Which of the following is not necessary to know in computing the future value of an
annuity?
a. Amount of the periodic payments
b. Interest rate
c. Number of compounding periods
d. Year the payments begin
Answer:
Flite Corporation has issued common stock only. The company has been successful and
has a gross profit rate of 20%. The information shown below was taken from the
company’s financial statements.
Instructions
Compute the following:
(a) Accounts receivable turnover and the average collection period.
(b) Inventory turnover and the days in inventory.
(c) Return on common stockholders’ equity.
Answer:
The cumulative effect of the declaration and payment of a cash dividend on a
company’s financial statements is to
a. decrease total liabilities and stockholders’ equity.
b. increase total expenses and total liabilities.
c. increase total assets and stockholders’ equity.
d. decrease total assets and stockholders’ equity.
Answer:
Ale Company reports a $16,000 increase in inventory and a $8,000 increase in accounts
payable during the year. Cost of Goods Sold for the year was $150,000. The cash
payments made to suppliers were
a. $150,000.
b. $158,000.
c. $126,000.
d. $174,000.
Answer:
On October 3, Karl Schickele, a carpenter, received a cash payment for services
previously billed to a client. Karl paid his telephone bill, and he also bought equipment
on credit. For the three transactions, at least one of the entries will include a
a. credit to Retained Earnings.
b. credit to Notes Payable.
c. debit to Accounts Receivable.
d. credit to Accounts Payable.
Answer:
Bad Debt Expense is considered
a. an avoidable cost in doing business on a credit basis.
b. an internal control weakness.
c. a necessary risk of doing business on a credit basis.
d. avoidable unless there is a recession.
Answer:
Which of the following would not be considered an external user of accounting data for
the GHI Company?
a. Internal Revenue Service Agent.
b. Management.
c. Creditors.
d. Customers.
Answer:
Cooke Corporation issues 10,000 shares of $50 par value preferred stock for cash at $80
per share. The entry to record the transaction will consist of a debit to Cash for
$800,000 and a credit or credits to
a. Preferred Stock for $800,000.
b. Preferred Stock for $500,000 and Paid-in Capital in Excess of Par’”Preferred Stock
for $300,000.
c. Preferred Stock for $300,000 and Paid-in Capital from Preferred Stock for $500,000.
d. Paid-in Capital from Preferred Stock for $800,000.
Answer:
If a corporation declares a 10% stock dividend on its common stock, the account to be
debited on the date of declaration is
a. Common Stock Dividends Distributable.
b. Common Stock.
c. Paid-in Capital in Excess of Par.
d. Retained Earnings.
Answer:
Receivables might be sold to
a. lengthen the cash-to-cash operating cycle.
b. take advantage of deep discounts on the cash realizable value of receivables.
c. generate cash quickly.
d. finance companies at an amount greater than cash realizable value.
Answer:
Which of the following will not cause a change in the stockholders’ equity of a
business?
a. An increase in prepaid expenses.
b. An increase in retained earnings.
c. The sale of common stock.
d. The declaration and payment of dividends.
Answer:
On May 25, Yellow House Company received a $650 check from Grizzly Bean for
services to be performed in the future. The bookkeeper for Yellow House Company
incorrectly debited Cash for $650 and credited Accounts Receivable for $650. The
amounts have been posted to the ledger. To correct this entry, the bookkeeper should:
a. debit Cash $650 and credit Unearned Service Revenue $650.
b. debit Accounts Receivable $650 and credit Service Revenue $650.
c. debit Accounts Receivable $650 and credit Cash $650.
d. debit Accounts Receivable $650 and credit Unearned Service Revenue $650.
Answer:
In the month of November, Kinsey Company Inc. wrote checks in the amount of
$27,750. In December, checks in the amount of $37,974 were written. In November,
$25,404 of these checks were presented to the bank for payment, and $32,649 were
presented in December. What is the amount of outstanding checks at the end of
December?
a. $2,346
b. $7,245
c. $7,671
d. $10,224
Answer:
The origins of accounting are generally attributed to the work of
a. Christopher Columbus.
b. Abner Doubleday.
c. Luca Pacioli.
d. Leonardo da Vinci.
Answer:
Sources of increases to stockholder’s equity are
a. additional investments by owners.
b. purchases of merchandise.
c. dividends.
d. expenses.
Answer:
Assume that Swann Company uses a periodic inventory system and has these account
balances: Purchases $630,000; Purchase Returns and Allowances $25,000; Purchase
Discounts $11,000; and Freight-In $19,000; beginning inventory of $45,000; ending
inventory of $55,000; and net sales of $750,000. Determine the cost of goods sold.
Answer:
Easton Company began business on October The sales journal, as it appeared at the end
of the month, follows:
1> Open general ledger T-accounts for Accounts Receivable (No. 112) and Sales (No.
401) and an accounts receivable subsidiary T-account ledger with an account for each
customer. Make the appropriate postings from the sales journal. Fill in the appropriate
posting references in the sales journal above.
2> Prove the accounts receivable subsidiary ledger by preparing a schedule of accounts
receivable.
Answer:
Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1.
Givens Brick Company signs a $600,000, 8%, 9-month note. What is the adjusting
entry required if Givens Brick Company prepares financial statements on June 30?
Answer:
Freight-in is an account that is subtracted from the Purchases account to arrive at cost of
goods purchased.
Answer:
Management consulting includes examining the financial statements of companies and
expressing an opinion as to the fairness of their presentation.
Answer: