The best managed companies will have
a. no uncollectible accounts.
b. a very strict credit policy.
c. a very lenient credit policy.
d. some accounts that will prove to be uncollectible.
Answer:
An accounting record of the balances of all assets, liabilities, and stockholders’ equity
accounts is called a
a. compound entry.
b. general journal.
c. general ledger.
d. chart of accounts.
Answer:
The financial statements of Danielle Manufacturing Company report net sales of
$750,000 and accounts receivable of $60,000 and $90,000 at the beginning and end of
the year, respectively. What is the average collection period for accounts receivable in
days?
a. 29.2
b. 36.5
c. 43.8
d. 73
Answer:
The following items were shown on the balance sheet of Easton Corporation on
December 31, 2015:
Instructions
Complete the following statements and show your computations.
(a) The number of shares of common stock issued was _______________.
(b) The number of shares of common stock outstanding was ____________.
(c) The sales price of the common stock when issued was $____________.
(d) The cost per share of the treasury stock was $_______________.
(e) The average issue price of the common stock was $______________.
(f) Assuming that 25% of the treasury stock is sold at $20 per share, the balance in the
Treasury Stock account would be $_______________.
Answer:
A candy factory’s employees work overtime to finish an order that is sold on February
28. The office sends a statement to the customer in early March and payment is
received by mid-March. The overtime wages should be expensed in
a. February.
b. March.
c. the period when the workers receive their checks.
d. either in February or March depending on when the pay period ends.
Answer:
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.
Answer:
All of the following items would be reported as other expenses and losses except
a. freight-out.
b. casualty losses.
c. interest expense.
d. loss from employees’ strikes.
Answer:
Proprietorships, partnerships, and corporations
a. are the three most common forms of business organizations in the U.S.
b. are the three most common forms of business organizations internationally.
c. are used in different proportions in different countries.
d. all of these answers are correct.
Answer:
Land improvements should be depreciated over the useful life of the
a. land.
b. buildings on the land.
c. land or land improvements, whichever is longer.
d. land improvements.
Answer:
If the average collection period is 60 days, what is the accounts receivable turnover?
a. 6.0 times
b. 6.1 times
c. 12.2 times
d. None of these
Answer:
NWA Air Charter signed a four-month note payable in the amount of $20,000 on
September 1. The note requires interest at an annual rate of 9%. The amount of interest
to be accrued at the end of September is
a. $150.
b. $200.
c. $600.
d. $1,800.
Answer:
Under GAAP, income statement items are generally described as
a. administration, distribution, manufacturing, etc.
b. salaries, depreciation, utilities, etc.
c. administration, depreciation, manufacturing, etc.
d. salaries, distribution, utilities, etc.
Answer:
Which of the following accounts has a normal credit balance?
a. Sales Returns and Allowances
b. Sales Discounts
c. Sales Revenue
d. Selling Expense
Answer:
The current ratio may also be referred to as the
a. short run ratio.
b. acid-test ratio.
c. working capital ratio.
d. contemporary ratio.
Answer:
Which of the following statements related to the adjusted trial balance is incorrect?
a. It shows the balances of all accounts at the end of the accounting period.
b. It is prepared before adjusting entries have been made.
c. It proves the equality of the total debit balances and the total credit balances in the
ledger.
d. Financial statements can be prepared directly from the adjusted trial balance.
Answer:
Under accrual-basis accounting
a. cash must be received before revenue is recognized.
b. net income is calculated by matching cash outflows against cash inflows.
c. events that change a company’s financial statements are recognized in the period they
occur rather than in the period in which cash is paid or received.
d. the ledger accounts must be adjusted to reflect a cash basis of accounting before
financial statements are prepared under generally accepted accounting principles.
Answer:
A company just starting business made the following four inventory purchases in June:
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
a. $683.
b. $825.
c. $1,290.
d. $1,432.
Answer:
1> Drive-by Truckers prepares monthly financial statements. On July 1, the Supplies
account had a balance of $3,000. During July, additional supplies were purchased for
$4,800 and that amount was debited to Supplies Expense. On July 31, a physical count
of supplies revealed that there was $2,000 on hand. Prepare the adjusting journal entry
that Drive-by Truckers should make on July 31.
2> Alesandro Rental Agency prepares monthly financial statements. On September 1, a
check for $9,000 was received from a tenant for six months’ rent. The full amount was
credited to Rent Revenue. Prepare the adjusting entry the company should make on
September 30.
Answer:
The board of directors of Moore Corporation is considering two plans for financing the
purchase of new plant equipment. Plan #1 would require the issuance of $5,000,000,
6%, 20-year bonds at face value. Plan #2 would require the issuance of 100,000 shares
of $5 par value common stock which is selling for $40 per share on the open market.
Moore Corporation currently has 100,000 shares of common stock outstanding and the
income tax rate is expected to be 35%. Assume that income before interest and income
taxes is expected to be $500,000 if the new factory equipment is purchased.
Instructions
Prepare a schedule which shows the expected net income after taxes and the earnings
per share on common stock under each of the plans that the board of directors is
considering.
Answer:
Freight costs incurred by the seller on outgoing merchandise are an operating expense
to the seller.
Answer:
Sales revenue should be recorded in accordance with the matching principle.
Answer:
If the unit cost of inventory has continuously increased, the ______________, first-out
inventory valuation method will result in a higher valued ending inventory than if the
______________, first-out method had been used.
Answer:
In order to encourage prompt payment of a trade receivable, companies often offer
______________ to customers.
Answer:
A reason some companies purchase investments is because they generate a significant
portion of their earnings from investment income.
Answer:
In a corporation, Retained Earnings is a part of stockholders’ equity.
Answer: