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The Grass is Greener Corporation provides $6,000 worth of lawn care on account during the month. Experience suggests that about 2% of net credit sales will not be collected. To record the potential bad debts, The Grass is Greener Corporation […]

During June, the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers. The company uses the accrual basis of accounting. How will these events affect the company’s financial statements? A. The income […]

Stockholders’ equity is: A. the amount the company received for all stock when issued plus the amount of retained earnings minus treasury stock. B. the amount the company received for all stock authorized plus the amount of retained earnings and […]

Which of the following statements isTRUE concerning the declaration and payment of cash dividends? A. Declaration and payment of cash dividends will reduce the amount of net income. B. Declaration and payment of cash dividends will not reduce the retained […]

Gross profit is not a ledger account name. Answer: Which of the following statements regarding cash and accrual accounting isTRUE? A. If payment is received at the same time a service is produced and sold, there is no difference between […]

Which of the following is an expense of this period? A. Costs of items used up this period but paid for next period. B. Costs of items paid for in this period but used up next period. C. Cost of […]

Your company issues $500,000 in bonds at an issue price of 98. The company will record: A. a debit of $490,000 to cash, a debit of $10,000 to a contra-liability account to reflect the discount, and a credit of $500,000 […]

The list of names and reference numbers that the company will use when accounting for transactions is called the Chart of Accounts. Answer: In general, the cash flow from operating activities is considered by many to be the most important […]

Which of the following nonfinancial factors is most likely to be a cause of a going-concern problem? A. Hiring a new CEO. B. Loss of a key patent. C. Announcing a new stock issue. D. Replacing an old product line. […]

On January 1, a company lends a corporate customer $80,000 at 6% interest. The amount of interest revenue that should be recorded for the first quarter is: A. $4,800. B. $1,200. C. $400. D. $1,600. Answer: When existing assets are […]

A company reported the following: Use the above information to answer the following question. What is the amount of income before income taxes? A. $9,500 B. $32,700 C. $13,000 D. $17,500 Answer: Starbellies Tattoo Parlor LLC is completing the accounting […]

Which of the following statements regarding shrinkage is notTRUE? A. Perpetual inventory systems can help managers detect shrinkage. B. Shrinkage is another term for inventory loss due to theft, error, or fraud. C. Shrinkage is detected by comparing the balance […]

You paid $10,000 to buy 1% of the stock in a corporation that has now gone bankrupt. The company owes $10 million dollars to creditors. As a result of the bankruptcy, you will lose $100,000. Answer: Which of the following […]

The inventory costing method that results in the lowest taxable income in a period of inflation is the FIFO method. Answer: The entry to record a bond retirement at maturity usually involves no gain or loss. Answer: TRUE If bonds […]

The percentage of credit sales method is simpler but less accurate than the aging method for calculating bad debts. Answer: Which of the following statements regarding the reporting of operating cash flows using the direct method isTRUE? A. Although most […]

After net income has been determined, it is then transferred to: A. the balance sheet. B. the income statement. C. the statement of cash flows. D. the statement of retained earnings. Answer: In its most basic form, the earnings per […]

The following information is taken from the financial statements of a company for the current year: Use the information above to answer the following question. The gross profit percentage for the current year rounded to the nearest whole percent is […]

Dividends are subtracted from revenues on the income statement. Answer: If a company factors its receivables, its receivables turnover ratio will be lower than it would have been if the receivables had not been factored. Answer: FALSE The accounts receivable […]

As a company uses supplies, an adjustment should be made to decrease an asset account and increase an expense account. Answer: Which of the following statements regarding dividends in arrears isTRUE? A. Dividends in arrears do not appear on the […]

The following transactions occurred during July: 1. Received $800 cash for services rendered during July. 2. Received $5,000 from issuance of stock to investors. 3. Received $400 from a customer in payment of accounts receivable from the prior month. 4. […]

E. Flynn Company uses a perpetual inventory system and had the following transactions during November: November 6: Purchased $5,800 of inventory on account, terms 2/10, n/30. November 8: Returned $800 of defective units and received full credit. November 15: Paid […]

Cash sales rung up by cashiers totaled $117,000. Cash in the drawer was counted and found to be $119,000. The journal entry to record the day’s sales would include A. a debit to cash for $117,000. B. a credit to […]

All other things being equal, the higher the return on equity ratio, the better the financial performance of the company. Answer: Which of the following isTRUE of a company’s quarterly report? A. Contains the same detail as is found in […]

Before reconciling to its bank statement, Lauren Cosmetics Corporation’s general ledger had a month-end balance in the cash account of $5,250. The bank reconciliation for the month contained the following items: Given the above information, what adjusted cash balance should […]

The threshold for recording contingent liabilities under IFRS is lower than that under GAAP. Answer: Which of the following statements isTRUE about retained earnings? A. Retained earnings represents cash available to pay dividends to stockholders. B. Retained earnings cannot be […]

The ledger consists of all of the accounts used by a business. Answer: A company does not need to record the receipt of a bill for utilities used during this year if they will not pay for it until next […]

Companies A and B both report net income growth of 12% per year. Company A has a receivables turnover ratio of 5.6, which is smaller than its previous year. Company B has a receivables turnover ratio of 11.3, which is […]

The amount of uncollectible accounts at the end of the year is estimated to be $25,000, using the aging of accounts receivable method. The balance in the Allowance of Doubtful Accounts account is an $8,000 credit before adjustment. What should […]

In 2014, Lawrence Company had gross sales of $750,000 on account and granted sales discounts of $15,000. On January 1, 2014, the Allowance for Doubtful Accounts had a credit balance of $18,000. During 2014, $30,000 of uncollectible accounts receivable were […]

A company started the current year with assets of $700,000, liabilities of $350,000 and contributed capital of $200,000. During the current year, assets increased by $400,000, liabilities decreased by $50,000 and contributed capital increased by $275,000. There was no payment […]

You form a partnership with your best friend. You have contributed 65% of the capital and can claim 65% of the net income. At the end of the first year, you discover that your partner has run up $40,000 in […]

When a customer buys services on account, it should be recorded by the company as: A. a debit to Cash and a credit to Accounts Receivable. B. a debit to Accounts Receivable and a credit to Revenue. C. a debit […]

A company incurred $5,000 in wages for employees for the year. $4,500 of these wages were paid by the end of the year. Choose theTRUE statement. A. Wages payable on the income statement will be $4,500. B. Wages expense on […]

A truck costing $12,000, on which $9,000 of accumulated depreciation has been recorded was sold for $2,000 cash. The entry to record this event would include a: A. gain of $1,000. B. loss of $1,000. C. credit to the Truck […]

E. Flynn Company uses a perpetual inventory system and had the following transactions during November: November 6: Purchased $5,800 of inventory on account, terms 2/10, n/30. November 8: Returned $800 of defective units and received full credit. November 15: Paid […]

A company reported the following information at December 31, 2013: What is the amount of current liabilities on the classified balance sheet? A. $9,450 B. $6,950 C. $113,540 D. $4,500 Answer: A company reported the following information at December 31, […]

Company X has net sales revenue of $436,000, cost of goods sold of $343,000, and all other expenses of $90,000. If interest expense is $10,000 and income tax expense is $1,000, the times interest earned ratio is closest to A. […]

Bobby Darin is the only employee of Atlantic Records, Inc. During the first week of January, Darin earned $800 and had federal and state income tax withholdings of $40 and $15, respectively. FICA taxes are 7.65 percent on wages up […]

Which of the following statements about dividends is notTRUE? A. Dividends represent a sharing of corporate profits with owners. B. Both stock dividends and cash dividends reduce retained earnings. C. Cash dividends paid to stockholders reduce net income. D. Dividends […]

When the amount of a contingent liability can be reasonably estimated and its likelihood is probable, the company should: A. include a description in the notes to the financial statements. B. record the estimated amount of the liability times the […]

The final balance of the Cash account would be: A. $219,300. B. $113,300. C. $28,500. D. $134,500. Answer: Which of the following would be acceptable as an alternative term used for the income statement? A. Statement of Operations. B. Statement […]

The Sarbanes-Oxley Act (SOX) does not: A. require an internal control assessment by management. B. protect whistleblowers. C. require an internal control report by the independent auditor. D. require an unqualified audit opinion. Answer: The combined effect of the declaration […]