artificial time periods

Time Period Assumption

Accountants divide the economic life of a business into artificial time periods.

current assets;cost of goods sold

Accounting for inventories is important because inventories affect the______________ section of the balance sheet and the________section on the income statement.

Generally accepted accounting principles (GAAP)

Accounting guidelines, formulated by the Federal Accounting Standards Board (FASB)

Fiscal Year

Accounting time period that is one year in length.

Which type of adjustment is needed for the following transaction? Interest of $100 has accumulated on a note payable.

Accrued Expense

Liability

Accrued salaries is what type of account?

An account is a part of the financial information system and is described by all except which one of the following?

An account is a source document.

journal

An accounting record where transactions are initially recorded in chronological order is called a

Retained earnings

An amount earned by a corporation and not yet distributed to stockholders.

Contributed capital

An entry on the shareholders' equity section of a company's balance sheet that summarizes the total value of stock that shareholders have directly purchased from the issuing company.

The accounting process begins with...

Analysis of transactions and source documents

What are the three steps of the recording process in order?

Analyze the transaction, journalize, and then post to ledger

Which of the following is not a basic principle of designing and developing an effective accounting information system?

Approval by the SEC

Economic resources owned by an entity

Assets

Accounting Equation

Assets = Liabilities + Equity

What effect would the following transaction have on the expanded accounting equation? Paid cash for supplies previously purchased.

Assets would decrease. Liabilities would decrease.

137. Smithson Corporation's unadjusted trial balance includes the following balances (assume normal balances): Accounts Receivable $3,357,000 Allowances for Doubtful Accounts $ 63,900 Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? a. $201,420 b. $137,520 c. $133,686 d. $205,254

B Solution: ($3,357,000 × .06) − $63,900 = $137,520

159. Ramos Company has a 90-day note that carries an annual interest rate of 8%. If the amount of the total interest on the note is equal to $700, then what is the principal of the note? a. $8,750 b. $35,000 c. $50,400 d. $22,400

B Solution: P × .08 × 90/360 = $700; P = ($700 × 360/90) ÷ .08 = $35,000

66. On January 15, Nifty Company sells merchandise on account to Martinez Associates for $3,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $600 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received? a. $2,400 b. $2,328 c. $2,310 d. $1,680

B Solution: [($3,000 − $600)] × .97 = $2,328

4. Which of the following would be added to the balance per bank on a bank reconciliation?

B) Deposits in transit.

75. Which one of the following is not an objective of a system of internal controls?

B) Overstate liabilities in order to be conservative.

95. If a check correctly written and paid by the bank for $471 is incorrectly recorded on the company's books for $417, the appropriate treatment on the bank reconciliation would be to

B) subtract $54 from the book's balance.

journal

Book of original entry

182. The financial statements of the Melton Manufacturing Company reports net sales of $300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days? a. 96.1 b. 48.7 c. 36.5 d. 60.8

Bs Solution: $300,000 ÷ [($50,000 + $30,000) ÷ 2] = 7.5; 365 ÷ 7.5 = 48.7

Asset

Buildings is what type of account?

115. Significant changes in stockholders' equity are reported in A. income statement B. retained earnings statement C. statement of stockholders' equity D. statement of cash flows

116. Retained earnings A. is the same as contributed capital B. cannot have a debit balance C. changes are summarized in the retained earnings statement D. is equal to cash on hand

To record a return of merchandise purchased on credit, the accountant would A. debit Purchases Returns and Allowances and credit Accounts Receivable B. debit Purchases Returns and Allowances and credit Purchases C. debit Accounts Payable and credit Purchases Returns and Allowances D. debit Purchases and credit Purchases Returns and Allowances

Which of the following accounts will appear on the postclosing trial balance? A. Miscellaneous Income B. Payroll Taxes Expense C. Medicare Tax Payable D. Sales

134. The following information is related to December 31, 2013 balances. Accounts receivable $2,100,000 Allowance for doubtful accounts (credit) (180,000) Cash realizable value $1,920,000 During 2014 sales on account were $580,000 and collections on account were $344,000. Also during 2014 the company wrote off $32,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $216,000. The change in the cash realizable value from the balance at 12/31/13 to 12/31/14 was a a. $200,000 increase. b. $236,000 increase. c. $168,000 increase. d. $204,000 increase.

C Solution: [($2,100,000 + $580,000 − $344,000 − $32,000) − $216,000] − $1,920,000 = $168,000

9. Which of the following accounts is classified as a contra revenue account?

C) Sales Returns and Allowances

bonds with a face amount of $1000000 are sold at 98. the entry to record the issuance is?

Cash 980,000 discount on bonds payable 20,000 bonds payable 1000000

Which item is a current asset?

Cash equivalents

If a petty cash fund is established in the amount of $200, and contains $119 in cash and $84 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts

Cash, $81; Cash Over and Short, $3.

What is work in progress inventory generally described as?

Costs applicable to units that have been started in production but are only partially completed

Equities

Creditor and ownership claims against the assets of the business

180. The average collection period for receivables is computed by dividing 365 days by a. net credit sales. b. average accounts receivable. c. ending accounts receivable. d. accounts receivable turnover.

164. Which of the following is a way of disposing of a note receivable? a. Honoring it on maturity date. b. Selling it to receive cash before the maturity date. c. Default by the maker. d. All of these are ways to dispose of notes receivable.

160. Douglas Company has a $51,000 note that carries an annual interest rate of 10%. If the amount of the total interest on the note is equal to $3,400, then what is the duration of the note in months? a. 6 months b. 4 months c. 12 months d. 8 months

D Solution: $3,400 ÷ ($51,000 × .10) = 666; .666 × 12 = 8

181. The financial statements of the Nelson Manufacturing Company reports net sales of $300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Nelson? a. 3.8 times b. 6 times c. 10.0 times d. 7.5 times

D Solution: $300,000 ÷ [($50,000 + $30,000) ÷ 2] = 7.5

149. The interest on a $7,000, 6%, 60-day note receivable is a. $35. b. $420 c. $210. d. $70.

D Solution: $7,000 × .06 × 60/360 = $70

Which of the following is false? A. Sales is a revenue account with a normal credit balance. B. Sales Discounts is a contra-revenue account with a normal debit balance. C. Inventory is an asset account with a normal debit balance. D. Cost of Goods Sold is an asset account with a normal debit balance.

D. Cost of Goods Sold is an asset account with a normal debit balance.

What type of account is Utilities Expense? A. Liabilities B. Revenue C. Asset D. Expense

D. Expense

Under a perpetual inventory system, purchases of merchandise for sale are recorded in an account called: A. Cost of Goods Sold B. Finished Goods C. Purchased D. Inventory

D. Inventory

69. The ability of a corporation to obtain capital is A. less than a partnership. B. about the same as a partnership. C. restricted because of the limited life of the corporation. D. enhanced because of limited liability and ease of share transferability.

D. enhanced because of limited liability and ease of share transferability.;

78. The excess of issue price over par of common stock is termed a(n) A. discount B. income C. deficit D. premium

D. premium;

62. Characteristics of a corporation include A. shareholders who are mutual agents B. direct management by the shareholders (owners) C. its inability to own property D. shareholders who have limited liability

D. shareholders who have limited liability;

All of the following are property, plant and equipment except A. land B. machinery C. buildings D. supplies

D. supplies

record date

Date when ownership of outstanding shares is determined for dividend purposes

A corporation purchases 20,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity?

Decrease by $700,000

EXPENSE RECOGNITION PRINCIPLE

Dictates that efforts (expenses) be matched with results (revenues). Thus, expenses follow revenues.

Which of the following is a manufacturing cost category

Direct materials Direct labor Manufacturing overhead

time period assumption

Divides the economic life of a business into artificial time periods.

Expense recognition principle.

Efforts (expenses) should be matched with results (revenues).

expense recognition principle

Efforts are related to accomplishments.

Under the terms FOB destination, ownership of the goods passes to the buyer when a public carrier accepts the goods from the seller.

F. Under the terms, FOB destination, legal tittle to the goods remains with the seller until the goods are delivered to the buyer by the transportation company.

If beginning inventory is overstated, net income will be overstated in the same year.

F. if beginning inventory is overstated, net income will be understated in the same year.

the lower-of-cost-or-market basis must be applied to each individual item of inventory.

F. this basis may also be applied to major categories of inventory or to total inventory.

In a period of rising prices, the inventory method that will show the highest net income is?

FIFO

In periods of inflation, phantom or paper profits may be reported as a result of using the

FIFO costing assumption.

Which of the following is not a reason why a single set of high-quality international accounting standards would be beneficial?

GAAP is widely considered to be a superior reporting system.

One difference between IFRS and GAAP is that:

IFRS uses more fair value measurements than GAAP.

finished goods; merchandise inventory

In a manufacturing company, goods that are ready to be sold to customers are referred to as ________________, whereas in a merchandising company they are generally referred to as ________________ .

LIFO

In a period of inflation, the cost flow method that results in the lowest income taxes is the

FIFO

In a period of inflation, which cost flow method produces the highest net income?

lower cost of goods sold than LIFO.

In a period of rising prices, FIFO will have:

when the service is performed

In a service-type business, revenue is recognized

Accounting Cycle is the recurring steps performed each reporting period...

In order...Analyze, Journalize, Post, Trial Balance, Adjust, Adjusted Trial Balance, Financial Statements, Close, Post-Closing Trial Balance, Reverse entries(optional)

lower net income than FIFO

In periods of rising prices, LIFO will produce:

Retained earnings

Income the company has earned since its inception, minus the dividends it has paid out to shareholders.

Which of the following is not one of the main factors that contribute to fraudulent activity?

Incompatible duties.

Adjustments for accrued expenses (such as salaries) increase/decrease which account groups?

Increase liabilities and increase expenses.

Which of the following would be classified as manufacturing overhead?

Indirect labor Indirect Materials Insurance on factory building

Going-concern Principle

Info that reflects a presumption a business will continue operating

Collier Company has implemented a just-in-time system, which relies on suppliers to deliver goods for resale as needed. This implementation is most consistent with which of the following basic principles of cash management?

Keeping inventory levels low

Unearned Revenue

Liabilities created when a customer pays before the revenue is earned

Time Period(assumption)

Life of a company divided into time periods with Useful reports for each ie. monthly, quarterly, fiscal/calendar years

Chart of Accounts

List of all company accounts with corresponding identification #s

Investing activities

Methods companies use to acquire and dispose of assets in the course of production and sales.

Financing activities

Methods companies use to fund investment resources.

Which f the following characteristics would likely be associated with a just-in-time inventory method?

Minimal finished goods inventory on hand

interim periods.

Monthly and quarterly time periods

Liability

Mortgage payable is what type of account?

Asset Book Value

Net balance sheet amount is computed as the asset's total cost less its accumulated depreciation

Interest Payable

Normal Balance: Credit Type of Account: Liability Financial Statement: BS

Note Payable

Normal Balance: Credit Type of Account: Liability Financial Statement: BS

Salary Payable

Normal Balance: Credit Type of Account: Liability Financial Statement: BS

Unearned Revenue

Normal Balance: Credit Type of Account: Liability Financial Statement: BS

Sales

Normal Balance: Credit Type of Account: Revenue Financial Statement: IS

Service Revenue

Normal Balance: Credit Type of Account: Revenue Financial Statement: IS

Which of the following expressions is incorrect?

Operating expenses - cost of goods sold = gross profit

Partnership

Owned by two or more persons. Often retail and service-type businesses Generally unlimited personal liability Partnership agreement

Owner's Equity

Ownership claim on total assets. Referred to as residual equity. Investment by owners and revenues (+) Drawings and expenses (-).

Corporation

Ownership divided into shares of stock Separate legal entity organized under state corporation law Limited liability

Asset

Prepaid advertising is what type of account?

Asset

Prepaid rent is what type of account?

Accrual basis of accounting

Preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues

Which of the following transactions are classified as financing activities?

Purchase of treasury stock Payment of Dividends Issuance of bonds at a discount

Treasury stock was acquired for cash at more than its par value and then subsequently sold for cash at more than its acquisition price. What is the effect on additional paid-in capital from treasury stock transactions?

Purchase of treasury stock- no effect Sale of treasury stock- increase

Under the perpetual inventory system, which of the following accounts would not be used?

Purchases

Under a periodic inventory system, acquisition of merchandise is debited to the

Purchases Account

Which statement is true when goods are purchased for resale by a company using a periodic inventory system?

Purchases on account are debited to the Purchases account. ----- All purchases are debited to the Purchases account in a periodic inventory system.

Which of the following is not an advantage of a subsidiary ledger?

Puts greater detail in the general ledger.

Budgeting

Quantifying goals and objectives

ACCRUED REVENUES

Revenues for services performed but not yet received in cash or recorded.

Deferred revenues

Revenues that have been collected but not earned; they are liabilities until the goods or services have been provided.

Temporary(Nominal Account)

Revenues, Expenses, and withdrawl accounts that are closed at the end of each accounting period

What are the three temporary accounts, aka the accounts the we "close" at the end of our accounting period?

Revenues, expenses, and dividends

Stockholders' equity

Salaries expense is what type of account?

Economic Entity Assumption

Stops owners from putting their own transactions in the company's records ex; can't list my home investment accounts as assets or utilities as company expenses

Asset

Supplies is what type of account?

Finished goods are a classification of inventory in a manufacturing enterprise that are completed and ready for sale.

In a period of falling prices, the LIFO method results in a lower cost of goods sold than the FIFO method.

The determination of inventory quantities involves taking a physical inventory and determining the ownership of goods.

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism.

Public Company Accounting Oversight Board (PCAOB)

The Public Company Accounting Oversight Board (PCAOB) was established pursuant to the Sarbanes-Oxley Act of 2002. The PCAOB establishes auditing and related professional practice standards to be used in the preparation and issuance of audit reports for "issuers."

inventory

The acquisition of inventory is debited to the________ account when a perpetual inventory system is used.

Disclosure

The act of providing financial information to external users.

of an entity be kept separate from the activities of its owner

The economic entity assumption requires that the activities:

What is "balanced" in the balanced scorecard apprach?

The emphasis on financial and non-financial performance measurements

general ledger

The entire group of accounts and their balances maintained by a company is called the:

reversing

The exact opposite of an adjusting entry made in a previous period.

expenses;revenues

The expense recognition principle attempts to match_______with________.

Going-Concern Principle

The going concern principle is the assumption that an entity will remain in business for the foreseeable future.

Revenue

The increase in equity resulting from the sale of good and services to customers.

conservatism

The lower of cost or market basis of valuing inventories is an example of:

Matching Principle

The matching principle directs a company to report an expense on its income statement in the same period as the related revenues.

Income

The net increase in equity from the company's operating activities. Income, also called net income, equals revenues minus expenses.

Which of the following factors does not affect the initial market price of a stock?

The par value of the stock

fair value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Planning activities

The process of identifying a company's goals, and the strategies adopted to reach those goals.

number of businesses in the United States

The proprietorship form of business organization represents the largest:

Which of the following is NOT true of the terms debit and credit?

They can be interpreted to mean increase and decrease.

How have many companies significantly lowered inventory levels and costs?

They have a just-in-time method

Liability

Unearned revenue is what type of account?

Trial Balance

Vertically lists accounts and balances Total Dr should = Total Cr

accumulates the effects of journalized transactions in the individual accounts

What does posting do?

The bank included a bank memorandum for $1590, which represents a collection of a customer's note by the bank for the company; principal amount of the note is $1500 and the remainder was interest.

Write off in the books +$1590 Debit Cash $1590 Credit notes recevable $1500 Credit interest revenue $90

A company purchased inventory as follows: 150 units at $5 350 units at $6 The average unit cost for inventory is

[(150 × $5) + (350 × $6)] ÷ 500 = $5.70

T-Account

___________________ (left side) I (right side) Debit I Credit

in a period of inflation, the use of the LIFO method will result in

a better matching of costs and revenues than FIFO

When a note receivable is dishonored,

accounts receivable is debited if eventual collection is expected.

Posting

accumulates the effects of journalized transactions in the individual accounts.

A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be

added to the balance per books.

Sources of increases to stockholder's equity are

additional investment by stockholders

Liabilities

are existing debts and obligations

write off method entries

bad debt exp AR

Par Value Stock

capital stock that has been assigned a value per share in the corporate charter

outstanding stock

capital stock that has been issued and is being held by stockholders

An Understatement of ending inventory will...

cause an understatement of assets and equity on the balance sheet

The chief accounting officer in a company is known as the

controller.

an unsecured bond is the same as a?

debenture bond

A merchandiser will earn an operating income of exactly $0 when

gross profit equals operating expenses

Generally accepted accounting principles are

guidelines that indicate how to report economic events.

All of the following are true about a corporation except:

has the right to vote

if bonds are issued at a premium, the stated interest rate is?

higher than the market rate of interest

Debits:

increase assets and decrease liabilities.

Performing services on account will have the following effects on the components of the basic accounting equation:

increase assets and increase stockholders' equity

Gross profit does NOT appear

on a single-step income statement

The procedure of transferring journal entries to the ledger account is called

posting

Interest=

principle x annual interest x time

If unearned revenues are initially recorded in revenue accounts and not all the related services been performed at the end of the accounting period, then failure to make an adjusting entry will cause

revenues to be overstated

Ethics are the standards of conduct by which one's actions are judged as:

right or wrong. honest or dishonest. fair or not fair.

Internal controls are concerned with

safeguarding assets.

prior period adjustment

the correction of an error in previously issued financial statements

Legal capital per share cannot be equal to the:

total proceeds from the sale of par value stock above par value

IFRS:

uses accrual accounting.

Other long-term liabilities

various obligations, such as warranty and deferred compensation liabilities and long-term tax liabilities, that will be satisfied at least a year in the future.

Credit Card Sales

Gives customers the ability to make purchases without cash or checks. Customers using these cards can make single monthly payments instead of several payments to different creditors and can defer their payments

Goods on Consignment

Goods shipped by the owner to the consignee who sells the goods for the owner

Damaged and Obsolete goods

Included in inventory at their net realizable value

Cash

Includes currency and coins along with the amounts on deposit in bank accounts, checking accounts, and many savings accounts, cashier's checks, certified checks and money orders

Costs included in the Merchandise Inventory account can include...

Invoice price minus any discount, transportation-in, storage and insurance

Trade Discount

Is a reduction in price below the list price

Debit Memo

Is the document a buyer issues to inform the seller of a debit made to the seller's account in the buyer's records.

Adjusted Trial Balance

Is the trial balance prepared once adjustments have been recorded and contains totals of all general ledger accounts

Balance Sheet

Lists types/amounts of Assets, Liabilities and Equity as of a specific date (AKA accounting equation)

Sales Returns (contra-revenue)

Merchandise that customers return to the seller after the sale

Owner's Equity

Owner's claims against assets

Internal Controls for Physical Count

-pre-numbered inventory tickets -counters of inventory should not be those who are responsible for the inventory -counters must confirm the validity of inventory existence, amounts and quality -second counts by a different counter

Full Disclosure

Report all details of financial statements that could impact user's decisions;often in the footnotes

Consistency Concept

Requires that the same valuation method stays constant unless another method becomes preferable

Revenue Recognition Principle

Revenue is recognized when Earned ie.selling products/providing service for cash/credit

Income Statement

Revenues - Expenses = Net Income Net Income=excess revenues over expenses(profit) Net loss=excess expenses over revenues

Capital calculation

Revenues - Expenses = Net Income - Withdraws = Ending Capital

Income Summary account

Special account to temp hold the amounts of revenues and expenses before net difference is added/subtracted from owner's capital account. Also used to close temp accounts ie.revenues, expenses, net income and withdraws

Objectivity Principle

Statement info must be supported by Unbiased evidence

Monetary unit Principle

Transactions to be expressed in monetary(money) units

Post-Closing Trial Balance

Trial balance prepared after closing entries have been journalized and posted. Reports all ledger accounts except temporary accounts

Aging of Receivables Method

Uses both past and current receivables info to estimate the allowance amount. Assumes that the longer an account is past due, the more likely it is to be uncollectible

Additions for Collections and Interest

When a bank collects an item, it is added to the depositor's account, less any service fee. The bank then sends a credit memo to notify the depositor of the transaction

Bank Account

a record set up by a bank for a customer

Bank Reconcilliation

a report explaining(reconciling) any differences between the checking account balance according to the depositors records and the balance reported on the bank statement

Promissory Note

a written promise to pay a specified amount of money, usually with interest, either on demand or at a definite future date. Sellers sometimes ask for a note to replace an account receivable when a customer requests additional time to pay a past due account. (calculate note at maturity)

Credit terms (2/10, n/30) is interpreted as...

2% cash discount if the amount is paid within 10 days(from date of invoice), If not then the balance is due within 30 days

An Overstatement of ending inventory will...

Cause an overstatement of assets and equity on the balance sheet

Straight Line Depreciation

Charges the same amount of expense period of the asset's useful life. (Cost - Salvage Value) / Useful life in periods

5 Fundamental Principles of Accounting info systems are...

Control, relevance, compatibility, flexibility and cost benefit

Generally Accepted Accounting Principles(GAAP) require that the inventory of a company...

be reported at lower of cost or market

Outstanding Checks

checks written (or drawn) by the depositor, deducted on the depositor's records, and sent to the payees but not yet received by the bank for payment at the bank statement date

Deposits in Transit

deposits made and recorded by the depositor but not yet recorded on the bank statement

A Merchandise company

Earns Net Income by buying and selling merch. can buy from manufacturers and sell to retailers can buy from manufacturers and sell to customers can be a wholesaler or a retailer

Merchandise inventory

includes all goods owned by a company and held for sale

Information Processors

interpret,transform, and summarize info for use in analysis and reporting

Accounts Receivable Ledger

is a subsidiary ledger that contains an account for each credit customer

Relevance Principle

requires and accounting info system to report Useful, understandable, timely, and pertinent info for effective decision making

Cash Equivalents

short term, highly liquid investment assets meeting 2 criteria; (1) readily convertible to a known cash amount and (2) sufficiently close to their due date so that their market value is not sensitive to interest rate changes

Accounts Payable Ledger

subsidiary ledger that contains a separate account for each supplier (creditor) to the company

Historical cost less accumulated depreciation for a plant asset is called A. book value B. market value C. accounting value D. original value

A. book value

The objective of internal control of purchases is to A. create written proof that purchases and payments are authorized. B. create a disciplined work environment C. make the sales process more complex. D. create more organized invoices.

83. When an account becomes uncollectible and must be written off a. Allowance for Doubtful Accounts should be credited. b. Accounts Receivable should be credited. c. Bad Debt Expense should be credited. d. Sales Revenue should be debited.

The basic accounting equation states that Assets+Stockholder's Equity= Liabilities

False

The basic principles of an accounting information system are cost awareness, usefulness, and fixed structure.

False

Sales should be recorded in accordance with the matching principle.

False. Sales Revenue should be recorded in accordance with he revenue recognition principle.

Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method?

Gain on sale of equipment

The reporting standard for external financial reports is

Generally accepted accounting principles

Proprietorship

Generally owned by one person. Often small service-type businesses Owner receives any profits, suffers any losses, and is personally liable for all debts.

T/F: A strong system of internal control requires that all payments be made by check except those made from a carefully controlled cash fund such as a petty cash fund.

True

T/F: The entry to record the social security and Medicare taxes levied on a business includes a debit to Payroll Taxes Expense.

True

Inventoriable costs

a pool of costs that consists of the cost of the beginning inventory and the costs of goods purchased during the period.

cash dividend

a pro rata distribution of cash to stock holders

Cash dividend

a pro rata distribution of cash to stockholders

stock dividend

a pro rata distribution of the corporation's own stock to stockholders

The balance in the Accumulated Depreciation account represents the

amount charged to expense since the acquisition of the long-term asset.

petty cash

amount of cash kept on hand and used for making small payments

Accounts payable

amounts owed to suppliers for goods and services purchased on credit.

Accruals

are made to record

disbursement

spending or distributing of money

In a period of rising prices, FIFO will have a

lower cost of goods sold than LIFO

if common stock is issued for an amount greater than par value, the excess should be credited to?

paid-in capital in excess of par value

The term legal capital is a descriptive term for

par value.

The "Other Accounts" column in a cash receipts journal is also referred to as the

sundry accounts column

Plant Assets

tangible assets used in a company's operations that have a useful life of more than one accounting period.

A retailer that collects sales taxes is acting as an agent for the

taxing authority

Short-term notes receivable

use the same estimations and computations as accounts receivable to determine cash realizable value.

Each share of common stock gives the stockholder the following ownership rights.

vote, preemptive right, residual claim

If a stockholder cannot attend a stockholders' meeting, he may delegate his voting rights by means of a(n)

proxy.

The two ways that a corporation can be classified by ownership are

publicly held and privately held.

In preparing closing entries for a merchandiser, the Income Summary account will be credited for the balance of

sales revenue

In preparing closing entries for a merchandising company, the Income Summary account will be credited for the balance of

sales revenue

Revenue Recognition

sales revenue must be recorded when services are performed

Inventory becomes part of cost of goods sold when a company

sells the inventory.

The date that the board of directors formally declares a cash dividend is the date of record.

False

The primary basis of accounting for inventories is market value T or F

False

The revenue recognition principle dictates that revenue should be recognized in the accounting period in which cash is received.

False

The statement of cash flows classifies cash receipts and payments as operating, non-operating, financial, and extraordinary activities

False

When no par stock has a stated value, the entire proceeds from the issue are credited to Common Stock

False

Th cost of a non cash asset acquired in exchange for common stock should be either the fair market value of the consideration given up or the consideration received, whichever is more clearly determinable.

True

The FIFO inventory method results in an ending inventory valued at the most recent costs. T or F

True

The First-in, First-out (FIFO) inventory method results in ending inventory valued at the most recent cost

True

The interest on a $10,000, 8%, 3 month note would be $200. T or F

True

Upon approval of the customer's request for a sales return or allowance, the seller normally prepares a business document known as a credit memorandum.

True

Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating cash provided by operations.

True

Utilities Expense is a temporary account T or F

True

Wages Payable has a normal credit balance T or F

True

sales discount

a reduction given by a seller for prompt payment of a credit sale.

Inventory turnover is calculated by dividing cost of goods sold by

average inventory

Noncash investing and financing activities must be reported in the body of the statement of cash flows

false

financial statements

financial reports that summarize the financial condition and operations of a business

prepare a trial balance

first step in preparing a worksheet

Preparing a worksheet involves

five steps

The double-entry system requires that each transaction must be recorded

in at least two different accounts

The proper order of the following steps in the accounting cycle is

journalize transactions, post to ledger accounts, prepare trial balance, journalize and post adjusting entries.

Closing entries are

journalized in the general journal

A 60-day note receivable dated April 13 has a maturity date of

june 12

A 30-day note dated May 18 has a maturity date of

june 17

Restricted cash expected to be used within the next year should be

reported as a current asset

Inventory is

reported as a current asset on the balance sheet

A debit memorandum would not be issued by the bank for

the collection of a notes receivable

Earned capital

the cumulative net income (and losses) that has been retained by the company (not paid out to shareholders as dividends)

Current maturities of long-term debt

the current portion of long-term debt that is due to be paid within one year.

payment date

the date dividend checks are mailed to stockholders

the liability for a dividend is recorded on what date?

the date of declaration

Expenses are recognized when

they make their contribution to revenue

Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates

segregation of duties is violated

Income statement

shows revenues, expenses and net income for a time period only revenue and expenses shown

endorsement

signature or stamp on the back of a check transferring ownership

economic entity

what assumption requires that the activities of an entity be kept separate from the activities of its owner

Direct materials become a cost of finish goods manufactured when they are acquired not when they are used

false

Few internal control systems provide for independent internal verification.

false

cumulative dividend

feature of preferred stock entitling the stockholder to receive current and unpaid prior-year dividends before common stock holders receive any dividends

The process of totaling the columns of a journal is termed

footing

Under the allowance method, Bad Debt Expense is recorded

for an amount that the company estimates it will not collect.

The term "FOB" denotes

free on board

Under GAAP, companies generally classify income statement items b

function

gross profit method.

a method ised to estimate the cost of the ending inventory in which the estimated cost of goods sold is subtracted from the cost of goods available for sale.

lower-of-cost-or-market basis.

a method of valuing inventory recognizes the decline in the value where current purchase price (market) is less than cost.

retail inventory method.

a method udes to estimate the cost of ? ending inventory by using a cost-to-? ratio.

other revenues and gains

a non operating section of the income statement that shows revenues from auxiliary operations and gains unrelated to the company's operations.

other expenses and losses

a nonoperating section of the income statement that shows expenses pertaining to auxiliary operations and losses unrelated to the company's operations.

accounting system

a planned process for providing financial information that will be useful to management

return on common stockholders' equity ratio

a ratio that measures profitability from the stockholders' point of view. it is computed by dividing net income available to common stockholders by average common stockholders' equity

If the cash budget showed a projected cash shortage, the company would most likely

arrange to borrow the necessary cash for that period.

An account is an individual accounting record of increases and decreases in specific

assets, liabilities, and owner's equity items.

A petty cash fund should be replenished

at the end of every accounting period.

the state charter allows a corporation to issue only a certain number of shares of each class of stock. what is this amount of stock called?

authorized stock

The amount of stock that may be issued according to the corporation's charter is referred to as the

authorized stock.

Inventory turnover is calculated by dividing costs of goods sold by

average inventory

Freight-in is subtracted from net purchases in determining cost of goods purchased.

par value stock

capital stock that has been assigned a value per share in the corporate charter

no-par value stock

capital stock that has not been assigned a value in the corporate charter

preferred stock

capital stock that has some contractual preferences over common stock

preferred stock

capital stock which has contractual preferences over common stock in certain areas

bonds with a face amount of $1000000 are sold at 106. the journal entry to record the issuance is?

cash 1060000 premium on bonds payable 60000 bonds payable 1060000

Bonds with a face amount $1,000,000 are sold at 106. the entry to record the issuance is?

cash debited $1,060,000 premium on bonds payable credited $60,000 bonds payable credited $1,000,000

which of the following is the appropriate general journal entry to record the declaration of a cash dividend?

cash dividends cash dividends payable

A company which uses special journals should record a transaction involving the purchase of merchandise for cash in a

cash payments journal

7.4a (bank rec)

cash per bank add: deposits less: outstanding checks adjusted total per bank cash per books add: notes payable less: nsf, errors on checks, errors on deposits adjusted total per books journal entries: (notes payable interest less fee) cash misc. ex >>notes rec >> interest rev (nsf) accts rec >> cash (error in check) accts pay >>cash (error in deposit) accts rec >>cash

selling the bonds at a premium has the effect of?

causing the interest expense to be lower than the bond interest paid

The effect of a stock dividend is to

change the composition of stockholders' equity.

retained earnings restriction

circumstances that make a portion of retained earnings currently unavailable for dividends

Stockholders' equity represents

claims of owners

Which of the following is not a limitation of internal control?

collusion

the entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to?

common stock

Nexis Corp. issues 1000 shares of $15 par value common stock at $25 per share. when the transaction is recorded, credits are made to?

common stock $15000 and paid in capital in excess of par value $10000

The specific identification method of costing inventories is used when the

company sells a limited quantity of high-unit cost items

A company will usually replace a manual accounting information system with an electronic system as the operations increase in

complexity

The lower-of-cost-or-market basis of valuing inventories is an example of

conservatism

The lower of cost or market basis of valuing inventories is an example of

conservatism.

Under a consignment arrangement, the

consignor has ownership until goods are shipped to the consignee

Multiple Step income statements...

contain more detail of revenues and expenses listing than a single-step

General Ledger

contains the entire group of accounts maintained by a company.

Treasury stock should be reported in the financial statements of a corporation as a(n)

deduction from total paid-in capital and retained earnings.

An adjusting entry that debits an expense and credits an asset is necessary for

deferred expenses.

All of the following bank reconciliation items would result in an adjusting entry on the company's books except

deposits in transit

All of the following bank reconciliation items would result in an adjusting entry on the company's books except

deposits in transit.

The operating section of the cash account includes debits for each of the following

depreciation expense net income a loss on disposal of equipment.

An intangible asset

derives its value from the rights and privileges it provides the owner

proving cash

determining that the amount of cash agrees with the balance of the cash account in the accounting records

Product costs consist of

direct materials direct labor manufacturing overhead

Two methods of accounting for uncollectible accounts are

direct write-off method and the allowance method

all of the following statements are true concerning treasury stock except:

does not change the number of shares outstanding

An intangible asset

does not have physical substance, yet often is very valuable.

one of the main disadvantages of the corporate form is the?

double taxation of dividends

Retained earnings

earned capital; net income that has been kept in the company

Combining the activities of Kellogg and General Mills would violate the

economic entity assumption.

When common stock is issued for services or non-cash assets, costs should be:

either the fair market value of the consideration given up or the consideration received, whichever is more clearly evident.

All of the following are advantages of using subsidiary ledgers except they

eliminate errors in individual accounts.

The cost of goods available for sale is allocated to the cost of goods sold and the

ending inventory

The cost of goods available for sale is allocated between

ending inventory and cost of goods sold

blank endorsement

endorsement consisting only of the endorser's signature

special endorsement

endorsement indicating a new owner of the check

restrictive endorsement

endorsement restricting further transfer of a check's ownership

Which departmental income statement will not show any revenues?

engineering

The composite balance of individual accounts in the accounts payable subsidiary ledger must

equal the balance of the accounts payable account in the general ledger.

if a company borrows money from a bank as an installment note, the interest portion of each annual payment will?

equal the interest rate on the note times the carrying amount of the note at the beginning of the period

book value per share

equity a common stockholder has in the net assets of the corporation from owning one share of stock

What causes the balance on the bank statement to differ from the cash balance in the general ledger?

errors by the bank, time lags, errors by the company

Entries are made to the Petty Cash account when

establishing the fund.

Allowing only designated personnel to handle cash receipts is an example of

establishment of responsibility.

CONTRIBUTED CAPITAL: Amounts invested in the business by stockholders RETAINED EARNINGS: Past earnings not distributed to stockholders as dividends

examples of stockholders' equity

A current asset is

expected to be realized in cash, sold or consumed within one year of the balance sheet or the company's operating cycle, whichever is longer

lifo

last in first out

After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to

ledger accounts

When journalizing, the reference column is

left blank

The factor which determines whether or not goods should be included in a physical count of inventory is

legal title

if the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500000 will be?

less than $500000

Accounts Payable

liabilities created by purchasing goods/services on credit

If cash is received in advance from a customer

liabilities will increase.

The relationship between current assets and current liabilities is important in evaluating a company's

liquidity

Deposit Ticket

lists items such as currency, coins, and checks deposited along with their corresponding dollar amount

Cash equivalents do not include

long-term investment. highly liquid.

The operating cycle of a merchandising company is ordinarily ___________________ that of a service firm.

longer than

The Sarbanes-Oxley Act requires that all major U.S. corporations

maintain an adequate system of internal control.

The two key parties to a promissory note are the

maker and the payee

what is not a prerequisite to paying a cash dividend?

market value in excess of par value per share

which of the following is not a prerequisite to paying a cash dividend?

market value in excess of par value per share

Allowance Method of accounting for bad debts...

matches the estimated loss from uncollectible accounts receivable against the sales they helped produce. Advantages (1) it records estimated bad debts expense in the period when the related sales are recorded and (2) it reports accounts receivable on the balance sheet at the estimated amount of cash to be collected

If a company reports a net loss, it

may still have a net increase in case.

The equivalent of finished goods inventory for a merchandising firm is referred to as

merchandise inventory

A credit balance in Cash Over and Short is reported as a (n)

misc. revenue

a cost that has characteristics of both a variable cost and a fixed cost is called a?

mixed cost

Management usually desires ________ financial statements and the IRS requires all businesses to file _________ tax returns.

monthly, annual

A corporation records a dividend-related liability

on the declaration date.

A post-closing trial balance will show

only permanent account balances

Generally, the most important category on the statement of cash flows is cash flows from

operating activities

The cash effects of transactions that create revenues and expenses are

operating activities

The indirect and direct methods of preparing the statement of cash flows are identical except for the

operating activities section

Indicate which one of the following would appear on the income statement of both a merchandising company and a service company.

operating expenses

The IASB and FASB are working on a converged statement of financial position using the headings of

operating, investing, and financing.

The order of presentation of activities on the statement of cash flows is

operating, investing, and financing.

Cash provided by operating activities fails to take into account that a company must invest in a new fixed asset just to maintain its current level of operations

true

In a perpetual inventory system, a company determines the cost of goods sold each time a sale occurs.

true

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

true

Manufacturing costs that cannot be classified as direct materials or direct labor are classified as manufacturing overhead

true

The FIFO method assumes that the earliest goods purchased are the first to be sold.

true

The lack of agreement between the bank balance and the book balance is due to time lags and errors.

true

The results under FIFO in a perpetual system are the same as in a periodic system.

true

The sale of land for cash would be classified as a cash inflow from an investing activity.

true

Under a periodic system, the company uses separate accounts to record freight costs, returns, and discounts.

true

fiscal year

twelve month accounting period

cost

what principle states that assets should be recorded at the value exchanged at the time the asset is acquired.

In a perpetual inventory system, the Cost of Goods Sold account is used

whenever there is a sale of merchandise or a return of merchandise sold

Inventory items on an assembly line in various stages of production are classified as :

work in process.

the balance in premium on bonds payable?

would be added to the related bonds payable on the balance sheet

the balance in discount on bonds payable?

would be subtracted from the related bonds payable on the balance sheet

On Form 941, the Employer's Quarterly Federal Tax Return, a firm calculates its liability for the quarter for A. federal income taxes withheld, social security and Medicare taxes, and FUTA taxes. B. federal income taxes withheld and social security and Medicare taxes. C. social security and Medicare taxes and FUTA taxes. D. federal and state income taxes withheld.

157. A 90-day note dated June 30, 2014, would mature on: a. September 30, 2014. b. September 27, 2014. c. September 28, 2014. d. September 29, 2014.

C Solution: $90 − (1 + 31 + 31) = 27

113. Kinsler Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Kinsler Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? a. Bad Debt Expense 14,000 Allowance for Doubtful Accounts 14,000 b. Bad Debt Expense 12,000 Allowance for Doubtful Accounts 12,000 c. Bad Debt Expense 10,000 Allowance for Doubtful Accounts 10,000 d. Bad Debt Expense 8,000 Accounts Receivable 8,000

C Solution: ($200,000 × .06) − $2,000 = $10,000

127. In 2014 Wilkinson Company had net credit sales of $1,500,000. On January 1, 2014, Allowance for Doubtful Accounts had a credit balance of $36,000. During 2014, $60,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage of receivables basis). If the accounts receivable balance at December 31 was $400,000, what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014? a. $ 40,000 b. $150,000 c. $ 64,000 d. $ 60,000

C Solution: ($400,000 × .10) + ($60,000 − $36,000) = $64,000

195. ABC Company accepted a national credit card for a $7,000 purchase. The cost of the goods sold is $5,600. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income? a. Increase by $1,358. b. Increase by $1,400. c. Increase by $1,190. d. Increase by $6,790.

C Solution: ($7,000 − $5,600) − ($7,000 × .03) = $1,190

196. XYZ Company accepted a national credit card for a $7,500 purchase. The cost of the goods sold is $6,000. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income? a. Increase by $1,455. b. Increase by $1,500. c. Increase by $1,275. d. Increase by $7,275.

C Solution: ($7,500 − $6,000) − ($7,500 × .03) = $1,275

130. The following information is related to December 31, 2013 balances. Accounts receivable $700,000 Allowance for doubtful accounts (credit) (60,000) Cash realizable value 640,000 During 2014 sales on account were $195,000 and collections on account were $115,000. Also, during 2014 the company wrote off $11,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $72,000. The change in the cash realizable value from the balance at 12/31/13 to 12/31/14 was a. $68,000 increase. b. $80,000 increase. c. $57,000 increase. d. $69,000 increase.

C Solution: [($700,000 + $195,000 − $115,000 − $11,000) − $72,000] − $640,000 = $57,000

66. A company purchased inventory as follows: 200 units at $20 300 units at $22 The average unit cost for inventory is

C) $21.20.

14. Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $35,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the amount of bad debt expense for that period?

C) $46,000

18. Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using

C) FIFO will have the highest ending inventory.

8. Which one of the following is not an objective of a system of internal controls?

C) Fairness of the financial statements.

44. Which of the following would be added to the balance per books on a bank reconciliation?

C) Notes collected by the bank.

12. Under the concept of establishment of responsibility, how many people should have the ultimate responsibility?

C) Only one individual.

30. Multiple-step income statements show

C) both income from operations and gross profit.

47. An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

C) debit to Bad Debts Expense for $2,800

7. The custodian of a company asset should

C) not have access to the accounting records for that asset.

52. Inventory becomes part of cost of goods sold when a company

C) sells the inventory.

The credit terms offered to a customer by a business firm were 2/10, n/30, which means

C) the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.

19. If employees are bonded

C) they have been insured against misappropriation of assets.

83. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 30,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? A. 35,000 B. 70,000 C. 25,000 D. 30,000

C. 25,000

During the month, a company sells goods for a total of $54,000, which includes sales taxes of $4,000; therefore, the company should recognize $50,000 in Sales Revenues and $4,000 in Sales Tax Expense.

False

Gross profit rate is computed by dividing cost of goods sold by net sales.

False

If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the Income Statement. T or F

False

In a perpetual inventory system, no attempt is made to keep detailed inventory records of the goods on hand throughout the period. T or F

False

Organizational costs are capitalized by debiting an intangible asset entitled Organization Costs.

False

Owners' claims to total business assets take precedence over the claims of creditors because owners invest assets in the business and are liable for losses.

False

Par value is indicative of the worth or market value of the stock.

False

Posting is the process of proving the equality of debits and credits in the trial balance

False

Preferred stock holders usually have the right to vote

False

Prepaid Insurance is a temporary account T or F

False

Prepaid Insurance is an expense account T or F

False

Service Revenue is closed out by debiting Income Summary and crediting Service Revenue T or F

False

T/F: A merchandising business sells goods that it produces.

False

T/F: After all adjusting entries are posted, the balances of the general ledger accounts should match the amounts shown in the Adjusted Trial Balance section of the worksheet.

False

T/F: Endorsements are placed on the front of a check.

False

T/F: FUTA tax, like social security tax, is levied on both the employer and the employee and, therefore, is withheld from employee's pay.

False

T/F: If a business uses pre-numbered purchase orders, it is not necessary to account for every purchase order.

False

T/F: The amount of sales tax due is required to be paid just once per year, at the end of the year, for all companies.

False

T/F: The balance of a customer's account in the accounts receivable ledger is circled to show that it is a debit amount.

False

T/F: The debit and credit amounts for the Income Summary account are combined into one number in the Income Statement section of the worksheet.

False

T/F: The employer must issue each employee a Form W-2 by January 15 of the next year.

False

T/F: The gross pay of an hourly employee is determined by subtracting the overtime premium from the regular earnings.

False

T/F: The monthly bank statement should be received and reconciled by the employee who deposits cash receipts and writes the checks.

False

T/F: The net amount due employees for their wages is recorded as a debit to Salaries and Wages Payable.

False

T/F: The objective of matching revenues and expenses to specific fiscal periods is most nearly attained when revenues and expenses are recognized in the period during which cash related to the transactions is received or paid.

False

T/F: The safest endorsement on a check is a full endorsement.

False

T/F: To arrive at the accurate balance on a bank reconciliation statement, it is necessary to deduct an NSF check from the bank statement balance.

False

T/F: When a customer pays within a certain time, he is eligible to receive a trade discount.

False

T/F: When a sales department needs goods, it sends the purchasing department a purchase invoice.

False

T/F: When the accrual basis of accounting is used, expenses are recognized only in the period during which they are paid.

False

The adjusting entry to record an accrued expense always involves a debit to a liability account and a credit to an expense account. T or F

False

The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet.

False

The cash proceeds from issuing par value stock may be equal to or greater than, not less than par value

False

The cost of goods sold section of an income statement prepared under a periodic inventory system will contain more detail than under a perpetual inventory system.

False

The cost principle states that assets should be recorded at their fair market value

False

The terms 2/10, n/30 mean that a 2% discount is available if the invoice is paid within the first 10 days of the next month. T or F

False

Transactions are entered in the ledger accounts and then transferred to journals

False

Transactions are entered in the ledger first and then they are analyzed in terms of their effect on the accounts.

False

Under the terms FOB destination, ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller. T or F

False

Upon the authorization of capital stock, a corporation will record a debit for the asset acquired and a credit to common stock

False

A purchase return is where the purchaser chooses to keep the merchandise if the supplier is willing to grant an allowance (deduction) from the purchase price.

False. A purchase return is where the purchaser returns the goods to the supplier for credit if the sale was made on credit, or for a cash refund if the purchase was originally for cash.

If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the income statement.

False. If a merchandiser sells land at more that its cost, the gain should be reported in the other revenues and gains section.

Merchandisers that sell to wholesalers are known as retailers. T or F?

False. Merchandisers that sell to retailers are known as wholesalers; retailers are merchandising companies that purchase and sell directly to consumers.

Sales Returns and Allowances is a contra-expense account.

False. Sales returns and allowances is a contra revenue account. it is subtracted from sales revenue in the computation of Net Sales.

The cost of ending inventory is added to the cost of goods available for sale to determine cost of goods sold.

False. The cost of ending inventory is subtracted from the cost of goods available for sale to determine the cost of goods sold.

Under a periodic inventory system, when the purchaser directly injures freight cost, the account Freight-in is credited

False. Under a periodic inventory system, when the purchaser directly incurs freight costs the account Freight-in is debited.

Under the perpetual inventory system, purchases of merchandise for sale are recorded by a credit to the inventory account.

False. Under a perpetual inventory system, purchases of merchandise for sale are recorded by a debit to the inventory account.

When the terms are FOB shipping point, the seller pays the freight costs from the seller's location.

False. When the terms are FOB shipping point, the buyer pays the freight costs; when the terms are FOB destination, the seller pays the freight costs.

In a perpetual inventory system no attempt is made to keep detailed inventory records of the goods on hand through the period.

False. in a perpetual inventory system detailed records of the cost of each inventory purchase and sale are maintained and continuously (perpetually) show the inventory that should be on hand for every item.

Merchandise inventory has two common characteristics: It is owned by the company and it is on hand waiting to be used in production.

False. merchandise inventory has two common characteristics: It is owned by the company and it is in a form ready for sale to customers in the ordinary course of business.

Which of the following is classified in an income statement as a nonoperating activity?

Interest expense --- Interest expense is properly classified as a non-operating activity.

Liability

Interest payable is what type of account?

Which of the following would NOT be considered an internal user of accounting data for Harris Country Club?

Internal Revenue Service Agent

ending inventory;sold

Inventoriable costs are allocated to and______________cost of goods___________.

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account?

Inventory

Owner's Equity Statement

Reports the changes in owner's equity for a specific period of time. The time period is the same as that covered by the income statement.

Income Statement

Reports the revenues and expenses for a specific period of time. Lists revenues first, followed by expenses. Shows net income (or net loss).

FULL DISCLOSURE PRINCIPLE

Requires that companies disclose all circumstances and events that would make a difference to financial statement users.

Which of the following is a merchandiser that sells directly to consumers?

Retailer

A merchandising company sells goods to?

Retailers and consumers

Which of the following is the appropriate general journal entry to record the declaration of cash dividends?

Retained Earnings Dividends Payable

Which financial statement does "Dividends" appear on?

Retained Earnings Statement

Stockholders' equity

Retained earnings is what type of account?

Which of the following statements about retained earnings restrictions is incorrect?

Retained earnings restrictions are generally disclosed through a journal entry on the books of a company.

Which principle states that revenue should be recognized in the accounting period in which a performance obligation is satisfied?

Revenue recognition principle

The non operating sections of the income statement will include a section entitled other:

Revenues and gains

Enterprise resource planning systems integrate all aspects of the organization, including accounting, sales, human resource management, and manufacturing

True

Expressing an opinion as to the fairness of the information presented in financial statements is a service performed by CPAs.

True

Finished goods inventory does not appear on the cost of goods manufactured schedule

True

Freight terms if FOB Destination means that the seller pays the freight costs T or F

True

Freight-out appears as an operating expense in the income statement.

True

GAAP are standards and rules recognized as a general guide for reporting purposes

True

Gross profit is computed by subtracting cost of goods sold from net sales.

True

If an unearned revenue account is not adjusted for revenues earned during the period, liabilities will be overstated and revenue will be understated. T or F

True

In accounting, the terms debit and credit mean left and right, respectively. T or F

True

In periods of rising prices, the FIFO method reports the highest net income, LIFO the lowest, and average cost falls in the middle. T or F

True

Managerial accounting internal reports are prepared more frequently than are classified financial statements

True

Net purchases is determined by subtracting purchase returns and allowances and purchase discounts from purchases.

True

Prepaid Insurance, Prepaid Rent, Supplies and Accounts Receivable are all asset accounts. T or F

True

T/F: After all the transactions have been posted, the totals of the balances in the accounts receivable subsidiary ledgers should equal the balance of the Accounts Receivable account in the general ledger.

True

T/F: At the end of each quarter, the individual earnings records are totaled.

True

T/F: Cash Short or over is an expense account when it has a debit balance.

True

T/F: Current assets are usually listed on a balance sheet in order of liquidity.

True

T/F: Current assets provide the funds needed to pay bills and meet expenses.

True

T/F: Employees submit Form W-4 to their employers to show the number of withholding allowances they claim for federal income tax withholding purposes.

True

T/F: If an amount recorded in the general journal requires two postings, a diagonal line is used to separate the two posting references.

True

T/F: In a firm that has a good system of internal control, cash receipts are deposited often.

True

T/F: Most cash transactions involve checks.

True

T/F: Purchase discounts is a contra expense account and has a normal credit balance.

True

T/F: Salaried employees who hold supervisory or managerial positions generally are not subject to wage and hour laws.

True

T/F: The Medicare tax is levied to provide medical care for the employee and the employee's spouse after they reach age 65.

True

T/F: The Sales Returns and Allowances account has a normal debit balance.

True

T/F: The balance of the Merchandise Inventory account that appears in the Trial Balance section of the worksheet represents the stock of goods on hand at the beginning of the current period.

True

T/F: Usually a bank provides pre-printed deposit slips.

True

T/F: When an accounts payable subsidiary ledger is used, the entry to Accounts Payable requires two posting references in the general journal.

True

The adjusting entry to record an accrued revenue always involves a debit to a receivable and a credit to a revenue account. T or F

True

The amount of stock that a corporation is authorized to sell is indicated in its charter.

True

The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets.

True

The current ratio permits analysts to compare the liquidity of different sized companies.

True

The dividends account is a temporary account T or F

True

The economic entity assumption requires that the activities of an entity be kept separate and distinct from the activities of its owner and all other economic entities.

True

The historical cost principle requires that if a company buys a building for $2,000,000 in 2012 that increases in value to $2,900,000 in 2014, the company will have to report the building at $2,000,000 in the balance sheet for 2014.

True

The inventory method of specific identification is appropriate for costly, easily distinguishable items such as pianos, automobiles, fur coats, and antiques. T or F

True

The issuance of the charter, often referred to as the articles of incorporation, creates the corporation

True

To close net income to owner's capital, Income Summary is debited and Owner's Capital is credited.

True

To record a sale, an asset account is debited and the revenue account Sales Revenue is credited.

True

Under the FIFO method, the costs of the earliest units purchased are the first charged to cost of goods sold. T or F

True

Under the cost method, Treasury stock is debited at the price paid to reacquire the shares, and the same amount is credited to Treasury Stock when the shares are sold.

True

Unearned Revenue is a permanent account T or F

True

When a company has both preferred and common stock, the computation of book value is more complex.

True

When preparing journal entries, total debits must always equal total credits T or F

True

When stock is issued for non cash assets, the par value of the stock is never a factor in determining the costs of the assets received.

True

A loss on disposal of a long-term asset can only occur if the cash proceeds received from the asset's sale is less than the asset's book value.

True.

If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a(n) A. decrease to Fees Income B. increase of capital C. increase to accounts receivable D. decrease to accounts payable

If an account has a credit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is A. $900 debit B. $500 debit C. $500 credit D. $900 credit

FOB shipping point

Title to the goods transfers when the public carrier accepts the goods from the seller

Which of the following would require a compound journal entry?

To record collection of accounts receivable when a cash discount is taken.

Accumulated Depreciation

Total amount of depreciation recorded throughout the life of an asset

A dividend based on paid-in capital is termed a liquidating dividend.

True

A dividend is a distribution by a corporation to its stockholders on a pro rata basis

True

A factor purchases receivables from businesses for a real fee and collects the remittances directly from customers

True

A merchandiser using a perpetual inventory system will usually need to make an adjusting entry to ensure that the recorded inventory agrees with physical inventory count.

True

Retained Earnings has a normal credit balance T or F

True

T/F: The entry to record the employer's payroll taxes would include a debit to an expense account and a credit to one or more liability accounts.

True

T/F: Time sheets or time cards are used to keep a record of hours worked each day by each employee paid on an hourly basis.

True

T/F: To achieve internal control over payroll operations, no changes in employee pay rates should be made without written authorization from management.

True

T/F: Under the accrual basis of accounting, the expense for uncollectible accounts is estimated and recorded before specific accounts are actually written off.

True

Assets

A resource owned by the company that is expected to provide the company future economic benefits.

Statement of Retained Earnings

Shows changes in Retained earnings for a specific time

Ending inventory is subtracted from the cost of goods available for sale in determining the cost of goods sold. T or F

True

When two or more people get together for the purpose of circumventing prescribed controls, it is called

collusion.

Liabilities of a company are owed to

creditors

What type of account is Common Stock? A. Stockholder's Equity B. Asset C. Liability D. Revenue

A. Stockholder's Equity

Interest Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Office Supplies Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

preparation of financial statements

A worksheet is a multiple column form that facilitates the:

Depreciation

Allocating costs of plant assets over expected their useful lives

Cost of Goods Sold is classified as a(n) A. Revenue account B. Asset account C. Expense account D. Owner's Equity account

Utilities Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

ACCRUED EXPENSES

Expenses incurred but not yet paid in cash or recorded

Dividends

Normal Balance: Debit Type of Account: Owner's Equity Financial Statement: RE

Sales Discount

Normal Balance: Debit Type of Account: Revenue Financial Statement: IS

Accounts Payable is a permanent account T or F

True

COGS and operating expenses

Two categories of expenses for merchandising companies are

Sales Returns & Allowances

Normal Balance: Debit Type of Account: Revenue Financial Statement: IS

Tangible frauds include

all of the above.

Adjustments for deferred revenues

decrease liabilities and increase revenues

In general, adjusting entries are required each time financial statements are prepared. T or F

True

55. Goods held on consignment are

A) never owned by the consignee.

Stockholders' equity

Dividends is what type of account?

accrued expenses

Expenses incurred but not yet paid.

Lending money and collecting the loans are

investing activites

When the terms are FOB shipping point, the seller pays the freight costs. T or F

False

accounting equation

an equation showing the relationship among assets, liabilities, and owner's equity

Each of the following is a feature of internal control except

an extensive marketing plan

single-step income statement.

an income statement that shows only one step in determining net income or net loss.

64. All of the following are items that would most likely be paid from a petty cash fund except:

C) administrative wages.

Gross profit is the difference between net sales and cost of goods sold.

True

Dividends has a normal credit balance T or F

False

78. A $100 petty cash fund has cash of $18 and receipts of $86. The journal entry to replenish the account would include a

C) credit to Cash Over and Short for $4.

Under the FIFO method, the costs of the earliest units purchases are first charged to cost of goods sold.

under the corporate form of business organization

ownership rights are easily transferred

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

Service charges

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

Service charges.

Stockholders' equity

Service revenue is what type of account?

40. Under the perpetual inventory system, in addition to making the entry to record a sale, a company would

C) debit Cost of Goods sold and credit Inventory.

treasury stock that had been purchased for $6400 last month was reissued this month for $8500. the journal entry to record the reissuance would include a credit to?

paid in capital from treasury stock for $2100

if dakota company issues 1500 shares of $6 par common stock for $75000?

paid in capital in excess of par will be credited for $66000

the excess of sales price of treasury stock over its cost should be credited to?

paid-in capital from sale of treasury stock

An advantage of a corporation is that it is subject to very few government regulations.

False

Discount term of 2/10, n/30 mean that a 10% cash discount is available if payment is made within 30 days.

False

The total amount earned by the employee is called the A. gross pay B. take home pay C. net pay D. payroll

For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation?

A returned $300 check recorded by bank as $30.

86. A NSF check should appear in which section of the bank reconciliation?

D) Deduction from the balance per books.

3. The Allowance for Doubtful Accounts is necessary because

A) when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.

post-closing trial balance

Final step in accounting cycle

Gross profit is calculated as a net sales minus A. cost of goods sold B. sales returns and allowances C. operating expenses D. advertising expense

A. cost of goods sold

Which one of the following items is NOT generally used in preparing a statement of cash flows?

Adjusted trail balances

Stockholders' equity

Advertising expense is what type of account?

Common Stock has a normal credit balance T or F

True

The Sales Returns and Allowances account is classified as a(n)

contra revenue account.

gross profit

net sales less cost of goods sold.

Net income is gross profit less

operating expenses

Salespeople who are paid a percentage of net sales are paid on A. commission basis B. salary basis C. hourly-rate basis D. piece-rate basis

This preprinted government form is used to report federal unemployment taxes. A. Form 940 B. Form 941 C. Form 8109 D. Form W-2

Which of the following would not be classified as a Current Asset? A. Equipment B. Supplies C. Accounts Receivable D. Cash

depreciation

A cost allocation process.

Contents of a balance sheet

All resources owned and amounts owed are listed in order of liquidity.

expenses

Consumed assets or services

What is the normal balance of the account "Accounts Receivable"?

Debit

Asset

Equipment is what type of account?

relevant

Financial information that is capable of making a difference in a decision is

Which of the following would not be included in the definition of cash?

NSF checks.

long term liabilities

Obligations that a company expects to pay after one year

Matching Principle

Requires expenses to be reported in the same period as the revenues earned

retained earnings

net income that a corporation retains for future use

Which of the following is not an accounting assumption?

Integrity

Accumulated Depreciation is a liability account and has a normal credit account balance.

False

After closing entries are posted, all permanent accounts will have zero balances T or F

False

An adjusting entry always involves two balance sheet accounts T or F

False

Book value per share is the same thing as liquidation value per share.

False

Acquired an investment in IBM stock for cash of $10,000. What is the net cash provided by financing activities?

$21,000

At October 1, Arcade Fire Enterprises reported owner's equity of $72,000. During October, no additional investments were made and the company posted a net loss of $8,000. If owner's equity at October 31 totals $64,000, what amount of owner drawings were made during the month?

if $1,000,000 of 8% bonds are issued at 105, the amount of cash received from the sale is?

$1,050,000

when the market rate of interest was 11%, Munson Corporation issued $1,000,000, 12%, 8-year bonds that pay interest semiannually. the selling price of this bond issue was?

$1,052,310

During 2014, Zuma Company had $150,000 in cash sales and $1,240,000 in credit sales. The accounts receivable balances were $180,000 and $215,000 at December 31, 2013 and 2014, respectively. Using the direct method of reporting cash flows from operating activities, what was the total cash collected from all customers during 2014?

$1,205,000

bonds payable has a balance of $1,000,000 and discount on bonds payable has a balance of $15,000. if the issuing corporation redeems the bonds at 97.5, what is the amount of gain or loss on redemption?

$10,000 gain

Common Stock Dividends Distributable is reported as a liability on the balance sheet.

False

Before posting a payment of $5,000, the Accounts Payable of Senator Company has a normal balance of $16,000. The balance after posting this transaction was

$11,000

Use the following information for an end of year adjusting entry The accounts receivable and balances for doubtful accounts at year-end are $152000 and 1300. Both have debit balances. It is estimated that bad debts will be 4% of accounts receivable.

$152000*2%= $6080 + $1300 = $7380 Debit bad debt expense $7380 Credit Allowance for doubtful accounts $7380

Using the percentage of receivables method for recording bad debts expense, estimated uncollectible accounts are $20,000. If the balance of the Allowance for Doubtful Accounts is $4,000 credit before adjustment what is the amount of bad debt expense for that period?

$16,000

What is the adjusting entry for the following transaction? Interest of $500 accumulates on notes payable.

Interest Expense 500 Interest Payable 500

Elton John Corp. was organized on Jan. 1, 2012, with authorized capital of 500,000 shares of $10 par value common stock. During 2012, John issued 10,000 shares at $12 per share, purchased 1,000 shares of treasury stock at $13 per share, and sold 1,000 shares of treasury stock at $14 per share. What is the amount of additional paid in capital at December 31, 2012?

$21,000

Merritt Company acquired a building valued at $190,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. the stock is widely traded and selling for $15 per share. at what amount should the building be recorded by Merritt Company?

$180,000

A company just starting business made the following four inventory purchases in June: Date Units Total cost of purchase June 1 150 units $ 390 June 10 200 units 585 June 15 200 units 630 June 28 150 units 510 $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is

$2,115 ÷ 700 = 3.02; 250 × 3.02 = $755

A restaurant purchased kitchen equipment on April 1, 2008 for $40,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2008 is...

$2,625

During August, 2014, Baxter's Supply Store generated revenues of $60,000. The company's expenses were as follows: cost of goods sold of $36,000 and operating expenses of $4,000. The company also had rent revenue of $1,000 and a gain on the sale of a delivery truck of $2,000. Baxter's operating income for the month of August, 2014 is

$20,000.

Misra Company compiled the following financial information as of December 31, 2015: Revenues.....$340,000 Retained Earnings (1/1/15)......60,000 Equipment......80,000 Expenses.....250,000 Cash.....90,000 Dividends......20,000 Supplies....10,000 Accounts Payable.....40,000 Accounts Receivable...70,000 Common Stock....80,000 Mira's assets on December 31, 2015 are A. $180,000 B. $490,000 C. $360,000 D. $250,000

$250,000

The following data are available for Sampson Corporation. Net income$200,000 Depreciation expense60,000 Dividends paid90,000 Loss on sale of land15,000 Decrease in accounts receivable30,000 Decrease in accounts payable45,000 Net cash provided by operating activities is:

$260000

As a result of a thorough physical inventory, Horace Company determined that it had inventory worth $320,000 at December 31, 2015. This count did not take into consideration the following facts: Herschel Consignment currently has goods worth $47,000 on its sales floor that belong to Horace but are being sold on consignment by Herschel. The selling price of these goods is $75,000. Horace purchased $22,000 of goods that were shipped on December 27, FOB destination, that will be received by Horace on January 3. Determine the correct amount of inventory that Horace should report.

$367,000

A company just starting business made the following four inventory purchases in June: Date Units Total cost of purchase June 1 150 units $ 390 June 10 200 units 585 June 15 200 units 630 June 28 150 units 510 $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is

$390 + [($585 ÷ 200) × 100] = $683

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

$390,000 ----- Cost of goods sold is computed by adding beginning inventory and cost of goods purchased and then subtracting ending inventory, or $60,000 + $380,000 - $50,000 = $390,000.

$3900

DEN Inc. has 1,000 shares of 4%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2007. What is the annual dividend on the preferred stock?

$4,000 in total

Baylor Inc. has a gross profit rate of 45%. During the period, the company had net sales of $400,000 and goods available for sale of $260,000. Beginning inventory was $35,000. Compute the dollar amount of the ending inventory.

$40000

Arquette Company's financial information is presented below. Sales $ ???? Cost of Goods Sold $ 270,000 Sales Returns and Allowances 20,000 Gross Profit ???? Net Sales 450,000 The missing amounts above are: Sales Gross Profit

$470,000 $180,000

A company sells a long-term asset that originally cost $180,000 for $60,000 on December 31,2008. The accumulated depreciation account had a balance of $72,000 after the current year's depreciation of $18,000 had been recorded. The company should recognize a

$48,000 loss on disposal

At the beginning of the year, Kimball Company had total assets of $700,000 and total liabilities of $400,000. If the total assets increased $100,000 and the total liabilities decreased $80,000, what is the amount of stockholders' equity at the end of the year?

$480,000

Brent Company has sales revenue of 13,000, cost of goods sold of 8,000 and operating expenses of 3,000 for the year ended December 31. Brent's gross profit is:

$5000

The accounting equation for Juan's Columbian Restaurant is as follows: $500,000 (Assetts) = $200,000 (Liabilities)+ $300,000 (SE) If Juan's purchases kitchen equipment on account for $20,000, the accounting equation will change to:

$520,000 (Assets)= $220,000 (Liabilities)+ $300,000 (SE)

Davies Company purchased merchandise inventory with an invoice price of $7,500 and credit terms of 2/10, n/30. What is the net cost of the goods if Davies Company pays within the discount period?

$7,350

At december 31, the stockholders equity section shows: C/S, $5 par value, 1,100,000 shares issued and 1,000,000 shares outstanding $5,500,000 Addition Paid in capital 1,400,000 Retained Earning 1,500,000 Treasury Stock(100,000 shares) (700,000) Total stockholders equity 7,700,000 The book value per share of common stock is:

$7.70

Arbor Corporation had reported the following amounts at December 31, 2014: Sales revenue $184,000; ending inventory $11,600; beginning inventory $17,200; purchases $60,400; purchases discounts $3,000; purchase returns and allowances $1,100; freight-in $600; freight-out $900. Calculate the cost of goods available for sale.

$74,100 ----- Cost of goods available for sale equal the beginning inventory plus purchases minus purchases discounts and purchases returns and allowances plus freight-in: $17,200 + $60,400 - $3,000 - $1,100 + $600 = $74,100.

a company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. subsequently, the company declared a 2% stock dividend on a date when the market price was $11 a share. what is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

$8,800

the charter of a corporation provides for the issuance of 100,000 shares of common stock. assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. what is the amount of cash dividends to be paid if a $2 per share dividend is declared?

$80,000

Romanoff Industries had the following inventory transactions occur during 2013: Units Cost/unit 2/1/13 Purchase 18 $45 3/14/13 Purchase 31 $47 5/1/13 Purchase 22 $49 The company sold 50 units at $70 each and has a tax rate of 30%. Assuming that a periodic inventory system is used, what is the company's after-tax income using FIFO? (rounded to whole dollars)

$829

The following items are taken from the financial statements of Dunagan Company for the year ending December 31, 2011: Accounts Payable.....$18,000 Accounts Receivable.....11,000 Accumulated Depreciation - Equipment.....28,000 Advertising Expense....21,000 Cash.......15,000 Common Stock......42,000 Dividends.......14,000 Depreciation Expense......12,000 Equipment.....210,000 Insurance Expense....3,000 Note Payable, due 6/30/12... 70,000 Prepaid Insurance (12-month policy).....6,000 Rent Expense.....17,000 Retained Earnings (1/1/11)....60,000 Salaries Expense.....32,000 Service Revenue......133,000 Supplies.....4,000 Supplies Expense.....6,000 What are total current liabilities at December 31, 2011? A. $88,000 B. $0 C. $70,000 D. $18,000

$88,000

when the market rate of interest was 11%, Valley Corporation issued $100,000, 8%, 10-year bonds that pay interest semiannually. using the straight-line method, the amount of discount or premium to be amortized each interest period would be?

$896

In Jude Company, land decreased $150,000 because of a cash sale for $150,000, the equipment account increased $60,000 as a result of a cash purchase, and Bonds Payable increased $120,000 from issuance for cash at face value. The net cash provided by investing activities is

$90000

Nick's Place recorded the following data: Units Unit Date Received Sold On Hand Cost 1/1 Inventory 600 $2.50 1/8 Purchased 1,000 1,600 3.00 1/12 Sold 1,200 400 The weighted average unit cost of the inventory at January 31 is:

(600 × $2.50) + (1,000 × $3.00) ÷1,600 = $2.81

On January 1, Bluefield Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,

-Bluefield's Paid-in Capital in Excess of Par Value account increased $400,000. -Bluefield's total stockholders' equity was unaffected. -Bluefield's Retained Earnings account decreased $1,200,000. All of the above.

Inventory Shrinkage

-Comparing a physical count of inventory with recorded inventory counts -refers to the loss of inventory -can be caused by theft or deterioration -is recognized by debiting Cost of Goods Sold

Standard-setting bodies:

-Securities and Exchange Commission (SEC) -Financial Accounting Standards Board (FASB) -International Accounting Standards Board (IASB)

in order to pay a cash dividend:

-the corporation must have adequate retained earnings -the board of directors must declare a dividend -the corporation must have adequate cash All of the above

corporations issue stock dividends

-to satisfy stockholders dividends expectations without spending cash -to increase the marketability of its stock by increasing the number of shares outstanding and thereby decreasing the market price per share -to emphasize that a portion of stockholders equity has been permanently reinvested in the business and therefore is unavailable for cash dividends All of the above

Using the following information: 12/31/12 Accounts receivable $ 525,000 Allowance (35,000 ) Cash realizable value $ 490,000 During 2013, sales on account were $145,000 and collections on account were $100,000. Also during 2013, the company wrote off $8,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectible accounts should be estimated at $40,000. Bad debts expense for 2013 is

...

.32. ---- $140,000 - $12,000 - $3,000 = $125,000; ($125,000 - $85,000) ÷ $125,000 = .32

Accounting Cycle

1 Analyze the transaction 2 Journalize 3 Post 4 Create Trial Balance 5 Journalize & Post Adjusting Entries 6 Create Adjusted Trial Balance 7 Prepare Financial Statements 8 Journalize & Post Closing Entries 9 Create Post-Closing Trial Balance

170. A note receivable is executed in December. When the note is paid the following February, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a a. credit to Interest Receivable. b. credit to Cash. c. debit to Notes Receivable. d. debit to Interest Income.

106. Under the allowance method, when a specific account is written off a. total assets will be unchanged. b. net income will decrease. c. total assets will decrease. d. total assets will increase.

107. The percentage of receivables basis for estimating uncollectible accounts emphasizes a. cash realizable value. b. the relationship between accounts receivable and bad debts expense. c. income statement relationships. d. the relationship between sales and accounts receivable.

109. A corporation purchased 1,000 shares of its $5 par common stock at $10 and subsequently sold 500 of the shares at $20. What is the amount of revenue realized from the sale? A. $0 B. $5,000 C. $2,500 D. $10,000

Structure of a balance sheet (at the top of the financial statement)

1. Name of entity: company X 2. Title of the statement: Balance sheet 3. Specific date of the statement: At Month day, year 4. Unit of measure (ex: in thousands of dollars)

115. Under the allowance method, when a year-end adjustment is made for estimated uncollectible accounts a. total assets decrease. b. total assets are unchanged. c. net income is unchanged. d. liabilities decrease.

5.1A

1. inventory >> accts pay 3. accts pay >> sales rev costs of goods sold >>inventory 9. accts pay >>inventory >>cash 12. cash sales discount >> accts rec 17. accts rec >>sales rev costs of goods sold >>inventory 18. inventory >>accts pay inventory >>cash 20. accts pay >>inventory 21. cash sales >> accts rec 22. accts rec >>sales rev costs of goods sold >> inventory 30. accts pay >> cash 31. sales returns >>accts rec inventory >>costs of goods sold

The following information is available for The Produce Company at December 31, 2008: beginning inventory $80,000, ending inventory $120,000; COGS $1,200,000; and sales $1,600,000. Tye's inventory turnover in 2008 is...

12 times

if fixed costs are $1400000, the unit selling price is $240, and the unit variable costs are $110, what is the amount of sales required to realize and operating income of $200000?

12,308 units

production and sales estimates for June are as follows: estimated inventory (units), June 1 21,000 desired inventory (units), June 30 19,000 Expected sales volume (units): Area X 7000 Area Y 4000 Area Z 5500 Unit sales price $20 the number of units expected to be manufactured in June is:

14500

Stine Company purchased merchandise with an invoice price of $2,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?

18%

if fixed costs are $450000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break even sales (units) if the unit selling price increases by $10?

18000 units and 12858 units

Soundgarden Company collected $18,200 in May of 2014 for 5 months of service which would take place from October of 2014 through February of 2015. The revenue reported from this transaction during 2014 would be

18200 (3/5) = $10,920

the charter of a corporation provides for the issuance of 100000shares of common stock. assume that 30000 shares were originally issued and 5000 were subsequently reacquired. what is the number of shares outstanding?

25000

Balance Sheet

Listing of a firms assets, liabilities, and stockholder equity. of a given date at the end of the accounting period.

40,000 (45,000-5,000)

During February 2014, its first month of operations, the owner of Ariel Pink Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid expenses of $14,000. Assuming no other transactions impacted the cash account, what is the balance in Cash at February 28?

50000+10000 - 14000 = $46,000

53. What causes the balance on the bank statement to differ from the cash balance in the general ledger? A) Time lags. B) Errors by the bank. C) Errors by the company. D) All of the above.

53. D

165. A dishonored note receivable a. Is no longer negotiable. b. Must be written off by the lender. c. Creates a claim against the maker for the amount of principal only. d. Is one that is not paid in full within 10 days of maturity.

119. The Dayton Corporation began the current year with a retained earnings balance of $32,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $7,000. Compute the year end retained earnings balance. A. $34,000 B. $37,000 C. $41,000 D. $44,000

122. The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record Bad Debt Expense a. is relevant when using the percentage-of-receivables basis. b. is relevant when using the direct write-off method. c. is relevant to both the percentage-of-receivables basis and the direct write-off method. d. will never show a debit balance at this stage in the accounting cycle.

123. A corporation has 50,000 shares of $25 par value stock outstanding. If the corporation issues a 3-for-1 stock split, the number of shares outstanding after the split will be A. 150,000 shares B. 50,000 shares C. 100,000 shares D. 16,666 shares

128. A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9. Subsequently, the company declared a 2% stock dividend on a date when the market price was $10 a share. The effect of the declaration and issuance of the stock dividend is to A. decrease retained earnings, increase common stock, and increase paid-in capital B. increase retained earnings, decrease common stock, and decrease paid-in capital C. increase retained earnings, decrease common stock, and increase paid-in capital D. decrease retained earnings, increase common stock, and decrease paid-in capital

129. The bookkeeper recorded the following journal entry Allowance for Doubtful Accounts 1,000 Accounts Receivable - Richard James 1,000 Which one of the following statements is false? a. This entry is only prepared on the last day of the accounting period. b. There should be written authorization for this transaction from someone who does not have responsibilities related to recording cash. c. There could be a violation of internal control policies. d. James' account was written off because it was determined to be uncollectible.

132. A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be: A. $5 B. $60 C. $25 D. $24

135. Samuels, Inc. reported net income for 2011 is $105,000. During 2011 the company had 5,000 shares of $100 par, 5% preferred stock and 20,000 of $5 par common stock outstanding. Samuels' earnings per share for 2011 is A. $4.00 B. $5.25 C. $6.50 D. $5.00

137. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the second year. A. $2.25 and $0.00 B. $2.25 and $0.45 C. $0.00 and $0.45 D. $2.00 and $0.45

139. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends in arrears for preferred stock for the second year. A. $25,000 B. $10,000 C. $0 D. $30,000

142. Which of the following is not true regarding a promissory note? a. Promissory notes may not be transferred to another party by endorsement. b. Promissory notes may be sold to another party. c. Promissory notes give a stronger legal claim to the holder than accounts receivable. d. Promissory notes may be bearer notes and not specifically identify the payee by name.

194. Factoring arrangements a. are ways to accelerate receivable collections. b. involve no commissions or service charges because the factor is guaranteed collections on the due date. c. are generally used by businesses that are insolvent. d. are mainly used in the textile and furniture industries.

199. If a retailer regularly sells its receivables to a factor, the service charge of the factor should be classified as a(n) a. selling expense. b. interest expense. c. other expense. d. contra asset.

201. If a company sells its accounts receivables to a factor a. the seller pays a commission to the factor. b. the factor pays a commission to the seller. c. there is a gain on the sale of the receivables. d. the seller defers recognition of sales revenue until the account is collected.

209. The retailer considers Visa and MasterCard sales as a. cash sales. b. promissory sales. c. credit sales. d. contingent sales.

60. The term "receivables" refers to a. amounts due from individuals or companies. b. merchandise to be collected from individuals or companies. c. cash to be paid to creditors. d. cash to be paid to debtors.

68. Which one of the following is not an accounting problem (issue) associated with accounts receivable? a. Depreciating accounts receivable b. Recognizing accounts receivable c. Valuing accounts receivable d. Accelerating cash receipts from accounts receivable

72. The Allowance for Doubtful Accounts is necessary because a. when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay. b. uncollectible accounts that are written off must be accumulated in a separate account. c. a liability results when a credit sale is made. d. management needs to accumulate all the credit losses over the years.

76. Under the allowance method, writing off an uncollectible account a. affects only balance sheet accounts. b. affects both balance sheet and income statement accounts. c. affects only income statement accounts. d. is not acceptable practice.

90. Nexis Corp. issues 1,000 shares of $15 par value common stock at $22 per share. When the transaction is recorded, credits are made to: A. Common Stock $15,000 and Paid-in Capital in Excess of Par Value $7,000. B. Common Stock $22,000 and Retained Earnings $15,000. C. Common Stock $7,000 and Paid-in Capital in Excess of Stated Value $15,000. D. Common Stock $22,000.

94. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is declared? A. $80,000 B. $10,000 C. $90,000 D. $100,000

95. The date on which a cash dividend becomes a binding legal obligation is on the A. declaration date. B. date of record. C. payment date. D. last day of the fiscal year.

All of the following are examples of the most common types of credit sales, except A. closed-account credit cards B. business credit cards C. bank credit cards D. cards issued by credit card companies

All of the following are internal control procedures that are recommended to protect payroll operations except A. assign new employees to work in payroll operations B. keep payroll records in locked files. C. make voluntary deductions from employee earnings based only on a signed authorization from the employee D. retain all Forms W-4

All of the following are internal control procedures that are recommended to protect payroll operations except A. assign new employees to work in payroll operations. B. keep payroll records in locked files. C. make voluntary deductions from employee earnings based only on a signed authorization from the employee. D. retain all Forms W-4

Allowance for Doubtful Accounts is reported in the A. Assets section of the balance sheet B. Operating Expenses section of the income statement. C. Liabilities section of the balance sheet. D. Cost of Goods Sold section of the income statement

Beckett Co. sold merchandise on account for $10,600, terms 2/10, n/30. Freight charges of $250 were prepaid by the seller and added to the invoice. The customer returned $800 of merchandise before making the payment then paid the invoice within the discount period. What is the amount Beckett Co. received? A. $9,854 B. $9,604 C. $9,849 D. $9,833

Both the employer and the employee are responsible for paying A. social security and Medicare taxes B. FUTA taxes C. social security, Medicare, and FUTA taxes D. SUTA taxes.

Generally, the base earnings subject to state unemployment taxes is A. smaller than the base for social security B. the same as the base of social security C. larger than the base for social security D. the amount of total earnings

Hour Place Clock Shop sold a grandfather clock for $2,250 subject to a 9% sales tax. The entry in the sales journal will include a credit to Sales for A. $2,250.00 B. $2,092.50 C. $2,452.50 D. $2,362.00

If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a debit entry of $200 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is a A. $900 debit B. $500 debit C. $500 credit D. $900 credit

Kay Sadia sold merchandise for $8,750 subject to a 6% sales tax. The entry in the sales journal will include a debit to Accounts Receivable for A. $9,275.00 B. $8,225.00 C. $8,750.00 D. $8,462.00

Merchandise is sold for $8,820, terms 1/10, n/30. Prior to payment, the customer returned $560 of the merchandise. If the invoice is paid within the discount period the amount of the sales discount is: A. $82.60 B. $165.20 C. $88.20 D. $93.80

Mr. Zee worked 48 hours during the week ended January 18, 2013. He is paid $10 per hour, and is paid time and a half for all hours over 40 in a week. He had $100 withheld from his pay for federal income taxes, and $20 withheld for health insurance. The combined social security and Medicare tax rate is 7.65%, and the federal and state unemployment tax rates are .8% and 3.8%, respectively. All earnings are taxable. What is the total employer payroll tax expense for Mr. Zee's current paycheck? A. $63.70 B. $39.78 C. $23.92 D. $0

On a bank reconciliation statement, you would find all of the following except A. a list of canceled checks. B. a list of NSF checks. C. a list of outstanding checks. D. the bank service charge.

Sales Returns and Allowances have the effect of A. decreasing total revenue B. increasing total revenue C. increasing expenses D. increasing assets

The Payroll Tax Expense account is used to record which of the following taxes? A. Federal unemployment compensation tax B. Federal Income Tax C. State Income Tax D. Sales Tax

The beginning capital balance shown on a statement of owner's equity is $43,000. Net income for the period is $18,000. The owner withdrew $22,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is A. $39,000 B. $47,000 C. $61,000 D. $83,000

The beginning capital balance shown on a statement of owner's equity is $86,000. Net income for the period is $36,000. The owner withdrew $44,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is A. $78,000 B. $94,000 C. $122,000 D. $166,000

The column totals in a payroll register A. are used in the journal entry to record the payroll. B. are posted directly to the general ledger accounts C. are unnecessary D. are neither recorded in a journal entry nor posted to the general ledger accounts.

The current ratio is calculated by A. dividing current assets by current liabilities B. dividing current liabilities by current assets C. dividing total assets by total current assets D. dividing current assets by total assets

The frequency of deposits of federal income taxes withheld and social security and Medicare taxes is most dependent on A. the amount owed B. the number of payroll periods a firm has C. the profit reported by the firm D. the number of employees on the payroll

The objective of internal control of purchases is to A. create written proof that purchases and payments are authorized B. create a disciplined work environment C. make the sales process more complex D. create more organized invoices

Which of the following accounts is not closed? A. Capital B. Depreciation Expense C. Sales D. Purchase Discounts

Which of the following forms is submitted with a copy of the Form W-2 for each employee to the Social Security Administration? A. Form W-3 B. Form W-4 C. Form 940 D. Form 941

Which of the following is correct? A. Purchases Discounts is a contra expense account and carries a credit balance B. Purchases Discounts is an expense account and carries a debit balance C. Purchases Discounts is an asset account and carries a credit balance D. Purchases Discounts is an expense account and carries a credit balance

Which of the following payroll taxes is not paid by the employee? A. federal unemployment tax B. federal income tax C. state income tax D. FICA (Social Security and Medicare)

Which of the following statements is correct? A. Purchases should be made only after proper authorization has been given in writing. B. The person who ordered the goods should also authorize payment. C. Computations on an invoice are assumed to be correct if computer generated. D. Purchase requisitions do not need to be printed on pre-numbered forms.

168. The maturity value of a $5,000, 6%, 60-day note receivable dated February 10th is a. $5,050. b. $5,025. c. $5,000. d. $5,300.

A Solution: $5,000 + ($5,000 × .06 × 60/360) = $5,050

Which of the following statements is not correct? A. The amount of social security tax withheld depends on an employee's gross earnings, marital status, and number of withholding allowances. B. Federal law requires that social security, Medicare, and federal income taxes be deducted from the gros pay of most employees C. Medicare taxes are levied in an equal amount on both employers and employees D. Once an employee's year-to-date wages reach a certain amount prescribed by law, social security tax is no longer withheld.

126. Net credit sales for the month are $750,000. The accounts receivable balance is $160,000. The allowance is calculated as 5% of the receivables balance using the percentage-of-receivables basis. If the Allowance for Doubtful Accounts has a credit balance of $5,000 before adjustment, what is the balance after adjustment? a. $ 8,000 b. $ 3,000 c. $13,000 d. $ 8,250

A Solution: $160,000 × .05 = $8,000

120. In reviewing the accounts receivable, the cash receivable value is $21,000 before the write-off of a $1,500 account. What is the cash receivable value after the write-off? a. $21,000 b. $1,500 c. $22,500 d. $19,500

A Solution: $21,000 before and after write-off

135. The following information is related to December 31, 2013 balances. Accounts receivable $2,100,000 Allowance for doubtful accounts (credit) (180,000) Cash realizable value $1,920,000 During 2014 sales on account were $580,000 and collections on account were $344,000. Also during 2014 the company wrote off $32,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $216,000. Bad debt expense for 2014 is a. $ 68,000. b. $ 36,000. c. $216,000. d. $ 4,000.

A Solution: $216,000 − ($180,000 − $32,000) = $68,000

112. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $30,000. If the balance of the Allowance for Doubtful Accounts is $4,000 debit before adjustment what is the balance after adjustment? a. $30,000 b. $34,000 c. $26,000 d. $4,000

A Solution: $30,000 estimated uncollectible accounts

150. The interest on a $4,000, 9%, 90-day note receivable is a. $90. b. $360. c. $30. d. $60.

A Solution: $4,000 × .09 × 90/360 = $90

171. The maturity value of a $40,000, 12%, 3-month note receivable is a. $41,200. b. $40,480. c. $44,800. d. $40,400.

A Solution: $40,000 + ($40,000 × .12 × 3/12) = $41,200

161. Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a 9-month, 12% interest note. If Young prepares it financial statements as of December 31, 2014, what adjusting entry must it make? a. Interest Receivable 2,000 Interest Revenue 2,000 b. Accounts Receivable 2,000 Interest Receivable 2,000 c. Cash 2,000 Interest Revenue 2,000 d. Notes Receivable 2,000 Interest Revenue 2,000

A Solution: $40,000 × .12 × 5/12 = $2,000

109. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the balance after adjustment? a. $45,000 b. $11,000 c. $56,000 d. $34,000

A Solution: $45,000 estimated uncollectible accounts

183. The financial statements of the Phelps Manufacturing Company reports net sales of $500,000 and accounts receivable of $80,000 and $40,000 at the beginning of the year and end of year, respectively. What is the accounts receivable turnover for Phelps? a. 8.3 times b. 12.5 times c. 6.3 times d. 4.2 times

A Solution: $500,000 ÷ [($80,000 + $40,000) ÷ 2] = 8.3

208. Schofield Retailers accepted $60,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales Revenue of $60,000 and a debit(s) to a. Cash for $57,600 and Service Charge Expense for $2,400. b. Accounts receivable for $57,600 and Service Charge Expense for $2,400. c. Cash for $60,000. d. Accounts Receivable for $60,000.

A Solution: $60,000 × (1 − .04) = $57,600

131. The following information is related to December 31, 2013 balances. Accounts receivable $700,000 Allowance for doubtful accounts (credit) (60,000) Cash realizable value 640,000 During 2014 sales on account were $195,000 and collections on account were $115,000. Also, during 2014 the company wrote off $11,000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that bad debts should be estimated at $72,000. Bad debt expense for 2014 is: a. $23,000. b. $12,000. c. $72,000. d. $ 1,000.

A Solution: $72,000 − ($60,000 − $11,000) = $23,000

197. A company sells $900,000 of accounts receivable to a factor for cash less a 2% service charge. The entry to record the sale should not include a a. debit to Interest Expense for $18,000. b. debit to Cash for $882,000. c. debit to Service Charge Expense for $18,000. d. credit to Accounts Receivable for $900,000.

A Solution: $900,000 × .02) = $18,000

187. Leary Corporation had net credit sales during the year of $900,000 and cost of goods sold of $540,000. The balance in receivables at the beginning of the year was $120,000 and at the end of the year was $180,000. What was the accounts receivable turnover? a. 6.0 b. 7.5 c. 5.0 d. 3.6

A Solution: $900,000 ÷ [($120,000 + $180,000) ÷ 2] = 6.0

Sole proprietorship

A business owned by a single person. The owner is responsible for all aspects of operation, including accounting, financing, production, and distribution. Sole proprietorships are easy to establish because they usually involve little government interference.

Partnership

A business with two or more owners who are also usually involved in managing the business.

inventory

A buyer would record a payment within the discount period under a perpetual inventory system by crediting ____________.

generally accepted accounting principles

A common set of standards that provides guidelines to accountants and indicates how to report economic events is called:

Jax Company uses a perpetual inventory system and on November 30 purchased merchandise for which it must pay the shipping charges. Which of the following is one part of the required journal entry when Jax pays the shipping charges of $200?

A debit to Inventory for $200

Turner Corporation returned $150 of goods originally purchased on credit from Morgan Industries. Using the periodic Inventory approach, Turner would record this transaction as:

Accounts Payable 150 Purchases Returns and Allowances 150

Purchase Invoice

A document that supports each credit purchase

double-entry accounting system

A financial record keeping system in which each transaction affects at least two accounts; for each debit there must be an equal credit.

Income statement

A financial statement showing the revenue and expenses for a fiscal period.

Balance sheet

A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

Kern Company sells merchandise on account for $8,000 to Block Company with credit terms of 2/10, n/30. Block Company returns $1,600 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? A. $6,272 B. $6,400 C. $7,480 D. $7,872

A. $6,272

Which of the following represents the largest number of common shares?

Authorized shares

Financial accounting

Accounting information and analyses prepared for people outside the organization.

Generally Accepted Accounting Principles (GAAP)

A set of rules and practices, having substantial authoritative support, that the accounting profession recognizes as a general guide for financial reporting purposes.

Which of the following statements reflects the transferability of ownership rights in a corporation?

A stockholder may dispose of part or all of his shares.

Managerial accounting

Accounting used to provide information and analyses to managers inside the organization to assist them in decision making.

The journal entry to record a return of merchandise purchased on account under a periodic inventory system would be

Accounts Payable Purchases, Returns, and Allowances

6. Hoover Company had beginning inventory of $15,000 at March 1, 2012. During the month, the company made purchases of $50,000. The inventory at the end of the month is $17,300. What is cost of goods sold for the month of March?

A) $47,700

24. Simonic Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. The entry to record this transaction by Simonic Retailers will include a credit to Sales of $75,000 and a debit(s) to:

A) Cash $72,000 and Service Charge Expense $3,000.

94. If a purchaser using a perpetual inventory system pays the transportation costs, then the

A) Inventory account is increased.

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

A) Outstanding checks.

56. If a check correctly written and paid by the bank for $626 is incorrectly recorded on the company's books for $662, the appropriate treatment on the bank reconciliation would be to

A) add $36 to the book's balance.

34. The term "receivables" refers to

A) amounts due from individuals or companies.

17. When applying the lower of cost or market rule to inventory valuation, market generally means

A) current replacement cost.

58. Entries are made to the Petty Cash account when

A) establishing the fund.

35. Under a perpetual inventory system, acquisition of merchandise for resale is debited to

A) the Inventory account.

5. If goods in transit are shipped FOB destination

A) the seller has legal title to the goods until they are delivered.

Financial information is presented below: Operating Expenses......90,000 Sales Returns & Allowances.......26,000 Sales Discounts.........12,000 Sales..........300,000 Cost of Goods Sold.......158,000 Gross profit would be A. $104,000 B. $142,000 C. $130,000 D. $116,000

A. $104,000

As of December 31, 2015, Morley Company has liabilities of $5,000 and stockholders' equity of $7,000. It received revenues of $23,000 during the year ended December 31, 2015. What are the assets for Morley Company as of December 31, 2015? A. $12,000 B. $35,000 C. $25,000 D. $2,000

A. $12,000

The following items are taken from the financial statements of Dunagan Company for the year ending December 31, 2011: Accounts Payable.......$18,000 Accounts Receivable........11,000 Accumulated Depreciation - Equipment.....28,000 Advertising Expense......21,000 Cash.......15,000 Common Stock.......42,000 Dividends.......14,000 Depreciation Expense......12,000 Equipment........210,000 Insurance Expense......3,000 Note Payable, due 6/30/12......70,000 Prepaid Insurance (12-month policy)......6,000 Rent Expense......17,000 Retained Earnings (1/1/11).....60,000 Salaries Expense.....32,000 Service Revenue......133,000 Supplies....4,000 Supplies Expense......6,000 What is the book value of the equipment at December 31, 2011? A. $182,000 B. $198,000 C. $28,000 D. $210,000

A. $182,000

77. A corporation issues 2,500 shares of common stock for $ 45,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for A. $25,000 B. $45,000 C. $20,000 D. $ 5,000

A. $25,000

As a result of a physical inventory, Horace Company determined that it had inventory worth $320,000 at December 31, 2015. This count did not take into consideration the following facts: Bretton Consignment currently has goods worth $47,000 on its sales floor that belong to Horace but are being sold on consignment by Bretton. The selling price of these goods is $75,000. Horace purchased $22,000 of goods that were shipped on December 27, FOB Destination, that will be received by Horace on January 3. Determine the correct amount of inventory that Horace should report. A. $367,000 B. $340,000 C. $320,000 D. $387,000

A. $367,000

A company just starting business made the following four inventory purchases in June: Total Cost June 1.............150 units........................... $ 390 June 10...........200 units............................ 585 June 15...........200 units........................... 630 June 28...........150 units........................... 510 $2115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. Using the average-cost method, the amount allocated to the ending inventory on June 30 is (round to the nearest dollar) A. $755 B. $1,360 C. $683 D. $825

A. $755

Fetherston Company's goods in transit at December 31 include: Sales Made Purchases Made (1) FOB Destination (3) FOB Destination (2) FOB Shipping Point (4) FOB Shipping Point Which items should be included in Fetherston's inventory at December 31? A. 1 and 4 B. 1 and 3 C. 2 and 4 D. 2 and 3

A. 1 and 4

On October 21, Martin, Inc. provided a service to a customer and received $1,400 cash. The journal entry to record this transaction would include: A. A debit to Cash and a credit to Service Revenue B. A debit to Accounts Receivable and a credit to Service Revenue C. A debit to Service Revenue and a credit to Cash D. A debit to Cash and a credit to Accounts Receivable

A. A debit to Cash and a credit to Service Revenue

What type of account is Equipment? A. Asset B. Revenue C. Liability D. Expense

A. Asset

The basic accounting equation may be expressed as A. Assets = Liabilities + Stockholders' Equity B. Assets + Liabilities = Stockholders' Equity C. Assets - Expenses = Stockholders' Equity D. Revenues = Liabilities + Stockholders' Equity

A. Assets = Liabilities + Stockholders' Equity

Which of the following accounts is not classified under the current asset section of the balance sheet? A. equipment B. Supplies C. Cash D. Prepaid Rent

A. Equipment

What type of account is Cost of Goods Sold? A. Expense Account B. Revenue Account C. Asset Account D. Contra-Revenue Account

A. Expense Account

67. Which one of the following would not be considered an advantage of the corporate form of organization? A. Government regulation B. Separate legal existence C. Continuous life D. Limited liability of stockholders

A. Government regulation

71. The term deficit is used to refer to a debit balance in which of the following accounts of a corporation? A. Retained Earnings B. Treasury Stock C. Organizational Expenses D. Common Stock

A. Retained Earnings

What type of account is Service Revenue? A. Revenue B. Liability C. Asset D. Expense

A. Revenue

If a buyer using a perpetual inventory system agrees to freight terms of FOB shipping point, then the A. buyer will debit the Inventory account for the amount of the freight charges B. buyer will debit Shipping Expense C. transportation company will bear the freight cost D. seller will bear the freight cost

A. buyer will debit the Inventory account for the amount of the freight charges

Closing entries A. cause the revenue and expense accounts to have zero balances B. summarize the activity in every account C. reduce the number of permanent accounts D. are prepared before the financial statements

A. cause the revenue and expense accounts to have zero balances

Hamilton Laundry purchased $7,000 worth of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $1,000 on hand. The adjusting entry that should be made by the company on June 30 is A. debit supplies Expense and credit Supplies for $6,000 B. debit Supplies Expense and credit Supplies for $1,000 C. debit Supplies and credit Supplies Expense for $1,000 D. debit Supplies and credit Supplies Expense for $6,000

A. debit supplies Expense and credit Supplies for $6,000

Husker Supplies Inc. purchased a 12-month insurance policy on March 1, 2015 for $1,800. At March 31, 2015, the adjusting journal entry to record expiration of this asset will include a A. debit to Insurance Expense and a credit to Prepaid Insurance for $150 B. debit to Prepaid Insurance and a credit to Cash for $1,800 C. debit to Insurance Expense and a credit to Cash for $150 D. debit to Prepaid Insurance and a credit to Insurance Expense for $200

A. debit to insurance Expense and a credit to Prepaid Insurance for $150

84. Par value A. is the monetary value assigned per share in the corporate charter. B. represents what a share of stock is worth. C. represents the original selling price for a share of stock. D. is established for a share of stock after it is issued.

A. is the monetary value assigned per share in the corporate charter.

65. Under the corporate form of business organization A. ownership rights are easily transferred. B. a stockholder is personally liable for the debts of the corporation. C. stockholders' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation. D. stockholders wishing to sell their corporation shares must get the approval of other stockholders.

A. ownership rights are easily transferred.

Monet Company made a purchase of merchandise on credit from Claude Corporation on August 3, for $3,000, terms 2/10, n/45. On August 10, Monet makes the appropriate payment to Claude. The entry on August 10 for Money Company is

Accounts Payable............................3,000 Inventory.............................................60 Cash.....................................................2,940

Young Company lends Dobson industries $30,000 on August 1, 2012, accepting a 9-month, 12% interest note. If Young prepares it financial statements as of December 31, 2012, what adjusting entry must it make?

Accounts Receivable Notes Receivable Interest Revenue

What would be the journal entry for the following transaction? Bill client $400 for services performed.

Accounts Receivable 400 Service Revenue 400

What is the adjusting entry for the following transaction? Services performed but not recorded total $5,000.

Accounts Receivable 5,000 Service Revenue 5,000

The entry to record the receipt of payment within the discount period on a sale of $2,000 with terms of 2/10, n/30 will include a credit to

Accounts Receivable for $2,000.

When a seller grants credit for returned goods, the account that is credited is

Accounts Receivable.

Which accounts in the general ledger are affected when the monthly posting is made from the sales journal?

Accounts Receivable; Sales Revenue

Liability

Accounts payable is what type of account?

Asset

Accounts receivable is what type of account?

Contra Asset

Accumulated depreciation is what type of account?

Securities Act of 1933

Act requiring registration with the SEC before issuance of securities through interstate commerce.

Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead in a more meaningful fashion?

Activity based costing

How to find a weighted average?

Add up all the units that were ever for sale and add up the dollar amount of each one's value Divide these number by eachother for the average weighted dollar amount.

Book Balance

Add: Collections made by the bank. Add: Interest earned on checking account. Deduct: Non-sufficient funds check (NSF). Deduct: Bank service charge. Add or Deduct: Book errors

Bank Statement Balance

Add: Deposits in transit. Deduct: Outstanding checks Add or Deduct: Bank errors

Which of the following is not a reason one set of international accounting standards are needed?

All of these answer choices are reasons one set of international accounting standards are needed.

Sarbanes-Oxley Act

An act of Congress in 2002 intended to bring reform to corporate accountability and stewardship in the wake of a number of major corporate scandals.

equality; adjusting

An adjusted trial balance proves the _______of the total debit and credit balances after all_________have been made.

Which of the following statements is false?

An income statement represents the revenues, expenses, changes in stockholders' equity, and resulting net income or net loss for a specific period of time.

Which of the following would affect the gross profit rate if sales remain constant?

An increase in cost of goods sold ----- Gross profit rate is computed by dividing gross profit by net sales and any change in sales, sales returns in allowances, sales discounts, or the cost of goods sold will affect the ratio.

57. The receivable that is usually evidenced by a formal instrument of credit is a(n) a. trade receivable. b. note receivable. c. accounts receivable. d. income tax receivable.

The Basic Accounting Equation

Assets = Liabilities + Owners Equity

The balance sheet equation (Basic accounting equation)

Assets = Liabilities + Stockholders' equity From this equation, we can derive the following: Liabilities = Assets - Stockholders' equity Stockholders' equity = Assets - Liabilities

Cost Principle

Assets and liabilities are initially recorded at the amount paid

current assets

Assets that a company expects to pay or convert to cash or use up within one year

Non-current assets

Assets that will be in the business for longer than the financial period - usually one year.

Assets tell you if a company has sufficient resources to operate. They could be sold for cash in case a company goes out of business Investors and creditors look at a company's debts because they want to know whether the company in which they want to invest has sufficient sources of cash to pay its debts If a business does not pay its creditors, they may force the sale of assets sufficient to meet their claims. The sale of assets may fail to cover all the company's debts, and some creditors may take a loss. If a company goes out of business and its assets are sold, the proceeds of that sale must be used to pay back creditors such as American Bank before the owners receive any money. Creditors consider stockholders' equity a protective cushion.

Assets, debts, and stockholders' equity are important to creditors and investors?

Income Statement

Assuming that there is a net loss for the period, debits equal credits in all but which section of the worksheet?

Bad debts expense should be recorded?

At the end of each accounting period

124. Under the direct write-off method of accounting for uncollectible accounts a. the allowance account is increased for the actual amount of bad debt at the time of write-off. b. a specific account receivable is decreased for the actual amount of bad debt at the time of write-off. c. balance sheet relationships are emphasized. d. bad debt expense is always recorded in the period in which the revenue was recorded.

104. How is treasury stock shown on the balance sheet? A. as an asset B. as a decrease in stockholders' equity C. as an increase in stockholders' equity D. treasury stock is not shown on the balance sheet

104. You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to a. debit Allowance for Doubtful Accounts and credit Bad Debt Expense. b. debit Allowance for Doubtful Accounts and credit Accounts Receivable. c. debit Bad Debt Expense and credit Allowance for Doubtful Accounts. d. debit Bad Debt Expense and credit Accounts Receivable.

122. The reduction of par or stated value of stock by issuance of a proportionate number of additional shares is termed a A. liquidating dividend B. stock split C. stock option D. preferred dividend

126. The primary purpose of a stock split is to A. increase paid-in capital B. reduce the market price of the stock per share C. increase the market price of the stock per share D. increase retained earnings

129. A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 4% stock dividend on a date when the market price was $12 a share. What is the amount transferred from the Retained Earnings account to Paid-in Capital accounts as a result of the stock dividend? A. $12,800 B. $19,200 C. $32,000 D. $48,800

130. Which of the following statements is not true about a 2-for-1 split? A. Par value per share is reduced to half of what it was before the split. B. Total contributed capital increases. C. The market price will probably decrease. D. A stockholder with ten shares before the split owns twenty shares after the split.

138. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the third year. A. $4.50 and $0.25 B. $3.25 and $0.25 C. $4.50 and $0.90 D. $2.00 and $0.25

139. The direct write-off method is acceptable for financial reporting purposes only if the bad debt losses are insignificant. a. This is a false statement because the direct write-off method violates the matching principle. b. This is a true statement based on the concept of materiality. c. This is a false statement because the direct write-off method can only be used for tax reporting. d. This is a true statement because companies can choose either the direct write-off or the allowance method for financial reporting, as long as they consistently apply the method.

141. A promissory note a. is not a formal credit instrument. b. may be used to settle an accounts receivable. c. has the party to whom the money is due as the maker. d. cannot be factored to another party.

151. A note receivable is a negotiable instrument which a. eliminates the need for a bad debts allowance. b. can be transferred to another party by endorsement. c. takes the place of checks in a business firm. d. can only be collected by a bank.

177. The accounts receivable turnover is used to analyze a. profitability. b. liquidity. c. risk. d. long-term solvency.

186. The accounts receivable turnover a. Is computed by dividing net credit sales for the accounting period by the cash realizable value of accounts receivable on the last day of the accounting period. b. Can be used to compute the average collection period. c. Is a method of evaluating the solvency of net accounts receivable. d. Is only important to internal users of accounting information.

206. When customers make purchases with a national credit card, the retailer a. is responsible for maintaining customer accounts. b. is not involved in the collection process. c. absorbs any losses from uncollectible accounts. d. receives cash equal to the full price of the merchandise sold from the credit card company.

61. Receivables are a. one of the most liquid assets and thus are always considered current assets. b. claims that are expected to be collected in cash. c. shown on the income statement at cash realizable value. d. always the result of revenue recognition.

75. The expense recognition a. requires that all credit losses be recorded when an individual customer cannot pay. b. necessitates the recording of an estimated amount for bad debts. c. results in the recording of a known amount for bad debt losses. d. is not involved in the decision of when to expense a credit loss.

78. If a company fails to record estimated bad debts expense, a. cash realizable value is understated. b. expenses are understated. c. revenues are understated. d. receivables are understated.

88. The Sneed Corporation issues 10,000 shares of $50 par value preferred stock for cash at $75 per share. The entry to record the transaction will consist of a debit to Cash for $750,000 and a credit or credits to A. Preferred Stock for $750,000. B. Preferred stock for $500,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $250,000. C. Preferred Stock for $500,000 and Retained Earnings for $250,000. D. Paid-in Capital from Preferred Stock for $750,000.

90. A debit balance in the Allowance for Doubtful Accounts a. is the normal balance for that account. b. indicates that actual bad debt write-offs have exceeded previous provisions for bad debts. c. indicates that actual bad debt write-offs have been less than what was estimated. d. cannot occur if the percentage of receivables method of estimating bad debts is used.

92. On January 1, 20xx, Swenson Corporation had 40,000 shares of $10 par value common stock issued and outstanding. All 40,000 shares had been issued in a prior period at $20.00 per share. On February 1, 20xx, Swenson purchased 4,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. The journal entry to record the purchase of the treasury shares on February 1, 20xx, would include a A. credit to Treasury Stock for $96,000. B. debit to Treasury Stock for $96,000. C. debit to a loss account for $120,000 D. credit to a gain account for $120,000.

97. When the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded a. in the year after the credit sale is made. b. in the same year as the credit sale. c. as each credit sale is made. d. when an account is written off as uncollectible.

98. Miriah Inc. has 10,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2014. What is the annual dividend on the preferred stock? A. $50 per share B. $50,000 in total C. $10,000 in total D. $0.50 per share

98. To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a a. debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. b. debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts. c. debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. d. debit to Loss on Credit Sales and a credit to Accounts Receivable.

A firm's bank reconciliation statement shows a book balance of $31,640, an NSF check of $800, and a service charge of $40. Its adjusted book balance is A. $32,480 B. $30,800 C. $30,880 D. $32,400

A wholesale business sells goods with a list price of $900 and a trade discount of 40 percent. The net price is A. $360.00 B. $540.00 C. $900.00 D. $940.00

Accrued expenses are A. paid for in one period but not fully used until a later period B. used in one period but not paid for until a later period. C. paid for, recorded, and used in one period D. budgeted but not paid for or used during the period

All of the following taxes are withheld from an employee's pay except A. Federal income tax B. SUTA tax C. Medicare tax D. Social security tax

An adjusting entry is usually not required for a revenue item when it is A. budgeted, paid for, and partially earned in one period but not fully earned until a later period. B. paid for by the customer, recorded, and earned in one period. C. paid for by the customer and recorded in one period but not fully earned until a later period D. earned in one period but not paid for by the customer or recorded until a later period.

Credit terms of 2/10, n/45 mean A. payment in full is due 2 days after date of the invoice. B. if the invoice is paid within 10 days of its date, a 2% discount may be taken; otherwise the total amount is due in 45 days C. if the invoice is paid within 10 days of its date, a 2% discount may be taken; otherwise the total amount is due in 35 days. D. only that payment in full is due 45 days after date of the invoice

Gross profit on sales is calculated by subtracting A. sales returns and allowances from sales B. cost of goods sold from net sales C. ending inventory from the total merchandise available for sale D. total expenses from sales

During the year, a firm purchased $256,200 of merchandise and paid freight charges of $41,720. If the total purchases returns and allowances were $15,790 and purchase discounts were $8,250 for the year, what is the net delivered cost of purchases? A. $297,920 B. $273,880 C. $321,960 D. $190,440

When credit terms of 1/15, n/60 are offered, how long is the discount period?

The 1% discount can be taken if the invoice is paid within 15 days.

Jason McCurdy has a regular hourly rate of $10.75. During a two week period, he worked 80 hours and had deductions of $110 for federal income tax, $53.50 for social security tax, and $12.50 for Medicare tax. His net pay was A. $860 B. $684 C. $750 D. $794

Publication 15, Circular E contains withholding information A. for social security and Medicare taxes only B. for federal income taxes only C. for social security, Medicare, and federal income tax taxes. D. for federal state income taxes

The Purchases account is A. a permanent account B. a temporary account C. a subsidiary account D. a liability account

The entry to reverse the adjustment for accrued interest income consists of a debit to A. Interest Income and a credit to Income Summary B. Interest Income and a credit to Interest Receivable C. Interest Income and a credit to Interest Expense D. Interest Receivable and a credit to Interest Income

When merchandise is needed, the purchasing department issues a form called A. a purchase invoice B. a purchase order C. a sale invoice D. a purchase requisition

Which of the following accounts is not closed? A. Sales B. Accounts Receivable C. Depreciation Expense D. Purchases

retained earnings statement

a financial statement that shows the changes in retained earnings during the year

Which of the following is a common example of the distribution channel? A. Manufacturer sells to Customer who sells to Wholesaler who sells to Retailer B. Manufacturer sells to Wholesaler who sells to Retailer who sells to Customer C. Manufacturer sells to Retailer who sells to Wholesaler who sells to Customer D. Customer sells to Wholesaler who sells to Retailer who sells to Wholesaler

Which of the following statements is correct? A. The term single-step income statement is sometimes used to describe a classified income statement. B. If a business is to earn a net income, the gross profit on sales must be greater than operating expenses. C. Salaries of office employees would be grouped with the selling expenses in the Operating Expenses section of the income statement D. All of the above statements are correct.

65. Dorman Company had the following items to report on its balance sheet: Employee advances $ 1,580 Amounts owed by customers for the sale of services (due in 30 days) 3,050 Refundable income taxes 1,120 Interest receivable 950 Accepted a formal instrument of credit for services (due in 18 months) 2,220 A loan to company president 8,000 Dishonored a note for principal and interest which will eventually be collected 1,380 Based on this information, what amount should appear in the "Other Receivables" category? a. $18,300 b. $11,650 c. $13,030 d. $15,250

B Solution: $1,580 + $1,120 + $950 + $8,000 = $11,650

146. The interest on a $10,000, 6%, 60-day note receivable is a. $680. b. $100. c. $200. d. $300.

B Solution: $10,000 × .06 × 60/360 = $100

63. M. Cornett is a corporation that sells breakfast cereal. Based on the accounts listed below, what are M. Cornett's total trade receivables? Income tax refund due $ 500 Advance due to the company from the company president 300 3-month note due from M. Cornett's main customer 2,000 Interest due this month on the above note 100 Due and unpaid from this month's sales 7,000 Due and unpaid from last month's sales 1,000 a. $8,000 b. $10,000 c. $9,000 d. $10,900

B Solution: $2,000 + $7,000 + $1,000 = $10,000

132. During 2014 Sedgewick Inc. had sales on account of $264,000, cash sales of $108,000, and collections on account of $168,000. In addition, they collected $2,900 which had been written off as uncollectible in 2013. As a result of these transactions the change in the accounts receivable balance indicates a a. $201,100 increase. b. $ 96,000 increase. c. $ 93,100 increase. d. $204,000 increase.

B Solution: $264,000 − $168,000 = $96,000

190. In the table below the information for four companies is provided. Company Accounts Receivable turnover Average collection period Martin 13.9 26.3 Lewis 13.3 27.4 Danforth 10.4 35.1 Garner 14.5 25.2 Industry Average 13.0 28.1 If Garner's net credit sales are $290,000, what are its average net accounts receivable? a. $11,508 b. $20,000 c. $42,050 d. $73,080

B Solution: $290,000 ÷ 14.5 = $20,000

167. Barber Company lends Monroe Company $30,000 on April 1, accepting a four-month, 6% interest note. Barber Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared? a. Note Receivable 30,000 Cash 30,000 b. Interest Receivable 150 Interest Revenue 150 c. Cash 150 Interest Revenue 150 d. Interest Receivable 450 Interest Revenue 450

B Solution: $30,000 × .06 × 1/12 = $150

111. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $30,000. If the balance of the Allowance for Doubtful Accounts is $4,000 credit before adjustment what is the amount of bad debt expense for that period? a. $30,000 b. $26,000 c. $34,000 d. $4,000

B Solution: $30,000 − $4,000 = $26,000

87. An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 debit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $4,500. b. debit to Bad Debt Expense for $6,100. c. debit to Bad Debt Expense for $2,900. d. credit to Allowance for Doubtful Accounts for $4,500.

B Solution: $4,500 + $1,600 = $6,100

118. Using the allowance method, the uncollectible accounts for the year is estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the amount of bad debt expense for the period? a. $9,000 b. $31,000 c. $40,000 d. $49,000

B Solution: $40,000 − $9,000 = $31,000

145. The interest on a $5,000, 10%, 1-year note receivable is a. $5,000. b. $500. c. $5,500. d. $5,450.

B Solution: $5,000 × .10 = $500

136. During 2014 Wheeler Inc. had sales on account of $528,000, cash sales of $216,000, and collections on account of $336,000. In addition, they collected $5,800 which had been written off as uncollectible in 2013. As a result of these transactions the change in the accounts receivable indicates a a. $402,200 increase. b. $192,000 increase. c. $186,200 increase. d. $408,000 increase.

B Solution: $528,000 − $336,000 + $5,800 − $5,800 = $192,000

125. A company has an ending accounts receivable balance of $900,000 and it estimates that uncollectible accounts will be 2% of the receivable balance. If Allowance for Doubtful Accounts has a credit balance of $2,000 prior to adjustment, its balance after adjustment will be a credit of a. $20,000. b. $18,000. c. $17,960. d. $16,000.

B Solution: $900,000 × .02 = $18,000

121. In 2014 the Golic Co. had net credit sales of $600,000. On January 1, 2014, the Allowance for Doubtful Accounts had a credit balance of $15,000. During 2014, $24,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance should be 10% of the balance in receivables (percentage-of-receivables basis). If the accounts receivable balance at December 31 was $160,000 what is the required adjustment to the Allowance for Doubtful Accounts at December 31, 2014? a. $16,000. b. $25,000. c. $31,000. d. $24,000.

B Solution: ($160,000 × .10) + ($24,000 − $15,000) = $25,000

108. Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? a. Bad Debt Expense 8,000 Allowance for Doubtful Accounts 8,000 b. Bad Debt Expense 6,000 Allowance for Doubtful Accounts 6,000 c. Bad Debt Expense 6,000 Accounts Receivable 6,000 d. Bad Debt Expense 8,000 Accounts Receivable 8,000

B Solution: ($200,000 × .04) − $2,000 = $6,000

81. Conway Company purchased merchandise inventory with an invoice price of $8,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Conway Company pays within the discount period?

B) $7,840

83. The interest on a $8,000, 6%, 60-day note receivable is

B) $80.

99. Carson Company on July 15 sells merchandise on account to Tayler Co. for $1,500, terms 2/10, n/30. On July 20 Tayler Co. returns merchandise worth $600 to Carson Company. On July 24 payment is received from Tayler Co. for the balance due. What is the amount of cash received?

B) $882

15. When an account becomes uncollectible and must be written off

B) Accounts Receivable should be credited.

50. Assets purchased for resale are recorded in which of the following accounts?

B) Inventory

38. A 90-day note dated April 30, 2012, would mature on:

B) July 29, 2012.

42. Which of the following is not a basic principle of cash management?

B) Keep inventory levels high.

54. Which of the following activities is not a component of the operating cycle?

B) Payment of employees' salaries

63. Which of the following is not an internal control procedure for cash?

B) The same individual receives the cash and pays the bills.

92. A sales invoice is prepared when goods

B) are sold on credit.

46. Gross profit for a merchandising concern is net sales minus

B) cost of goods sold

25. Gross profit does not appear

B) on a single-step income statement.

43. Net income will result if gross profit exceeds

B) operating expenses.

A company just starting business made the following four inventory purchases in June: June 1 150 units @ $5.20/unit = $ 780 June 10 200 units @ $5.85/unit = 1,170 June 15 200 units @ $6.30/unit = 1,260 June 28 150 units @ $6.60/unit = 990 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. Using the average cost method, the amount allocated to the ending inventory on June 30 is A. $3,000 B. $1,200 C. $1,150 D. $4,200

B. $1,200

82. Merritt Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and selling for $18 per share. At what amount should the building be recorded by Merritt Company? A. $60,000 B. $216,000 C. $210,000 D. $156,000

B. $216,000

For the year ended 2015, Degas Co. has the following amounts: Sales Revenue $350,000; Gross Profit $120,000; and Operating Expenses $90,000. What are the amounts of Cost of Goods Sold and Net Income? A. $130,000 and $90,000 B. $230,000 and $30,000 C. $230,000 and $140,000 D. $260,000 and $140,000

B. $230,000 and $30,000

Rudolf Diesel Company's inventory records show the following data: Units Unit Cost Beginning Inventory 10,000 $9.00 Purchases: June 18 9,000 $8.00 Nov. 8 6,000 $7.00 A physical inventory on December 31 shows 8,000 units on hand. Under the FIFO method, the December 31 ending inventory is A. $72,000 B. $58,000 C. $56,000 D. $64,000

B. $58,000

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $64; second purchase $76; third purchase $68. If the company sold two units for a total of $200 and used FIFO costing, the gross profit for the period would be A. $56 B. $60 C. $62 D. $68

B. $60

On October 15, Grafton, Inc. received $400 from a customer in payment of a balance due for services billed on October 1. The entry by Grafton, Inc. will include a credit to A. Cash B. Accounts Receivable C. Service Revenue D. Unearned Revenue

B. Accounts Receivable

Which of the following is not a basic principle of cash management?

keep inventory levels high.

61. Which of the following is not characteristic of a corporation? A. The financial loss that a stockholder may suffer from owning stock in a public company is limited. B. Cash dividends paid by a corporation are deductible as expenses by the corporation. C. A corporation can own property in its name. D. Corporations are required to file federal income tax returns.

B. Cash dividends paid by a corporation are deductible as expenses by the corporation.

70. Which of the following statements concerning taxation is accurate? A. Corporations pay federal income taxes but not state income taxes. B. Corporations pay federal and state income taxes. C. Only the owners must pay taxes on corporate income. D. Corporations pay income taxes but their owners do not.

B. Corporations pay federal and state income taxes

Which of the following accounts would not appear on the balance sheet? A. Accounts payable B. Dividends C. Cash D. Common Stock

B. Dividends

Betsy Carter owns a small dry cleaning business. During October, she paid for her family's groceries and her home utility bill using her company's checking account. She records these transactions as Miscellaneous Expenses for her business. Which accounting assumption/principle is Betsy violating? A. Monetary Unit Assumption B. Economic Entity Assumption C. Historical Cost Principle D. No violation has occurred

B. Economic Entity Assumption

What type of account is Advertising Expense? A. Revenue B. Expense C. Liability D. Asset

B. Expense

Of the following companies, which one would not likely employ the specific identification method for inventory costing? A. Farm implement dealership B. Hardware store C. Music store specialization in organ sales D. Antique shop

B. Hardware store

What type of account is Notes Payable? A. Stockholder's Equity B. Liability C. Expense D. Asset

B. Liability

Which of the following accounts is not an asset? A. Accounts Receivable B. Service Revenue C. Inventory D. Equipment

B. Service Revenue

63. One of the main disadvantages of the corporate form is the A. professional management B. double taxation of dividends C. charter D. corporation must issue stock

B. double taxation of dividends

On a classified balance sheet, current assets are customarily listed A. with the largest dollar amounts first B. in the order of liquidity C. in alphabetical order D. in the order of acquisition

B. in the order of liquidity

The balance in the income summary account before it is closed will be equal to A. the beginning balance in the retained earnings account B. the net income or loss on the income statement C. zero D. the ending balance in the retained earnings account

B. the net income or loss on the income statement

74. Which of the following is not a right possessed by common stockholders of a corporation? A. the right to vote in the election of the board of directors B. the right to receive a minimum amount of dividends C. the right to sell their stock to anyone they choose D. the right to share in assets upon liquidation

B. the right to receive a minimum amount of dividends

permanent accounts

Balance sheet accounts whose balances are carried forward to the next period

The four financial statements

Balance sheet, income statement, statement of stockholder's equity, and statement of cash flows.

Which of the following financial statements is prepared as of a specific date?

Balance sheet.

Liability

Bonds payable is what type of account?

The Journal

Book of original entry. Transactions recorded in chronological order. Contributions to the recording process: Discloses the complete effects of a transaction. Provides a chronological record of transactions. Helps to prevent or locate errors because the debit and credit amounts can be easily compared.

Which of these accounts normally have a debit balance?

Both Sales Discounts and Sales Returns and Allowances

99. Under the allowance method of accounting for uncollectible accounts, a. the cash realizable value of accounts receivable is greater before an account is written off than after it is written off. b. Bad Debt Expense is debited when a specific account is written off as uncollectible. c. the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off. d. Allowance for Doubtful Accounts is closed each year to Income Summary.

174. Which of the following is least likely to help a company minimize losses as credit standards are relaxed? a. Require potential customers to provide bank guarantees. b. Ask a potential customer for references regarding payment history. c. Increase the estimate of uncollectible accounts at the end of each period. d. Check a potential customer's credit rating.

93. Bad Debt Expense is considered a. an avoidable cost in doing business on a credit basis. b. an internal control weakness. c. a necessary risk of doing business on a credit basis. d. avoidable unless there is a recession.

The four subdivisions for long-term assets are

land, land improvements, buildings, and equipment

204. A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables? a. The loss section of the income statement will increase each time receivables are sold. b. The credit to Accounts Receivable is less than the debit to Cash when the accounts are sold. c. Selling expenses will increase each time accounts are sold. d. The other expenses section of the income statement will increase each time accounts are sold.

101. When a stock dividend is declared, which of the following accounts is credited? A. Common Sock B. Dividend Payable C. Stock Dividends Distributable D. Retained Earnings

105. The excess of sales price of treasury stock over its cost should be credited to A. Treasury Stock Receivable B. Premium on Capital Stock C. Paid-In Capital from Sale of Treasury Stock D. Income from Sale of Treasury Stock

105. When an account is written off using the allowance method, accounts receivable a. is unchanged and the allowance account increases. b. increases and the allowance account increases. c. decreases and the allowance account decreases. d. decreases and the allowance account increases.

106. What is the total stockholders' equity based on the following account balances? Common Stock $375,000 Paid-In Capital in Excess of Par 90,000 Retained Earnings 190,000 Treasury Stock 15,000 A. $670,000 B. $655,000 C. $640,000 D. $565,000

107. Treasury stock which was purchased for $3,000 is sold for $3,500. As a result of these two transactions combined A. income will be increased by $500 B. stockholders' equity will be increased by $3,500 C. stockholders' equity will be increased by $500 D. stockholders' equity will not change

111. In which section of the financial statements would Paid-In Capital from Sale of Treasury Stock be reported? A. other expense on income statement B. intangible asset on balance sheet C. stockholders' equity on balance sheet D. other income on income statement

113. All of the following are normally found in a corporation's stockholders' equity section except A. Common Stock B. Paid-In Capital in Excess of Par C. Dividends in Arrears D. Retained Earnings

117. Which of the following would appear as a prior-period adjustment? A. loss resulting from the sale of fixed assets B. difference between the actual and estimated uncollectible accounts receivable C. error in the computation of depreciation expense in the preceding year D. loss from the restructuring of assets

120. What is the total stockholders' equity based on the following data? Common Stock $630,000 Excess of Issue Price Over Par 375,000 Retained Earnings (deficit) (65,000) A. $1,070,000 B. $1,005,000 C. $940,000 D. $565,000

123. The direct write-off method of accounting for bad debts a. uses an allowance account. b. uses a contra asset account. c. does not require estimates of bad debt losses. d. is the preferred method under generally accepted accounting principles.

125. A corporation has 50,000 shares of $28 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately A. $7.00 B. $112.00 C. $37.50 D. $600.00

133. A corporation has 60,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be: A. 60,000 B. 10,000 C. 300,000 D. 30,000

134. Earnings per share A. is the net income per common share B. must be reported by publicly traded companies C. helps compare companies of different sizes D. all of the above

136. Sabas Company has 20,000 shares of $100 par, 2% cumulative preferred stock and 100,000 shares of $50 par common stock. The following amounts were distributed as dividends: Year 1: $10,000 Year 2: 45,000 Year 3: 90,000 Determine the dividends per share for preferred and common stock for the first year. A. $0.50 and $0.10 B. $0.00 and $0.10 C. $0.50 and $0.00 D. $2.00 and $0.00

143. The two key parties to a promissory note are the a. maker and a bank. b. debtor and the payee. c. maker and the payee. d. sender and the receiver.

152. When a company receives an interest-bearing note receivable, it will a. debit Notes Receivable for the maturity value of the note. b. credit Notes Receivable for the maturity value of the note. c. debit Notes Receivable for the face value of the note. d. credit Notes Receivable for the face value of the note.

153. The face value of a note refers to the amount a. that can be received if sold to a factor. b. borrowed plus interest received at maturity from the maker. c. at which the note receivable is recorded. d. remaining after a service charge has been deducted.

156. Short-term notes receivable a. have a related allowance account called Allowance for Doubtful Notes Receivable. b. are reported at their gross realizable value. c. use the same estimations and computations as accounts receivable to determine cash realizable value. d. present the same valuation problems as long-term notes receivables.

173. All of the following statements regarding the financial statement presentation of receivables are true except: a. Short-term receivables are reported in the current assets section of the balance sheet. b. The gross amount of receivables less the allowance for doubtful accounts is equal to the net receivables. c. Short-term receivables are reported above the short-term investments in the balance sheet. d. Companies report bad debts expense under "Selling Expenses" in the operating expenses section of the income statement.

176. The accounts receivable turnover is computed by dividing a. total sales by average receivables. b. total sales by ending receivables. c. net credit sales by average receivables. d. net credit sales by ending receivables.

178. A high accounts receivable turnover ratio indicates a. the company's sales are increasing. b. a large proportion of the company's sales are on credit. c. customers are making payments very quickly. d. customers are making payments slowly.

189. All of the following statements are true regarding the average collection period except: a. it is a popular variant of the accounts receivable turnover . b. it is used to assess the effectiveness of a company's credit and collection policies. c. it should generally exceed the credit term period. d. its increase may suggest a decline in the financial health of customers.

202. A captive finance company refers to a. a finance company that is owned by individuals who borrow money from the company. b. finance companies that won't allow early repayment of loans. c. a company that is wholly owned by another company and provides financing to purchasers of its owner company's goods. d. any company that issues a major credit card.

203. Receivables might be sold to a. lengthen the cash-to-cash operating cycle. b. take advantage of deep discounts on the cash realizable value of receivables. c. generate cash quickly. d. finance companies at an amount greater than cash realizable value.

58. Which of the following receivables would not be classified as an "other receivable"? a. Advance to an employee b. Refundable income tax c. Notes receivable d. Interest receivable

59. Notes or accounts receivables that result from sales transactions are often called a. sales receivables. b. non-trade receivables. c. trade receivables. d. merchandise receivables.

62. Non-trade receivables should be reported separately from trade receivables. Why is this statement either true or false? a. It is true because trade receivables are current assets and non-trade receivables are long term. b. It is false because all current receivables must be grouped together in one account. c. It is true because non-trade receivables do not result from business operations and should not be included with accounts receivable. d. It is false because management can decide how to report receivables.

69. Accounts receivable are valued and reported on the balance sheet a. in the investments section. b. at gross amounts less sales returns and allowances. c. at cash realizable value. d. only if they are not past due.

70. Three accounting issues associated with accounts receivable are a. depreciating, returns, and valuing. b. depreciating, valuing, and collecting. c. recognizing, valuing, and accelerating collections. d. accrual, bad debts, and accelerating collections.

74. Under the allowance method, Bad Debt Expense is recorded a. when an individual account is written off. b. when the loss amount is known. c. for an amount that the company estimates it will not collect. d. several times during the accounting period.

82. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when a. a sale is made. b. an account becomes bad and is written off. c. management estimates the amount of uncollectibles. d. a customer's account becomes past due.

91. When Bayou Corporation was formed on January 1, 20xx, the corporate charter provided for 100,000 share of $10 par value common stock. The following transaction was among those engaged in by the corporation during its first month of operation: The corporation issued 9,000 shares of stock at a price of $23 per share. The entry to record the above transaction would include a A. debit to Cash for $90,000 B. credit to Common Stock for $207,000 C. credit to Paid in Capital in Excess of Par for $117,000 D. debit to Common Stock for $90,000

96. Bad Debt Expense is reported on the income statement as a. part of cost of goods sold. b. an expense subtracted from net sales to determine gross profit. c. an operating expense. d. a contra revenue account.

A credit policy that is too lenient results in A. increased sales volume accompanied by a low level of losses. B. decreased sales volume accompanied by a low level of losses. C. increased sales volume accompanied by a high level of losses. D. decreased sales volume accompanied by a high level of losses

After both of the entries for the inventory adjustment have been posted the debit in the Income Summary account represents: A. Net Income B. Ending Inventory C. Beginning Inventory D. Cost of Goods Sold

An employee whose regular hourly rate is $10 and whose overtime rate is 1.5 times the regular rate worked 44 hours in one week. In the payroll register, the employer should record an overtime premium of A. $440 B. $220 C. $20 D. $5

At the end of the year Stan Still Stationery Store had the following balances: Sales $580,000; Sales Discounts $2,540; Sales Returns and Allowances $14,280; Sales Salaries Expense $60,000. The Net Sales for the year are: A. $565,720 B. $577,460 C. $563,180 D. $503,180

After journal entries are posted, the reference column

of the general ledger will show journal page numbers

Each type of deduction made from the employees' earnings is recorded in a separate A. asset account B. expense account C. liability account D. revenue account

FICA taxes are paid by: A. employees only B. employer and federal government C. both the employee and employer D. neither the employee nor employer

For the current fiscal year, Purchases were $166,000, Purchase Returns and Allowances were $3,000 and Freight In was $12,000. If the beginning merchandise inventory was $110,000 and the ending merchandise inventory was $75,000, the Cost of Goods Sold is: A. $186,000 B. $116,000 C. $210,000 D. $216,000

For which of the following taxes is there no limit on the amount of annual earnings subject to the tax? A. Federal Unemployment compensation tax B. Social Security tax C. Federal income tax D. State unemployment compensation tax

Freight charges on merchandise purchases should be debited to A. the Purchases account. B. the Accounts Payable account. C. the Freight In account. D. the Creditor's account in the subsidiary ledger.

Hugh Morris Company pays weekly wages of $10,000 every Friday for a five day week ending on that day. If the last day of the year is on Wednesday, the adjusting entry to record the accrued wages is: A. debit Wages Expense $6,000; credit Cash $6,000 B. debit Wages Expense $4,000; credit Cash $4,000 C. debit Wages Expense $6,000; credit Wages Payable $6,000 D. debit Wages Expense $6,000; credit Drawing $6,000

Merchandise costing $5,600 with terms of 1/10, n/30, with transportation costs of $320 included on the invoice (not included in the $5,600) is sold on account. If the bill is paid within ten days, the amount of the purchase discount is A. $59.20 B. $3.20 C. $56.00 D. $52.80

The preparation of adjusting entries is

often an involved process requiring the skills of a professional.

Prepaid expenses appear in the A. Operating Expenses section of the income statement B. Other Expenses section of the income statement C. Current Assets section of the balance sheet D. Current Liabilities section of the balance sheet

Purchases of merchandise are A. debited to Merchandise Inventory B. credited to Merchandise Inventory C. debited to Purchases D. credited to Sales

148. The interest on a $9,000, 10%, 1-year note receivable is a. $9,000. b. $75. c. $900. d. $9,900.

C Solution: $9,000 × .10 = $900

The amount of the purchases for a period is presented in A. the Liabilities section of the balance sheet B. the Revenue section of the income statement C. the Cost of Goods Sold section of the income statement D. the Expenses section of the income statement

The beginning capital balance shown on a statement of owner's equity is $100,000. Net income for the period is $50,000. The owner withdrew $25,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is A. $175,000 B. $150,000 C. $125,000 D. $100,000

The total of the balances in the creditor's accounts should agree with the balance of A. the Purchases account in the general ledger B. the Accounts Receivable account in the general ledger C. the Accounts Payable account in the general ledger D. the Sales account in the general ledger

The total of the individual creditor accounts in the subsidiary ledger must ________ the balance of the Accounts Payable control account. A. be greater than B. be less than C. be equal to D. be subtracted from

To arrive at an accurate balance on a bank reconciliation statement, outstanding checks should be A. added to the bank statement balance. B. added to the book balance. C. deducted from the bank statement balance. D. deducted from the book balance.

beginning inventory to cost of goods purchased

Cost of goods available for sale is computed by adding

When checks are issued to employees after the entry to record the payroll has been made, the accountant would A. debit Salaries Expense, debit Wages Expense, and credit Cash B. debit Salaries and Wages Payable, debit Social Security Tax Payable, debit Medicare Tax Payable, debit Employee Income Tax Payable, and credit Cash C. debit Salaries and Wages Payable and credit Cash D. debit Salaries and Wages Payable and credit Salaries Expense and Wages Expense

Which of the following describes Sales Returns and Allowances? A. A revenue account with a normal credit balance. B. An expense account with a normal debit balance. C. A contra revenue account with a normal debit balance. D. A contra expense account with a normal credit balance.

Which of the following is not one of the three basic types of business? A. Service B. Merchandising C. Wholesale D. Manufacturing

Which of the following statements is not correct? A. In accounting, the term "cash" includes checks, money orders, and funds on deposit in a bank as well as currency and coins. B. The cash register proof is used to enter the cash sales and sales tax in the journal. C. In a well managed business, most bills are paid by cash. D. The petty cash account balance is usually listed separately from the Cash account on the Balance Sheet.

Which of the following would not be shown as an adjustment to the book balance on a bank reconciliation statement? A. bank service charges B. NSF checks C. deposits in transit D. a charge for printing new checks

par value is?

the monetary value assigned per share in the corporate charter

172. Nance Co. holds Gant Inc.'s $25,000, 120 day, 9% note. The entry made by Nance Co. when the note is collected, assuming no interest has previously been accrued is: a. Cash 25,000 Notes Receivable 25,000 b. Accounts Receivable 25,750 Notes Receivable 25,000 Interest Revenue 750 c. Cash 25,750 Notes Receivable 25,000 Interest Revenue 750 d. Accounts Receivable 25,750 Notes Revenue 25,000 Interest Revenue 700

C Solution: $25,000 × .09 × 120/360 = $750

114. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $34,000. If the balance of the Allowance for Doubtful Accounts is $9,000 debit before adjustment what is the amount of bad debt expense for that period? a. $34,000 b. $ 9,000 c. $43,000 d. $25,000

C Solution: $34,000 + $9,000 = $43,000

89. An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $4,500. b. debit to Allowance for Doubtful Accounts for $5,700. c. debit to Bad Debt Expense for $5,700. d. credit to Allowance for Doubtful Accounts for $4,500.

C Solution: $4,500 + $1,200 = $5,700

86. An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $4,500. b. debit to Allowance for Doubtful Accounts for $3,300. c. debit to Bad Debt Expense for $3,300. d. credit to Allowance for Doubtful Accounts for $4,500.

C Solution: $4,500 − $1,200 = $3,300

88. An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 credit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $4,500. b. debit to Allowance for Doubtful Accounts for $2,900. c. debit to Bad Debt Expense for $2,900. d. credit to Allowance for Doubtful Accounts for $4,500.

C Solution: $4,500 − $1,600 = $2,900

117. Using the allowance method, the uncollectible accounts for the year are estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 credit before adjustment, what is the balance after adjustment? a. $9,000 b. $31,000 c. $40,000 d. $49,000

C Solution: $40,000 estimated uncollectible accounts

163. Young Company lends Dobson industries $40,000 on January 1, 2014, accepting a 9-month, 12% interest note. If Dobson dishonors the note and does not pay it in full at maturity but Young expects that it will eventually be able to collect the debt, which of the following entries should most likely be made by Young Company? a. Cash 40,000 Notes Receivable 40,000 b. Accounts Receivable 40,000 Notes Receivable 40,000 c. Accounts Receivable 43,600 Notes Receivable 40,000 Interest Revenue 3,600 d. Accounts Receivable 43,600 Notes Receivable 40,000 Interest Receivable 3,600

C Solution: $40,000 × .12 × 9/12 = $3,600

110. Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $45,000. If the balance of the Allowance for Doubtful Accounts is $11,000 debit before adjustment what is the amount of bad debt expense for that period? a. $45,000 b. $11,000 c. $56,000 d. $34,000

C Solution: $45,000 + $11,000 = $56,000

207. On April 5 Donna's Boutique accepted a Visa card for a $600 purchase. Visa charges a 2% service fee. The entry to record this transaction would include a a. credit to Cash of $588. b. debit to Cash of $600. c. debit to Service Charge Expense of $12. d. credit to Service Charge Expense of $12.

C Solution: $600 × .02 = $12

On December 7, Foster, Inc. paid a cash dividend of $1,700. The journal entry to record this transaction would include: A. a debit to Common Stock and a credit to Cash B. A debit to Wages Expense and a credit to Dividends C. A debit to Dividends and a credit to Cash D. A debit to Cash and a credit to Dividends

C. A debit to Dividends and a credit to Cash

What type of account is Accounts Receivable? A. Revenue B. Liability C. Assets D. Stockholder's Equity

C. Asset

What type of account is Cash? A. Expense B. Revenue C. Asset D. Liability

C. Asset

81. The entry to record the issuance of common stock at a price above par includes a debit to A. Organizational Expenses B. Common Stock C. Cash D. Paid-In Capital in Excess of Par-Common Stock

C. Cash

Which of the following is false? A. The carrying value of an asset is historical cost - accumulated depreciation. B. Depreciation expense has a normal debit balance. C. Depreciation is the method of adjusting property, plant and equipment to fair market value. D. Accumulated depreciation is a contra asset account.

C. Depreciation is the method of adjusting property, plant and equipment to fair market value.

Which of the following events would not require a journal entry? A. Paying employees for wages earned B. Borrowing cash from a bank and signing a note C. Hiring a new director of human resources D. Purchasing supplies on account

C. Hiring a new director of human resources

68. Which of the following is not true of a corporation? A. It may enter into binding legal contracts in its own name. B. It may sue and be sued. C. The acts of its owners bind the corporation. D. It may buy, own, and sell property.

C. The acts of its owners bind the corporation.

Which of the following accounts is not a liability? A. Utilities Payable B. Notes Payable C. Wages Expense D. Unearned Revenue

C. Wages Expense

On Dec. 1, 2015, The Sun Shop received $240 from Carla for a twelve-month membership. The membership allows Carla to tan as much, or as little, as she wants each month. The December 31 adjusting entry is A. a debit to Unearned Revenue and a credit to Service Revenue for 220. B. a debit to Cash and a credit to Unearned Revenue for 240. C. a debit to Unearned Revenue and a credit to Service Revenue for 20. D. a debit to Service Revenue and a credit to Unearned Revenue for 20.

C. a debit to Unearned Revenue and a credit to Service Revenue for 20.

A dividend is A. equal to liabilities minus stockholders' equity B. equal to assets minus stockholders' equity C. a distribution of the company's earnings to its stockholders D. equal to revenues less expenses

C. a distribution of the company's earnings to its stockholders

76. The par value per share of common stock represents A. the minimum selling price of the stock established by the articles of incorporation. B. the minimum amount the stockholder will receive when the corporation is liquidated C. an arbitrary amount established in the articles of incorporation D. the amount of dividends per share to be received each year

C. an arbitrary amount established in the articles of incorporation

The ending retained earnings amount is shown on A. the balance sheet only B. the retained earning statement only C. both the balance sheet and the retained earnings statement D. both the income statement and the retained earnings statement

C. both the balance sheet and the retained earnings statement

64. A disadvantage of the corporate form of business entity is A. mutual agency for stockholders B. unlimited liability for stockholders C. corporations are subject to more governmental regulations D. the ease of transfer of ownership

C. corporations are subject to more governmental regulations

Beginning inventory plus net cost of purchases equals A. ending inventory B. cost of goods sold C. cost of goods available for sale D. freight in

C. costs of goods available for sale

In preparing closing entries A. the dividends account will be debited B. each revenue account will be credited C. each expense account will be credited D. the retained earnings account will be debited if there is net income for the period

C. each expense account will be credited

80. The price at which a stock can be sold depends upon a number of factors. Which statement below is not one of those factors? A. the financial condition, earnings record, and dividend record of the corporation B. investor expectations of the corporation's earning power C. how high the par value is D. general business and economic conditions and prospects

C. how high the par value is

An income statement A. reports the assets, liabilities, and stockholders' equity at a specific date. B. summarizes the changes in retained earnings for a specific period of time. C. presents the revenues and expenses for a specific period of time. D. reports the changes in assets, liabilities, and stockholders' equity over a period of time.

C. presents the revenues and expenses for a specific period of time.

Which of the following would appear on both a single-step and a multiple-step income statement?

Cost of goods sold ----- Cost of goods sold is shown in both a single-step and multiple-step income statement.

LIFO

Cost of goods sold consists of the most recent inventory purchases

periodic

Cost of goods sold is determined only at the end of the accounting period in a ___________system.

A retailer makes a $100 sale with terms of 2/10, n/30 on the first of the month. The customer returns $20 of merchandise for credit on account. What journal entry will the retailer record when payment is received within the discount period under a perpetual inventory system?

Cash 78.40 Sales Discounts 1.60 Accounts Receivable 80.00

Schofield Retailers accepted $50,000 of Silver Bank MasterCard credit card charges for merchandise sold on August 1. Silver Bank charges 4% for its credit card use. The entry to record this transaction by Schofield Retailers will include a credit to Sales of $50,000 and a debit(s) to

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

Which one of the following transactions is recorded with the same entry in a perpetual and a periodic inventory system?

Cash received on account with a discount

Which of the following does not appear as a separate section on the cash budget?

Cash sales.

Which of the following items are necessary in preparing a statement of cash flows?

Change of cash Cash provided by operations Cash from financing and investing activities

For which of the following errors should the appropriate amount be added to the balance per books on a bank reconciliation?

Check written for $57 recorded as $75.

New Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:

Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000.

Aretha Franklin Inc. issues 10,000 shares of $1 stated value no-par value common stock at $8 per share. The entry for the issue will include a debit to cash for $80,000 and credits to:

Common stock, $10,000 and Paid-in Capital in Excess of Stated Value, $70,000

Common stock

Common stockholders have the right to vote at stockholders' meetings, sell or otherwise dispose of their stock, purchase their proportional share of any common stock later issued by corporation, receive the same dividend if any on each common share of the corporation, share in any assets remaining after creditors and preferred stockholders are paid.

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

Companies determine cost of goods sold only at the end of the accounting period.

Solvency

Company's long-run financial viability and its ability to cover long-term obligations.

Which of the following statements is NOT true?

Comparability means using the same accounting principles from year to year within a company

Which of the following type of business provides ownership in transferable shares of stock?

Corporation

book value

Cost less accumulated depreciation

The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method?

Cost of Goods Sold

193. Selling accounts receivables to factors and allowing credit terms such as 2/10, n/30 a. represent common business practices. b. represent ways to accelerate receivables collections. c. result in collections that are less than the gross accounts receivable. d. All of these answer choices are correct.

198. The sale of receivables by a business a. indicates that the business is in financial difficulty. b. is generally the major revenue item on its income statement. c. is an indication that the business is owned by a captive finance company. d. can be a quick way to generate cash for operating needs.

100. The liability for a dividend is recorded on which of the following dates? A. the date of record B. the date of payment C. the last day of the fiscal year D. the date of declaration

100. When using the balance sheet approach, the balance in Allowance for Doubtful Accounts must be considered prior to the end of period adjustment when using which of the following methods? a. Net realizable method b. Direct write-off method c. Accrual method d. Allowance method

101. Allowance for Doubtful Accounts on the balance sheet a. is offset against total current assets. b. increases the cash realizable value of accounts receivable. c. appears under the heading "Other Assets." d. is deducted from accounts receivable.

102. Treasury stock shares are A. shares held by the U.S. Treasury Department B. part of the total outstanding shares but not part of the total issued shares of a corporation C. unissued shares that are held by the treasurer of the corporation D. issued shares that have been reacquired by a corporation

102. When an account is written off using the allowance method, the a. cash realizable value of total accounts receivable will increase. b. net accounts receivable will decrease. c. allowance account will increase. d. net accounts receivable will stay the same.

103. If an account is collected after having been previously written off a. the allowance account should be debited. b. only the control account needs to be credited. c. both income statement and balance sheet accounts will be affected. d. there will be both a debit and a credit to accounts receivable.

103. Which statement below is not a reason for a corporation to buy back its own stock. A. resale to employees B. bonus to employees C. for supporting the market price of the stock D. to increase the shares outstanding

108. Treasury stock that had been purchased for $5,600 last month was reissued this month for $8,500. The journal entry to record the reissuance would include a credit to A. Treasury Stock for $8,500 B. Paid-In Capital from Treasury Stock for $8,500 C. Paid-In Capital in Excess of Par/Common for $2,900 D. Paid-In Capital from Treasury Stock for $2,900

110. A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity? A. increase, $100,000 B. increase, $350,000 C. decrease, $100,000 D. decrease, $350,000

112. Which of the following is not classified as paid-in capital on the balance sheet? A. common stock B. common stock distributable C. donated capital D. treasury stock

114. Which of the following amounts should be disclosed in the stockholders' equity section of the balance sheet? A. the number of shares of common stock outstanding B. the number of shares of common stock issued C. the number of shares of common stock authorized D. all of the above

118. A restriction/appropriation of retained earnings A. decreases total assets B. increases total retained earnings C. decreases total retained earnings D. has no effect on total retained earnings

121. Treasury stock should be reported in the financial statements of a corporation as a(n) A. investment. B. liability. C. current asset. D. deduction from stockholders's equity.

124. When a corporation completes a 3-for-1 stock split A. the ownership interest of current stockholders is decreased B. the market price per share of the stock is decreased C. the par value per share is decreased D. b and c

127. A company with 100,000 authorized shares of $4 par common stock issued 40,000 shares at $8. Subsequently, the company declared a 2% stock dividend on a date when the market price was $11 a share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend? A. $3,200 B. $6,400 C. $4,800 D. $8,800

131. A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $150. If the corporation issues a 5-for-1 stock split, the market value of the stock after the split will be approximately: A. $25 B. $150 C. $5 D. $30

138. A write off of a specific accounts receivable under the allowance method a. increases bad debt expense for the accounting period. b. should occur on the last day of the accounting period. c. decreases the cash realizable value of accounts receivable. d. should be formally approved by an authorized employee.

After a bank reconciliation statement is completed, a firm may have to make an entry in its accounting records for A. outstanding checks. B. deposits in transit. C. the bank statement balance. D. NSF checks.

A debt that is expected to be paid within one year through the creation of long-term debt is a current liability.

False

140. Under the allowance method of accounting for bad debts, why must uncollectible accounts receivable be estimated at the end of the accounting period? a. To allow the collection department to schedule work for the next accounting period. b. To determine the gross realizable value of accounts receivable. c. The IRS rules require the company to make the estimate. d. To match bad debt expense to the period in which the revenues were earned.

158. The interest rate for a three-month loan would normally be stated in terms of which of the following rates of interest? a. Daily b. Monthly c. Quarterly d. Annual

169. When a note is dishonored, the payee's entry includes a a. debit to Interest Revenue. b. credit to Accounts Receivable. c. debit to Interest Expense. d. credit to Notes Receivable.

185. A popular variation of the accounts receivable turnover is the a. credit risk ratio. b. concentration of credit risk. c. bad debts ratio. d. average collection period.

191. In the table below the information for four companies is provided. Company Accounts Receivable turnover Average collection period Martin 13.9 26.3 Lewis 13.3 27.4 Danforth 10.4 35.1 Garner 14.5 25.2 Industry Average 13.0 28.1 Assuming all four companies are in the same industry, which company appears to have the greatest likelihood of paying its current obligations? a. Martin b. Lewis c. Danforth d. Garner

73. The account Allowance for Doubtful Accounts is classified as a(n) a. liability. b. contra account of Bad Debt Expense. c. expense. d. contra account to Accounts Receivable.

79. If the amount of uncollectible account expense is understated at year end a. net income will be understated. b. stockholders' equity will be understated. c. Allowance for Doubtful accounts will be overstated. d. net Accounts Receivable will be overstated.

80. If the amount of uncollectible account expense is overstated at year end a. net income will be overstated. b. stockholders' equity will be overstated. c. Allowance for Doubtful accounts will be understated. d. net Accounts Receivable will be understated.

84. The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles a. will increase income in the period it is collected. b. will decrease income in the period it is collected. c. requires a correcting entry for the period in which the account was written off. d. does not affect income in the period it is collected.

85. The direct write-off method of accounting for uncollectible accounts a. emphasizes the matching of expenses with revenues. b. emphasizes balance sheet relationships. c. emphasizes cash realizable value. d. is not generally accepted as a basis for estimating bad debts.

91. Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited a. when a credit sale is past due. b. at the end of each accounting period. c. whenever a pre-determined amount of credit sales have been made. d. when an account is determined to be uncollectible.

93. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $2 per share dividend is declared? A. $ 60,000 B. $ 20,000 C. $120,000 D. $100,000

94. Two methods of accounting for uncollectible accounts are the a. allowance method and the accrual method. b. allowance method and the net realizable method. c. direct write-off method and the accrual method. d. direct write-off method and the allowance method.

96. The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to A. decrease total liabilities and stockholders' equity. B. increase total expenses and total liabilities. C. increase total assets and stockholders' equity. D. decrease total assets and stockholders' equity.

A check issued for $1,980 to pay a vendor on account was recorded in the firm's records as $1,890; the canceled check was properly listed on the bank statement at $1,980. To arrive at an accurate balance on a bank reconciliation statement, the error should be A. added to the bank statement balance. B. added to the book balance. C. deducted from the bank statement balance. D. deducted form the book balance.

A company reported gross profit of $85,000, total operating expenses of $40,000 and interest income of $2,500. What is the income from operations? A. $47,500 B. $42,500 C. $40,000 D. $45,000

A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month. Its net delivered cost of purchases was A. $14,800 B. $17,600 C. $16,200 D. $15,400

A periodic inventory system requires a detailed inventory record of inventory items.

False

Employees' payments for federal income taxes withheld and social security and Medicare taxes are periodically A. sent directly to the Internal Revenue Service. B. deposited in a special-purpose bank account, controlled by the company, until year-end when the funds are sent to the U.S. Treasury Department. C. sent to the local office of the Internal Revenue Service. D. deposited in a government-authorized financial institution.

Hugh Snow, the buyer, returned merchandise to Farley Co., the seller. The entry on the books of Farley company to record the return of merchandise from Hugh Snow would include a: A. Debit Accounts Payable B. Credit to Purchase Returns and Allowances C. Debit to Accounts Receivable D. Debit Sales Returns and Allowances

Included with its bank statement a firm may receive a credit memorandum, which could indicate A. a bank service charge deducted from the firm's account balance. B. the bank's return of a dishonored (NSF) check that was issued by a credit customer of the firm. C. a fee for printing new business checks. D. an addition to the firm's account balance because the bank collected the amount due on a promissory note from a customer of the firm.

Interest Expense is classified as a(n): A. Administrative Expense B. Selling Expense C. Other Income D. Other Expense

Double-entry system

Each transaction must affect two or more accounts to keep the basic accounting equation in balance. Recording done by debiting at least one account and crediting another. DEBITS must equal CREDITS.

Kristy Casey earns $39,000 per year and is paid once a month. For January, she had $188 withheld from her pay for federal income taxes, and $52 withheld for health insurance. Social Security and is 6.2% and Medicare tax is 1.45%; the federal unemployment tax rate is .8% and state unemployment tax rates is 4.2%. What is the total employer payroll tax expense for Kristy's January paycheck? A. $385.13 B. $162.50 C. $248.63 D. $411.13

A worksheet is a mandatory form that must be prepared along with an income statement and balance sheet.

False

On January 2, 2014, a firm purchased equipment for $8,500. Depreciation expense for the year ending December 31, 2014, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is A. $1,500 B. $1,700 C. $1,200 D. $1,400

Rick O'Shea, the only employee of Hunter Furniture Company, makes $30,000 per year and is paid once a month. For the month of July, his federal income taxes withheld are $180, state income taxes withheld are $37, social security is 6.2%, Medicare tax is 1.45%, State Unemployment Tax is 4%, and Federal Unemployment tax is .8%. What is Rick's net pay for July? A. $2,500.00 B. $2,283.00 C. $2,308.75 D. $2,091.75

Roy DeSoto earns a regular hourly salary of $24.50. He is paid time-and-a-half for all hours in excess of 40 in the week. For the week ended March 8, 2013, he worked a total of 50 hours. His gross wages year to date, prior to his March 8, paycheck, are $11,980. Social Security Tax is 6.2%, Medicare Tax is 1.45%, federal unemployment tax is .8% and state unemployment tax is 4.2%, both on a maximum of $7,000 of gross wages per year. What is the employer's payroll tax expense for Roy for the week ended March 8, 2013? A. $154.96 B. $123.97 C. $170.47 D. $103.08

The Sales Returns and Allowances account is classified as A. an asset account B. a contra asset account C. a revenue account D. a contra revenue account

The Supplies account has a trial balance of $3,136. A year-end inventory shows $1,734 worth of supplies left at the end of the year. The correct adjusting entry is: A. debit Supplies Expense $1,734; credit Prepaid Supplies $1,734 B. debit Supplies $1,402; credit Supplies Expense $1,402 C. debit Supplies Expense $3,136; credit Supplies $3,136 D. debit Supplies Expense $1,402; credit Supplies $1,402

The adjusting entry to record accrued interest on a note payable requires a debit to A. Interest Income and a credit to Notes Payable B. Interest Payable and a credit to Interest Expense C. Interest Expense and a credit to Cash. D. Interest Expense and a credit to Interest Payable

The entry to record the return of merchandise from a customer on which sales tax was charged includes A. a debit to Accounts Receivable B. a credit to Sales Tax Payable C. a credit to Sales Returns and Allowances D. a debit to Sales Tax Payable

The entry to replenish a petty cash fund includes A. a debit to Cash and a credit to Petty Cash. B. a debit to Petty Cash Fund and a credit to Cash. C. debits to various expense accounts and a credit to Petty Cash Fund. D. debit to various expense accounts and a credit to Cash.

The entry to reverse the adjusting entry for accrued payroll taxes expense includes A. a debit to Payroll Taxes Expense B. a debit to Employee Income Tax Payable C. a credit to Social Security Tax Payable and a credit to Medicare Tax Payable D. a debit to Social Security Tax Payable and a debit to Medicare Tax Payable

To arrive at an accurate balance on a bank reconciliation statement, a service charge should be A. added to the bank statement balance. B. added to the book balance. C. deducted from the bank statement balance. D. deducted from the book balance.

Indicate where the event purchase of land and a building with a mortgage would appear, if at all, on the indirect statement of cash flows.

Does not represent a cash flow

128. An analysis and aging of the accounts receivable of Watts Company at December 31 reveal these data: Accounts receivable $ 2,400,000 Allowance for doubtful accounts per books before adjustment (credit) 150,000 Amounts expected to become uncollectible 195,000 What is the cash realizable value of the accounts receivable at December 31 after adjustment? a. $2,055,000 b. $2,250,000 c. $2,400,000 d. $2,205,000

D Solution: $2,400,000 − $195,000 = $2,205,000

67. Wilton sells softball equipment. On November 14, they shipped $3,000 worth of softball uniforms to Paola Middle School, terms 2/10, n/30. On November 21, they received an order from Douglas High School for $1,800 worth of custom printed bats to be produced in December. On November 30, Paola Middle School returned $300 of defective merchandise. Wilton has received no payments from either school as of month end. What amount will be recognized as net accounts receivable on the balance sheet as of November 30? a. $4,800 b. $4,500 c. $3,000 d. $2,700

D Solution: $3,000 − $300 = $2,700

119. Using the allowance method, the uncollectible accounts for the year is estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 debit before adjustment, what is the amount of bad debt expense for the period? a. $9,000 b. $31,000 c. $40,000 d. $49,000

D Solution: $40,000 + $9,000 = $49,000

162. Young Company lends Dobson industries $40,000 on August 1, 2014, accepting a 9-month, 12% interest note. If Young accrued interest at its December 31, 2014 year-end, what entry must it make to record the collection of the note and interest at its maturity date? a. Cash 43,600 Notes Receivable 40,000 Interest Revenue 3,600 b. Cash 43,600 Notes Receivable 43,600 c. Notes Receivable 40,000 Interest Receivable 2,000 Interest Revenue 1,600 Cash 43,600 d. Cash 43,600 Notes Receivable 40,000 Interest Receivable 2,000 Interest Revenue 1,600

D Solution: $40,000 × .12 × 5/12 = $2,000; $40,000 × .12 × 4/12 = $1,600

154. Rosen Company receives a $5,000, 3-month, 6% promissory note from Bay Company in settlement of an open accounts receivable. What entry will Rosen Company make upon receiving the note? a. Notes Receivable 5,075 Accounts Receivable—Bay Company 5,075 b. Notes Receivable 5,075 Accounts Receivable—Bay Company 5,000 Interest Revenue 75 c. Notes Receivable 5,000 Interest Receivable 75 Accounts Receivable—Bay Company 5,000 Interest Revenue 75 d. Notes Receivable 5,000 Accounts Receivable—Bay Company 5,000

D Solution: $5,000 face value

205. Gipson Furniture factors $500,000 of receivables to Kwik Factors, Inc. Kwik Factors assesses a 3% service charge on the amount of receivables sold. Gipson Furniture factors its receivables regularly with Kwik Factors. What journal entry does Gipson make when factoring these receivables? a. Cash 485,000 Loss on Sale of Receivables 15,000 Accounts Receivable 500,000 b. Cash 485,000 Accounts Receivable 485,000 c. Cash 500,000 Accounts Receivable 485,000 Gain on Sale of Receivables 15,000 d. Cash 485,000 Service Charge Expense 15,000 Accounts Receivable 500,000

D Solution: $500,000 × (1 − .03) = $485,000

155. Doane Company receives a $7,000, 3-month, 6% promissory note from Ray Company in settlement of an open accounts receivable. What entry will Doane Company make upon receiving the note? a. Notes Receivable 7,035 Accounts Receivable—Ray Company 7,035 b. Notes Receivable 7,105 Accounts Receivable—Ray Company 7,000 Interest Revenue 105 c. Notes Receivable 7,000 Interest Receivable 105 Accounts Receivable—Ray Company 7,000 Interest Revenue 105 d. Notes Receivable 7,000 Accounts Receivable—Ray Company 7,000

D Solution: $7,000 face value

28. Fehr Company sells merchandise on account for $2,500 to Kelly Company with credit terms of 2/10, n/30. Kelly Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

D) $1,960

85. The maturity value of a $30,000, 9%, 40-day note receivable dated July 3 is

D) $30,300.

26. Using the allowance method, the uncollectible accounts for the year is estimated to be $35,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 debit before adjustment, what is the amount of bad debt expense for the period?

D) $44,000

80. The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

D) Inventory.

98. The amount of cost of good available for sale during the year depends on the amounts of

D) beginning merchandise inventory and net costs of purchases.

Patterson has the following inventory invormation: July 1 Beginning Inventory 20 units @ $19 = $ 380 July 7 Purchases 70 units @ $20 = $1,400 July 22 Purchases 10 units @ $23 = $ 230 $2,010 A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is A. $1,306 B. $1,287 C. $1,280 D. $1,330

D. $1,330

On May 1, 2015, Maricel Advertising Company received $3,000 from a customer for advertising services to be completed by April 30, 2016. At December 31, 2015, $2,000 of the fees have been earned. The adjusting entry on December 31, 2015 by Maricel Advertising will include a A. $2,000 credit to Unearned Revenue B. $1,000 debit to Service Revenue C. $1,000 credit to Unearned Revenue D. $2,000 debit to Unearned Revenue

D. $2,000 debit to Unearned Revenue

Tamara Company purchased a machine on January 1, 2015. Annual depreciation is $800. At December 31, 2017, the balance in the accumulated depreciation account, after adjustment should be: A. $3,200 B. $1,600 C. $800 D. $2,400

D. $2,400

Allister Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: Product Cost Market A $112,000 $120,000 B 80,000 76,000 C 155,000 162,000 If Allister applies the LCM basis, the value of the inventory reported on the balance sheet would be: A. $347,000 B. $362,000 C. $358,000 D. $343,000

D. $343,000

Stockholders invested $20,000 cash in a business for common stock. The journal entry to record this transaction would include A. A debit to Cash and a credit to Retained Earnings B. A debit to Cash and a credit to Investment Income C. A debit to Service Revenue and a credit to Cash D. A debit to Cash and a credit to Common Stock

D. A debit to Cash and a credit to Common Stock

A company spends $15 million dollars for an office building. Over what period should the cost be written off? A. When the $15 million is expended in cash B. After $15 million in revenue is recognized C. All in the first year D. Over the useful life of the building

D. Over the useful life of the building

Vicki's Dance Studio bills a client for dancing lessons earned during the past week. The journal entry will include a credit to A. Cash B. Common Stock C. Accounts Receivable D. Service Revenue

D. Service Revenue

Which of the following is a temporary account? A. Common Stock B. Cash C. Retained Earnings D. Service Revenue

D. Service Revenue

On October 4, 2015, Terry Corporation had sales on account of $2,500 from selling merchandise which had cost $1,900. The entries to record the day's sales would include: A. a debit of $1,900 to Inventory B. a debit of $2,500 to Inventory C. a credit of $1,900 to Cost of Goods Sold D. a credit of $2,500 to Sales

D. a credit of $2,500 to Sales

Hint: This question is from the buyer's point of view. The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would be A. debit to Accounts Payable and a credit to Purchase Returns & Allowances B. debit to Purchase Returns & Allowances and a credit to Accounts Payable C. debit to Inventory and a credit to Accounts Payable D. debit to Accounts Payable and a credit to Inventory

D. debit to Accounts Payable and a credit to Inventory

An account which is increased by a debit is a A. revenue account B. retained earnings account C. liability account D. dividends account

D. dividends account

Prepare the appropriate journal entries to record the following transactions Received a check from Jane Smiley for $700 on an account that had previously been written off as uncollectable.

Debit Accounts recevable for 700 Credit Allowance for doubtful accounts 700 Debit Cash 700 Credit Accounts Recevable 700

Prepare Journal entries to record the following transactions Miner company excepted a %6, 3-mont, $6000 note dated July 1 from Lox Company for the balance due on Lox's account.

Debit Notes Recivable $6000 Credit Accounts Recevable $6000

The closing entry for dividends consists of which account(s) being debited and which account(s) being credited?

Debit Retained Earnings Credit Dividends

The closing entry for all revenue accounts consists of which account(s) being debited and which account(s) being credited?

Debit Revenues Credit Retained Earnings

White Laundry Company purchased $6,500 of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $3,000 on hand. It is the company's first period of operations. The adjusting entry that should be made by the company on June 30 is

Debit Supplies Expense, $3,500; Credit Supplies, $3,500

Lake of Fire Company purchased supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $1,900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

Debit Supplies Expense, $5,100; Credit Supplies, $5,100.

Assume instead that the note is disonored and that no interest has been accrued. Lox company is expected to eventually pay the amount owed.

Debit accounts received 6090 credit notes received 6000 Credit interest revenue 90

Liabilities

Debts created by purchasing goods/services on credit

Trial Balance

Each account is analyzed to determine whether it is complete and up-to-date for financial statement purposes.

A check is correctly written and paid by the bank for $271 is incorrectly recorded on the books for $217. The appropriate adjustment on a bank reconciliation would be?

Deduct $54 from the book's balance

Which type of adjustment is needed for the following transaction? Supplies of $100 are on hand.

Deferred expense or Prepaid expense

For which of the following errors should the appropriate amount be added to the balance per bank on a bank reconciliation?

Deposit of $600 recorded by bank as $60.

Which of the following would be added to the balance per bank on a bank reconciliation?

Deposits in transit

Which of the following bank reconciliation items would not result in an adjusting entry?

Deposits in transit.

Which of the following is not a typical example of an accrued expense?

Depreciation

What is the adjusting entry for the following transaction? Depreciation on equipment is $2,500 for this month.

Depreciation Exp. - Eq. 2,500 Accumulated Depr. - Eq. 2,500

estimate

Depreciation expense for a period is an ___________ rather than a factual measurement of cost that has expired.

Stockholders' equity

Depreciation expense is what type of account?

Which one of the following items would never appear on a cash budget?

Depreciation expense.

cost;valuation

Depreciation is a __________ allocation process rather than a process of __________.

Transaction

Economic events recorded by accountants

FIFO

Ending inventory valuation consists of the most recent inventory purchases

Adjusting Entries

Ensure that the revenue recognition and expense recognition principles are followed. Necessary because the trial balance may not contain up-to-date and complete data. Required every time a company prepares financial statements. Will include one income statement account and one balance sheet account.

Closing Process

Ensures Net Income/Net Loss and owners withdraws are closed into the owner's capital account

closing entries

Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders' equity account.

Statements about the accrual basis of accounting

Events that change a company's financial statements are recorded in the periods in which the events occur. Revenue is recognized in the period in which the performance obligation is satisfied. The accrual basis of accounting is in accordance with generally accepted accounting principles.

Business Entity(assumption)

Every business accounted for separately from other entities, to include its owners

Assets

Everything a company owns

Expense Recognition

Expenses are typically recorded in the period they are incurred, regardless of when cash is paid

Saira works for a sports franchise which pays wages and salaries earned on a monthly basis. A new accountant was hired by the sports franchise in late May. Due to inexperience, the new accountant failed to accrue Saira's salary for May. What is the impact on the May 31 financial statements of the sports franchise?

Expenses are understated; net income is overstated.

Which of the following statements is NOT true? (chapter 3)

Expenses increase stock holders equity

Operating Expenses

Expenses incurred in the process of earning sales revenue

prepaid expenses

Expenses paid before they are incurred

Accrued liabilities

Expenses that have been incurred but have not been paid at the end of the accounting period

The primary basis of accounting for inventories is market value

F. The primary basis of accounting for inventories is cost.

Under the lower-of-cost market basis, market is defined as selling price.

F. Under the lower-of-cost-or-market basis, market is defined as current replacement cost, not selling price.

in the retail method, the cost-to-retail-ratio is applied to the goods available for sale at retail to determine the estimated cost of the inventory.

F. the cost to retail ratio is applied to the ending inventory at retail.

in a perpetual inventory system, the cost of goods sold under the FIFO method is based on the cost of the latest goods on hand during the period.

F.the cost of goods sold is based on the earliest goods on hand prior to the sale.

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

FIFO method

perpetual vs. periodic system

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

Which one of the following is not an objective of a system of internal controls?

Fairness of the financial statements.

Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated?

Faithful representation

A company's operating cycle and fiscal year are usually the same length of time

False

A compound journal entry requires several debits to one account and several credits to one account.

False

A debit to an account always indicates an increase in that account

False

Which of the following payroll taxes are usually filed and remitted annually?

Federal unemployment taxes

Statement of cash flows

Financial statement that reports net cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing.

Note Payable

Formal arrangement that includes the signing of a note

freight-out

Freight cost to deliver goods to customers reported as a selling expense

FOB Shipping Point

Freight terms that require the buyer to pay the freight cost.

FOB Destination

Freight terms that require the seller to pay the freight cost

Which of the following companies would be most likely to use a perpetual inventory system?

Fur dealer

Which of the following should be included in the physical inventory of a company?

Goods in transit from another company shipped FOB shipping point

Finished Goods

Goods ready for sale to customers by retailers and wholesalers

Work In Progress

Goods that are only partially completed in a manufacturing company

Statement of Cash Flows

Information for a specific period of time. Answers the following: Where did cash come from? What was cash used for? What was the change in the cash balance?

Financial accounting

Information system that identifies, records, and communicates the economic events of an organization for external users

gross profit

Income from operations is determined by subtracting total operating expenses from __________.

Liability

Income taxes payable is what type of account?

First In First Out(FIFO)

Inventory valuation method that assigns a value to the inventory on the balance sheet that approximates current cost. Ir also mimics the actual flow of goods for most businesses

Weighted Average

Inventory valuation method that tends to smooth out erratic changes in costs

Which one of the following sections would not appear on a cash budget?

Investing

Lending money and collecting the loans are

Investing activities

All of the following are owner's equity accounts except

Investment in Stock

Asset

Investment is what type of account?

Cost of Goods Sold(expense)

Is the term used for the cost of buying and preparing merchandise for sale

net income

It is generally recognized that a major objective of accounting for inventory is the proper determination of___________

Which of the following would not be true of a privately held corporation?

Its shares are regularly traded on the New York Stock Exchange.

A company's legal debts or obligations that arise during the course of business operations

Liabilities

Which group does the account "Salaries and Wages Payable" belong to?

Liabilities

Lulu Luxuries Company issued a four-year interest-bearing note payable for $200,000 on January 1, 2013. Each January the company is required to pay $50,000 on the note. How will this note be reported on the December 31, 2014 balance sheet?

Long-term debt, $100,000; Long-term debt due within one year, $50,000.

Internal Users of Accounting

Marketing Management Finance Human Resource

inventory turnover

Measures the number of times the inventory sold during the period

Which of the following is an example of a bank reconciliation item that requires an adjusting entry?

NSF check

Accumulated Depreciation

Normal Balance: Credit Type of Account: Asset Financial Statement: BS

Account Payable

Normal Balance: Credit Type of Account: Liability Financial Statement: BS

Retained Earnings

Normal Balance: Credit Type of Account: Owner's Equity Financial Statement: BS

Cash

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Note Receivable

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Office Equipment

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Office Furniture

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Office Supplies

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Prepaid Insurance

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Prepaid Rent

Normal Balance: Debit Type of Account: Asset Financial Statement: BS

Advertising Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Computer Repair Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Credit Card Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Rent Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

Salary Expense

Normal Balance: Debit Type of Account: Expense Financial Statement: IS

A 30-day note dated September 8 has a maturity date of

October 8th

CPA

Offers expert accounting service to the general public

Monetary Unit Assumption

Only data that can be expressed in dollars ex: can't express "owner health" in dollars not adjusted based on inflation

The order of presentation of activities of the statement of cash flows is

Operating, investing, and financing.

An error in the count of physical goods on hand at the end of the current period resulted in a $3000 overstatement in ending inventory. The effect of the error on the current period would be?

Overstate net income

if common stock is issued for an amount greater than par value, the excess should be credited to?

Paid in capital in excess of par value

Big Head Todd sells 2,000 shares of treasury stock purchased for $32,000 at $20 per share. The entry to record this sale should include a credit to:

Paid-in Capital from Treasury Stock $8,000

Mary Wells, Inc. issues 2,000 shares of $10 par value common stock at $22 per share. The entry of the issue will include a credit of $24,000 to:

Paid-in Capital in Excess of Par Value

If Morgan Company issues 2,000 shares of $5 par value common stock for $140,000, the account

Paid-in Capital in Excess of Par Value will be credited for $130,000.

If common stock is issued for an amount greater than par value, the excess should be credited to

Paid-in Capital in Excess of Par Value.

Asset

Patents is what type of account?

Which of the following items does not result in an entry to the Inventory account under a perpetual system?

Payment of freight costs for goods shipped to a customer ---- This entry requires a debit to Freight-out and a credit to cash. Freight-out is not part of the cost of inventory.

Prepaid Expenses

Payments of expenses that will benefit more than one accounting period.

the basis of computing uncollectible accounts that provide a reasonable matching of expenses with revenues is the

Percentage of reasonable basis

Detailed records of goods held for resale are not maintained under a

Periodic inventory system

Under what system is cost of goods sold determined at the end of an accounting period?

Periodic inventory system ----- Under the periodic inventory system, cost of goods sold for the period is calculated by adding purchases for the period to the beginning inventory balance and subtracting the ending inventory balance.

Which inventory system will likely be used by a company with merchandise that has a high unit value?

Perpetual inventory system

The Nice Corporation issues 10,000 shares of $100 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $1,100,000 and a credit or credits to

Preferred Stock for $1,000,000 and Paid-in Capital in Excess of Par Value—Preferred Stock for $100,000.

Which of the following is not included in the cash disbursements section of a cash budget?

Repayments of borrowed funds.

Balance Sheet

Reports the assets, liabilities, and owner's equity at a specific date. Lists assets at the top, followed by liabilities and owner's equity. Total assets must equal total liabilities and owner's equity. Is a snapshot of the company's financial condition at a specific moment in time (usually the month-end or year-end).

Which of the following is classified in an income statement as a nonoperating activity?

Receiving dividend revenue from an investment ------ Because dividend revenue is not related to the company's normal business operations, it should be classified as nonoperating activity.

REVENUE RECOGNITION PRINCIPLE

Recognize revenue in the accounting period in which the performance obligation is satisfied.

Account

Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. Debit = "Left" Credit = "Right"

Stone Roses Candies paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $1,500 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January

Salaries and wages expense 4500 Salaries and wages payable

Liabilitiy

Salaries payable is what type of account?

What is the adjusting entry for the following transaction? Salaries earned by employees of $1,500 have not been recorded.

Salary Expense 1,500 Salary Payable 1,500

Crowder Corporation recorded the return of $200 of goods originally sold on credit to Discount Industries. Using the periodic inventory approach, Crowder would record this transaction as:

Sales Returns and Allowances 200 Accounts Receivable 200

Which one of the following will result in gross profit?

Sales revenue less cost of goods sold ----- Cost of goods sold is subtracted from net sales to calculate gross profit.

An account that will have a zero balance after closing entries have been journalized and posted is

Service Revenue

Which of the following statements about a cash dividend is incorrect?

Shareholders usually vote to determine the amount of income to be distributed in the form of a dividend

Statement of Owners Equity

Shows beginning OE(capital), events that increase it(owner investments and Net Income), events that decrease it(withdraws and net loss)

Accounts payable Notes payable Accrued expenses Taxes payable Unearned revenues Bonds payable

Some Liabilities

Cash Accounts receivable Notes receivable Inventories (to be sold) Supplies Prepaid expenses Plant and Equipment Short term investments Long term investments Buildings Land Intangibles

Some assets

False

T/F: Sales revenue should be recorded in accordance with the matching principle

False

T/F: The trial balance will not balance when incorrect account titles are used in journalizing or posting

True

T/F: Under the lower-of-cost-or-market basis, market is defined as current replacement cost

Which of the following techniques are not used by accountants to interpret and report financial information?

Special memos for each class of external users.

Which of the following inventory methods is often impractical to use?

Specific identification

Remmers, Inc. declares a 10% common stock dividend when it has 20,000 shares of $10 par value common stock outstanding. If the market value of $24 per share is used, the amounts debited to stock dividends and credited to Paid-in capital in excess of Par value are:

Stock dividends $48,000 Paid-In capital in excess of Par Value $28,000

The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next.

The inventory method of specific identification is appropriate for costly, easily distinguishable items such as pianos, automobiles, fur coats, and antiques.

The pool of inventory costs consists of the beginning inventory plus the cost of goods purchased.

under the LIFO method, the cost of the most recent purchase prior to sale is allocated to the units sold in a perpetual inventory system.

Historical cost

The amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets.

Historical cost

The amount paid for an asset and used as a basis for recognizing it on the balance sheet and carrying it on later balance sheets. buy house in 1995 at 10k will be noted as 10k in 2017

current replacement cost

The amount that would be paid at the present time to acquire an identical item

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

The amount to be received as payment in full on June 23 is $686. Because payment is made within the discount period of 10 days, the amount received as payment in full is $700 ($750 - return of $50) minus the discount of $14 ($700 × 2%), or $686.

Which of the following is NOT associated with a perpetual inventory system? A. Detailed records of the cost of each inventory purchase and sale are maintained. B. The system is usually more expensive. C. Shrinkage and lost or stolen goods are more readily determined. D. The cost of goods sold is determined only at the end of the accounting period.

The cost of goods sold is determined only at the end of the accounting period.

Admission Revenue has a normal credit balance T or F

True

After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances

True

At the time an asset is acquired, cost and fair value should be the same

True

Cash has a normal debit balance T or F

True

Cash is a permanent account T or F

True

Martin Company purchases $4,200 of merchandise on March 1, with credit terms of 3/10, n/30. If Martin pays on March 11, what is the cost of this purchase?

The terms of 3% if paid within 10 days on the $4,200 invoice permits the buyer to take a discount of $126 on the invoice, $4,200 - (3% × $4,200) = $4,074

Which of the following controls would best help detect the removal of a blank check by an employee from the back of a company's checkbook for subsequent misappropriation of funds?

The use of prenumbered checks.

operating cycle

The________of a company is the average time that it takes to purchase inventory, sell it on account, and then collect cash from customers.

Each general ledger control account balance must equal the composite balance of the individual accounts in the related subsidiary ledger at the end of an accounting period.

True

Each transaction must be analyzed in terms of its effect on the accounts before it can be recorded in a journal.

True

Ending merchandise inventory is subtracted from the coast of goods available for sale in determining the cost of goods sold.

True

specific identification

Tracks the actual physical flow for each inventory item available for sale

General Journal records...

Transaction date,Account names, Amount of each debit/credit, and explanation

posting

Transferring journal entries to ledger accounts.

Which one of the following items is NOT considered a part of the cost of a truck purchased for business use?

Truck License

A consolidated income statement is a summary statement of all the departmental income statements of a property

True

A corporation is a legal entity separate and distinct from it's owners.

True

A debit column for Sales Returns and Allowances may be found in the cash payments journal

True

A partnership must have more than one owner

True

A prior period adjustment is reported as an adjustment of the beginning balance of Retained Earnings.

True

A sales discount is the offer of a cash discount to a customer for the prompt payment of a balance due.

True

A simple journal entry requires only one debit to an account and one credit to an account.

True

A single-step income statement reports all revenues, both operating and other revenues and gains, at the top of the statement.

True

A stock dividend results an increase of stock dividends and an increase in paid-in capital in the accounts.

True

A successful corporation can have a continuous and perpetual life

True

A trial balance does not prove that all transactions have been recorded or that the ledger is correct

True

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

True

Accounts Receivable has a normal debit balance T or F

True

gross profit;retail inventory

Two widely used methods of estimating inventories are the__________method and the___________ method.

consignor has ownership until goods are sold to a customer.

Under a consignment arrangement, the:

inventory

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods are recorded in ___________

What is the adjusting entry for the following transaction? Services related to unearned service revenue worth $500 were performed this month.

Unearned Service Rev. 500 Service Revenue 500

Allen Sutton has invested $600,000 in a privately held family corporation. The corporation does not do well and must declare bankruptcy. What amount does Sutton stand to lose?

Up to his total investment of $600,000

Last In First Out(LIFO)

Used during a period of steadily rising costs, this valuation method yields the lowest reported net income

Check

Used to withdraw money from an account, a document signed by the depositor instructing the bank to pay a specified amount of money to a designated recipient

Percent of Receivables Method(aka balance sheet method)

Uses balance sheet relations to estimate bad debts- mainly the relation between accounts receivable and the allowance amount. Assumes that a given percent of a company's receivables is uncollectible.

On the costs of goods manufactured schedule, depreciation on factory equipment

appears in the manufacturing overhead section.

Stockholders' equity

Utilities expense is what type of account?

account

What is a record of increases and decreases in specific assets, liabilities, and stockholders' items.

revenue recognition principle

What principle gives accountants guidance as to when revenue is to be recorded

balance sheet

What reports the assets, liabilities, and stockholders' equity of a business enterprise at a specific date.

sales returns and allowances; accounts receivable

When a customer returns merchandise previously purchased on credit, the entry for the seller to record the return requires a debit to the_________account and a credit to the___________ account.

Dividends

When earnings are distributed to stockholders not a expense

compound entry

When three or more accounts are required in one journal entry, the entry is referred to as a:

accrual basis accounting

Which form of accounting is in accordance with generally accepted accounting principles?

because some costs expire with the passage of time and have not yet been journalized.

Why are adjusting entries required

Transactions

are a business's economic events recorded by accountants.

Checks that were written in September and still not presented to the bank for payment at October 31st amounted to $690

Write off -$690 on the bank This was due to an outstanding check

Checks written in October which have not been paid by the bank at october 31 amounted to $1250

Write off in the books -$1250 These are due to outstandig checks

The bank included a $25 debit memorandum for service charges for the month of October.

Write off in the books for $25 Debit miscenalious expences Credit Cash

Bank Reconciliation - What is the effect? If the books are affected, how would the adjusting entries be written? A check correctly written and paid by the bank for $1590 was incorrectly in the cash payments journal for $1560. The check was payment on account.

Write off in the books for -$90 Debit Accounts payable Credit Cash

At May 1, 2015, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of $7. During May, the company purchased inventory as follows: 800 units at $7 600 units at $8 The company sold 1,000 units during the month for $12 per unit. Kibbee uses the average cost method. The average cost per unit for May is

[(200 × $7) + (800 × $7) + (600 × $8)] ÷ 1,600 = $7,375

cumulative dividend

a feature of preferred stock entitling the stockholder to receive current and unpaid prior-year dividends before common stockholders receive any dividends

Statement of stockholder's equity

a financial statement that shows changes in a corporations ownership for a fiscal period

Inventory turnover

___________is calculated as cost of goods sold divided by average inventory

A trial balance will not balance if:

a $100 cash drawing by the owner is debited to Owner's Drawing for $1,000 and credited to Cash for $100.

a legal document that indicates the name of the issuer, the face value of the bond and such other data is called?

a bond certificate

receipt

a business form giving written acknowledgement for cash received

corporation

a business organized as a legal entity separate and distinct from its owners under state corporation law

proprietorship

a business owned by one person

source document

a business paper from which information is obtained for a journal entry

Liquidity

a company's ability to pay for its near term obligations

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of

a comparative balance sheet.

a bond indenture is

a contract between the corporation issuing the bonds and the bondholders

privately held corporation

a corporation that has only a few stockholders and whose stock is not available for sale to the general public

divided

a corporation's distribution of cash or stock to its stockholders on a pro rata (proportional) basis

treasury stock

a corporation's own stock that the corporation has issued and reacquired but not retired

Treasury stock is

a corporation's own stock, which has been reacquired and held for future use.

when the market rate of interest on bonds is higher than the contract rate, the bonds will sell at?

a discount

charter

a document that is issued by a state to set forth important terms and features regarding the creation of a corporation

Entries in a sales journal

are made from sales invoices

Current Liabilities

are obligations that the company is to pay within the forthcoming year.

Accumulated other comprehensive income or loss

accumulated changes in equity that are not reported in the income statement

An adjusting entry

affects a balance sheet account and an income statement account.

The adjusted trial balance is prepared

after the adjusting entries are prepared and posted to the ledger

In deciding whether the U.S. should adopt IFRS, the issue the SEC said should be considered is

all of these answer choices are correct.

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales

allowance

Cost allocation of an intangible asset is referred to as

amortization

"t" account

an account device used to analyze transactions

Contra-revenue account.

an account that is offset against a revenue account on the income statement.

debit

an amount recorded on the left side of a "t" account

revenue

an increase in owner's equity resulting from the operation of a business

perpetual inventory system

an inventory system in which the accounting records continuously show the inventory that should be on hand at any point in time.

if the straight-line method of amortization of bond premium or discount is used, what statement is true?

annual interest expense will remain the same over the life of the bonds with the amortization of bond discount

The amount recorded for merchandis inventory includes..

any purchase discounts, returns and allowances, necessary freight cost, and any trade discounts

allowance method

bad debt exp allowance for DA

The financial statement that reports assets, liabilities, and stockholders' equity is the

balance sheet

The balances that appear on the post-closing trial balance will match the

balance sheet account balances after closing entries.

bank balance=

balance- outstanding checks+deposits

Percent of Sales Method(aka income statement method)

based on the idea that a given percent of a company's credit sales for the period is uncollectible.

A patent should

be amortized over its 20-year legal life or its useful life, whichever is shorter

Dividends in arrears should:

be disclosed in the notes to the financial statement

The adjusted cash balance per books=

beg. balance+NR- bank charge- NSF

A manufacturing company calculates costs of goods sold as follows

beginning FG inventory + cost of goods manufactured - ending FG inventory

Cost of goods sold is computed from the following equation:

beginning inventory + cost of goods purchased - ending inventory

Cost of goods available for sale is computed by adding

beginning inventory to the cost of goods purchased.

Those most responsible for the major policy decisions of a corporation are the

board of directors.

The entry to record the granting of credit to a customer for a sales return is posted to

both the accounts receivable subsidiary ledger and the general ledger.

Inventories affect

both the balance sheet and the income statement

Freight terms of FOB shipping point mean that the

buyer must bear the freight costs

the interest expense recorded on an interest payment date is increased?

by the amortization of discount on the bonds payable

86. If Everly Company issues 1,000 shares of $5 par value common stock for $75,000, the account A. Common Stock will be credited for $75,000. B. Paid-in Capital in excess of Par Value will be credited for $5,000. C. Paid-in Capital in excess of Par Value will be credited for $70,000. D. Cash will be debited for $70,000.

Treasury Stock is a(n)

contra stockholders' equity account.

A business organized as a separate legal entity under state law having ownership divided into shares of stock is a

corporation.

what is an accurate statement concerning taxation?

corporations pay federal and state income taxes

Expenses

cost gained because of selling goods and providing service; decreases equity

Beginning inventory plus the cost of goods purchased equals

cost of goods available for sale

cost of goods sold

cost of goods available for sale less ending merchandise inventory.

For a manufacturing firm, cost of goods available for sale is computed by adding the beginning finished goods inventory to

cost of goods manufactured

which one of the following does not appear on the balance sheet of a manufacturing company?

cost of goods manufactured

The book value of a long-term asset is the difference between the

cost of the asset and the accumulated depreciation to date

Understating beginning inventory will understate

costs of goods sold

Prepaid expenses

costs paid in advance for rent, insurance, or other services

A deposit made by a company will appear on the bank statement as a

credit

The collection of a $700 account beyond the 2 percent discount period will result in a

credit to Accounts Receivable for $700. ----- $700 - 0 = $700

Cash

currency, bank deposits, certificates of deposit, and other cash equivalents

Liabilities are generally classified on a balance sheet as

current liabilities and long-term liabilities

The acquisition of treasury stock by a corporation

decreases its total assets and total stockholders' equity.

which of the following describes the behavior of the fixed cost per unit?

decreases with increasing production

Which of the following statements is false? a. IFRS employs the periodicity assumption. b. IFRS employs accrual accounting. c. IFRS requires that revenues and costs must be capable of being measured reliably. d. IFRS uses the cash basis of accounting.

d. IFRS uses the cash basis of accounting.

A company using a perpetual inventory system that returns goods previously purchased on credit would

debit Accounts Payable and credit Inventory.

You have just received notice that a customer of yours with an account receivable balance of $100 has gone bankrupt and will not make any future payments. Assuming you use the allowance method, the entry you make is to

debit Allowance for Doubtful Accounts and credit Accounts Receivable.

A business pays weekly salaries of $30,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on a Thursday is

debit Salaries and Wages Expense, $24,000; credit Salaries and Wages Payable, $24,000.

what is the journal entry a company records for the issuance of bonds when the contract rate is less than the market rate?

debit cash and discount on bonds payable, credit bonds payable

the journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to?

debit cash, credit bonds payable

what is the journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same?

debit cash, credit bonds payable

what is the journal entry a company records for the payment of interest, interest expense, and amortization of bond premium is?

debit interest expense and premium on bonds payable, credit cash

what is the journal entry a company records for the payment of interest, interest expense, and amortization of bond discount is?

debit interest expense, credit cash and discount on bonds payable

what is the adjusting entry to record the amortization of a discount on bonds payable?

debit interest expense, credit discount on bonds payable

what is the entry to record the amortization of a premium on bonds payable on an interest payment date?

debit interest expense; debit premium on bonds payable; credit cash

Posting a sales journal to the accounts in the general ledger requires a

debit to Accounts Receivable and a credit to Sales Revenue.

A $200 petty cash fund has cash of $34 and receipts of $160. The journal entry to replenish the account would include a

debit to Cash Over and Short for $6.

The Victor Corporation issues 1,000, 10-year, 8%, $1,000 bonds dated January 1, 2011, at 96. the journal entry to record the issuance will show a

debit to Cash for $960,000

Deerhoof Company purchases equipment for $2,700 and supplies for $400 from Milkman Co. for $3,100 cash. The entry for this transaction will include a

debit to Equipment $2,700 and a debit to Supplies $400 for Deerhoof.

On October 1, 2014, Dakota Company issued an $800,000, 10%, nine-month interest-bearing note. If the Dakota Company is preparing financial statements at December 31, 2014, the adjusting entry for accrued interest will include a:

debit to Interest Expense of $20,000

The collection of an $900 account within the 2 percent discount period will result in a

debit to Sales Discounts for $18. ----- $900 × .02 = $18

on january 1, 20xx, swenson corporation had 40,000 shares of $10 par value common stock issued and outstanding. all 40,000 shares had been issued prior period at $20 per share. on february 1, 20xx, swenson purchased 2,000 shares of treasury stock for $24 per share and later sold the treasury shares for $21 per share on March 1, 20xx. the journal entry to record the purchase of the treasury shares on february 1, 20xx, would include a?

debit to treasury stock for $48,000

the date on which a cash dividend becomes a binding legal obligation is on the?

declaration date

The date on which a cash dividend becomes a binding legal obligation is on the

declaration date.

the cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to?

decrease total assets and stockholder's equity

The cumulative effect of the declaration and payment of a cash dividend on a company's financial statements is to

decrease total assets and stockholders' equity.

The purchase of treasury stock:

decreases common stock outstanding

when the effective-interest method is used, the amortization of the bond premium?

decreases interest expense each period

Adjusting entries are made to ensure that:

expenses are recognized in the period in which they are incurred. revenues are recorded in the period in which services are performed. balance sheet and income statement accounts have correct balances at the end of an accounting period.

If a company fails to record estimated bad debts expense,

expenses are understated.

A net loss will result during a time period when

expenses exceed revenues.

Deferrals are:

expenses or revenues that are recognized at a date later than the point when cash was originally exchanged. There are two types: Prepaid expenses and Unearned revenues.

Information in a company's first IFRS statements must include each of the following except

explain differences between IFRS and GAAP statements.

A bank issues a debit memorandum when it collects a note receivable for a depositor.

false

A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions

false

There are more steps involved in preparing a worksheet for a merchandising company than for a service company.

false

When the terms of sale are FOB shipping point, ownership of the goods remains with the seller until the goods reach the buyer.

false

The information provided in the notes that accompany financial statements required because of the

full disclosure principle

a $300,000 bond was redeemed at 103 when the carrying value of the bond was $315,000. the entry to record the redemption would include a?

gain on bond redemption of $6,000

A record of increases and decreases in a specific asset, liability, and stock holder's equity ore,s os ca;;ed a

general ledger

The information for preparing a trial balance on a work sheet is obtained from

general ledger accounts

Each of the following is a feature of internal control except

generic design of documents

FOB destination

goods are placed free on board at the buyer's place of business, and the seller must pay the freight costs.

FOB shipping point

goods are placed free on board the carrier by the seller, and the buyer must pay the freight costs.

Inventory

goods purchased or produced for sale to customers

Inventory

goods purchased or produced for sale to customers ex: merchandise at target

if the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

greater than face value

Time Period Principle

he time period principle is the concept that a business should report the financial results of its activities over a standard time period, which is usually monthly, quarterly, or annually.

the price at which a stock can be sold depends upon a number of factors. what factor is not included?

how high the par value is

Mrs. Smith has worked for Bosco Inc. for 20 years without taking a vacation. An internal control feature that would address this situation would be

human resource controls

Purpose of accounting is to:

identify, record, and communicate

Land acquired from the issuance of common stock is reported

in a separate schedule at the bottom of the statement

In the balance sheet, ending inventory is reported:

in current assets immediately following accounts receivable.

Property, plant, and equipment (PPE)

includes land, factory buildings, warehouses, office buildings, machinery, office equipment, and other items used in the operations of the company.

Intangible and other assets

includes patents, trademarks, franchise rights, goodwill, and other items that provide future benefits, but do not possess physical substance.

stockholders equity?

includes retained earnings and paid in capital

numbers of times interest charges earned is computed as?

income before income taxes plus interest expense divided by interest expense

XYZ Company accepted a national credit card for a $3,000 purchase. The cost of the goods sold is $1,800. The credit card company charges a 3% fee. What is the impact of this transaction on net operating income?

increased by $1110

Costner's Market recorded the following events involving a recent purchase of merchandise: Received goods for $40,000, terms 2/10, n/30. Returned $800 of the shipment for credit. Paid $200 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory

increased by $38,616

Tony's Market recorded the following events involving a recent purchase of inventory under a perpetual inventory system: Received goods for $40,000, terms 2/10, n/30. Returned $800 of the shipment for credit. Paid $200 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory

increased by $38,616. ----- [($40,000 - $800) × .98] + $200 = $38,616

As interest is recorded on an interest-bearing note, the Interest Expense account is

increased; the Interest Payable account is increased

Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them

increases the potential for errors and fraud.

An internal auditor reconciling the bank statement monthly is an example of

independent internal verification.

The principle of establishing responsibility does not include

independent internal verification.

All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act of 2002 except:

independent outside auditors must eliminate redundant internal control.

A traditional definition of internal control specifically includes all of the following features except

insistence that employees not take earned vacations.

The Sarbanes-Oxley Act determines:

internal control standards of U.S. publicly traded companies.

Which of the following accounts will appear in the trial balance of a merchandising company but not a service company?

inventory

the cash and securities comprising a sinking fund established to redeem bonds at maturity in 2015 should be classified on the balance sheet as what?

investments

the two main sources of stockholders' equity are?

investments by stockholders and net income retained in the business

Long-term financial investments

investments in debt securities or shares of other firms that management does not intend to sell in the near future

The partnership form of business organization

is a common form of organization for service-type businesses

Accumulated Depreciation

is called a contra asset account.

8.3A

journal entries: bad debt >>allow of da allow of da >>accts rec accts rec >>allow of da cash >>accts rec adjusting entries: bad debt(debit) allow of da balance - -- - adjusting- credit adjusting debit adjusting credit

The usual sequence of steps in the recording process is to analyze each transaction, enter the transaction in the

journal, and transfer the information to the ledger accounts.

The net income (or loss) for the period

is found by computing the difference between the income statement columns of the worksheet

The direct write-off method of accounting for uncollectible accounts

is not generally accepted as a basis for estimating bad debts.

The statement of free cash flow

is not reported on the statement of cash flows.

Bussan Corp. splits its common stock 4 for 1, when the market value is $80 per share. Prior to the split, Bussan had 50,000 shares of $12 par value common stock issued and outstanding. After the split, the par value of the stock:

is reduced to $3 per share

Book Value

is the difference between the cost of any depreciable asset and its accumulated depreciation.

par value?

is the monetary value assigned per share in the corporate charter

American Institute of Certified Public Accountants (AICPA)

is the national professional organization of Certified Public Accountants (CPAs) in the United States It sets ethical standards for the profession and U.S. auditing standards for audits of private companies, non-profit organizations, federal, state and local governments.

earnings per share?

is the net income per common share, must be reported by publicly traded companies, helps compare companies of different sizes (ALL OF THE ABOVE)

Depreciation

is the process of allocating the cost of an asset to expense over its useful life.

A trial balance:

is the same under IFRS and GAAP.

average cost

is the total added and divided by the quantity

Par value

is the value assigned per share in the corporate charter.

treasury stock shares are?

issued shares that have been reacquired by a corporation

Financing activities involve

issuing debt

A new average cost is computed each time a purchase is made in the

moving-average cost method

Dividends in arrears on cumulative preferred stock

must be paid before common stockholders can receive a dividend.

Physical counts of inventory...

necessary to measure and adjust for inventory shrinkage

The accounts receivable turnover ratio is computed by dividing

net credit sales by average net accounts receivable

Of the items below, the one that appears first on the statement of cash flows is

net increase ( decrease) in cash

The gross profit rate is computed by dividing gross profit by

net sales

income from operations

net sales less cost of goods sold and operating expenses.

net sales- COGS

The custodian of a company asset should

not have access to the accounting records for that asset

Intangible and other assets

not physical: such as copyrighted material ex: copyright material removed from youtube

A check returned by the bank marked "NSF" means

not sufficient funds

Notes Payable involves a written promissory note. For example, if your company wishes to borrow $100,000 from its bank, the bank will require company officers to sign a formal loan agreement before the bank provides the money. (The bank might also require your company to pledge collateral and for the company owners to personally guarantee the loan.) Perhaps the loan paperwork will be a half inch high. Your company will record this loan in its general ledger account, Notes Payable. (The bank will record the loan in its general ledger account Notes Receivable.) Contrast the bank loan with phoning one of your company's suppliers and asking for a delivery of products or supplies. On the next day the products arrive and you sign the delivery receipt. A few days later your company receives an invoice from the supplier and it states that the payment for the products is due in 30 days. This transaction did not involve a promissory note. As a result, this transaction is recorded in your company's general ledger account Accounts Payable. The supplier will record the transaction with a debit to its asset account Accounts Receivable

note payable vs. account payable

Interest is usually associated with

notes receivable.

A corporation has the following account balances: Common Stock, $1 par value, $40,000; Paid-in Capital in Excess of Par Value, $1,800,000. Based on this information, the

number of shares issued is 40,000.

Unearned Revenue

obligation to provide a service ex: $50 to nation geographic, obligation to send magazines 5k flights to italy; Delta obligated to provide flights

The information in a statement of cash flows will not help investors to assess the entity's ability to

obtain favorable borrowing terms at a bank.

sinking fund income is reported in the income statement as?

other income

Most companies pay current liabilities

out of current assets

An adjusting entry is not required for

outstanding checks.

The number of shares of issued stock equals

outstanding shares plus treasury shares

An entry in the "Other Accounts" column in a cash receipts journal could occur when the credit is to

owner's capital

If an owner makes a withdrawal of cash from a proprietorship, then

owner's equity will decrease

Cash equivalents include each of the following except

petty cash

accounting

planning, recording, analyzing, and interpreting financial information

the sneed corporation issues 10000 shares of $50 par preferred stock for cash at $75 per share. the entry to record the transaction will consist of a debit to cash for $750000 and a credit or credits to?

preferred stock for $500000 and paid in capital in excess of par-preferred stock for $250000

The gross profit method can be used for all of the following reasons except

preparation of annual financial statements.

An income statement

presents the revenues and expenses for a specific period of time

ethics

principles of right and wrong that guide an individual in making decisions

IFRS is considered to be more:

principles-based and less rules-based than GAAP.

A contingent liability is recorded when the likelihood of the contingency is

probable

Depreciation

process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use. Factors include; cost, salvage value and useful life

Posting

process of transferring amounts from the journal to the ledger accounts.

The primary purpose of a trial balance is to

prove that the debits equal the credits after posting

Two bases for estimating uncollectible accounts are percentage of

receivables and percentage of sales

The board of directors of Essex Company declared a cash dividend on November 15, 2007, to be paid on December 15, 2007, to stockholders owning the stock on November 30, 2007. Given these facts, the date of November 30, 2007, is referred to as the

record date.

journalizing

recording transactions in a journal

Direct Write-Off Method of accounting for bad debts...

records the loss from an uncollectible account receivable when it is determined to be uncollectible. No attempt is attempted to predict bad debts expense

the primary purpose of a stock split is to?

reduce the market price of the stock per share

Before a check authorization is issued, the following documents must be in agreement, except for the

remittance advice.

bank statement

report of deposits, withdrawals, and bank statements sent to a depositor by a bank

Economic Entity Assumption

requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.

Monetary Unit Assumption

requires that companies include in the accounting records only transaction data that can be expressed in terms of money.

Control Principle

requires that internal controls aid managers in controlling and monitoring business activities

stockholders' equity

residual claim on total assets of a business

A prior period adjustment should be reported in the:

retained earnings statement as an adjustment of the beginning balance.

The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the

revenue recognition principle

net sales=

revenue- sales discounts- sales returns and allowances

Accrual Accounting

revenues and expenses are recorded when they happened

Revenue Recognition

revenues are recorded when they are gained, no matter when cash is recieved

Net income will result during a time period when

revenues exceed expenses.

The balance in the income summary account before it is closed will be equal to

the net income or loss on the income statement.

net sales

sales less sales returns and allowances and sales discounts

All of the following are contra revenue accounts except

sales revenue

Which of the following are period costs

selling expenses

Bank Statement

sent once a month to each depositor showing the activity in the account

Restricted cash should be reported

separately on the balance sheet

The control principle related to not having the same person authorize and pay for goods is known as

separation of duties

The control principle related to not having the same person authorize and pay for goods is known as

separation of duties.

Managerial accounting is applicable to

service entities manufacturing entities Not-for-profit entities

characteristics of a corporation include?

shareholders who have limited liability

Short-term borrowings

short-term debt payable to banks or other creditors

Marketable securities

short-term investments that can be quickly sold to raise cash

Balance Sheet

shows business assets, liabilities and stockholders equity

The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a

single-step statement.

Objectivity Principle

states that accounting information and financial reporting should be independent and supported with unbiased evidence

Materiality constraint

states that an amount can be ignored if its effect on the financial statements is unimportant to users' business decisions.

Fair Value Principle

states that assets and liabilities should be reported at fair value (the price received to sell an asset or settle a liability).

proof of stock ownership is evidenced by a printed or engraved form known as a:

stock certificate

Common Stock Dividends Distributable is classified as a(n)

stockholders' equity account.

treasury stock which was purchased for $3,000 is sold for $3,500. as a result of these two transactions combined:

stockholders' equity will be increased by $500 (3,500-3,000)

If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has

suffered a net loss for the period.

The statement of cash flows

summarizes the operating, financing, an investing activities of an entity.

The face value of a note refers to the amount

that is identified on the formal instrument of credit

A company just starting business made the following four inventory purchases in June: Date Units Total cost of purchase June 1 150 units $ 390 June 10 200 units 585 June 15 200 units 630 June 28 150 units 510 $2,115 A physical count of merchandise inventory on June 30 reveals that there are 250 units on hand. The inventory method which results in the highest gross profit for June is

the FIFO method

capital

the account used to summarize the owner's equity in a business

what is not true pertaining to a corporation?

the acts of its owners bind the corporation

the interest expense recorded on an interest payment date is increased by what?

the amortization of discount on bonds payable

a corporation issues for cash $15,000,000 of 8%, 30-year bonds, interest payable annually, at a time when the market rate of interest is 9%. the straight-line method is adopted for the amortization of bond discount or premium. what statement is true?

the amount of annual interest paid to bondholders remains the same over the life of the bonds

Authorized Stock

the amount of stock a corporation is allowed to sell as indicated in its charter

authorized stock

the amount of stock that a corporation is authorized to sell as indicated in its charter

state value

the amount per share assigned by the board of directors to no-par stock that becomes legal capital per share

owner's equity

the amount remaining after the value of all the liabilities is subtracted from the value of all assets

All of the following are true regarding bank statements except

the bank statement balance will always agree with the company recorded balance.

Stockholders of a corporation directly elect

the board of directors.

The fiscal year of a business is usually determined by

the business

declaration date

the date the board of directors formally declares the dividend and announces it to stockholders

record date

the date when ownership of outstanding shares is determined for dividend purposes

when issuing cash dividends, the board of directors commits the corporation to a binding legal obligation:

the declaration date

contribution margin is?

the excess of sales revenue over variable cost

The LIFO inventory method assumes that the cost of the latest units purchased are

the first to be allocated to cost of goods sold

Selection of an inventory costing method by management does NOT usually depend on

the fiscal year end

If accounting information has relevance, it is useful in making predictions about

the future events of a company.

specific identification method.

the inventory costing method that tracks the actual physical flow of the goods available for sale.

First-in, first-out method FIFO

the inventory costing method which assumes that the earliest goods acquired are the first to be recognized as cost of goods sold.

average cost method

the inventory costing method which assumes that the goods available for sale are homogeneous. (SAME)

Last-in, first-out method LIFO

the inventory costing method which assumes that the latests units purchased are the first to be allocated to cost of goods sold.

Additional paid-in-capital

the investment by stockholders in excess in of the amounts assignable to capital stock as par or stated value of the common stock.

stock split

the issuance of additional shares of stock to stockholders accompanied by a reduction in the par or stated value per share

Units of activity is an appropriate depreciation method to use when...

the productivity of the asset varies significantly from one period to another

double-entry accounting

the recording of debit and credit parts of a transaction

what is not a right possessed by common stockholders of a corporation?

the right to receive a minimum amount of dividends

If goods in transit are shipped FOB destination

the seller has legal title to the goods until they are delivered

normal balance

the side of the account that is increased

cost of goods available for sale.

the sum of the beginning merchandise inventory plus the cost of goods purchased.

A consequence of separation of duties is that

theft is still possible when several employees are involved.

If employees are bonded

they have been insured against misappropriation of assets.

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except

to determine ownership of the goods

Internal Control Procedures

to ensure reliable financial reports, safeguards to protect assets, policies to direct operations toward common goals and methods to achieve compliance with laws and regulations

A bank reconciliation should be prepared

to explain any difference between the depositor's balance per books and the balance per bank

A bank reconciliation should be prepared

to explain any difference between the depositor's balance per books with the balance per bank.

paid-in-capital

total amount mark cuban would invest into the corporation

paid-in capital

total amount of cash and other assets paid in to the corporation by stockholders in exchange for capital stock

Camper Van Company purchased equipment for $2,600 cash. As a result of this event,

total assets remained unchanged

what is not true about a 2-for-1 split?

total contributed capital increases

weighted average =

total cost/ total units

which of the following conditions would cause the break-even point to increase?

total fixed costs increase

Business Entity Principle

transactions associated with a business must be separately recorded from those of its owners or other businesses

posting

transferring information from a journal entry to a ledger account

Posting

transfers journal entries to ledger accounts

Posting:

transfers journal entries to ledger accounts.

The officer that is generally responsible for maintaining the cash position of the corporation is the

treasurer.

A company records each reconciling item used to determine the adjusted cash balance per books.

true

A multiple-step income statement distinguishes between operating and non-operating activities.

true

The Accounting Equation is...

Assets=Liabilities + Owner's Equity $100 = $10 + $90

Deductions for Uncollectible items/services(aka non-sufficient funds NSF)

A company sometimes deposits another party's check that is uncollectible(usually meaning the balance in that party's account is not large enough to cover the check)

Sales allowances(contra-revenue)

A credit to the buyer for defective merchandise or goodwill

Credit Memo

Advises the buyer that a return or allowance has been credited to the Account Receivable

Accounts Receivable

Assets created by selling goods/services on credit

Classified Balance Sheet order...

Assets- Current(used within a year or ops cycle) Long-term investments(year+) Plant assets(tangible long lived revenue producing) Intangible(long term resources ie. patent,TM) Liabilities-Current(due within a year or ops cycle) Long-Term(Due outside a year or ops cycle) Equity- Owners claim on the assets

Financial Accounting I, MULTIPLE

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