Department contribution margin equals gross profit on sales minus direct departmental
expenses.
A deposit ticket usually combines checks deposited with coin and currency deposited.
On the worksheet, the Beginning Inventory account is found in the debit column of the
Balance Sheet.
All closing entries must be posted after preparing the post-closing trial balance.
When a department showing a loss is eliminated, other departments will always achieve
a greater contribution margin.
The worksheet is a formal financial statement.
The Discount Lost account is used when the net method is used for recording invoices.
Payroll tax deductions represent expenses to the employer.
Indirect expenses are subjective in nature and may be allocated in a number of ways.
The straight line method for amortization of bonds allocates equal amounts of premium
to Bonds Interest Expense each period.
Gains incurred in selling or trading assets are always recognized.
Posting is the process of transferring information from the ledger to the journal.
After all liabilities have been paid, the remaining assets are distributed based on the
partners’ capital balances.
Using the voucher system when paying an invoice outside the discount period,
assuming the gross method, the entry would be to debit Vouchers Payable, credit
Discounts Lost, and credit Cash.
When an account receivable is written off as uncollectible using the direct write off
method, it increases Bad Debts Expense.
The normal balance of the Petty Cash account is a credit.
The debt-to-equity ratio measures the extent of (or proportion of) borrowed capital to
equity, with which a business operates.
When calculating book value per share, if a redemption value is not stated, market
value is used instead.
The market rate of interest and the contract rate of interest will always be the same for a
bond sold at a discount.
The acid test ratio is the best test to determine the ability to pay short-term debt.
The Freight-in account is an operating expense account.
The gross profit method can be used to estimate the amount of inventory destroyed by
fire.
Unearned Rent Revenue is a income statement account.
Employees must receive W-3s by January 31 of the following year.
Written authorizations for cash payments are called vouchers.
LIFO provides an up-to-date ending inventory on the balance sheet because it uses the
latest purchases to calculate ending inventory.
The debits do not equal credits on the adjusted trial balance columns of the worksheet.
Under the accrual system, expenses are recorded when paid.
The function of accounting includes analyzing, recording, classifying, summarizing,
reporting, strategic management and environmental assessment.
A bond issue of $500,000 sold at 107 has a bond discount of $35,000.
An incorrect inventory figure will affect only the balance sheet.
The worksheet contains a trial balance.
If the ending balance in the Cash Short and Over account is a debit, it indicates that
cash shortages have exceeded cash overages for the period.
In a perpetual inventory system, Purchases, Freight-In, and Purchases Returns and
Allowances accounts are not used.
For tax purposes, equipment is depreciated using the straight-line method under
MACRS.
Each individual expense account is credited when closing, and the total of all the
expense accounts is transferred to Income Summary.
The credit recorded in the journal entry to establish the petty cash fund is to:
A) Cash.
B) Petty Cash.
C) Postage Expense.
D) Withdrawals.
The cost of a plant asset was increased for the payment of this year’s insurance
premium. This error would cause:
A) the period’s net income to be overstated.
B) the period’s net income to be understated.
C) the period’s end assets to be understated.
D) None of these is correct.
The ledger is:
A) a group of accounts that records data from business transactions.
B) a tool used to insure that all accounts have normal balances.
C) a chronological record of the day’s transactions.
D) a tool used to ensure that debits equal credits.
Which is NOT a good reason to use the specific invoice method?
A) The flow of goods and flow of cost are the same.
B) It can be used with goods with large sales volume.
C) It is simple to use if there is a small amount of high-cost unique goods.
D) Costs are matched with the sales they helped to produce.
The return of merchandise was recorded as a debit to Accounts Receivable and a credit
to Purchases Returns and Allowances. This error will cause:
A) net income to be overstated.
B) net income to be understated.
C) total liabilities to be understated.
D) total assets to be overstated.
The beginning balance in the Capital account would appear on which financial
statement?
A) Statement of Owner’s Equity
B) Balance Sheet
C) Income Statement
D) None of these answers is correct.
When preparing the statement of cash flows by the indirect method, if current liabilities
decrease, the difference is:
A) added to net income.
B) added to investments.
C) deducted from net income.
D) subtracted from investments.
On November 1, Phone Center received $4,800 for two years’ rent in advance from
Garrison Company. The November 30 adjusting entry that Phone Center should make is
to:
A) debit Rental Income; credit Unearned Rent $3,000.
B) debit Cash; credit Rental Income $3,000.
C) debit Unearned Rent; credit Rental Income $200.
D) debit Unearned Rent; credit Rent Expense $200.
The posting reference column in the ledger is:
A) used to record the journal and page number the transactions originated.
B) used to record the ledger number.
C) used to record the date.
D) not used.
Jemco bought goods for $300 on credit. Jemco returned $50 worth of goods. Terms of
the sale were 2/10, n/30. If Jemco pays the amount owed within the discount period,
what is the amount they should pay?
A) $300
B) $255
C) $245
D) $250
Fit City estimates it will collect $3,300 of the $3,525 owed by customers. The
difference of $225 represents the:
A) Gross Accounts Receivable.
B) the Net Realizable Value.
C) Allowance for Doubtful Accounts.
D) Value of the Current Unpaid Receivables.
A partner may withdraw from a partnership and take assets valued at more than book
equity if:
A) the remaining partners are not anxiously awaiting the partner’s retirement.
B) partnership assets are overvalued.
C) partnership assets are undervalued.
D) Both A and C are correct.
A debit to an expense account was posted as a debit to a revenue account. This error
would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) revenue to be understated.
D) None of the above is correct.
Find the maturity dates for the following:
a) A 103-day note dated April 22.
b) A 6-month note dated March 31.
c) A 80-day note dated February 12, 2016, a leap year.
At the start of this year 18 months rent was paid. At the year’s end, how will this affect
the balance sheet?
A) Assets will be decreased.
B) Liabilities will be increased.
C) Owner’s equity will be increased.
D) This has no effect on the period end balance sheet.
BNL completed a performance and collected revenue of $10,000 not previously billed
or recorded. The journal entry to record the collection would be:
A)
B)
C)
D)
Gino’s Corporation had 30,000 shares of $16 par value common stock outstanding with
a market value of $30 per share. Gino announced a four-for-one stock split. After the
split, the par value of the stock:
A) remained the same as before the split.
B) was reduced to $4.00 per share.
C) was reduced by $4.00 per share.
D) was reduced to $8.00 per share.
The Logan Company issued 140 shares of its $12 par value stock for $14 per share. The
entry to record the receipt of cash and issuance of the stock would include a:
A) debit to Cash of $1,680; credit to Common Stock for $1,680.
B) debit to Cash for $1,960.
C) credit to Common Stock for $1,960.
D) debit to Discount on Common Stock for $280.
Carl’s earnings during the month of March were $6,200. His earnings for the year prior
to March were $5,600. Carl’s employer is subject to federal unemployment taxes of
0.8% and state unemployment taxes of 5.4% on the first $7,000. The employer’s
unemployment payroll tax expense for Carl in the month of March is:
A) $4.96.
B) $86.80.
C) $496.00.
D) $0.49.
The journal entry to record a loss when selling a plant asset would include:
A) a credit to accumulated depreciation.
B) a debit to loss on sale of plant asset.
C) a debit to the plant asset account.
D) None of these is correct.
Moab Corporation sells $400,000 of 7%, 20-year bonds for 97 on January 1. Interest is
paid on January 1 and July 1. Straight-line amortization is used. What is the amount of
the discount at issuance?
A) $10,000
B) $5,000
C) $12,000
D) $28,000
How are credits distinguished from debits in the journal?
A) A line separation
B) A different color
C) Indenting
D) There is no distinction.
A debit memorandum decreases which account on the seller’s books?
A) Accounts Payable
B) Purchases Returns and Allowances
C) Sales Returns and Allowances
D) Accounts Receivable
If current assets are $60,000 and current liabilities are $10,000, the current ratio is:
A) 5:1.
B) 6:1.
C) 0.6:1.
D) None of the above.
The trial balance:
A) includes all accounts with a ledger balance.
B) includes assets, liabilities, capital, withdrawals, revenues and expenses.
C) ensures that debits equal credits.
D) All of the above are correct.
The reason for filing vouchers in an unpaid voucher file according to due date is:
A) to allow the company to take advantage of cash discounts.
B) to allow the company to cancel payment of the bills.
C) to keep accounts receivable up to date.
D) to keep the cash payments journal up to date.
After the adjustment for depreciation has been made, the original cost of the equipment:
A) increases with a credit.
B) decreases with a debit.
C) remains the same.
D) None of these answers is correct.
Interest on a $5,000, 15% promissory note for six months is:
A) $375.
B) $37.50.
C) $3,750.
D) $3.75.
Articles of partnership:
A) are required to form a partnership by federal law.
B) are a formal written agreement that states the partners’ relationship.
C) may be an oral agreement.
D) Both B and C are correct.
Chase Hunford negotiated a $50,000 bank loan for 210 days at a bank rate of 12%. The
bank deducted the interest in advance.
Required (show your calculations):
a) Calculate the amount of interest charged by the bank.
b) Calculate the amount of cash Chase received from the bank.
c) Calculate the effective interest rate charged by the bank.
d) Prepare Chase’s journal entry for the transaction.
Double declining-balance method is used in the first year when straight-line should be
used. This error would cause:
A) the period’s net income to be overstated.
B) the period’s net income to be understated.
C) the period end assets to be overstated.
D) None of these is correct.
Jane Kathryn has 15,000 shares outstanding of $15 par value, 5% preferred stock and
100,000 shares outstanding $10 par value common stock. In the first 3 years of
operations, the company paid dividends in Year 1, $0; Year 2, $10,000; Year 3, $20,000.
Calculate the dividend paid to preferred and common stockholders under the following
independent situations:
a) Preferred is non-cumulative and nonparticipating.
Year Preferred Common
1 ________ ________
2 ________ ________
3 ________ ________
b) Preferred is cumulative and nonparticipating.
Year Preferred Common
1 ________ ________
2 ________ ________
3 ________ ________
Which of the following is reported in the statement of cash flows?
A) net cash flow from managing activities
B) net cash flow from illegal activities
C) net cash flow from start-up activities
D) net cash flow from financing activities
On January 1, 20XX, Edward Company issued $100,000, 10-year, 8% bonds at face
values. The bonds have semiannual interest payments on June 30 and December 31.
Record the 20XX journal entries.
For each of the following, identify in column 1 the category to which the account
belongs, in column 2 the normal balance for the account, in column 3 the financial
statement that the account in which the account balance is reported, and in column 4 the
account’s nature (permanent/temporary).
The following data applies to the July 15 payroll for the Woodard Research Firm
(overtime is paid at 1 1/2)
Assume:
FICA-OASDI is 6.2% based on a limit of $117,000.
FICA-Medicare is 1.45%.
FUTA is .8% based on a limit of $7,000.
SUTA is 5.6% based on a limit of $7,000.
State income tax is 2.8%.
Compute the total state income tax.
What is the purpose of adjusting entries? Discuss the effect of not preparing adjusting
entries on various accounts.
Using the following accounts:
[1] Cash
[2] Subscription receivable-common stock
[3] Machinery
[4] Building
[5] Land
[6] Organization costs
[7] Preferred stock
[8] Common stock
[9] Paid in capital in excess of par value – preferred
[10] Paid in capital in excess of par value – common
[11] Common stock subscribed
[12] Discount on common stock
[13] Organization Expense
Indicate the account(s) to be debited and credited to record the following transaction.
Sold common stock at a price equal to the par value.
Debit ________ Credit ________
Given the following accounts:
[1] Expense accounts.
[2] Accounts receivable
[3] Finished goods inventory.
[4] Work in process inventory.
[5] Raw materials inventory.
[6] Factory supplies inventory.
[7] Manufacturing overhead applied
[8] Depreciation expense
[9] Accounts payable.
[10] Payroll
[11] Utilities expense
[12] Sales.
[13] Raw materials purchases.
[14] Manufacturing overhead-control.
[15] Cost of goods sold.
Indicate the account(s) to be debited and credited to record the following transactions.
Charged direct labor to production.
Debit ________ Credit ________
The Allowance for Doubtful Accounts has a credit balance of $5,000. Net credit sales
for the year were $900,000. Four percent is the estimated uncollectible based on net
credit sales. Calculate the amount of the adjustment using the income statement
approach.
Amount of the adjustment ________
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement that the account in which the account balance is reported, and in Column 4
the account’s nature (temporary/permanent).
How would you compute the accrued interest expense on December 31 for a $5,000
note payable for 75 days at 8% interest dated November 25?
Sarah’s Sports uses the allowance method of accounting for uncollectible accounts.
Record journal entries for the transactions listed below:
March 1 Received $900 from John in payment of his $1,300 account.
March 8 Wrote off the balance of John’s account.
March 9 Received $800 from Tayler to pay off his account in full.
If an account is not paid on time using the net method, the account ________ must be
recorded.
Payroll information for Kinzer’s Interior Decorating for the first week in October is as
follows:
Taxable earnings subject to Federal and State Unemployment taxes: $5,000
Assume the following tax rates:
Required: Prepare the payroll tax expense entry.
The following data applies to the July 15 payroll for the Woodard Research Firm
(overtime is paid at 1 1/2)
Assume:
FICA-OASDI is 6.2% based on a limit of $117,000.
FICA-Medicare is 1.45%.
FUTA is .8% based on a limit of $7,000.
SUTA is 5.6% based on a limit of $7,000.
State income tax is 2.8%.
Compute the employees’ FICA-OASDI.
Given the following accounts:
[1] Cash
[2] Accounts receivable
[3] Allowance for doubtful accounts
[4] Merchandise inventory
[5] Store supplies
[6] Store equipment
[7] Accumulated depreciation
[8] Notes payable
[9] Accounts payable
[10] Able Partner’s, Capital
[11] Baker Partner’s, Capital
[12] Able Partner’s, withdrawals
[13] Baker Partner’s, withdrawals
[14] Income summary
[15] Service revenue
[16] Gain on realization
[17] Loss on realization
Indicate the account(s) to be debited and credited to record the following transaction.
Able partner invested cash in the business.
Debit ________ Credit ________
Prepare the general journal entry to record the payroll.
Define and compare capital expenditures and revenue expenditures.
Determine the beginning owner’s equity of a business having an ending owner’s equity
of $3,500, additional investments of $600, withdrawals of $500, and net loss of $750.
$ ________
Using the information provided below, prepare a journal entry to record the payroll tax
expense for Mr. B’s Carpentry.
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $117,000 and Medicare 1.45%.
State unemployment tax rate is 2% on the first $7,000.
Federal unemployment tax rate is 0.8% on the first $7,000.