accoutnig funa'
Which of the following terms best describes a distribution of the net income of a corporation to its owners? a. Dividends b. Liquidation of assets c. Monetary Unit d. Retained Earnings
a
Beaver Tree Service Beginning Retained Earnings $550,000 Ending Retained Earnings 700,000 Dividends Paid 100,000 Revenue 525,000 Refer to Beaver Tree Service. What is the company's net income? a. $350,000 b. $250,000 c. $300,000 d. $150,000
b
Cash flows from issuing and repurchasing stock or issuing and repaying debt are classified as a. borrowing activities. b. operating activities. c. investing activities. d. financing activities.
d
On January 2, Alfredo Corporation sold merchandise with a gross price of $100,000 to a customer with terms of 2/10, n/30. How much Sales Discounts would be recorded if payment was received from the customer on January 8? Assume the company uses the Gross Method of recording receivables. a. $2,000 b. $100.000 c. $98,000 d. $0
a
While preparing the February 28th bank reconciliation, the accountant identified the following items: Company's balance according to the general ledger $23,100 Outstanding checks 550 Interest earned on the checking account 100 A customer's NSF check returned by the bank 1,000 In the process of preparing the reconciliation, the accountant discovered an error in recording a customer's check; the amount was incorrectly recorded on the books as a cash receipt of $600, while the bank correctly recorded the amount as $650. What is the company's adjusted cash balance on February 28th? a. $22,250 b. $22,150 c. $22,200 d. $21,700
a
All of the following accounts have normal credit balances except a. Unearned Revenue b. Inventory c. Common Stock d. Accounts Payable
b
If a corporation declares a 2-for-1 stock split, which of the following is true? a. A journal entry is required to show the effect on the stockholders' equity accounts. b. The par value will be reduced to half of the pre-split par value. c. The market price of the stock is expected to increase after the split. d. The stockholders will have a higher proportionate ownership share after the split.
b
Metalcrafts Inc. Selected information from the company's financial records is presented below: Equipment, December 31, 2013 $300,000 Equipment, December 31, 2014 400,000 Accumulated depreciation, December 31, 2013 80,000 Accumulated depreciation, December 31, 2014 60,000 During 2014, the company sold equipment with a cost of $50,000 and accumulated depreciation of $30,000. A gain of $10,000 was recognized on the sale of the equipment. This was the only equipment sale during the year. Refer to Metalcrafts, Inc. What was depreciation expense for 2014? a. $40,000 b. $10,000 c. $50,000 d. $30,000
b
The balance in the retained earnings account represents a. cash in the bank. b. accumulated earnings that have not been distributed to stockholders. c. accumulated revenues from all prior years of operations. d. the amount of cash available for dividend
b
The financial statements are prepared after a. The accounts are closed b. The adjusted trial balance is prepared c. Business transactions are recorded d. Adjustments are recorded
b
Which of the following financing activities results in a cash inflow? a. Repaying a bank loan b. Issuing bonds c. Buying treasury stock d. Paying cash dividends
b
Which one of the following is not an external user of financial statements? a. Internal Revenue Service b. The Company's President c. Creditors d. Stockholders
b
Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long? a. The company should expand operations with its excess cash. b. The collection cost would be reduced. c. The company may offer sales discounts to shorten the collection period. d. Cash flows from operations may be higher than expected for the company's sales.
c
While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the company records? a. Deposits in transit b. Interest earned on the bank account c. Bank service charges d. Outstanding checks
c
A check returned by a bank because the issuer's cash account balance could not cover the check is called a(n) a. Outstanding check b. Certified check c. Canceled check d. NSF check
d
A company reported net income for the current year. Which of the following business transactions would cause its cash from operating activities to be higher than its net income? a. A bank loan was repaid during the year. b. Equipment was purchased for cash during the year. c. Cash dividends were paid to stockholders during the year. d. Depreciation expense was recorded for the year.
d
When a firm borrows money, one effect on the accounting equation is a(n) a. decrease in contributed capital. b. decrease in assets. c. decrease in liabilities. d. increase in assets.
d
Which financial statement would you analyze to assess a firm's operating performance for the past year? a. Statement of Public Accounting b. Balance Sheet c. Statement of Retained Earnings d. Income Statement
d
Which inventory costing method might allow a company to manipulate income by making significant inventory purchases at year end? a. Specific identification b. Weighted average cost c. FIFO d. LIFO
d
Which of the following is not an investing activity? a. Purchase of investments for cash. b. Purchase of equipment for cash. c. Sale of land for cash. d. Sale of merchandise for cash.
d
Which of the following is one of the elements of stockholders' equity? a. Dividends payable b. Net income c. Loss on the sale of equipment d. Retained earnings
d
Which one of the following is a correct fundamental accounting equation? a. Assets + Stockholders' Equity = Liabilities b. Assets + Retained Earnings = Stockholders' Equity c. Assets + Liabilities = Stockholders' Equity d. Assets = Liabilities + Stockholders' Equity
d
Cost of goods sold is equal to: a. the cost of merchandise purchased plus transportation costs plus beginning inventory minus purchase returns and allowances and purchased discounts minus ending inventory. b. the cost of merchandise purchased plus transportation costs less ending inventory. c. the total amount of merchandise purchased during the year. d. the cost of merchandise purchased plus transportation costs plus beginning inventory minus purchase returns and allowances and purchase discounts.
a
The effect of recording depreciation for the year is a(n) a. decrease in assets and a decrease in net income. b. increase in assets and an increase in net income. c. decrease in net income and no change in assets. d. decrease in assets but no change in owners' equity.
a
What will be the increase in the Paid-in capital in excess of par account if a corporation issues 20,000 shares of $1.00 par common stock for $6 per share? a. $100,000 b. $140,000 c. $20,000 d. $120,000
a
While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the bank statement? a. Outstanding checks b. Interest earned on the bank account c. Deposits in transit d. Bank service charges
a
The cost of goods sold is equal to: a. the inventory account as reported on the balance sheet. b. the cost of goods available for sale less ending inventory. c. purchases less beginning inventory plus ending inventory. d. the amount of inventory on hand at the end of the accounting period.
b
The going concern assumption is concerned with a. measuring ongoing business activities at their exchange price at the time of the initial external transaction. b. the company's ability to continue operations long enough to carry out its existing obligations. c. offsetting management's natural optimism by providing a prudent approach to uncertainty in financial statement items. d. any information that is capable of influencing the decisions of anyone using the financial statements.
b
AT&U Company Data for the year ended December 31, 2012, are presented below: Sales (credit) $2,500,000 Sales returns and allowances 50,000 Accounts Receivable (December 31, 2012) 640,000 Allowance for Doubtful Accounts (Before adjustment at December 31, 2012) 20,000 Estimated amount of uncollected accounts based on aging analysis 45,000 Refer to AT&U Company. If the company estimates its bad debt to be 2% of net credit sales, what will be the balance in the Allowance for Doubtful Accounts account after the adjustment for bad debts? a. $49,000 b. $20,000 c. $69,000 d. $19,000
c
Balance sheet accounts are also known as which of the following? a. Temporary accounts b. Nominal accounts c. Permanent accounts d. Closing accounts
c
If the balance on the bank statement does not equal the balance per the company's records, then it can be assumed that: a. The company has made errors in its records concerning the cash account. b. The bank has made errors in preparing the bank statement. c. There will be items reconciling the difference. d. The company has no errors in its records concerning the cash account.
c
Which of the following sets of factors is needed to calculate depreciation on plant and equipment? a. The asset's acquisition cost, replacement cost, and its estimated residual value b. The estimated residual value of the asset, its replacement cost, and its market value c. The estimated life of the asset, its acquisition cost, and its estimated residual value d. The asset's replacement cost, its estimated life, and its estimated residual value
c
Allatoona Landing reported net credit sales of $1,250,000 and cost of goods sold of $900,000 for 2012. Its beginning balance of Accounts Receivable was $175,000. The accounts receivable balance decreased by $25,000 during 2012. Rounded to two decimal places, what is the company's accounts receivable turnover rate for 2012? a. 11.03 b. 8.33 c. 7.14 d. 7.69
d
Failure to record depreciation expense for the period results in which of the following? a. Net income being overstated b. No effect on total assets c. Stockholders' equity being overstated d. Both a and c
d
Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each, $900 4 Purchases 115 units at $18.20 each, $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each, $1,368.75 24 Sold 40 units Total cost of goods available for sale $4,361.75 30 On hand, 100 units Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, ending inventory at June 30th is: a. $1,810.00 b. $1,823.25 c. $1,806.25 d. $1,811.75
d
What should a company do to improve its accounts receivable turnover rate? a. Lower its selling prices. b. Reduce the number of employees working in the credit department. c. Increase its sales force. d. Give customers credit terms of 2/10, n/30 rather than 1/10, n/30.
d
Which of the following is not classified as a current liability account? a. Income taxes payable b. Salaries and wages payable c. Accounts payable d. Note payable, due in 2 years
d
Which one of the following is an accurate description of the Allowance for Doubtful Accounts? a. Expense Account b. Revenue Account c. Liability Account d. Contra Account
d
While preparing a bank reconciliation, which of the following items would be added to the bank statement balance? a. Interest earned on the bank account b. Outstanding checks c. Bank service charges d. Deposits in transit
d
The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11% simple annual interest is? a. $9,900 b. $49,500 c. $139,500 d. $1,980
b
Accumulated Depreciation a. decreases with a credit. b. is a adjunct account. c. increases with a credit. d. increases with a debit.
c
If a company's bonds are callable, a. the investor never knows what the redemption price will be until the bonds are actually called. b. the bonds are never allowed to remain outstanding until the maturity date. c. the bondholder has the right to sell an option on the bond. d. the issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4%.
d
In the reconciliation of a bank statement, deposits in transit should be: a. subtracted from the unadjusted bank statement balance. b. added to the unadjusted balance per the company's records. c. added to the unadjusted bank statement balance. d. subtracted from the unadjusted balance per the company's records.
c
What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for the insurance company? a. Assets increase and Stockholders' equity increases. b. Assets decrease and liabilities decrease. c. Liabilities decrease and Stockholders' equity increases. d. Assets increase and liabilities decrease.
c
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2012? a. Double-declining-balance b. Straight-line c. All methods produce the same expense in 2012. d. Units-of-production
a
When a corporation issues a stock dividend, which of the following is true? a. Total stockholders' equity remains the same. b. Total stockholders' equity decreases. c. Cash decreases. d. Retained earnings is increased.
a
When using the indirect method to determine operating cash flows, where is the gain from selling a long-term investment recognized? (The proceeds from selling the investment are considered separately.) a. Operating activity b. Not reported on the statement of cash flows c. Investing activity d. Noncash investing or financing activity e. Financing activity
a
Which of the following is the correct entry to establish a petty cash fund in the amount of $300? a. Petty Cash Fund 300 Cash 300 b. Cash 300 Petty Cash Fund 300 c. Miscellaneous Expense 300 Petty Cash Fund 300 d. None of these, as no entry is necessary to record an exchange of cash.
a
Which of the following is true for a corporation that issues 1,000 shares of $2 par common stock at $5 per share? a. Total stockholders' equity will increase by $5,000. b. $2 per share is the maximum selling price for these shares of stock. c. The per share dividend amount on these shares is $2. d. The common stock account will increase by $5,000.
a
Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31. Refer to Gainesville Truck Center. Which of the following statements is true regarding the entry to record wages and the related liabilities? a. Social security tax payable will be credited in the amount of $620. b. Social security tax payable will be debited in the amount of $765. c. Federal income taxes payable will be credited in the amount of $2,100. d. Medicare tax payable will be debited in the amount of $145.
a
Payment is made for machinery purchases previously on credit. What effect does this transaction have on the accounting equation? a. Assets and liabilities decrease. b. Liabilities decrease and retained earnings increase. c. Assets and liabilities increase. d. Assets and contributed capital increase.
a
A credit means a. the event had a favorable impact on the entity's financial statements. b. the event had an effect on the right side of the T-account. c. the event had an unfavorable impact on the entity's financial statements. d. the event had the effect of increasing the account balance.
b
Which of the following statements regarding amortization is true? a. Amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero. b. Amortization of the premium causes the amount of interest expense to increase. c. Cash interest payments on bonds equals interest expense on the income statement when there is amortization of bond premium. d. Amortization of the premium causes the premium on bonds payable account to increase.
a
How is the Balance Sheet linked to the other financial statements? a. Retained earnings is reported on the Balance Sheet. b. There is no link between the Balance Sheet and other statements, as each contains different accounts and provides different information. c. The amount of retained earnings is reported on the Balance Sheet as a liability. d. Retained earnings is added to total assets and reported on the Balance Sheet.
a
What is unearned revenue? a. Liability b. Stockholders' equity c. Revenue d. Asset
a
Cash flows from acquiring and disposing of long-term assets are classified as a. purchasing activities. b. investing activities. c. operating activities. d. financing activities.
b
Credit entries are used to a. increase dividends b. increase liability accounts c. increase expense accounts d. increase asset accounts
b
During the bank reconciliation process, an accountant identified an error. A check written for $20 to pay a supplier for goods purchased on credit was erroneously recorded in the company's records for $200. Which of the following entries would correct this error? a. Accounts Receivable 180 Accounts Payable 180 b. Cash 180 Accounts Payable 180 c. Cash 180 Accounts Receivable 180 d. None of these, as the error should be corrected by the supplier's personnel
b
During the first quarter of 2012, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. Which of the following records the sale of the batteries? a. Accounts Receivable 636,000 Sales Revenue 636,000 b. Accounts Receivable 636,000 Sales Revenue 600,000 Sales Tax Payable 36,000 c. Accounts Receivable 600,000 Sales Revenue 564,000 Sales Tax Payable 36,000 d. Accounts Receivable 600,000 Sales Revenue 600,000
b
Income statement accounts are also known as which of the following? a. Real accounts b. Temporary accounts c. Permanent accounts d. Asset accounts
b
Parlato Corp. has an inventory turnover rate of 8 times. Calculate the company's average days to sell inventory. a. 150 b. 45.625 c. 1,200 d. 120
b
When is a liability for dividends created? a. at the end of each fiscal year. b. at the date of declaration. c. at the date of record. d. at the date of payment.
b
Assets become expenses when? a. They are paid for in cash. b. Purchased for cash or on credit. c. Their economic benefits expire. d. Asset is delivered.
c
A company wishes to issue $600,000 of 10-year, 6.8% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the selling price? a. The face value of the bonds, the market rate of interest, the purpose of the issue, and the bond life. b. The market rate of interest, the stated rate of interest, the bond rating, and the bond life. c. The life of the bonds, the market rate of interest, the bond rating, and the face value of the bonds. d. The face value of the bonds, the stated rate of interest, the market rate of interest, and the bond life.
d
The amount of cash in the cash register from sales totals $534. The amount for sales recorded on the cash register tape was $530. Which journal entry is required? a. Cash in Bank 530 Sales 530 b. Cash in Bank 530 Cash Over and Short 4 Sales 534 c. Cash in Bank 534 Sales 534 d. Cash in Bank 534 Sales 530 Cash Over and Short 4
d
The control activity "segregation of duties" is most effective in: a. Increasing cost of sales b. Increasing the likelihood of embezzlement c. Assisting employees in performing risk assessment procedures d. Preventing collusion
d
The following transactions occurred during June: June 1 Purchased two new maintenance carts on account at $750 each. Payment is due in 30 days. June 8 Accepted $500 of advance payments from customers for services to be provided next month. June 15 Received the utility bill for $300. Payment is due in 30 days. June 20 Billed customers $1,500 services provided. Payment is due in 30 days. June 30 Received $500 from customers who were billed earlier. Refer to Hesson Properties. What journal entry is required to record the purchase of the carts? a. Equipment 1,500 Cash 1,500 b. Accounts Payable 1,500 Equipment 1,500 c. Cash 1,500 Equipment 1,500 d. Equipment 1,500 Accounts Payable 1,500
d
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. If the company uses the straight-line method of depreciation, what is the book value at December 31, 2014? a. $10,000 b. $8,000 c. $4,000 d. $6,000
d
A company had sales of $40,000, sales discounts of $800, sales returns of $1,600 and commissions owed to sales people of $600. Compute net sales. a. $37,600 b. $39,000 c. $37,000 d. $38,400
a
A company issued $500,000 of bonds for $498,351. Interest is paid semiannually. The bond markets and the financial press are likely to report the bond issue price as: a. 99.67 b. 49.84 c. 100.00 d. 498.35
a
A company receiving payment of a $20,000 accounts receivable within 10 days with terms of 2/10, n/30, would record a sales discount of: a. 2% of $20,000 b. 10% of $20,000 c. (100% - 2%) x $20,000 d. (100% - 10%) x $20,000
a
A sporting goods chain purchased supplies at a cost of $11,000 during the year. At January 1, the beginning balance in the supplies account was $3,000. At December 31, supplies on hand are $800. Determine supplies expense for the year. a. $13,200 b. $11,800 c. $ 3,000 d. $11,000
a
AT&U Company Data for the year ended December 31, 2012, are presented below: Sales (credit) $2,500,000 Sales returns and allowances 50,000 Accounts Receivable (December 31, 2012) 640,000 Allowance for Doubtful Accounts (Before adjustment at December 31, 2012) 20,000 Estimated amount of uncollected accounts based on aging analysis 45,000 Refer to AT&U Company. If the company uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense? a. $595,000 b. $615,000 c. $640,000 d. $620,000
a
Alco Roofing Company's beginning accounts receivable were $200,000 and ending accounts receivable were $270,000. During the period, credit sales totaled $570,000, How much cash was collected from customers? a. $500,000 b. $570,000 c. $640,000 d. $470,000
a
Coffski, Inc. sold merchandise to a customer on credit. The invoice amount was $1,000; the invoice date was June 10th; credit terms were 1/10, n/30. Which of the following statements is true? a. The customer should pay $1,000 if the invoice is paid on July 9th. b. The customer must pay a $10 penalty if payment is made after July 9th. c. The customer must pay $1,010 if payment is made after June 20th. d. The customer can take a 10% discount if the invoice is paid by June 30th.
a
What is the name for a person who lends funds to a business entity and expects repayment with interest? a. Creditor b. Stockholder c. Proprietor d. Owner
a
A current liability includes obligations which must be repaid a. within one year or within the operating cycle, whichever is longer. b. by the end of the operating cycle. c. within one year. d. within one year or within the operating cycle, whichever is shorter.
a
Depreciation is a process by which a. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset. b. the difference between current market value and historical cost of plant and equipment. c. replacement funds are accumulated for plant and equipment. d. the decline in market value of plant and equipment is determined and recorded.
a
A company purchased equipment for $150,000 cash. What is the effect on total assets? a. Increase b. No net effect c. Decrease d. Cannot be determined from this limited information.
b
Cash flows from acquiring and selling products are classified as a. financing activities. b. operating activities. c. distribution activities. d. investing activities.
b
Cash flows from borrowing and paying off a 90-day bank loan are classified as a. operating activities. b. financing activities. c. investing activities. d. purchasing activities.
b
Depreciation is a. the difference between the original cost and salvage value of an asset. b. an effort to achieve proper matching of the cost of operating assets with related revenues. c. an accumulation of funds to replace the related plant asset. d. the cash allocated each period to maintain a plant asset.
b
Metalcrafts Inc. Selected information from the company's financial records is presented below: Equipment, December 31, 2013 $300,000 Equipment, December 31, 2014 400,000 Accumulated depreciation, December 31, 2013 80,000 Accumulated depreciation, December 31, 2014 60,000 During 2014, the company sold equipment with a cost of $50,000 and accumulated depreciation of $30,000. A gain of $10,000 was recognized on the sale of the equipment. This was the only equipment sale during the year. Refer to Metalcrafts, Inc. Assume that all purchases of equipment were paid with cash. How much cash was paid to purchase equipment during 2014? a. $50,000 b. $150,000 c. $200,000 d. $250,000
b
A non-classified balance sheet typically does not have a distinction between which of the following items? a. Assets and Liabilities b. Liabilities and Stockholders' Equity c. Current and Noncurrent items d. Resources invested by the owners and amounts borrowed from creditors
c
Barnes Restaurant reports the following amounts: Cash $125,000 Inventory $215,000 Land 275,000 Unearned Revenue 117,000 Equipment 350,000 Common Stock 300,000 Calculate Current Assets. a. $615,000 b. $457,000 c. $340,000 d. $125,000
c
Businesses engage in which of the following three main activity categories? a. Financing, Management, Operating b. Financing, Credit, Operating c. Financing, Investing, Operating d. Cash, Credit, Noncash
c
Convertible bonds are attractive to bondholders because a. they carry a convertible interest rate that can be increased when the market rate of interest increases. b. the issuing company cannot retire the bonds before maturity. c. they can be converted into stock at the bondholder's option. d. they usually carry a higher rate of interest than non-convertible bonds.
c
Failure to record the supplies used during the year would result in which of the following? a. Total assets being understated b. Net income being understated c. Assets and Stockholders' equity being overstated d. An overstatement of liabilities
c
If technology changes rapidly, a firm should a. expense plant assets immediately because of the uncertainty of future benefits. b. depreciate plant assets over long periods of time. c. consider an accelerated rate of depreciation. d. use the straight-line method of depreciation as it is the easiest.
c
Information for 2012 and 2011 is presented below for this company which uses the straight-line depreciation method. 2012 2011 Property, plant and equipment $250,000 $190,000 Accumulated depreciation 100,000 85,000 Depreciation expense 62,500 47,500 Net sales 1,000,000 900,000 Total assets 625,000 475,000 Refer to Fireworks City. Determine the asset turnover ratio for 2012. a. 1.60 times b. 4.55 times c. 7.84 times d. 4.00 times
c
Land is not depreciated because it a. does not have an established depreciable life. b. appreciates in value. c. will provide future benefits for a company for an unlimited period of time. d. has a useful life that is limited to the period of time a company is in business
c
On January 01, 2013, Kale Farms purchased a tractor for $20,000. The company signed a 6% installment note to pay off the debt with 48 monthly payments over four years. Each payment is $469.70. How much interest must be paid over the life of the loan? a. $4,800.00 b. $0 since all of the interest was paid at the time the loan was recorded. c. $2,545.60 d. $1,200.00
c
Which one of the following items is reported as a current stockholders' equity on a classified balance sheet? a. Net Income b. Accounts Payable c. Land d. Common Stock
d
Happy Heights Country Club Selected accounts at July 31 are provided below: CASH 7/1 bal. 12,000 7/3 1,000 7/5 3,600 7/7 1,800 UNEARNED TUITION REVENUE 7/3 1,000 ACCOUNTS RECEIVABLE 7/2 3,600 7/7 1,800 MEMBERSHIP REVENUE 7/2 3,600 7/5 3,600 Refer to Happy Heights Country Club. On which date did the country club sell a club membership on account? a. July 2nd b. July 3rd c. July 5th d. July 7th
a
When a corporation declares a cash dividend, which of the following is true? a. Stockholders' equity decreases. b. No entry is necessary. c. Liabilities decrease. d. Cash decreases
a
A company purchased land and incurred the following costs: Purchase Price $500,000 Excavation Costs 50,000 Razing Old Building 12,500 Broker Fees 10,000 Cost of a Parking Lot 25,000 What is the cost of the land? a. $562,500 b. $597,500 c. $550,000 d. $572,500
d
Bonds sell at a premium when the a. issuing company agrees to repay the maturity before the due date. b. issuing company has a better reputation than other companies in the same business. c. yield rate of interest is more than the stated rate at the time of issue. d. market rate of interest is less than the stated interest rate at the time of issue.
d
When bonds are issued by a company, the accounting entry shows an a. increase in assets and an increase in stockholders' equity. b. increase in assets and an increase in liabilities. c. increase in liabilities and an increase in stockholders' equity. d. increase in liabilities and a decrease in stockholders' equity.
b
When bonds are sold for less than the par amount, this means that the a. bonds are sold at a premium. b. stated rate of interest is less than the yield rate of interest. c. maturity value will be less than the par amount. d. maturity value will be greater than the par amount.
b
Which of the following statements is true? a. Business transactions are recorded first in the general ledger, then that information is transferred to the general journal. b. The posting of an amount recorded in the general ledger can be verified by referring to the account number listed in the posting reference column on that line in the general journal. c. No explanation is needed for each entry in the general ledger. d. An entry in a general ledger account can be traced to the trial balance by referring to the page listed in the posting reference column of that ledger account.
b
Which one of the following adjustments will increase assets? a. Interest incurred on money borrowed during the period but not yet paid to the bank is accrued. b. Rent revenue is recorded for amounts owed by a tenant but not yet paid. c. Depreciation for the period is recorded. d. The use of supplies is recorded.
b
During the first quarter of 2012, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. What is the amount of the current liability related to this transaction? a. $600,000 b. $636,000 c. $150,000 d. $36,000
d
GT Company has $200 in cash, $500 in accounts receivable, and $700 in inventory. The company also has $200 in accounts payable and $200 in unearned sales revenue. What is the company's quick ratio? a. 3.50 b. 2.25 c. 3.00 d. 1.75
d
The stockholders' equity section of the December 31, 2014, balance sheet is provided below: Common Stock, $30 par, 20,000 shares issued and outstanding $600,000 Paid-in Capital in Excess of Par--Common Stock 240,000 Retained Earnings 700,000 Total Stockholders' Equity $1,540,000 Assume that all of the 20,000 shares of stock that was issued as of December 31, 2014, was issued for $42 per share. On March 1, 2015, the company reacquired 4,000 shares of its common stock for $50 per share. Refer to Ladder Distributors. How much should be reported on the company's March 31, 2015, balance sheet for treasury stock? a. $168,000 b. $32,000 c. $128,000 d. $200,000
d
Which inventory costing method results in the highest inventory balance during a period of rising purchase prices? a. Weighted average cost b. LIFO c. Both FIFO and LIFO result in the same inventory balance. d. FIFO
d
Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each, $900 4 Purchases 115 units at $18.20 each, $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each, $1,368.75 24 Sold 40 units Total cost of goods available for sale $4,361.75 30 On hand, 100 units Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, cost of goods sold for the month of June is: a. $2,538.00 b. $2,550.00 c. $2,520.00 d. $2,540.00
a
On January 1, 2012, a company sold a machine for $5,000 that it had used for several years. The machine cost $11,000, and had accumulated depreciation of $4,500 at the time of sale. What gain or loss will be reported on the income statement for the sale of the machine? a. Loss of $1,500 b. Gain of $5,000 c. Gain of $1,500 d. Loss of $6,500
a
Services are provided for customers who pay for their services immediately. What effect does this transaction have on the accounting equation? a. Assets and retained earnings increase. b. Liabilities increase and retained earnings decreases. c. Assets and liabilities increase. d. Assets and liabilities decrease
a
The Premium on Bonds Payable account is shown on the balance sheet as a. a separate valuation account that increases the bond liability to market value at the issue date b. a subtraction from a long-term liability. c. a contra asset. d. a reduction of an expense.
a
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment? a. $.10 b. $.12 c. $1.00 d. $1.10
a
Which balance sheet accounts are most affected by investing activities? a. Long-term assets. b. Current assets and current liabilities. c. Stockholders' equity. d. Long-term liabilities.
a
Which of the following statements is true? a. If all transactions are correctly posted to the general ledger, the sum of the accounts with debit balances should be equal to the sum of the accounts with credit balances. b. If the sum of the debit balances equals the sum of the credit balances, this proves that there were no mistakes made in the posting process. c. Posting occurs when numbers in the general ledger accounts are transferred to the general journal. d. If a debit entry is made to an account in the general journal, the same account will receive a credit entry when the amount is posted to the general ledger.
a
Which one of the following is not a proper method of recognizing assets as expenses in a particular accounting period? a. Customers' account balances in accounts receivable are assigned to expense in the period in which each customer pays. b. Prepaid insurance is assigned to expense as the insurance expires. c. Merchandise inventory is assigned to cost of goods sold in the period the goods are sold. d. A building is depreciated and its cost is assigned to the current and future accounting periods in which the building is expected to be used.
a
What is the impact on the accounting equation of recording the issuance of a short-term note payable? a. Both assets and stockholders' equity increase. b. Both assets and stockholders' equity decrease. c. Liabilities increase and stockholders' equity decreases. d. Both assets and liabilities increase.
d
Operating activities: Net income $120,000 Add: Depreciation 10,000 Decrease in accounts receivable 5,000 $135,000 Deduct: Decrease in accounts payable 15,000 Net cash inflow from operating activities $120,000 Which method of preparing the operating activities section was used? a. The direct method. b. Cannot be determined without further information. c. The indirect method. d. Either method.
c
The chronological record in which transactions are initially recorded in the order in which they occur is called a(n) a. Trial Balance b. Chart of Accounts c. Journal d. T-account
c
Which of the following lease conditions would result in a capital lease to the lessee? a. The lessee will return the property to the lessor at the end of the lease term. b. The fair market value of the property at the inception of the lease is $20,000; the present value of the lease payments is $17,600. c. The lessee can purchase the property for $1 at the end of the lease term. d. The lease term is 70% of the property's economic life.
c
Which of the following statements is false? a. An income statement reports the amounts of revenue and expense on an accrual basis. b. A statement of cash flows explains the changes in cash from operating, investing, and financing activities. c. A statement of retained earnings reports the amount of cash received from operating activities and the amount of cash paid for dividends. d. A balance sheet reports a company's cash balance at a specific date.
c
On January 1, 2013, this company issued $500,000, 10-year, 9% bonds for $480,745. The bonds pay interest on June 30 and December 31. The market rate is 10%. The company plans to use the effective interest method of amortizing bond discounts and premiums. Refer to Kaleidoscope Paint. The interest expense on the bonds at June 30, 2013, is a. $24,037 b. $43,267 c. $21,634 d. $22,500
a
Treasury shares represent the a. number of shares that are currently held by stockholders. b. number of shares that the corporation has sold. c. number of previously issued shares that have been repurchased by the corporation. d. maximum number of shares that can be sold by the corporation.
c
A corporation began operations on October 1, 2014, with 3,000 shares of $2 par common stock authorized. The company issued common stock on several occasions during 2014 and 2015. On December 31, 2015, the company repurchased 1,000 shares of its outstanding shares and then reissued 500 of these shares on March 1, 2016. On June 1, 2016, the company's board of directors declared a 2-for-1 stock split. As a result of this stock split, which of the following is true? a. The number of shares issued decreased. b. Total liabilities decreased. c. Assets decreased. d. Total stockholders' equity remained the same.
d
This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. What amount will be reported as depreciation expense over the 5-year life of the equipment? a. $4,000 b. $8,000 c. $12,000 d. $10,000
d
External users of financial information a. Rely on management to tell them whether the company is a good investment b. Need detailed records of the business to make informed decisions. c. Are primarily responsible for the preparation of financial statements. d. Rely on the financial statements to help make informed decisions.
d
Goodwill can be recorded as an asset when a(n) a. offer is received to purchase the business at a price in excess of the value of the assets. b. business has above normal profitability compared to other businesses in its industry. c. business can determine that it has created customer goodwill and name recognition. d. business is purchased and payment is made in excess of the value of the net assets.
d
Hesson Properties, Inc. The following transactions occurred during June: June 1 Purchased two new maintenance carts on account at $750 each. Payment is due in 30 days. June 8 Accepted $500 of advance payments from customers for services to be provided next month. June 15 Received the utility bill for $300. Payment is due in 30 days. June 20 Billed customers $1,500 services provided. Payment is due in 30 days. June 30 Received $500 from customers who were billed earlier. Refer to Hesson Properties. What journal entry is required to record the utility bill? a. Utilities Expense 300 Accounts Payable 300 b. Cash 300 Utilities Expense 300 c. Utilities Expense 300 Cash 300 d. Accounts Receivable 300 Utilities Expense 300
a
Klump Co. uses a perpetual inventory system and had the following inventory transactions for the month of June. June 1 On hand, 50 units at $18.00 each, $900 4 Purchases 115 units at $18.20 each, $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each, $1,368.75 24 Sold 40 units Total cost of goods available for sale $4,361.75 30 On hand, 100 units Refer to the information provided for Klump Co. If the company uses the LIFO inventory costing method, cost of goods sold for the month of June is: a. $2,550.00 b. $2,551.25 c. $2,538.00 d. $2,555.00
a
The principle of conservatism is concerned with a. the minimization of costs associated with providing financial information. b. the company's procedures for recording activities at their initial exchange price. c. the avoidance of overstating assets or income in the preparation of financial statements. d. the company's ability to carry out its existing commitments.
c
