Nord Company had $375,000 of current assets and $150,000 of current liabilities before
borrowing $70,000 from the bank with a 3-month note payable. What effect did the
borrowing transaction have on the amount of Nord Company’s working capital?
a. No effect
b. $70,000 increase
c. $140,000 increase
d. $70,000 decrease
Answer:
Notes receivable are recognized in the accounts at
a. cash (net) realizable value.
b. face value.
c. gross realizable value.
d. maturity value.
Answer:
Sales revenue
a. may be recorded before cash is collected.
b. will always equal cash collections in a month.
c. only results from credit sales.
d. is only recorded after cash is collected.
Answer:
On January 1, Boswell borrowed $20,000 at 6% interest for 1 year. Boswell accrues
interest on the note monthly. If no adjusting entry is made at the end of January, what
will be the impact on the financial statements for January?
a. Revenues will be overstated by $100
b. Expenses will be understated by $1,200
c. Liabilities will be understated by $2,000
d. Net Income will be overstated by $100
Answer:
An aircraft company would most likely have
a. a high inventory turnover.
b. low profit margin.
c. high volume.
d. a low inventory turnover.
Answer:
Fugazi City College sold season tickets for the 2015 football season for $240,000. A
total of 8 games will be played during September, October and November. In
September, three games were played. The adjusting journal entry at September 30
a. is not required. No adjusting entries will be made until the end of the season in
November.
b. will include a debit to Cash and a credit to Ticket Revenue for $60,000.
c. will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for
$90,000.
d. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for
$80,000.
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:
A buyer would record a payment within the discount period under a perpetual inventory
system by crediting
a. Accounts Payable.
b. Inventory.
c. Purchase Discounts.
d. Sales Discounts.
Answer:
If stock is issued for a noncash asset, the asset should be recorded on the books of the
corporation at
a. fair value.
b. cost.
c. zero.
d. a nominal amount.
Answer:
The principles of internal control activities are used in the
a. U.S. but not globally.
b. internationally but not in the U.S.
c. in the U.S. and Canada but not globally.
d. globally.
Answer:
The following information is available for Lighten Company:
Lighten’s cost of goods sold is
a. $125,000.
b. $120,000.
c. $108,000.
d. $105,000.
Answer:
The balance in the supplies account on June 1 was $5,200, supplies purchased during
June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be
used for the appropriate adjusting entry is
a. $3,500.
b. $5,700.
c. $6,500.
d. $11,700.
Answer:
A review of the November 30 bank statement and other data of James Company reveals
the following:
Instructions: Prepare the November 30 (a) bank reconciliation (omit heading) and (b)
related journal entries.
(b)
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 FIFO inventory method, the amount allocated to cost of goods sold
for June is
a. $683.
b. $825.
c. $1,290.
d. $1,432.
Answer:
Jean’s Vegetable Market had the following transactions during 2014:
1> Issued $50,000 of par value common stock for cash.
2> Repaid a 6 year note payable in the amount of $22,000.
3> Acquired land by issuing common stock of par value $100,000.
4> Declared and paid a cash dividend of $2,000.
5> Sold a long-term investment (cost $3,000) for cash of $8,000.
6> Acquired an investment in IBM stock for cash of $15,000.
What is the net cash provided (used) by investing activities?
a. $15,000
b. $33,000
c. ($7,000)
d. $8,000
Answer:
Entries in a sales journal are
a. posted only to accounts in an accounts receivable subsidiary ledger.
b. posted only to accounts in the general ledger.
c. posted to accounts in an accounts receivable subsidiary ledger and to accounts in the
general ledger.
d. never posted.
Answer:
Nicklaus Company has decided to sell one of its old machines on June 30, 2015. The
machine was purchased for $200,000 on January 1, 2011, and was depreciated on a
straight-line basis for 10 years with no salvage value. If the machine was sold for
$65,000, what was the amount of the gain or loss recorded at the time of the sale?
a. $45,000.
b. $135,000.
c. $55,000.
d. $115,000.
Answer:
Ratios that measure the short-term ability of the company to pay its maturing
obligations are
a. liquidity ratios.
b. profitability ratios.
c. solvency ratios.
d. trend ratios.
Answer:
Indicate where the purchase of land for cash would appear, if at all, on the indirect
statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Answer:
Presented below are three different aircraft lease transactions that occurred for Western
Airways in 2015. All the leases start on January 1, 2015. In no case does Western
receive title to the aircraft during or at the end of the lease period; nor is there a bargain
purchase option.
Instructions
(a) Which of the above leases are operating leases and which are capital leases? Explain
your answer.
(b) How should the lease transaction with Utah Insurance be recorded in 2015?
(c) How should the lease transaction with Laine Leasing be recorded in 2015?
Answer:
Clare Company had total operating expenses of $185,000 in 2014, which included
Depreciation Expense of $36,000. Also, during 2014, prepaid expenses increased by
$8,000 and accrued expenses decreased by $7,600.
Instructions
Calculate the amount of cash payments for operating expenses in 2014 using the direct
method.
Answer:
Depletion expense is reported in the income statement as an operating expense.
Answer:
For its fiscal year ending December 31, 2015, Conner Corporation reported the
following partial data
The flood loss is considered an extraordinary item. The income tax rate is 30% on all
items.
Instructions
Prepare a correct income statement, beginning with income before income taxes.
Answer:
Management consulting includes examining the financial statements of companies and
expressing an opinion as to the fairness of their presentation.
Answer:
The study of accounting is not useful for a business career unless your career objective
is to become an accountant.
Answer:
The balances of the major classes of plant assets and accumulated depreciation by
major classes should be disclosed in the balance sheet or notes.
Answer:
Finished goods are a classification of inventory for a manufacturer that are completed
and ready for sale.
Answer:
When the disposal of a significant component occurs, the income statement should
report both income from continuing operations and income (loss) from discontinued
operations.
Answer: