The basic issues in accounting for notes receivable include each of the following except
a. analyzing notes receivable.
b. disposing of notes receivable.
c. recognizing notes receivable.
d. valuing notes receivable.
Answer:
Proving the equality of the totals in the columns of multiple-column special journals is
called
a. posting to the subsidiary.
b. debiting and crediting.
c. footing and crossfooting.
d. updating the master file.
Answer:
In Jude Company, land decreased $150,000 because of a cash sale for $150,000, the
equipment account increased $60,000 as a result of a cash purchase, and Bonds Payable
increased $120,000 from issuance for cash at face value. The net cash provided by
investing activities is
a. $150,000.
b. $210,000.
c. $90,000.
d. $270,000.
Answer:
Presented below are two independent situations.
1> Guo Cosmetics acquired 10% of the 200,000 shares of common stock of Chy
Fashion at a total cost of $12 per share on March 18, 2014. On June 30, Chy declared
and paid a $50,000 dividend. On December 31, Chy reported net income of $110,000
for the year. At December 31, the market price of Chy Fashion was $15 per share. The
stock is classified as available-for-sale.
2> Liptin, Inc., obtained significant influence over Blurr Corporation by buying 25% of
Blurr 50,000 outstanding shares of common stock at a total cost of $7 per share on
January 1, 2014. On June 15, Blurr declared and paid a cash dividend of $40,000. On
December 31, Blurr reported a net income of $90,000 for the year.
Instructions
Prepare all the necessary journal entries for 2014 for (a) Guo Cosmetics and (b) Liptin,
Inc.
Answer:
The post-closing trial balance contains only
a. income statement accounts.
b. balance sheet accounts.
c. balance sheet and income statement accounts.
d. income statement, balance sheet, and retained earnings statement accounts.
Answer:
Freight terms of FOB shipping point mean that the
a. seller must debit freight out.
b. buyer must bear the freight costs.
c. goods are placed free on board at the buyer’s place of business.
d. seller must bear the freight costs.
Answer:
Alternative adjusting entries do not apply to
a. accrued revenues and accrued expenses.
b. prepaid expenses.
c. unearned revenues.
d. prepaid expenses and unearned revenues.
Answer:
On January 1, 2015, Superfuzz Company purchased equipment for $40,000. The
company is depreciating the equipment at the rate of $800 per month. The book value
of the equipment at December 31, 2015 is
a. $0.
b. $9,600.
c. $30,400.
d. $40,000.
Answer:
What do the following classes of ratios measure?
(a) Liquidity ratios.
(b) Profitability ratios.
(c) Solvency ratios.
Answer:
The net income reported on the income statement for the current year was $220,000.
Depreciation recorded on plant assets was $35,000. Accounts receivable and inventories
increased by $2,000 and $8,000, respectively. Prepaid expenses and accounts payable
decreased by $2,000 and $12,000 respectively. How much cash was provided by
operating activities?
a. $200,000
b. $235,000
c. $220,000
d. $255,000
Answer:
The first step in solving an ethical dilemma is to
a. identify and analyze the principal elements in the situation.
b. identify the alternatives.
c. recognize an ethical situation and the ethical issues involved.
d. weigh the impact of each alternative on various stakeholders.
Answer:
Which one of the following transactions is recorded with the same entry in a perpetual
and a periodic inventory system?
a. Cash received on account with a discount
b. Payment of freight costs on a purchase
c. Return of merchandise sold
d. Sale of merchandise on credit
Answer:
From an internal control standpoint, the asset most susceptible to improper diversion
and use is
a. prepaid insurance.
b. cash.
c. buildings.
d. land.
Answer:
On January 2, 2012, Porter Corporation issued 30,000 shares of 5% cumulative
preferred stock at $100 par value. On December 31, 2015, Porter Corporation declared
and paid its first dividend. What dividends are the preferred stockholders entitled to
receive in the current year before any distribution is made to common stockholders?
a. $0
b. $150,000
c. $450,000
d. $600,000
Answer:
Shipping terms of FOB destination mean that the
a. purchaser is responsible for the shipping charges.
b. shipping charges are debited to Freight-Out.
c. items should be in the purchaser’s inventory account at year-end if the items are in
transit.
d. both (a) and (c) above.
Answer:
The entry to record the receipt of payment within the discount period on a sale of
$2,000 with terms of 2/10, n/30 will include a credit to
a. Sales Discounts for $40.
b. Cash for $1,960.
c. Accounts Receivable for $2,000.
d. Sales Revenue for $2,000.
Answer:
In calculating net cash provided by operating activities using the indirect method, an
increase in prepaid expenses during a period is
a. deducted from net income.
b. added to net income.
c. ignored because it does not affect income.
d. ignored because it does not affect expenses.
Answer:
The four subdivisions for plant assets are
a. land, land improvements, buildings, and equipment.
b. intangibles, land, buildings, and equipment.
c. furnishings and fixtures, land, buildings, and equipment.
d. property, plant, equipment, and land.
Answer:
Identify whether each of the following items would be (a) added to the book balance,
(b) deducted from the book balance in a bank reconciliation, (c) added to the bank
balance, or (d) deducted from the bank balance.
1> Deposits in transit
2> Bank service charge
3> Collection of note and interest by bank on company’s behalf
4> NSF check
5> Outstanding checks
Answer:
The following data are available for Two-off Company.
Net cash provided by financing activities is:
a. $180,000.
b. $370,000.
c. $360,000.
d. $420,000.
Answer:
In recording the acquisition cost of an entire business,
a. goodwill is recorded as the excess of cost over the fair value of identifiable net assets.
b. assets are recorded at the seller’s book values.
c. goodwill, if it exists, is never recorded.
d. goodwill is recorded as the excess of cost over the book value of identifiable net
assets.
Answer:
The first item listed under current liabilities is usually
a. accounts payable.
b. notes payable.
c. salaries and wages payable.
d. taxes payable.
Answer:
aUnder the direct method, the formula for computing cash collections from customers is
sales revenues plus the increase in accounts receivable or minus the decrease in
accounts receivable.
Answer:
The entire group of accounts and their balances maintained by a company is called the
________________.
Answer:
You are visiting with a friend, Jim Borke, who wants to start a new business. During
discussions on forming the business, Jim makes this statement:
Our business will have accounts receivable and accounts payable. It will also acquire a
substantial amount of computers and equipment. Will it be acceptable to use the cash
basis of accounting?
Prepare a response for Jim.
Answer:
Stone Roses Candies paid employee wages on and through Friday, January 26, and the
next payroll will be paid in February. There are three more working days in January
(29’“31). Employees work 5 days a week and the company pays $1,500 a day in wages.
What will be the adjusting entry to accrue wages expense at the end of January?
Answer:
Information pertaining to long-term stock investments in 2014 by Bell Corporation
follows:
Acquired 18% of the 250,000 shares of common stock of Kansas Company at a total
cost of $8 per share on January 1, 2014. On July 1, Kansas Company declared and paid
a cash dividend of $2 per share. On December 31, Kansas’s reported net income was
$654,000 for the year.
Obtained significant influence over Toto Company by buying 30% of Toto’s 100,000
outstanding shares of common stock at a total cost of $22 per share on January 1, 2014.
On June 15, Toto Company declared and paid a cash dividend of $1.50 per share. On
December 31, Toto’s reported net income was $280,000.
Instructions
Prepare all necessary journal entries for 2014 for Bell Corporation.
Answer: