Exam 1 review
A partially completed balance sheet for Blue Co. Inc. as of October 31, 2019, is presented. Where amounts are shown for various items, the amounts are correct. Required: a. Using the following data, complete the balance sheet. Blue Co.'s records show that current and former customers owe the firm a total of $4,400; $610 of this amount has been due for more than a year from two customers who are now bankrupt. b. The automobile, which is still being used in the business, cost $17,700 new; a used car dealer's Blue Book shows that it is now worth $10,000. Management estimates that the car has been used for one-third of its total potential use. (The car is being depreciated using the straight-line method.) c. The land cost Blue Co. $10,000; it was recently assessed for real estate tax purposes at a value of $14,000 . d. Blue Co.'s president isn't sure of the amount of the note payable, but he does know that he signed a note. e. Since Blue Co. was formed, net income has totaled $35,000, and dividends to stockholders have totaled $20,500. Blue Co. INC. Balance sheet OCT 31, 2019 assets cash $850 Account receivable ? land ? automobile ? less: accumulated depreciation ? automobile total ? total assets ? liabilitnes & Stockholders' Equity notes payable ? account payable $3,550 total liabilities ? SH's EQ common stock $5,600 retained earnings ? total stockholders' equity ? Total lib& SHS' EQ ?
Blue Co. INC. Balance sheet OCT 31, 2019 assets cash $850 Account receivable $3,790 (4,400-610) land $10,000 automobile $17,700 less: accumulated depreciation $5,900 (17,700*(1/3) automobile total $11,800 (17,700-5,900) total assets $26,440 (Sum^) liabilities & Stockholders' Equity notes payable $2,840 (total lib-acct pay) account payable $3,500 total liabilities $6,340 (total lib & SH-SH) SHs' EQ common stock $ 5,600 retained earnings $14,500 (35,000-20,500) total stockholders' equity $20,100 (Sum^) Total lib& SHS' EQ $26,440 (= assets)
Retained earnings, December 31, 2018: $307,200 Cost of equipment purchased during 2019: 35,000 Net loss for the year ended December 31, 2019: 4,950 Dividends declared and paid in 2019: 14,500 Decrease in the cash balance from January 1, 2019, to December 31, 2019: 14,400 Decrease in long-term debt in 2019: 12,300 Required: From the above data, calculate the retained earnings balance as of December 31, 2019. (Enter decreases with a minus sign to indicate a negative financial statement effect.) Statement of Equity For year-end Dec 31, 2019
Statement of Equity For year-end Dec 31, 2019 retained earnings Dec 31, 2018 $307,200 less net loss -4,950 less: dividends -14,500 Retained earnings Dec 31, 2019 287,750
On January 31, an entity's balance sheet showed total assets of $2,250 and liabilities of $750. Stockholders' equity at January 31 was: a) $1,500 b) $1,250 c) $3,000 d) $750
a) $1,500 ($2,250-$750=)
The provisions of the Sarbanes-Oxley Act of 2002 had the following components: a) All of the answers are correct. b) Attestation. c) Quality control. d) Enforce auditing.
a) All of the answers are correct.
Chicago Consulting, an engineering consulting firm, provided $6,000 of services to a client; the client paid $2,000 when the bill was submitted and will pay the balance within a week. Chicago Consulting will record this transaction by: a) Dr.Cash 2,000; Dr.Fees receivable 4,000' Cr.Fees revenue 6,000 b) Dr.Cash 2,000; Dr.Fees revenue 4,000; Cr.Fees receivable 6,000 c) Dr.Cash 2,000; Cr.Fees revenue 2,000 d) Dr.Fees revenue 6,000; Cr.Fees receivable 4,000; Cr.Cash 2,000
a) Dr.Cash 2,000; Dr.Fees receivable 4,000' Cr.Fees revenue 6,000
Moped, Inc. purchased machinery at a cost of $44,000 on January 1, 2020. The expected useful life is 5 years and the asset is expected to have salvage value of $4,000. Moped depreciates its assets using the double-declining balance method.What is the firm's gain or loss if the machinery is sold for $22,000 on December 31, 2021? a) Gain of $6,160 b) Loss of $8,000 c) Loss of $1,200 d) Gain of $8,000
a) Gain of $6,160 (44,000*40%=17600; (44,000-17,600)*40%=10,560; 17600-10560=)
The accrual of interest on short-term marketable securities results in: a) an increase in current assets and an increase in net income. b) an increase in current assets and a decrease in net income. c) an increase in current liabilities and an increase in net income. d) an increase in noncurrent assets and an increase in liabilities.
a) an increase in current assets and an increase in net income.
The objectives of financial reporting for nonbusiness enterprises: a) focus on providing information for resource providers, rather than investors. b) are exactly the same as those for business enterprises. c) do not give consideration to the cost of providing information. d) have more of an internal utilization rather than external reporting focus.
a) focus on providing information for resource providers, rather than investors.
The return on investment measure of performance: a) is used by individuals to compare investment performance. b) is calculated using total assets at the beginning of the period as the amount of investment. c) is relevant only to business enterprises. d) is calculated using sales as the amount of return.
a) is used by individuals to compare investment performance.
The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is: a) matching revenue and expense. b) consistency. c) objectivity. d) original cost.
a) matching revenue and expense.
When comparing entity financial ratios with industry ratios: a) relative values at a point in time may not be significant. b) the trend of entity ratios should be compared to the current year's industry ratio. c) it should be assumed that the data result from the consistent application of alternative accounting methods. d) entity ratios should not be compared with industry ratios.
a) relative values at a point in time may not be significant.
Paid-in Capital represents: a) the amount invested in the entity by the stockholders. b) earnings retained for use in the business. c) net assets of the entity at the date of the statement. d) fair value of the entity's common stock.
a) the amount invested in the entity by the stockholders.
One inventory cost flow assumption will result in different cost of goods sold from another inventory cost flow assumption only if: a) the cost of inventory items changes during the year. b) price levels do not change during the year. c) inventory quantities change from the beginning to end of the year. d) a new product is added to inventory during the year.
a) the cost of inventory items changes during the year.
The principal reason for converting a customer's account receivable to a note receivable is: a) the note receivable earns interest and the account receivable does not. b) the receivable is less likely to have to be written off as uncollectible. c) the customer is more likely to continue purchasing the company's products. d) working capital is immediately increased.
a) the note receivable earns interest and the account receivable does not.
On January 1, 2019, the balance in Kubera Co.'s Allowance for Bad Debts account was $1,490. During the year, a total of $3,645 of delinquent accounts receivable was written off as bad debts. The unadjusted balance in the Allowance for Bad Debts account at December 31, 2019, was $1,330. Required: a. What was the total amount of bad debts expense recognized during the year? (Hint: Make a T-account for the Allowance for Bad Debts account.) b. As a result of a comprehensive analysis, it is determined that the December 31, 2019, adjusted balance of Allowance for Bad Debts should be $4,380. Show the adjustment required in journal entry format. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
a. beg: $1,490 credit write off: -$3,645 debit after write off: $-2,155 debit (sum^) bad debt end: $1,330 credit bad debt exp: $3,485 (sum^ no -) b. bad bet exp: $3,050 Dr. allow for doubtful account: $3,050 Cr. ($4,380-$1,330)
Answer the following questions that are related to the following Interest Payable T-account: Interest Payable February 1 balance 1,140 February transactions 1,550 February 28 adjustment ? February 28 balance 2,050 Required: a. What is the amount of the February 28 adjustment? b. What account would most likely have been credited for the amount of the February transactions? Interest expense Cash Interest payable c. What account would most likely have been debited for the amount of the February 28 adjustment? Interest expense Interest payable Cash d. Why would this adjusting entry have been made? The entry would have been made to make the income statement and balance sheet more accurate. The entry would have been made to close the interest payable account.
a. 2,460 (2,050+1,550-1,140=) b. Cash. c. Interest expense. d. The entry would have been made to make the income statement and balance sheet more accurate.
Following are the current asset and current liability sections of the balance sheets for Freedom Inc. at January 31, 2020 and 2019 (in millions): January 31, 2020 January 31, 2019 Current Assets Cash $10 $7 Accounts receivable 7 10 Inventories 6 10 Total current assets $23 $27 Current Liabilities Note payable $6 $6 Accounts payable 6 3 Other accrued liabilities 4 4 Total current liabilities $16 $13 Required: a. Calculate the working capital and current ratio at each balance sheet date. (Enter "Working capital" in millions of dollars (i.e., 10,000,000 should be entered as 10). Round your "Current ratio" to 2 decimal places.) 2020 2019 Working Capital: Current ratio: b. Evaluate the firm's liquidity at each balance sheet date. - Based on the working capital and current ratio measures, the firm has become more liquid over the 2-year period. - Based on the working capital and current ratio measures, the firm has become less liquid over the 2-year period. c. Assume that the firm operated at a loss during the year ended January 31, 2020. How could cash have increased during the year? - Changes in a firm's cash position and its profitability are not directly related under accrual basis of accounting. - Changes in a firm's cash position and its profitability are not directly related under cash basis of accounting.
a. 2020 2019 Working Capital: 7 14 Current ratio: 1.44 2.08 b. - Based on the working capital and current ratio measures, the firm has become less liquid over the 2-year period. c. - Changes in a firm's cash position and its profitability are not directly related under accrual basis of accounting.
Renter Co. acquired the use of a machine by agreeing to pay the manufacturer of the machine $900 per year for 17 years. At the time the lease was signed, the interest rate for a 17-year loan was 10%. Table 6-5. (Use appropriate factor from the tables provided.) Required: (8.0216) a. Calculate the amount that Renter Co. could have paid at the beginning of the lease to buy the machine outright. (Round your answer to 2 decimal places.) amount: b. What causes the difference between the amount you calculated in part a and the total of $15,300 ($900 per year for 17 years) that Renter Co. will pay under the terms of the lease? - The difference between the total amount paid and the present value of the lease payments is interest. -The difference between the total amount paid and the present value of the lease payments is depreciation. -The difference between the total amount paid and the present value of the lease payments is taxes. c. What is the appropriate amount of cost to be reported in Renter Co.'s balance sheet (at the time the lease was signed) with respect to this asset? (Round your answer to 2 decimal places.) amount:
a. 7,219.44 (900*8.0216) b. - The difference between the total amount paid and the present value of the lease payments is interest. c. 7,219.44 (900*8.0216)
Charlie's Furniture Store has been in business for several years. The firm's owners have described the store as a "high-price, high-service" operation that provides lots of assistance to its customers. Margin has averaged a relatively high 36% per year for several years, but turnover has been a relatively low 0.4 based on average total assets of $800,000. A discount furniture Store is about to open in the area served by Charlie's, and management is considering lowering prices to compete effectively. Required: a. Calculate current sales and ROI for Charlie's Furniture Store. b. Assuming that the new strategy would reduce margin to 20%, and assuming that average total assets would stay the same, calculate the sales that would be required to have the same ROI as Charlie's currently earns. c. Suppose you presented the results of your analysis in parts a and b of this problem to Charlie, and he replied, "What are you telling me? If I reduce my prices as planned, then I have to increase my sales volume by 50% to earn the same return?" Given the results of your analysis, what is the actual amount of increase in sales required? d. Now suppose Charlie says, "You know, I'm not convinced that lowering prices is my only option in staying competitive. What if I were to increase my marketing effort? I'm thinking about kicking off a new advertising campaign after conducting more extensive market research to better identify who my target customer groups are." In general, explain to Charlie what the likely impact of a successful strategy of this nature would be on margin, turnover, and ROI. e. What are the other alternative strategy that might help Charlie maintain the competitiveness of his business. a. Sales; ROI b. sales c. inc in sales required d. effect on margin; effect on turnover; effect on ROI e. -increase selling price and implement labor saving strategies. - Increase selling price and implement a reduction in inventory carrying costs. -Implement labor saving strategies and a reduction in inventory carrying costs.
a. Sales= $320,000 (turnover*total avg. assets) ROI = 14.4 (turnover* margin) b. Sales = $576,000 (ROI/new margin= turnover*total avg. assets) c. Increase in sales required $256,000 (576,000-320,000) d. effect on margin: Decrease effect on turnover: Increase effect on ROI: Decrease e. -Implement labor saving strategies and a reduction in inventory carrying costs.
Mamba Metals, Inc. had an ROI of 12%, margin of 3%, and sales of $20 million for the year. Mamba's turnover for the year was: a) 36% b) 4.0 c) $600,000 d) 3.0
b) 4.0 (12%/3%=4)
Unquiet Hands, Inc. borrowed $30,000 on October 1, 2019 at 6% interest with both principal and interest due on September 30, 2020. Which of the following journal entries should the firm use to accrue interest at the end of each month? a) Dr.Interest receivable; Cr.Interest payable b) Dr.Interest payable; Cr.Cash c) Dr.Interest expense; Cr.Interest payable d) Dr.Interest payable;Cr.Interest expense
b) Dr.Interest payable; Cr.Cash
Which of the following is a universally accepted measure of profitability? a) All of these. b) Return on investment. c) Return on retained earnings. d) Return on liabilities.
b) Return on investment.
Stockholders' equity refers to which of the following? a) A listing of the organization's assets and liabilities. b) The ownership right of the stockholder(s) of the entity. c) Probable future sacrifices of economic benefits. d) The amount of resources controlled by the entity.
b) The ownership right of the stockholder(s) of the entity.
Expenses are: a) cash disbursements. b) decreases in net assets resulting from usual operating activities. c )decreases in net assets from dividends to stockholders. d) decreases in net assets from uninsured accidents.
b) decreases in net assets resulting from usual operating activities.
A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper's records: a) increase assets and decrease liabilities. b) increase assets and increase expenses. c) have no effect on total assets. d) increase assets and increase revenues.
b) increase assets and increase revenues.
A journal: a) is where transactions are posted to after they are initially recorded. b) is where transactions are initially recorded. c) is the same as a source document, such as an invoice from a supplier or a copy of a credit purchase made by a customer. d) serves as an index to the ledger.
b) is where transactions are initially recorded.
The balance sheet valuation of inventories is: a) cost, regardless of the cost of replacing the inventory. b) lower of cost or market. c) lower of selling price or cost. d) lower of realizable value or selling price.
b) lower of cost or market.
Another term for return on equity is: a) return on retained earnings. b) none of these. c) return on assets. d) return on investment.
b) none of these.
Accumulated depreciation on a balance sheet: a) recognizes the economic loss in value of an asset because of its age or use. b) represents the portion of the cost of an asset that is assumed to have been "used up" in the process of operating the business. c) represents cash that will be used to replace worn out equipment. d) is part of stockholders' equity.
b) represents the portion of the cost of an asset that is assumed to have been "used up" in the process of operating the business.
The income statement shows amounts for: a) revenues, expenses, losses, and liabilities. b) revenues, gains, expenses and losses. c) revenues, assets, gains, and losses d) revenues, expenses, gains, and fair value per share.
b) revenues, gains, expenses and losses.
Regardless of the inventory cost flow assumption used, inventories on the balance sheet are stated at: a) realizable value. b) the lower of cost or market. c) replacement cost. d) original cost.
b) the lower of cost or market.
Accounting can be defined as: a) the process of preparing and auditing an entity's financial statements. b) the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments. c) the process of communicating the financial results of corporate activities to investors and regulatory bodies. d) the process of planning, controlling, and evaluating financial performance, and supporting the management decision-making process.
b) the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments.
The effect of an adjustment is: a) to correct an entry that was not in balance. b) to increase the accuracy of the financial statements. c) to record cash receipts and payments not previously recorded. d) to close the books.
b) to increase the accuracy of the financial statements.
It is not unusual for a company to use different depreciation methods for book and tax purposes. When this happens, the firm usually: a) is trying to minimize its book income. b) uses an accelerated depreciation method for tax purposes. c) uses an accelerated depreciation method for book purposes. d) is trying to maximize its taxable income.
b) uses an accelerated depreciation method for tax purposes.
Financial statement ratios support informed judgments and decision making most effectively: a) when the trend of entity data is compared to the trend of industry data. b) when compared to an industry average for the most recent year. c) when viewed as a trend of entity data. d) when viewed for a single year.
b) when the trend of entity data is compared to the trend of industry data.
Present Value of $1 Discount Rate P 8% 10% 5 0.6806 0.62097 7 0.5835 0.51329 9 0.5002 0.4241 Present Value of an Annuity of $1 Discount Rate P 8% 10% 5 3.9927 3.79087 7 5.2064 4.86849 9 6.2469 5.7590 Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its industry; net income has averaged $140,000 a year more than the industry average. These "excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate of 8%, how much goodwill will arise from Psyche's purchase of Trim? a) $700,000 b) $81,672 c) $558,978 d) $176,314
c) $558,978 ($140,000*3.9927)
The officer of a corporation responsible for the firm's published financial statements would be most concerned about pronouncements of the: a) GASB. b) IRS. c) FASB. d)SEC. e) AICPA.
c) FASB.
When costs are rising over time: a) ending inventory balances will be greater under LIFO. b) cost of goods sold using the weighted average method will be greater than LIFO cost of goods sold. c) FIFO results in higher profits than LIFO. d) LIFO results in higher profits that FIFO.
c) FIFO results in higher profits than LIFO.
Which classification of accounting is most concerned with the use of economic and financial information to plan and control many of the activities of the entity? a) Auditing / Public accounting. b) Income tax accounting. c) Managerial accounting. d) Financial accounting.
c) Managerial accounting.
Which of the following accounting concepts/principles is most significant in the development of a capitalization policy? a) Consistency. b) Matching of revenue and expense. c) Materiality. d) Original Cost.
c) Materiality.
If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be: a) Higher. b) Would depend on the amount borrowed. c) The same. d) Lower.
c) The same.
Which of the following was NOT one of the reasons for the FASB's decision to undertake the Conceptual Framework project? a) To facilitate the FASB's efforts in developing accounting and reporting guidance by providing a common foundation and basic reasoning on which to consider merits of alternatives. b) To describe concepts that will underlie guidance on future accounting practices and in due course serve as a basis for evaluating existing guidance and practices. c) To provide detailed, industry-specific authoritative guidance for the accounting and financial reporting of complex business transactions. d) To provide a structure or framework of financial accounting concepts.
c) To provide detailed, industry-specific authoritative guidance for the accounting and financial reporting of complex business transactions.
When a depreciable asset is sold: a) a loss arises if the sales proceeds exceed the net book value. b) depreciation expense is adjusted so there is no gain or loss. c) a gain arises if the sales proceeds exceed the net book value. d) any cash received results in a gain.
c) a gain arises if the sales proceeds exceed the net book value.
The current assets of most companies are usually made up of: a) very small proportion (less than 10%) of the total assets of the entity. b) cash, marketable securities, and accounts and notes receivable. c) cash and assets expected to be converted to cash within a year. d) assets that are currently used in the operations of the company.
c) cash and assets expected to be converted to cash within a year.
A credit entry will: a) increase the balance of an expense account. b) always decrease the account balance. c) increase the balance of a revenue account. d) always increase the account balance.
c) increase the balance of a revenue account.
A cash equivalent is a current asset that: a) will be converted to cash within one year. b) will be converted to cash within one month. c) is readily convertible into cash with a minimal risk. d) is readily convertible into cash with a substantial risk.
c) is readily convertible into cash with a minimal risk.
The Statement of Changes in Stockholders' Equity shows: a) revenues, expenses, and liabilities for the period. b) the change in cash during a year. c) net income and dividends for the period. d) paid-in capital and long-term debt at the end of the period.
c) net income and dividends for the period.
A chart of accounts: a) is the same as a T-account, with debits on the left and credits on the right. b) is where transactions are posted to after they are initially recorded. c) serves as an index to the ledger, with each account numbered to facilitate frequent references that are made to it. d) is where transactions are initially recorded.
c) serves as an index to the ledger, with each account numbered to facilitate frequent references that are made to it.
The net book value of a depreciable asset is: a) the amount for which the asset should be insured. b) the fair value of the asset. c) the difference between the asset's cost and accumulated depreciation. d) the difference between the asset's cost and depreciation expense.
c) the difference between the asset's cost and accumulated depreciation.
When a firm buys land on which there is a building, and the building is torn down so that an appropriate new building can be constructed on the land: a) the cost assigned to the land excludes the cost of the old building. b) any of the purchase cost allocated to the old building is reported as a loss. c) the total cost of the land and old building are capitalized as land cost. d) any of the purchase cost allocated to the old building is capitalized as part of the cost of the new building.
c) the total cost of the land and old building are capitalized as land cost.
At the beginning of the year, paid-in capital was $164 and retained earnings was $94. During the year, the stockholders invested $48 and dividends of $12 were declared and paid. Retained earnings at the end of the year were $104.Net income for the year was: a) $20 b) $30 c) $40 d) $22
d) $22 (104-94+12=)
At the beginning of the year, paid-in capital was $164 and retained earnings was $94. During the year, the stockholders invested $48 and dividends of $12 were declared and paid. Retained earnings at the end of the year were $104.Total stockholders' equity at the end of the year was: a) $212 b) $164 c) $188 d) $316
d) $316 (164+94+48-12+22=)
Present Value of $1 Discount Rate P 8% 10% 5 0.6806 0.62097 7 0.5835 0.51329 9 0.5002 0.4241 Present Value of an Annuity of $1 Discount Rate P 8% 10% 5 3.9927 3.79087 7 5.2064 4.86849 9 6.2469 5.7590 A particular common stock has an annual cash dividend of $4 per share and is predicted to have a market value of $60 per share 5 years from now. Assuming a discount rate of 10%, a fair market price for the stock today is: a) $40.00 b) $75.16 c) $112.42 d) $52.41
d) $52.41 (60/4=15*3.79087=56.862)
At the beginning of the fiscal year, the balance sheet showed assets of $2,728 and stockholders' equity of $1,672. During the year, assets increased $148 and liabilities decreased $76.Liabilities at the end of the year totaled: a) $1,820 b) $1,672 c) $1,056 d) $980
d) $980 (2,728-1,672=1056-76=)
Which of the following are qualified to express an auditor's opinion about an entity's financial statements? a) A Comptroller. b) A Certified Management Accountant. c) A Certified Internal Auditor. d) A Certified Public Accountant.
d) A Certified Public Accountant.
Which of the following is not a characteristic or limitation of the kind of information that financial reporting by business enterprises can provide? a) The information results in approximate, rather than exact, measures. b) The information largely reflects the financial effects of transactions that have already taken place. c) The information is provided and used at a cost. d) All of the answers are characteristics or limitations of the kind of information that financial reporting by business enterprises can provide.
d) All of the answers are characteristics or limitations of the kind of information that financial reporting by business enterprises can provide.
Which of the following is not usually considered a measure of an entity's liquidity? a) Acid-test ratio. b) Current ratio. c) Working capital. d) Cash ratio.
d) Cash ratio.
Which of the following is true regarding cost flow assumptions? a) Manufacturing firms are required to use FIFO. b) Service firms are required to use LIFO. c) If a firm uses FIFO for tax purposes, then FIFO must be used for financial reporting purposes. d) If a firm uses LIFO for tax purposes, then LIFO must be used for financial reporting purposes.
d) If a firm uses LIFO for tax purposes, then LIFO must be used for financial reporting purposes.
Leasehold is an example of which of the following types of assets? a) Goodwill. b) Current asset. c) Property, plant and equipment. d) Intangible asset.
d) Intangible asset.
Which of the following accounts is part of working capital? a) Sales b) Common Stock c) Retained Earnings d) Merchandise Inventory
d) Merchandise Inventory
Which of the following is not an example of a decision or informed judgment that a potential employee could make from accounting information? a) Assessment of the risk that the company may become bankrupt in the near future. b) The extent of the company's commitment to a research program. c) Probability of the company's ability to make profit sharing plan contributions in the future.Incorrect d) Personnel turnover statistics (i.e., hiring and terminations).
d) Personnel turnover statistics (i.e., hiring and terminations).
The balance in the Wages Payable account increased from $13,000 at the beginning of the month to $20,000 at the end of the month. Wages accrued during the month totaled $82,000. a) Wages expense for the month totaled $89,000. b) Wages paid during the month totaled $89,000. c) Wages expense for the month totaled $75,000. d) Wages paid during the month totaled $75,000.
d) Wages paid during the month totaled $75,000. (82k-20k+13k)
When a firm purchases supplies for its business: a) the supplies expense account should always be debited. b) either the supplies account or the supplies expense account should be credited. c) the supplies account should always be debited. d) an adjustment will probably be required as supplies are used.
d) an adjustment will probably be required as supplies are used.
A current ratio of 6.0 is usually an indication that the firm: a) has a reasonable degree of liquidity. b) has made the most productive use of its assets. c) as a low degree of liquidity. d) has not made the most productive use of its assets.
d) has not made the most productive use of its assets.
If there is a loss on the disposal of a depreciable asset: a) in retrospect, the life over which the asset was depreciated was too short. b) no cash was received in the disposal transaction. c) the net book value of the asset was negative. d) in retrospect, the depreciation expense recognized over the asset's life was too low.
d) in retrospect, the depreciation expense recognized over the asset's life was too low.
n the buyer's records, the purchase of merchandise on account would: a) increase liabilities and increase paid-in capital. b) increase assets and increase expenses. c) have no effect on total assets. d) increase assets and increase liabilities.
d) increase assets and increase liabilities.
An unqualified auditors' opinion about an entity's financial statements: a) guarantees that the entity was not involved in or the victim of any fraudulent activities during the audited period. b) is a clean bill of health. c) means that all of the entity's transactions during the audited period were checked out. d) states that they are presented in conformity with accounting principles generally accepted in the United States.
d) states that they are presented in conformity with accounting principles generally accepted in the United States.