Which of the following methods of computing depreciation is production based?
a. Straight-line
b. Declining-balance
c. Units-of-activity
d. None of these answer choices are correct.
Answer:
Additions and improvements
a. occur frequently during the ownership of a plant asset.
b. normally involve immaterial expenditures.
c. increase the book value of plant assets when incurred.
d. typically only benefit the current accounting period.
Answer:
When an account is written off using the allowance method, the
a. cash realizable value of total accounts receivable will increase.
b. cash realizable value of total accounts receivable will decrease.
c. allowance account will increase.
d. cash realizable value of total accounts receivable will stay the same.
Answer:
Retained earnings are occasionally restricted
a. to set aside cash for dividends.
b. to keep the legal capital associated with paid-in capital intact.
c. due to contractual loan restrictions.
d. if preferred dividends are in arrears.
Answer:
Yo La Corporation issued a one-year, 6%, $100,000 note on August 31, 2015. Interest
expense for the year ended December 31, 2015 was
a. $6,000.
b. $2,500.
c. $2,000.
d. $1,500.
Answer:
A debit is not the normal balance for which account listed below?
a. Dividends
b. Cash
c. Accounts Receivable
d. Service Revenue
Answer:
At the beginning of September 2015, Stella Company reported Inventory of $8,000.
During the month, the company made purchases of $35,600. At September 30, 2015, a
physical count of inventory reported $8,400 on hand. Cost of goods sold for the month
is
a. $35,200.
b. $35,600.
c. $36,000.
d. $43,600.
Answer:
On December 1, the accounts receivable control account balance in the general ledger
of Mitus Company was $9,000. The accounts receivable subsidiary ledger contained the
following detailed customer balances: Acme $1,500, Baker $2,100, Fare $2,600, and
Grote $2,800. The following information is available from the company’s special
journals for the month of December:
Cash Receipts Journal: Cash received from Fare $1,900, from Acme $1,600, from
Santos $1,700, and from Baker $1,800.
Sales Journal: Sales to Santos $2,300, to Fare $1,700, to Acme $2,300, and to Grote
$2,400.
Additionally, Fare returned defective merchandise for credit for $900. Acme returned
defective merchandise for $600 which he had purchased for cash.
Instructions
(a) Using T-accounts for Accounts Receivable Control and the detail customer accounts,
post the activity for the month of December.
(b) Reconcile the accounts receivable control account with the subsidiary ledger by
preparing a detail list of customer balances at December 31.
Answer:
A liquidity ratio measures the
a. income or operating success of an enterprise over a period of time.
b. ability of the enterprise to survive over a long period of time.
c. short-term ability of the enterprise to pay its maturing obligations and to meet
unexpected needs for cash.
d. number of times interest is earned.
Answer:
Under IFRS, the statement of comprehensive income can be prepared
under
a. the one-statement approach only.
b. the two-statement approach only.
c. either the one-statement approach or the two-statement approach
d. either the two-statement approach or the stockholders’ equity statement
approach.
Answer:
The periodicity assumption states
a. the business will remain in operation for the foreseeable future.
b. the life of a business can be divided into artificial time periods and that useful reports
covering those periods can be prepared.
c. every economic entity can be separately identified and accounted for.
d. only those things that can be expressed in money are included in the accounting
records.
Answer:
A T-account is
a. a way of depicting the basic form of an account.
b. what the computer uses to organize bytes of information.
c. a special account used instead of a trial balance.
d. used for accounts that have both a debit and credit balance.
Answer:
A truck costing $110,000 was destroyed when its engine caught fire. At the date of the
fire, the accumulated depreciation on the truck was $50,000. An insurance check for
$125,000 was received based on the replacement cost of the truck. The entry to record
the insurance proceeds and the disposition of the truck will include a
a. Gain on Disposal of $15,000.
b. credit to the Truck account of $60,000.
c. credit to the Accumulated Depreciation account for $50,000.
d. Gain on Disposal of $65,000.
Answer:
A customer charges a treadmill at Annie’s Sport Shop. The price is $4,000 and the
financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to
pay the bill within 30 days and a finance charge is added to the customer’s account.
What is the amount of the finance charge?
a. $8
b. $20
c. $80
d. $240
Answer:
In periods of inflation, phantom or paper profits may be reported as a result of using the
a. perpetual inventory method.
b. FIFO costing assumption.
c. LIFO costing assumption.
d. periodic inventory method.
Answer:
Debt investments are recorded at the
a. face value of the bonds purchased.
b. face value of the bonds purchased plus interest.
c. price paid for the bonds plus interest.
d. price paid for the bonds plus brokerage fees.
Answer:
The preparation of closing entries
a. is an optional step in the accounting cycle.
b. results in zero balances in all accounts at the end of the period so that they are ready
for the following period’s transactions.
c. is necessary before financial statements can be prepared.
d. results in transferring the balances in all temporary accounts to retained earnings.
Answer:
A balance sheet shows
a. revenues, liabilities, and stockholders’ equity.
b. expenses, dividends, and stockholders’ equity.
c. revenues, expenses, and dividends.
d. assets, liabilities, and stockholders’ equity.
Answer:
If an adjusting entry is not made for an accrued expense,
a. expenses will be overstated.
b. liabilities will be understated.
c. net income will be understated.
d. stockholders’ equity will be understated.
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. Mofro’s
stockholders’ equity changed by what amount from the beginning of the year to the end
of the year?
a. $100,000.
b. $150,000.
c. $200,000.
d. $250,000.
Answer:
On September 23, Sebadoh Company received a $350 check from Surfer Rosa Inc. for
services to be performed in the future. The bookkeeper for Sebadoh Company
incorrectly debited Cash for $350 and credited Accounts Receivable for $350. The
amounts have been posted to the ledger. To correct this entry, the bookkeeper should
a. debit Cash $350 and credit Unearned Service Revenue $350.
b. debit Accounts Receivable $350 and credit Unearned Service Revenue $350.
c. debit Accounts Receivable $350 and credit Cash $350.
d. debit Accounts Receivable $350 and credit Service Revenue $350.
Answer:
An account consists of
a. one part.
b. two parts.
c. three parts.
d. four parts.
Answer:
A patent should
a. be amortized over a period of 20 years.
b. not be amortized if it has an indefinite life.
c. be amortized over its useful life or 20 years, whichever is longer.
d. be amortized over its useful life or 20 years, whichever is shorter.
Answer:
The following information is available for Dennehy Company:
Dennehy’s cost of goods sold is
a. $262,500.
b. $285,000.
c. $292,500.
d. $345,000.
Answer:
Current liabilities are obligations that are reasonably expected to be paid from
Answer:
______________ is calculated as cost of goods sold divided by average inventory.
Answer:
If a company has sales of $110 in 2013 and $154 in 2014, the percentage increase in
sales from 2013 to 2014 is 140%.
Answer:
A contingent liability is a liability that may occur if some future event takes place.
Answer:
For the accounts listed below, indicate if the normal balance of the account is a debit or
credit.
Answer:
Certain agricultural and mineral products can be reported at net realizable value under
Answer:
On November 1, 2015, Nate Corporation’s stockholders’ equity section is as follows:
On November 1, Nate declares and distributes a 15% stock dividend when the market
value of the stock is $14 per share.
Instructions
Indicate the balances in the stockholders’ equity accounts after the stock dividend has
been distributed.
Answer:
The following information is available for Edmiston Company.
Instructions
Compute the accounts receivable turnover and the average collection period.
Answer: