The following information was taken from the financial statements of Lawson
Company:
Instructions
(a) Compute the net sales for each year.
(b) Compute the cost of goods sold in dollars and as a percentage of net sales for each
year.
(c) Compute operating expenses in dollars and as a percentage of net sales for each
year. (Income taxes are not operating expenses).
Answer:
The following data are available for Alamo Corporation.
Net cash provided by investing activities is:
a. $285,000.
b. $260,000.
c. $305,000.
d. $425,000.
Answer:
Comanic Corp. has common stock of $5,400,000, retained earnings of $2,000,000,
unrealized gains on trading securities of $100,000 and unrealized losses on
available-for-sale securities of $200,000. What is the total amount of its stockholders’
equity?
a. $7,200,000
b. $7,400,000
c. $7,300,000
d. $7,500,000
Answer:
As of June 30, 2015, Actual Tigers Company has assets of $100,000 and stockholders’
equity of $40,000. What are the liabilities for Actual Tigers Company as of June 30,
2015?
a. $40,000
b. $60,000
c. $100,000
d. $140,000
Answer:
A major difference between IFRS and GAAP relates to the
a. Retained Earnings account.
b. Revaluation Surplus account.
c. Share Capital account.
d. Share Premium account.
Answer:
Mofro’s Computer Repair Shop started the year with total assets of $300,000 and total
liabilities of $200,000. During the year, the business recorded $500,000 in computer
repair revenues, $300,000 in expenses, and Mofro paid dividends of $50,000. The net
income reported by Mofro’s Computer Repair Shop for the year was
a. $100,000.
b. $150,000.
c. $200,000.
d. $250,000.
Answer:
A credit granted to a customer for returned goods requires a debit to
a. Sales Revenue and a credit to Cash.
b. Sales Returns and Allowances and a credit to Accounts Receivable.
c. Accounts Receivable and a credit to a contra-revenue account.
d. Cash and a credit to Sales Returns and Allowances.
Answer:
The current carrying value of Kane’s $800,000 face value bonds is $797,000. If the
bonds are retired at 103, what would be the amount Kane would pay its bondholders?
a. $797,000
b. $800,000
c. $820,910
d. $824,000
Answer:
The second set of debit and credit columns on a worksheet is generally used for
a. closing entries.
b. the trial balance.
c. the balance sheet figures.
d. the adjustments.
Answer:
A company purchased land for $90,000 cash. Real estate brokers’ commission was
$5,000 and $7,000 was spent for demolishing an old building on the land before
construction of a new building could start. Under the historical cost principle, the cost
of land would be recorded at
a. $107,000.
b. $90,000.
c. $70,000.
d. $102,000.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
What are total current liabilities at December 31, 2015?
a. $18,000
b. $70,000
c. $88,000
d. $120,000
Answer:
A deposit made by a company will appear on the bank statement as a
a. debit.
b. credit.
c. debit memorandum.
d. credit memorandum.
Answer:
The double-entry system requires that each transaction must be recorded
a. in at least two different accounts.
b. in two sets of books.
c. in a journal and in a ledger.
d. first as a revenue and then as an expense.
Answer:
Accrued revenues are
a. cash received and a liability recorded before services are performed.
b. revenue for services performed and recorded as liabilities before they are received.
c. revenue for services performed but not yet received in cash or recorded.
d. revenue for services performed and already received in cash and recorded.
Answer:
Larson Company has twenty employees who each earn $120 per day. If they
accumulate vacation time at the rate of 1.5 vacation days for each month worked, the
amount of vacation benefits that should be accrued at the end of the month is
a. $240.
b. $2,400.
c. $3,600.
d. $360.
Answer:
Three accounting issues associated with accounts receivable are
a. depreciating, returns, and valuing.
b. depreciating, valuing, and collecting.
c. recognizing, valuing, and disposing.
d. accrual, bad debts, and disposing.
Answer:
The following information is available for Pencil Corporation:
A 20% stock dividend is declared and paid when the market value was $16 per share.
Instructions
Compute each of the following after the stock dividend.
(a) Total stockholders’ equity.
(b) Number of shares outstanding.
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 each of the following under the average-cost method:
(a) Cost of ending inventory.
(b) Cost of goods sold.
Answer:
A small neighborhood barber shop that is operated by its owner would likely be
organized as a
a. joint venture.
b. partnership.
c. corporation.
d. proprietorship.
Answer:
The total of the individual account balances in the accounts receivable subsidiary ledger
should agree with the total of the individual account balances in the accounts payable
subsidiary ledger.
Answer:
An inexperienced accountant for Tilly Company made the following errors in recording
merchandising transactions.
1> A $270 refund to a customer for faulty merchandise was debited to Sales Revenue
$270 and credited to Cash $270.
2> A $310 credit purchase of supplies was debited to Inventory $310 and credited to
Cash $310.
3> A $190 sales return was debited to Sales Revenue.
4> A cash payment of $40 for freight on merchandise purchases was debited to
Freight-Out $400 and credited to Cash $400.
Instructions
Prepare separate correcting entries for each error, assuming that the incorrect entry is
not reversed. (Omit explanations.)
Answer:
In vertical analysis, the base amount in an income statement is usually net sales.
Answer:
Shellhammer Company’s inventory records show the following data for the month of
September:
A physical inventory on September 30 shows 200 units on hand. Calculate the value of
the ending inventory and cost of goods sold if the company uses weighted average
inventory costing and a periodic inventory system. Round cost per unit to 2 decimal
places and ending inventory and cost of goods sold to the nearest dollar.
Answer:
During 2014, Blaine Company sold a building with a book value of $145,000 for
proceeds of $175,000. The company also sold long-term investments for proceeds of
$32,000. The company purchased land and a new building for $320,000 by signing a
long-term note payable. No other transactions impacted long-term asset accounts during
2014.
Instructions
Compute net cash flows from investing activities.
Answer:
Consolidated financial statements should be prepared only when a subsidiary company
has a controlling interest in the parent company.
Answer:
On January 14, Balcom Corporation purchased 20, 11%, $1,000 Eiger Company bonds for
$20,000. On November 30, the company sold 10 of the Eiger Company bonds for $11,600.
Prepare journal entries for the purchase and sale of the Eiger Company bonds.
Answer:
