A debit entry
A.increases assets.
B.increases expenses.
C.decreases liabilities.
D.increases assets, expenses, and liabilities.
Under what condition should a pending lawsuit be recognized as a liability on a
company’s balance sheet?
A.The amount can be reasonably estimated.
B.The outcome is probable.
C.The outcome is reasonably possible.
D.The outcome is probable and can be reasonably estimated.
The Davis Company reported net income of $60,000 on sales of $300,000. The
company has total assets of $500,000 and total liabilities of $100,000. What is the
company’s return on equity ratio?
A.10.0%
B.12.5%
C.15.0%
D.20.0%
For 2016, the Sacramento Corporation had beginning and ending Retained Earnings
balances of $208,054 and $231,012 respectively. Also during 2016, the corporation
declared and paid cash dividends of $29,000 and issued stock dividends valued at
$16,000. Total expenses were $32,916. Based on this information, what was the amount
of total revenue for 2016?
A.$68,158
B.$143,154
C.$100,874
D.$179,132
On January 1, 2016, Milton Manufacturing Company purchased equipment with a list
price of $88,000. A total of $4,000 was paid for installation and testing. During the first
year, Milton paid $6,000 for insurance on the equipment and another $2,200 for routine
maintenance and repairs. Innovative uses the units-of-production method of
depreciation. Useful life is estimated at 100,000 units, and estimated salvage value is
$8,000. During 2016, the equipment produced 13,000 units. What is closest to the
amount of depreciation for the year?
A.$10,920
B.$11,960
C.$11,700
D.$12,740
Green Corporation has the following stock outstanding:
In 2016, Green paid $100,000 in dividends. No dividends were paid in 2014 or 2015.
Required: a) Compute the total amount of dividends that was paid to each class of stock
in 2016.
b) Compute the amount of dividends per share for each class of stock
On January 1, 2016, The Hanover Corporation issued $70,500 of 8%, 5-year bonds at
97. Hanover uses the straight-line method of bond discount amortization. The interest
payments are due on December 31 each year.
The journal entry used to record the interest payment on December 31, 2017 would be:
A.
B.
C.
D.
Which of the following is not one of the purposes of an internal control system?
A.Safeguarding the company’s assets.
B.The evaluation of performance.
C.The assessment of the degree of compliance with company policies and public laws.
D.Ensuring that the company is using the most effective marketing plan.
When using the indirect method to prepare the statement of cash flows, an increase in
noncash current assets is
A.subtracted from net income in the cash flows from operating activities section.
B.subtracted from current liabilities in the cash flows from financing activities section.
C.added to net income in the cash flows from operating activities section.
D.added to equipment purchases in the cash flows from investing activities section.
North Woods Company has a line of credit with the Olympia State Bank. North Woods
agreed to pay interest at an annual rate equal to 2% above the bank’s prime rate. Funds
are borrowed or repaid on the first day of each month and interest is paid in cash on the
last day of each month. Borrowing is shown as a positive amount, and repayments are
shown as negative amounts indicated by parentheses. Activity to date is given as
follows:
The amount of interest paid at the end of March would be:
A.$150.
B.$300.
C.$267.
D.$250.
Indicate whether each of the following statements about financial statement analysis is
true or false.
_____ a) Net margin measures a company’s immediate debt-paying ability.
_____ b) Accounts receivable turnover is a direct measure of a company’s uncollectible
accounts expense.
_____ c) Accounts receivable turnover is calculated by using the following formula: net
credit sales/average accounts receivable.
_____ d) Net credit sales is sales on account less sales returns and discounts.
_____ e) The amount of average receivables can be calculated using the amount of
receivables shown on balance sheets for the current year and previous year.
The matching concept refers to the “matching” of:
A.expenses and revenues
B.expenses and liabilities
C.assets and equity
D.assets and liabilities
Which of the following cash transactions would not be shown under operating
activities?
A.Cash paid for interest
B.Cash paid for dividends
C.Cash received from dividends
D.All of these answer choices would not be shown under operating activities
Pace Company issued at 97 bonds with a face value of $200,000. As a result of the
issue:
A.Assets and liabilities would both increase by $200,000.
B.Assets and liabilities would both increase by $194,000.
C.Assets would increase by $194,000 and liabilities would increase by $200,000.
D.Assets would increase by $200,000, and liabilities would increase by $194,000.
Chase Co. uses the perpetual inventory method. The inventory records for Chase
reflected the following
Assuming Chase uses a FIFO cost flow method, the ending inventory on January 31 is:
A.$345.
B.$340.
C.$330.
D.$1,020.
The gross margin method requires all but which of the following elements of
information?
A.Total sales for the present period.
B.The ending inventory for the present period.
C.Amount of purchases during the present period.
D.The beginning inventory for the present period.
West Company borrowed $10,000 on September 1, 2016 from the Valley Bank. West
agreed to pay interest annually at the rate of 6% per year. The note issued by West
carried an 18-month term. Based on this information the amount of interest expense
appearing on West’s 2016 income statement would be
A.$-0-.
B.$150.
C.$60.
D.$200.
Packard Company engaged in the following transactions during 2015, its first year in
operations: (Assume all transactions are cash transactions.)
1) Acquired $950 cash from the issue of common stock.
2) Borrowed $420 from a bank.
3) Earned $650 of revenues.
4) Paid expenses of $250.
5) Paid a $50 dividend.
During 2016, Packard engaged in the following transactions: (Assume all transactions
are cash transactions.)
1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750.
4) Incurred expenses of $360.
5) Paid dividends of $100.
The total in Packard’s retained earnings account before closing in 2015 is
A.$400.
B.$0.
C.$350.
D.$450.
For the year ended December 31, 2016, Carsom Company had cash collections from
customers of $220,000, cash paid to employees of $32,000, cash paid to suppliers of
$100,000, cash used to retire long-term bonds of $32,000, and cash payments for
dividends of $20,000. Based on this information, the amount of cash provided by
operating activities for 2016 is:
A.$68,000.
B.$88,000.
C.$188,000.
D.$120,000.
Which of the following is not an internal control procedure for the control of cash
receipts?
A.Immediate preparation of records of all cash receipts.
B.Customers should be given written receipts for all monies paid.
C.All cash should be deposited frequently.
D.Use of prenumbered checks.
Perez Company began 2016 with a balance of $148,000 in accounts receivable and
$8,600 in allowance for doubtful accounts. During the year, it provided $656,000 in
services to customers on account and collected $580,000 in cash from its accounts
receivable. Perez wrote off $6,500 of uncollectible accounts during 2016. At the end of
the year, the company prepared an aging schedule and adjusted its accounts based on
the estimate that $12,600 of receivables would not be collected.
Required: a) Prepare the journal entries to record all the transactions related to accounts
receivable, including the estimate of uncollectible accounts expense.
b) What was the net realizable value of Pence’s accounts receivable at the end of 2016?
Straight-line interest amortization of a premium or discount on bonds payable:
A.assigns variable amounts of interest over the term of the liability.
B.uses compound interest principles.
C.assigns the same amount of interest to each interest period over the term of the
liability.
D.is required for U.S. income tax reporting.
Peterson Company’s petty cash fund was established on January 1, 2016 with $500. On
January 31, 2016 a count of the fund revealed: $105 in cash remaining and vouchers for
miscellaneous payments totaling $400. What effect will the necessary entries to
replenish the fund have on the company’s financial statements?
A.
B.
C.
D.
Harding Corporation acquired real estate that contained land, building and equipment.
The property cost Harding $1,900,000. Harding paid $350,000 and issued a note
payable for the remainder of the cost. An appraisal of the property reported the
following values: Land, $374,000; Building, $1,100,000 and Equipment, $726,000.
Assume that Harding uses the units of production method when depreciating its
equipment. Harding estimates that the purchased equipment will produce 1,000,000
units over its 5-year useful life and has salvage value of $34,000. Harding produced
265,000 units with the equipment by the end of the first year of purchase.
Which amount below is closest to the amount Harding will record for depreciation
expense for the equipment in the first year?
A.$193,450
B.$125,200
C.$157,145
D.$165,890
Which of the following is not a principle of the AICPA Code of Professional Conduct?
A.Due Care
B.Objectivity and Independence
C.Integrity
D.Conservatism
Indicate whether each of the following statements is true or false.
_____ a) The higher the accounts receivable turnover ratio, the longer is a company’s
cash collection period.
_____ b) The accounts receivable turnover ratio is measured as the amount of sales
divided by accounts receivable.
_____ c) The average days to collect accounts receivable is measured as 365 divided by
the accounts receivable turnover ratio.
_____ d) The higher the average days to collect accounts receivable, the greater is the
amount of cash collection.
_____ e) The higher the average days to collect accounts receivable, the faster is the
cash inflow from accounts receivable.
In the first year of operations, 2016, John’s Repair Service recognized $220,000 of
service revenue on account. The ending accounts receivable balance was $15,100. Jake
estimates that 3% of sales on account will not be collected; no accounts receivable had
been written off by year end. Assume there were no other transactions affecting
accounts receivable.
a) What amount of cash was collected in 2016?
b) What amount of uncollectible accounts expense was recognized in 2016?
Jessup Company paid its sales employees $2,200 in sales commissions. What impact
will this transaction have on working capital?
A.Increase it
B.Decrease it
C.No impact
D.Not enough information is provided to answer the question.
Anchor Company purchased a manufacturing machine with a list price of $160,000 and
received a 2% cash discount on the purchase. The machine was delivered under terms
FOB shipping point, and freight costs amounted to $2,400. Anchor paid $3,000 to have
the machine installed and tested. Insurance costs to protect the asset from fire and theft
amounted to $3,600 for the first year of operations. Based on this information, the
amount of cost recorded in the asset account would be:
A.$156.800.
B.$159,200.
C.$165,800.
D.$162,200.
Describe the transaction shown in the following journal entry.
A.Paid cash to a customer who requested a refund.
B.Received cash in advance for work to be performed in future months.
C.Recorded adjusting entry for work completed.
D.Received cash for services completed.
Choose the correct answer to complete the following: Discount notes….
A.are recorded in the account “notes payable” at more than face value on the day of
issue.
B.are recorded in the account “notes payable” at face value on the day of issue.
C.are recorded in the account “notes payable” at less than face value on the day of issue.
D.are not recorded until the maturity date.
Glasgow Enterprises started the period with 80 units in beginning inventory that cost
$7.50 each. During the period, the company purchased inventory items as follows
Glasgow sold 220 units after purchase 3 for $17.00 each.
Glasgow’s ending inventory under LIFO would be:
A.$2,730.
B.$2,460.
C.$2,220.
D.$1,950.
Montana Company was authorized to issue 200,000 shares of common stock. The
company had issued 50,000 shares of stock when it purchased 10,000 shares of treasury
stock. The number of outstanding shares of common stock was:
A.190,000.
B.60,000.
C.40,000.
D.50,000.
Houff Company uses the allowance method to account for uncollectible accounts. An
account that had been previously written-off as uncollectible was recovered. How
would the recovery affect the company’s accounting equation?
A.Increase assets and increase equity.
B.Increase assets and decrease liabilities.
C.Reduce liabilities and increase equity.
D.Have no effect on assets, liabilities or equity.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts.
Ingstrom Co. provided $2,600 of services for a customer who paid $1,000 cash
immediately and promised to pay an additional $1,600 one month later.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
On January 1, 2016, Briand Co. issued $200,000 of bonds payable at 98. Indicate the
effects of issuing the bonds.
Xavier Co. sold goods with the terms 2/15, n/30. What do the terms mean?
In relation to inventory, differentiate between the flow of cost and the physical flow of
goods.
Baird Corp. had beginning Accounts Receivable of $254,000 and ending Accounts
Receivable of $228,000. If total sales were $1,440,000, what amount of cash was
collected from customers, in what category, with what description would the collections
be reported on the statement of cash flows using the indirect method? What amount,
and in what category, and with what description would the collections be reported using
the direct method?
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts. Enter only one letter for each element.
Shelton Robotics Company amortized $30,400 of patent cost. How does this entry
affect Shelton’s financial statements?
Explain the computation of and the significance of inventory turnover.
Why would a merchandising company need good internal controls related to its
inventory? List three of the key elements of an internal control system that would apply
to inventory, and explain how each of them does relate to inventory.
What is the purpose of the statement of cash flows?
Describe the differences between the liquidity ratios, solvency ratios and profitability
ratios. Identify examples of each type of ratio as well.
When a warranty repair job is completed, what is the effect on the accounting equation?
What type of account is Discount on Notes Payable, and is the normal balance a debit
or credit?
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts.
Epstein Co. paid a $20,000 cash dividend to its owners.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
The Premier Corporation began operations on January 1, 2016 by issuing 10,000 shares
of no-par stock for $22 per share. Indicate the effects of this transaction on the financial
statements.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
On January 1, 2016, Ravenwood Company issued a long-term installment note. Show
how the issuance of the note affected the financial statements.