In its first year of operations, Arid Corporation had the following transactions
pertaining to its $20 par value preferred stock.
Instructions
(a) Journalize the transactions.
(b) Indicate the amount to be reported for (1) preferred stock, and (2) paid-in capital in
excess of par ‘” preferred stock at the end of the year.
Answer:
Most companies pay current liabilities
a. out of current assets.
b. by issuing interest-bearing notes payable.
c. by issuing stock.
d. by creating long-term liabilities.
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:
Oakley Company does not ring up sales taxes separately on the cash register. Total
receipts for February amounted to $42,800. If the sales tax rate is 7%, what amount
must be remitted to the state for February’s sales taxes?
a. $2,996
b. $2,800
c. $4,280
d. It cannot be determined.
Answer:
Cash equivalents could include each of the following except
a. bank certificates of deposit.
b. money market funds.
c. petty cash.
d. U.S. Treasury bills.
Answer:
Dawson’s Fashions sold merchandise for $40,000 cash during the month of July.
Returns that month totaled $1,000. If the company’s gross profit rate is 40%, Dawson’s
will report monthly net sales revenue and cost of goods sold of
a. $39,000 and $23,400.
b. $39,000 and $24,000.
c. $40,000 and $23,400.
d. $40,000 and $24,000.
Answer:
Cloud Manufacturing declared a 10% stock dividend when it had 700,000 shares of $3
par value common stock outstanding. The market price per common share was $12 per
share when the dividend was declared. The entry to record this dividend declaration
includes a credit to
a. Stock Dividends for $210,000.
b. Paid-in Capital in Excess of Par for $630,000.
c. Common Stock for $210,000.
d. Common Stock Dividends Distributable for $840,000.
Answer:
The cumulative effect of the declaration and payment of a cash dividend on a
company’s balance sheet is to
a. decrease current liabilities and stockholders’ equity.
b. increase total assets and stockholders’ equity.
c. increase current liabilities and stockholders’ equity.
d. decrease stockholders’ equity and total assets.
Answer:
All of the following are contra revenue accounts except
a. sales revenue.
b. sales allowances.
c. sales discounts.
d. sales returns.
Answer:
A credit is not the normal balance for which account listed below?
a. Common stock account
b. Revenue account
c. Liability account
d. Dividends account
Answer:
Limited liability is not enjoyed by the owner(s) of a
a. corporation.
b. partnership.
c. proprietorship.
d. both partnership and proprietorship.
Answer:
All of the following statements about short-term investments are true
except:
a. Short-term investments are also called marketable securities
b. Trading securities are always classified as short-term investments.
c. Short-term investments are listed below accounts receivable in the
current asset section of the balance sheet.
d. Short-term assets must be readily marketable.
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:
Revenues are
a. the cost of assets consumed during the period.
b. gross increases in stockholders’ equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.
Answer:
The ability of a corporation to obtain capital is
a. enhanced because of limited liability and ease of share transferability.
b. less than a partnership.
c. restricted because of the limited life of the corporation.
d. about the same as a partnership.
Answer:
On January 1, 2014, Mudhoney Inc. purchased equipment for $45,000. The company is
depreciating the equipment at the rate of $750 per month. At January 31, 2015, the
balance in Accumulated Depreciation is
a. $750.
b. $9,000.
c. $9,750.
d. $35,250.
Answer:
Instructions: Each of the events below may have an effect on the statement of cash
flows. Designate how the event should be reported within the statement of cash flows
using the codes provided below. Codes may be used more than once, or not at all.
Codes
A. Investing activity; cash inflow
B. Investing activity; cash outflow
C. Financing activity; cash inflow
D. Financing activity; cash outflow
E. Operating activity; cash inflow
F. Operating activity; cash outflow
G. Noncash investing and financing activity
Events
_ 1> Issued checks for the weekly payroll
_ 2> Paid an account payable
_ 3> Issued bonds payable for cash
_ 4> Declared and paid a cash dividend
_ 5> Paid cash for a new car for a traveling salesperson
_ 6> Purchased treasury stock for cash
_ 7> Paid cash for 40% interest in another company
_ 8> Received interest on a long-term bond investment
_ 9> Converted bonds payable into common stock
_ 10> Sold a long-term stock investment for cash at book value
Answer:
If the average collection period is 60 days, what is the accounts receivable turnover?
a. 6.0 times
b. 6.1 times
c. 12.2 times
d. None of these
Answer:
On July 1, 2015, Hale Kennels sells equipment for $220,000. The equipment originally
cost $600,000, had an estimated 5-year life and an expected salvage value of $100,000.
The accumulated depreciation account had a balance of $350,000 on January 1, 2015,
using the straight-line method. The gain or loss on disposal is
a. $30,000 gain.
b. $20,000 loss.
c. $30,000 loss.
d. $20,000 gain.
Answer:
The following information is available for Redcands Company:
Instructions
Based on the preceding information, compute the net cash provided by operating
activities.
Answer:
Both the gross amount of receivables and the allowance for doubtful accounts should be
reported in the financial statements.
Answer:
Control accounts are always located in the general ledger.
Answer:
Working capital is current assets divided by current liabilities.
Answer:
Financial statements are the major means of communicating accounting information to
interested parties.
Answer:
Cash flows from operating activities can be calculated using the indirect or direct
method. Briefly describe how the two methods differ yet arrive at the same information
about the net cash flows from operating activities.
Answer:
Fresh Corporation reports the following selected financial statement information at
December 31, 2015:
Instructions
Calculate the debt to assets and times interest earned ratios.
Answer: