Nevada Sales purchased some equipment for $12,000 by issuing a five-year note
payable. This will appear in the non-cash investing and financing activities section of
the statement of cash flows.
The discount on bonds payable becomes interest expense through a process of
depreciation.
In the cash receipts journal, the Other Accounts CR column is used when a transaction
involves a credit entry that is not listed in the headings (columns) of the cash receipts
journal.
Free cash flow is calculated by adding cash payments planned for investments in
long-term assets and cash dividends to the amount of net cash provided by operating
activities.
When a corporation retires its shares of treasury stock, the stock certificates are
canceled.
A company purchased machinery by issuing a long-term note payable. This is an
example of a non-cash investing and financing activity for the statement of cash flows.
To report accounts receivable at the appropriate amount on the balance sheet, a
company determines an accurate estimate of uncollectible accounts and recognizes the
associated bad debt expense.
When a company acquires a long-term bond investment, by paying cash, total assets
remain unchanged.
Maryland Services purchased 10 delivery vehicles by issuing a 10-year installment note
payable for $320,000. This transaction is shown in the investing activities section of the
statement of cash flows.
Employer FICA is paid by the employer and recorded as a payroll tax expense.
The fair value method is used to account for available-for-sale debt investments.
When a company accepts a promissory note from a customer who cannot pay an
accounts receivable, the company will credit Notes Receivable.
Each time a sale is recorded, two journal entries are also recorded to account for
estimated sales returns.
When borrowing cash from a bank, the business is required to sign a promissory note
stating that the business will pay the principal plus interest at a specified maturity date.
The higher the acid-test ratio, the less able the business is to pay its current liabilities.
A disadvantage of a typical enterprise resource planning system is that it cannot be
offered through cloud computing.
All available-for-sale debt investments are reported as long-term assets on the balance
sheet.
Unlike cash dividends, which are optional payments to stockholders, the interest
payments on bonds are required.
The beginning balance in the Common Stock account of Woodlands Technologies, Inc.
was $80,000. The revenues and expenses amounted to $55,000 and $41,000,
respectively. During the year, the company did not declare any dividends or issue
common stock. The Common Stock account will have $135,000 at the end of the year.
An invoice can be either a sales invoice or a purchase invoice.
Centennial, Inc. sold goods on credit terms n/20 to Harper, Inc. This means no
discounts are offered, and the amount of the invoice is due 20 days after the invoice
date.
A trial balance is a list of all of the ledger accounts of a company with their balances at
a point in time.
On July 14, Jones Sporting Goods sold equipment that originally cost $50,000. After
updating depreciation, the Accumulated Depreciation – Equipment had a normal
balance of $44,000. The selling price of the equipment was $42,000. Jones will report a
loss of $8,000.
When a company issues stock at an amount greater than the par value, a gain is
recorded for the difference between the issue price and the par value.
Managerial accounting focuses on providing information for external decision makers.
For the year ended December 31, 2019, the Statement of Cash Flows for Mississippi
Family Auto Supply shows the following information: Net Cash Used by Operating
Activities, $(70,000); Net Cash Provided by Investing Activities, $48,000; and Net
Cash Provided by Financing Activities, $42,000. Cash has increased by $169,000.
Businesses strive to sell merchandise inventory quickly because the merchandise
inventory generates no profit until it is sold.
Dividends are the expenses of a business.
In computing the lower-of-cost-or-market, under IFRS, the market value is defined as
the net realizable value, which is essentially the sales price.
A note payable can be classified either as a long-term liability or a short-term liability,
depending on the discretion of the accountant.
Defective, damaged, or otherwise unsuitable merchandise that is returned to the seller is
referred to as purchase allowances by the purchaser.
Cash in the bank is more liquid than a petty cash fund.
Retirement compensation is a benefit because the employer sets aside money for the
employee’s future retirement.
An imprest system is a way to account for petty cash by maintaining a constant balance
in the petty cash account.
Legal capital refers to the portion of stockholders’ equity that cannot be used for
dividends.
In an accounting cycle, an analysis of transactions is performed at the end of each
accounting period.
When computing investing cash flows, it is helpful to evaluate the T-accounts for each
long-term liability.
A general ledger is an accounting journal designed to record one specific type of
transaction.
A stock split can involve issuing more shares of stock than authorized in the corporate
charter.
On November 1, 2019, Alpha Omega, Inc. sold merchandise for $15,000, FOB
destination, with payment terms, n/30. The cost of goods sold was $5,100. On
November 3, the customer returns on this sale amounted to $6,000. The company
received the balance on November 9, 2019. Calculate the cost of goods sold from these
transactions.
A) $2,040
B) $5,940
C) $5,100
D) $3,060
The following is a summary of information presented on the financial statements of a
company on December 31, 2019.
With respect to net sales revenue, a horizontal analysis reveals ________.
A) a 20.92% increase in net sales revenue
B) a 240.62% decrease in net sales revenue
C) a decrease of $44,000 in net sales revenue
D) a $44,000 increase in net sales revenue
What is the calculation for return on assets (ROA)? What does ROA measure?
The cash basis of accounting ignores ________.
A) payables
B) revenue
C) cash
D) expenses
Which of the following is true of posting entries from a cash payments journal?
A) Entries in the cash payments journal are posted monthly to the accounts payable
subsidiary ledger and daily to the general ledger.
B) The postings of accounts payable are credits and increase the balance in the
individual accounts payable account.
C) After posting the payment of accounts payable, a check mark is entered in the cash
payments journal and the posting reference is printed in the subsidiary ledger.
D) At the end of the month, each column is totaled and the totals, including the Other
Accounts DR column, are posted to the specific general ledger accounts.
On January 1, 2017, the Accounts Receivable of Martha, Inc. had a debit balance of
$150,000. During January, the company provided services for $400,000 on account.
The company collected $240,000 from its customers on account in January. What was
the ending balance in the Accounts Receivable account at the end of January?
A) $160,000
B) $550,000
C) $310,000
D) $400,000
Outdoor Paints Company uses the direct method for preparing its statement of cash
flow. Outdoor reports the following information regarding 2019:
From the income statement:
Sales Revenues, $270,000
Cost of Goods Sold, $213,000
Operating Expenses, $31,000
From the balance sheet:
What amount will be shown for payments to suppliers for operating expenses? (Accounts
Payable are for purchases of merchandise inventory only, and Accrued Liabilities relate to
operating expenses.)
A) $34,100
B) $31,000
C) $29,400
D) $35,700
Paid-in capital consists of ________.
A) amounts received from customers
B) amounts raised by issuing bonds or preferred stocks
C) earnings generated by the corporation
D) amounts received from stockholders in exchange for stock
Which of the following accounts would appear in the income statement credit column
of the worksheet?
A) Service Revenue
B) Prepaid Insurance
C) Unearned Revenue
D) Depreciation Expense
Which of the following items must be examined by the controller or treasurer before
signing a check?
A) the ledger
B) the purchase order
C) the confirmation report
D) the journal entry
Which of the following accounts will be included in a post-closing trial balance?
A) Accumulated Depreciation—Building
B) Rent Expense
C) Interest Expense
D) Service Revenue
From its inception through the year of 2017, First Mart, Inc. was profitable and made
strong dividend payments each year. In the year 2018, First Mart had major losses and
paid no dividends. In 2019, the company started making large profits again, and they
were able to pay dividends to all shareholders—both common and preferred. There are
2000 shares of cumulative, 10% preferred stock outstanding. The preferred stock has a
par value of $100. What is the total amount of dividends that should be paid to the
preferred stockholders in December, 2019?
A) $60,000
B) $90
C) $20,000
D) $40,000
GAAP refers to guidelines for accounting information in the United States. The
acronym GAAP in this statement refers to ________.
A) Globally Accepted Accounting Policies
B) Government Approved Accounting Principles
C) Generally Accredited Accounting Policies
D) Generally Accepted Accounting Principles
Millburn Corporation has acquired a property that included both land and a building for
$510,000. The corporation hired an appraiser who has determined that the market value
of the land is $320,000 and that of the building is $440,000. At what amount should the
corporation record the cost of land? (Round any intermediate calculations to two
decimal places, and your final answer to the nearest dollar.)
A) $341,700
B) $134,400
C) $255,000
D) $214,200
Which of the following should NOT be considered when comparing the Adjusted Trial
Balance to the Post-Closing Trial Balance to ensure that no errors were made in the
closing process?
A) Account balances above Retained Earnings are the same.
B) The account balances on each of the trial balances are the same.
C) Account balances below Retained Earnings are zero.
D) The Retained Earnings account balance on the post-closing trial balance matches
Retained Earnings on the balance sheet.
A business makes a cash payment of $12,000 to a supplier for supplies purchased two
weeks earlier. Which of the following accounts is debited?
A) Cash
B) Accounts Payable
C) Supplies
D) Accounts Receivable
The Allowance for Bad Debts account has a credit balance of $2,000 before the
adjusting entry for bad debts expense. The company’s management estimates that 2% of
net credit sales will be uncollectible for the year 2019. Net credit sales for the year
amounted to $270,000. What will be the balance of Allowance for Bad Debts on the
December 31, 2019 balance sheet?
A) $5,400
B) $2,000
C) $7,400
D) $5,360
On October 1, 2019, Fashion Jewelers accepted a 5-month, 11% note for $7,500 in
settlement of an overdue account receivable. The accounting period ends on December
31. Calculate the accrued interest on the note at December 31, 2019. (Round any
intermediate calculations to two decimal places, and your final answer to the nearest
dollar.)
A) $206
B) $344
C) $825
D) $413
Which of the following statements regarding receivables is correct?
A) Each receivable transaction involves three parties.
B) Receivables occur when a business loans money to another party.
C) A receivable occurs when a business makes a cash sale of goods or services to
another party.
D) A receivable is the right to pay cash in the future from a current receivable
transaction.
The field of accounting that focuses on providing information for external decision
makers is ________.
A) managerial accounting
B) financial accounting
C) cost accounting
D) nonmonetary accounting
Which of the following is NOT included in income from continuing operations?
A) gain on sale of machinery
B) a segment of a business that has been discontinued
C) cost of goods sold
D) losses due to lawsuits
The Merchandise Inventory account balance is $52,000. A physical count of inventory
reveals that the actual inventory balance is $41,000. Which of the following would be
included in the adjusting entry? (Assume a perpetual inventory system.)
A) a $41,000 credit to Merchandise Inventory
B) a $52,000 debit to Cost of Goods Sold
C) a $11,000 credit to Cost of Goods Sold
D) a $11,000 credit to Merchandise Inventory
Fleetwood, Inc. signed a three-year note payable for $59,000 at 7% annual interest.
What is the interest expense for 2019 if the note was signed on August 1, 2019? (Do not
round any intermediate calculations, and round your final answer to the nearest dollar.)
A) $2065
B) $1721
C) $12,390
D) $4130
Which of the following is NOT an inventory costing method?
A) specific identification
B) lower of cost or market
C) last-in, first-out
D) first-in, first-out
Which of the following is the correct formula to calculate inventory turnover?
A) Inventory turnover = Cost of goods sold / Average merchandise inventory
B) Inventory turnover = Cost of goods sold × Average merchandise inventory
C) Inventory turnover = Cost of goods sold + Average merchandise inventory
D) Inventory turnover = Cost of goods sold – Average merchandise inventory
In counting the number of days in a note term, ________.
A) do not count the maturity date
B) do not count the interest periods
C) count the date the note was issued
D) None of the statements are correct.
A company that uses the perpetual inventory system purchased inventory for $970,000
on account with terms of 3/7, n/20. Which of the following correctly records the
payment made 15 days after the date of invoice?
A)
B)
C)
D)
For a company with significant uncollectible receivables, the direct write-off method is
unsuitable because ________.
A) it overstates liabilities on the balance sheet
B) it violates the matching principle
C) it uses estimates for determining the bad debt expense
D) companies are not able to track customer payment histories
Accountants record ________.
A) economic recessions
B) estimated future transactions
C) only those events that have dollar amounts than can be measured reliably
D) the $20,000 increase in value of a building that actually cost $50,000 but could be
sold for $70,000
The proportion of assets that are financed with debt can be calculated using the
________ ratio.
A) quick
B) debt
C) asset
D) cash
Which of the following statements is true if a bond’s stated interest rate is the same as
the market rate?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount lower than the maturity value.