In the first month of operations, the total of the debit entries to the cash account
amounted to $1,200 and the total of the credit entries to the cash account amounted to
$800. The cash account has a(n)
a. $800 credit balance.
b. $1,200 debit balance.
c. $400 debit balance.
d. $400 credit balance.
Answer:
Moore, Inc. had 250,000 shares of common stock outstanding before a stock split
occurred, and 1,000,000 shares outstanding after the stock split. The stock split was
a. 2-for-4.
b. 5-for-1.
c. 1-for-4.
d. 4-for-1.
Answer:
Eneri Company’s inventory records show the following data:
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units
for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic
inventory method. What is the cost of goods available for sale?
a. $169,200
b. $178,000
c. $206,000
d. $325,000
Answer:
Financial information is presented below:
The gross profit rate would be
a. .347.
b. .397.
c. .473.
d. .542.
Answer:
Correcting entries are made
a. at the beginning of an accounting period.
b. at the end of an accounting period.
c. whenever an error is discovered.
d. after closing entries.
Answer:
Lewis Corporation experienced a fire on December 31, 2016, in which its
financial records were partially destroyed. It has been able to salvage some
of the records and has ascertained the following balances.
Additional information:
1> The inventory turnover is 4 times
2> The return on common stockholders’ equity is 20%. The company had
no additional paid-in capital.
3> The accounts receivable turnover is 8.6 times.
4> The return on assets is 16%.
5> Total assets at December 31, 2015, were $685,000.
Instructions
Compute the following for Lewis Corporation.
(a) Cost of goods sold for 2016.
(b) Net sales (credit) for 2016.
(c) Net income for 2016.
(d) Total assets at December 31, 2016.
Answer:
Presented here is a partial amortization schedule for Roseland Company who sold
$300,000, five year 10% bonds on January 1, 2014 for $312,000 and uses annual
straight-line amortization.
Which of the following amounts should be shown in cell (i)?
a. $31,200
b. $32,400
c. $30,000
d. $6,000
Answer:
Perdue Company has purchased equipment that requires annual payments of $30,000 to
be paid at the end of each of the next 6 years. The appropriate discount rate is 12%.
What amount will be used to record the equipment?
a. $180,000
b. $123,342
c. $165,772
d. $115,650
Answer:
The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be
a. $3,000.
b. $1,667.
c. $750.
d. $500.
Answer:
Kennedy Company issued stock to Ed Kennedy in exchange for his investment of
$75,000 cash in the business. The company recorded revenues of $555,000, expenses of
$420,000, and had paid dividends of $30,000. What was Kennedy’s net income for the
year?
a. $105,000.
b. $135,000.
c. $165,000.
d. $180,000.
Answer:
An analysis and aging of the accounts receivable of Hugh Company at December 31
revealed the following data:
The cash realizable value of the accounts receivable at December 31, after adjustment,
is:
a. $794,000.
b. $844,000.
c. $850,000.
d. $894,000.
Answer:
Flores Company publishes a monthly sports magazine, Hunting Preview. Subscriptions
to the magazine cost $25 per year. During October 2014, Flores sells 30,000
subscriptions beginning with the November issue. Flores prepares financial statements
quarterly and recognizes subscription revenue earned at the end of the quarter. The
company uses the accounts Unearned Subscription Revenue and Subscription Revenue.
Instructions
(a) Prepare the entry in October for the receipt of the subscriptions.
(b) Prepare the adjusting entry at December 31, 2014, to record subscription revenue
earned in December 2014.
(c) Prepare the adjusting entry at March 31, 2015, to record subscription revenue earned
in the first quarter of 2015.
Answer:
Failure to prepare an adjusting entry at the end of the period to record an accrued
expense would cause
a. net income to be understated.
b. an overstatement of assets and an overstatement of liabilities.
c. an understatement of expenses and an understatement of liabilities.
d. an overstatement of expenses and an overstatement of liabilities.
Answer:
SurferRosa Music Store borrowed $30,000 from the bank signing a 9%, 3-month note
on September 1. Principal and interest are payable to the bank on December 1. If the
company prepares monthly financial statements, the adjusting entry that the company
should make for interest on September 30, would be
a. Debit Interest Expense, $2,700; Credit Interest Payable, $2,700.
b. Debit Interest Expense, $225; Credit Interest Payable, $225.
c. Debit Notes Payable, $2,700; Credit Cash, $2,700.
d. Debit Cash, $675; Credit Interest Payable, $675.
Answer:
In vertical analysis, the base amount for each income statement item is
a. gross profit.
b. net income.
c. net sales.
d. sales.
Answer:
On January 2, 2015, Parr Company purchased 100% of the common stock
of Sneed Company for $420,000. The fair value of Sneed Company’s assets
and liabilities are equal to their book values except that land has a fair
value of $120,000 and buildings have a fair value of $260,000.
Instructions
(a) Complete the worksheet below for preparing a consolidated balance
sheet. You may add accounts to the worksheet if necessary.
(b) Prepare a consolidated balance sheet for Parr Company and Subsidiary
on January 2, 2015.
Answer:
When constructing a worksheet, accounts are often needed that are not listed in the trial
balance already entered on the worksheet from the ledger. Where should these
additional accounts be shown on the worksheet?
a. They should be inserted in alphabetical order into the trial balance accounts already
given.
b. They should be inserted in chart of account order into the trial balance already given.
c. They should be inserted on the lines immediately below the trial balance totals.
d. They should not be inserted on the trial balance until the next accounting period.
Answer:
If prepaid expenses are initially recorded in expense accounts and have not all been
used at the end of the accounting period, the failure to make an adjusting entry will
cause
a. assets to be understated.
b. assets to be overstated.
c. expenses to be understated.
d. contra-expenses to be overstated.
Answer:
A company would not likely use subsidiary ledgers for
a. inventory.
b. retained earnings.
c. equipment.
d. accounts receivable.
Answer:
Vertical analysis is also called
a. common size analysis.
b. horizontal analysis.
c. ratio analysis.
d. trend analysis.
Answer:
If $150,000 face value bonds are issued at 103, the proceeds received will be $103,000.
Answer:
Under a periodic inventory system, the acquisition of inventory is charged to the
Purchases account.
Answer:
Notes payable are often used instead of accounts payable.
Answer:
The declining-balance method of depreciation is called an accelerated depreciation
method because it depreciates an asset in a shorter period of time than the asset’s useful
life.
Answer:
Gross profit rate is computed by dividing cost of goods sold by net sales.
Answer:
The use of special journals often saves time in the _______________ process.
Answer:
Intracompany comparisons of the same financial statement items can often detect
changes in financial relationships and significant trends.
Answer: