Described below are several transactions which an organization like the Rogers
Symphony Orchestra might record. Several accounts from the organization’s financial
statements also are listed below. Using these account titles, record each transaction in
proper journal entry format in the general journal provided. A written explanation for
each journal entry is notrequired.
A) Customers are mailed bills for tickets, $225,000. B) Customers pay for tickets in
advance, $130,000. C) Administrative employees are paid their monthly salaries,
$14,000. D) An invoice is received for new musical instruments, $15,200; payment is
due in 30 days. E) Payments received from customers for amounts billed in a previous
transaction amount to $135,000. F) Payment is made for the instruments invoice
received in a previous transaction.
The following set of items describes activities completed by a company in collecting
cash for merchandise sales. For each activity, identify whether or not the activity
adheres to or violates sound internal control procedures. Monthly statements, indicating
the current balance due, are mailed to customers.
a. Adheres to sound internal control procedures
b. Violates sound internal control procedures
c. Neither strengthens nor violates internal control
Fenchurch Corp. uses the direct write-off method to account for bad debts. What are the
effects on the accounting equation of the entry to record the write-off of a customer’s
account balance?
a. Assets and liabilities decrease.
b. Assets and owners’ equity decrease.
c. Owners’ equity decrease and liabilities increase.
d. No effect; assets increase and decrease by the same amount.
Identify where each of the following accounts would be reported on CocaÂCola’s
financial statements.
a. Balance Sheet-Property, Plant, and Equipment
b. Balance Sheet-Intangible Assets
c. Balance Sheet-Current Assets
d. Balance Sheet-Other Assets
e. Income Statement-Operating Section
f. Income Statement-Other Revenue and Expense Section
g. Statement of Cash Flows
Accumulated amortization
Maxim Company sells auto parts. The company employs a periodic inventory system.
Identify all the effects on the accounting equation.
a. Increase in assets
b. Decrease in assets
c. Increase in liabilities
d. Decrease in liabilities
e. Increase on owners’ equity
f. Decrease in owners’ equity
g. Increase in assets and increase in owners’ equity
h. Decrease in assets and decrease in owners’ equity
i. Increase in liabilities and decrease in owners’ equity
j. Decrease in liabilities and increase in owners’ equity
Granted a customer a credit on its balance due for goods that were returned.
Select the letter of the term each statement best describes.
a. authorized shares
b. issued shares
c. outstanding shares
d. par value
e. additional paid-in capital
f. retained earnings
g. cumulative feature
h. participating feature
i. callable stock
j. treasury stock
k. retirement of stock
l. dividend payout ratio
m. stock dividend
n. stock split
o. market value per share
p. convertible stock
q. book value per share
Allows preferred stock to be returned to the corporation in exchange for common stock.
Which of the following transactions affects the liabilities for Gravette, Inc.?
a. Supplies are purchased for cash by Gravette.
b. Gravette places an order for merchandise with a supplier; the merchandise will be
shipped to Ernest White in 60 days.
c. The owners of Gravette invest $100,000 in the company.
d. Payment is made on a bank loan which Gravette had obtained 6 months ago.
Under the allowance method of accounting for bad debts, the company estimates the
amount of bad debts before those debts actually occur.
a. True
b. False
You want to know whether selling and administrative expenses were reasonable for the
past year, based on the level of sales. The best analysis for obtaining this information is:
a. trend analysis
b. vertical analysis
c. horizontal analysis
d. liquidity analysis
A 2-for-1 stock split increases the par value per share.
a. True
b. False
Eversoll Inc. uses the periodic inventory system.
If Eversoll uses the weighted average cost inventory method, the amount assigned to
the June 30th inventory would be
a. $1,359.90
b. $1,486.50
c. $1,549.00
d. $1,591.50
When using the direct method, how is the issuance of stock for cash shown on the
statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
For each transaction select the letter of the type of adjustment that would be required.
a. Deferred expense
b. Deferred revenue
c. Accrued liability
d. Accrued asset
Amounts earned, not received from customers are recorded
Which one of the following is an example of a deferred revenue?
a. Sales are made to customers on credit.
b. Interest has been earned by a bank deposit, but it has not been recorded.
c. Cash is received prior to providing the services to customers.
d. Cash sales are made to customers.
All of the following are considered to be long-term liabilities for Parsons Company
except: a. Bonds issued this year (due in 10 years).
b. The third year payments for a three-year lease signed this year.
c. The current year portion of Deferred taxes.
d. The principal of a note payable signed this year, but due in five years.
Whether LIFO costing is applied at the time each sale is made or only at the end of the
period, both the periodic and perpetual systems will yield the same ending inventory
under LIFO.
a. True
b. False
Four journal entries are presented below. Write an explanation for each entry in the
space provided below the entry.
The independent auditor’s report conveys whether or not the business is a good
investment.
a. True
b. False
Which of the following statements is true regarding the two allowance methods used to
account for bad debts?
a. The percentage of net credit sales approach takes into account the existing balance in
the Allowance for Doubtful Accounts account.
b. The direct write-off method takes into account the existing balance in the Allowance
for Doubtful Accounts account.
c. The percentage of accounts receivable approach takes into account the existing
balance in the Allowance for Doubtful Accounts account.
d. The direct write-off method does a better job of matching revenues and expenses.