If a check correctly written and paid by the bank for $584 is incorrectly recorded on the
company’s books for $548, the appropriate treatment on the bank reconciliation would
be to
a. deduct $36 from the book’s balance.
b. add $36 to the book’s balance.
c. deduct $36 from the bank’s balance.
d. deduct $584 from the book’s balance.
Answer:
Lawford Company’s equipment account increased $800,000 during the period; the
related accumulated depreciation increased $60,000. New equipment was purchased at
a cost of $1,400,000 and used equipment was sold at a loss of $40,000. Depreciation
expense was $200,000. Proceeds from the sale of the used equipment were
a. $420,000.
b. $500,000.
c. $560,000.
d. $640,000.
Answer:
Entries in a sales journal
a. are made from sales invoices.
b. will indicate the invoice number in the reference column of the sales journal.
c. will occupy two lines of the sales journal.
d. indicate either a cash debit or accounts receivable debit.
Answer:
Sebastian Belle, CPA, has billed her clients for services performed. She subsequently
receives payments from her clients. What entry will Sebastian make upon receipt of the
payments?
a. Debit Unearned Service Revenue and credit Service Revenue
b. Debit Cash and credit Accounts Receivable
c. Debit Accounts Receivable and credit Service Revenue
d. Debit Cash and credit Service Revenue
Answer:
The disposal of a significant component of a business is called
a. a change in accounting principle.
b. an extraordinary item.
c. an other expense.
d. discontinued operations.
Answer:
The asset turnover is computed by dividing
a. net income by average total assets.
b. net sales by average total assets.
c. net income by ending total assets.
d. net sales by ending total assets.
Answer:
The body of theory underlying accounting is not based on
a. physical laws of nature.
b. concepts.
c. principles.
d. definitions.
Answer:
The units-of-activity method is generally not suitable for
a. airplanes.
b. buildings.
c. delivery equipment.
d. factory machinery.
Answer:
Clooney Department Store estimates inventory by using the retail inventory method.
The following information was developed:
The estimated cost of the ending inventory is
a. $280,000.
b. $336,000.
c. $420,000.
d. $466,667.
Answer:
Financial statements combining the operations of Sears and J.C. Penney would violate
the
a. monetary unit assumption.
b. economic entity assumption.
c. historical cost principle.
d. both the monetary unit assumption and the historical cost principle.
Answer:
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
a. increased by $38,416.
b. increased by $38,612.
c. increased by $38,616.
d. increased by $39,400.
Answer:
U.S. standards are developed by the
a. IFRS.
b. GAAP.
c. IASB.
d. FASB.
Answer:
The ending inventory of Larkin Company, which uses a periodic inventory system, was
understated $7,000 on December 31, 2015. Because of this error, 2015 net income was
a. overstated $5,000.
b. overstated $7,000.
c. understated $2,000.
d. understated $7,000.
Answer:
If a check correctly written and paid by the bank for $427 is incorrectly recorded on the
company’s books for $472, the appropriate treatment on the bank reconciliation would
be to
a. add $45 to the bank’s balance.
b. add $45 to the book’s balance.
c. deduct $45 from the bank’s balance.
d. deduct $427 from the book’s balance.
Answer:
The primary purpose of the statement of cash flows is to
a. provide information about the investing and financing activities during a period.
b. prove that revenues exceed expenses if there is a net income.
c. provide information about the cash receipts and cash payments during a period.
d. facilitate banking relationships.
Answer:
Adjusting entries are prepared from
a. source documents.
b. the adjustments columns of the worksheet.
c. the general ledger.
d. last year’s worksheet.
Answer:
In order to increase comparability, in recent years, the FASB and IASB have made
efforts to reduce the differences between U.S.GAAP and IFRS through a process known
as
a. convergence
b. monetary unit assumption
c. the cost principle
d. the fair value principle
Answer:
Tomas Pest Control Products has the following information available:
What is Tomas’ free cash flow?
a. $27,000
b. $23,000
c. $21,000
d. $10,000
Answer:
Lake Company received proceeds of $188,000 on 10-year, 6% bonds issued on January
1, 2015. The bonds had a face value of $200,000, pay interest semi-annually on June 30
and December 31, and have a call price of 101. Lake uses the straight-line method of
amortization.
What is the amount of interest Lake must pay the bondholders in 2015?
a. $11,200
b. $12,000
c. $13,200
d. $10,800
Answer:
Intangible assets are
a. listed under current assets on the balance sheet.
b. not listed on the balance sheet because they do not have physical substance.
c. long-lived assets that are often very valuable.
d. listed as a long-term investment on the balance sheet.
Answer:
An adjusting entry is not required for
a. outstanding checks.
b. collection of a note by the bank.
c. NSF checks.
d. bank service charges.
Answer:
A company sells a plant asset which originally cost $360,000 for $120,000 on
December 31, 2015. The Accumulated Depreciation account had a balance of $144,000
after the current year’s depreciation of $36,000 had been recorded. The company should
recognize a
a. $240,000 loss on disposal.
b. $96,000 gain on disposal.
c. $96,000 loss on disposal.
d. $60,000 loss on disposal.
Answer:
Match the internal control principle below with the appropriate cash disbursements
procedure described.
a. Establishment of responsibility
b. Segregation of duties
c. Documentation procedures
d. Physical controls
e. Independent internal verification
f. Human resource controls
_____ 1> Compare checks to invoices.
_____ 2> Different individuals approve and make payments.
_____ 3> Print check amounts by machine with indelible ink.
_____ 4> Only designated personnel are authorized to sign checks.
_____ 5> Each check must have approved invoice.
_____ 6> Requiring employees to take vacations.
Answer:
The process of transferring the information in the journal to the general ledger is called
posting. Explain the posting process, including the importance of the journal page
number and the account numbers.
Answer:
In analyzing and interpreting financial statement information, three major
characteristics are generally evaluated: (1)____________, (2)_____________, and
(3)_____________.
Answer:
The purchase of office equipment on credit increases total assets and total liabilities.
Answer:
Debt investments are investments in government and corporation bonds.
Answer:
In applying the LIFO assumption in a perpetual inventory system, the cost of the units
most recently purchased prior to sale is allocated first to the units sold.
Answer:
Glover Co. returned defective goods costing $5,000 to Mal Company on April 19, for
credit. The goods were purchased April 10, on credit, terms 3/10, n/30. The entry by
Glover Co. on April 19, in receiving full credit is:
Answer: