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:
In the Papyrus Corporation, cash receipts from customers were $136,000, cash
payments for operating expenses were $102,000, and one-third of the company’s $9,300
income taxes were paid during the year. Net cash provided by operating activities is:
a. $34,000.
b. $24,700.
c. $30,900.
d. $27,800.
Answer:
Which of the following statements is incorrect?
a. Expenses increase stockholders’ equity.
b. Expenses have normal debit balances.
c. Expenses decrease stockholders’ equity.
d. Expenses are a negative factor in the computation of net income.
Answer:
Eaton Company’s ledger at the end of the current year shows Accounts Receivable of
$150,000.
Instructions
a. If Allowance for Doubtful Accounts has a credit balance of $4,400 in the trial balance
and bad debts are expected to be 10% of accounts receivable, journalize the adjusting
entry for the end of the period.
b. If Allowance for Doubtful Accounts has a debit balance of $4,400 in the trial balance
and bad debts are expected to be 10% of accounts receivable, journalize the adjusting
entry for the end of the period.
Answer:
Treasury stock is reported in the balance sheet as a deduction from
a. capital stock.
b. additional paid-in capital.
c. retained earnings.
d. paid-in capital and retained earnings.
Answer:
Adjusting entries are required
a. because some costs expire with the passage of time and have not yet been
journalized.
b. when the company’s profits are below the budget.
c. when expenses are recorded in the period in which they are incurred.
d. when revenues are recorded in the period in which services are performed.
Answer:
Switzer, Inc. has 8 computers which have been part of the inventory for over two years.
Each computer cost $600 and originally retailed for $900. At the statement date, each
computer has a current replacement cost of $400. How much loss should Switzer, Inc.,
record for the year?
a. $1,600.
b. $2,400.
c. $3,200.
d. $4,000.
Answer:
Dinosaur Junior Corporation purchased a one-year insurance policy in January 2015 for
$75,000. The insurance policy is in effect from May 2015 through April 2016. If the
company neglects to make the proper year-end adjustment for the expired insurance
a. net income and assets will be understated by $50,000.
b. net income and assets will be overstated by $50,000.
c. net income and assets will be understated by $25,000.
d. net income and assets will be overstated by $25,000.
Answer:
Debt investments that are held to maturity are recorded at
a. amortized cost.
b. fair value.
c. original cost.
d. maturity value.
Answer:
The following information is available for Yancey Company:
Assume that Yancey uses a periodic inventory system and that there are 700 units left at
the end of the month.
Instructions
Compute the cost of ending inventory under the
(a) FIFO method.
(b) LIFO method.
Answer:
A transaction involving a loss on the sale of equipment affects cash provided (used) by
a. operations and investing activities.
b. operations and financing activities.
c. financing activities and investing activities.
d. operations, financing activities, and investing activities.
Answer:
Kong Inc. reported net income of $298,000 during 2015 and paid dividends of $26,000
on common stock. It also has 10,000 shares of 6%, $100 par value cumulative preferred
stock outstanding. Common stockholders’ equity was $1,200,000 on January 1, 2015,
and $1,600,000 on December 31, 2015. The company’s return on common stockholders’
equity for 2015 is:
a. 17.4%
b. 17.0%
c. 15.1%
d. 21.3%
Answer:
A $600,000 bond was retired at 102 when the carrying value of the bond was $622,000.
The entry to record the retirement would include a
a. gain on bond redemption of $12,000.
b. loss on bond redemption of $10,000.
c. loss on bond redemption of $12,000.
d. gain on bond redemption of $10,000.
Answer:
All revenue and expense accounts have been closed at the end of the calendar year for
Patton Company. The Income Summary account has total debits of $530,000 and total
credits of $600,000. As of the same date, Retained Earnings has a balance of $115,000,
and the Dividends account has a balance of $48,000.
Instructions
[a) Journalize the entries required to complete the closing of the accounts.
[b) Prepare a retained earnings statement for the year ended December 31, 2015.
Answer:
Management usually desires ________ financial statements and the IRS requires all
businesses to file _________ tax returns.
a. annual, annual
b. monthly, annual
c. quarterly, monthly
d. monthly, monthly
Answer:
Each of the following accounts is reported as long-term liabilities except
a. Interest Payable.
b. Bonds Payable.
c. Discount on Bonds Payable.
d. Premium on Bonds Payable.
Answer:
Common Stock Dividends Distributable is reported as additional paid-in capital in the
stockholders’ equity section.
Answer:
Which of the following combinations presents correct examples of liquidity,
profitability, and solvency ratios, respectively?
Answer:
During a study session, a classmate states that it is not necessary to make journal entries
and then post them to the ledger. She states that it is sufficient to analyze the transaction
and simply record the information in T-accounts.
What is your response to this statement? Be brief, yet concise.
Answer:
The book value of a depreciable asset is always equal to its market value because
depreciation is a valuation technique.
Answer:
Wayne Company reported net income of $265,000 for 2014. Wayne also reported
depreciation expense of $45,000 and a loss of $8,000 on the sale of equipment. The
comparative balance sheet shows a decrease in accounts receivable of $15,000 for the
year, a $17,000 increase in accounts payable, and a $6,000 decrease in prepaid
expenses.
Instructions
Prepare the operating activities section of the statement of cash flows for 2014. Use the
indirect method.
Answer:
The duties of approving an item for payment and paying the item should be done by
different departments or individuals.
Answer:
Internal control consists of the related methods and measures adopted to ____________
its assets and enhance the ______________ and ______________ of its accounting
records.
Answer:
Cost of debt investments includes the price paid plus ______________
Answer:
Depletion expense for a period is only recognized on natural resources that have been
extracted and sold during the period.
Answer: