Using the percentage-of-receivables basis, the uncollectible accounts for the year is
estimated to be $38,000. If the balance for the Allowance for Doubtful Accounts is a
$7,000 credit before adjustment, what is the amount of bad debt expense for the period?
a. $7,000
b. $31,000
c. $38,000
d. $45,000
Answer:
If a company is given credit terms of 2/10, n/30, it should
a. hold off paying the bill until the end of the credit period, while investing the money
at 10% annual interest during this time.
b. pay within the discount period and recognize a savings.
c. pay within the credit period but don’t take the trouble to invest the cash while waiting
to pay the bill.
d. recognize that the supplier is desperate for cash and withhold payment until the end
of the credit period while negotiating a lower sales price.
Answer:
During 2015, Rathke Corporation reported net sales of $3,000,000, net income of
$1,200,000, and depreciation expense of $100,000. Rathke also reported beginning total
assets of $1,000,000, ending total assets of $1,500,000, plant assets of $800,000, and
accumulated depreciation of $500,000. Rathke’s asset turnover is
a. 3 times.
b. 2.4 times.
c. 2.0 times.
d. .96 times.
Answer:
Rubble Company reported net income of $70,000 for the year. During the year,
accounts receivable increased by $6,000, accounts payable decreased by $5,000 and
depreciation expense of $8,000 was recorded. Net cash provided by operating activities
for the year is
a. $67,000.
b. $89,000.
c. $63,000.
d. $70,000.
Answer:
A corporation purchases 40,000 shares of its own $30 par common stock for $45 per
share, recording it at cost. What will be the effect on total stockholders’ equity?
a. Increase by $1,800,000
b. Decrease by $1,200,000
c. Decrease by $1,800,000
d. Increase by $1,200,000
Answer:
An extraordinary item is one that
a. occurs infrequently and is uncontrollable in nature.
b. occurs infrequently and is unusual in nature.
c. is material and is unusual in nature.
d. is material and is uncontrollable in nature.
Answer:
Deposits in transit
a. have been recorded on the company’s books but not yet by the bank.
b. have been recorded by the bank but not yet by the company.
c. have not been recorded by the bank or the company.
d. are checks from customers which have not yet been received by the company.
Answer:
Beonce Company received proceeds of $188,000 on 10-year, 6% bonds issued on
January 1, 2013. The bonds had a face value of $200,000, pay interest semi-annually on
June 30 and December 31, and have a call price of 101. Beonce uses the straight-line
method of amortization.
Beonce Company decided to redeem the bonds on January 1, 2015. What amount of
gain or loss would Beonce report on its 2015 income statement?
a. $9,600 gain
b. $11,600 gain
c. $11,600 loss
d. $9,600 loss
Answer:
Mt. Zion Inc. pays its employees twice a month, on the 7thand the 21st. On June 21, Mt.
Zion Inc. paid employee salaries of $5,000. This transaction would
a. increase stockholders’ equity by $5,000.
b. decrease the balance in Salaries and Wages Expense by $5,000.
c. decrease net income for the month by $5,000.
d. be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to
Salaries and Wages Expense.
Answer:
Customarily, a trial balance is prepared
a. at the end of each day.
b. after each journal entry is posted.
c. at the end of an accounting period.
d. only at the inception of the business.
Answer:
Under IFRS, Revaluation Surplus is part of
a. share premium.
b. retained earnings.
c. general reserves.
d. contributed capital.
Answer:
On January 1, Collins Corporation had 800,000 shares of $10 par value common stock
outstanding. On March 31, the company declared a 10% stock dividend. Market value
of the stock was $15/share. As a result of this event,
a. Collins’ Paid-in Capital in Excess of Par account increased $400,000.
b. Collins’ total stockholders’ equity was unaffected.
c. Collins’ Stock Dividends account increased $1,200,000.
d. All of these answers are correct.
Answer:
A $1,000 face value bond with a quoted price of 98 is selling for
a. $1,000.
b. $980.
c. $908.
d. $98.
Answer:
Match the internal control principle below with the appropriate cash receipts procedure
described.
a. Documentation procedures
b. Establishment of responsibility
c. Independent internal verification
d. Human resource controls
e. Physical controls
f. Segregation of duties
_____ 1> Only designated personnel are authorized to handle cash receipts.
_____ 2> Different individuals receive cash and record cash receipts.
_____ 3> Use remittance advice and cash register tapes.
_____ 4> Store cash in safes and bank vaults.
_____ 5> Treasurer compares total receipts to bank deposits daily.
_____ 6> Bonding of employees that handle cash.
Answer:
An adjusting entry
a. affects two balance sheet accounts.
b. affects two income statement accounts.
c. affects a balance sheet account and an income statement account.
d. is always a compound entry.
Answer:
If the present value of lease payments equals or exceeds 90% of the fair value of the
leased property, the
a. conditions are met for the lease to be considered a capital lease.
b. lease is uneconomical and should not be entered into.
c. lease may be classified as an operating lease.
d. recording of a lease liability is optional’”that is, the off-balance sheet approach can be
elected.
Answer:
If a stockholder cannot attend a stockholder’s meeting, he may delegate his voting rights
by means of
a. an absentee ballot.
b. a proxy.
c. a certified letter.
d. a telegram.
Answer:
Able Towing Company purchased a tow truck for $180,000 on January 1, 2014. It was
originally depreciated on a straight-line basis over 10 years with an assumed salvage
value of $36,000. On December 31, 2016, before adjusting entries had been made, the
company decided to change the remaining estimated life to 4 years (including 2016)
and the salvage value to $5,000. What was the depreciation expense for 2016?
a. $18,000.
b. $14,400.
c. $45,000.
d. $36,550
Answer:
Short-term notes receivables
a. have a related allowance account called Allowance for Doubtful Notes Receivable.
b. are reported at their gross realizable value.
c. use the same estimations and computations as accounts receivable to determine cash
realizable value.
d. present the same valuation problems as long-term notes receivables.
Answer:
An enterprise which sells goods to customers is known as a
a. proprietorship.
b. corporation.
c. retailer.
d. service firm.
Answer:
By January 31 following the end of a calendar year, an employer is required to provide
each employee with a(n)
a. state unemployment tax form.
b. federal unemployment tax form 940.
c. wage and tax statement form W-2.
d. employee’s withholding allowance certificate form W-4.
Answer:
Wilco Legal Eagles Company entered into the following transactions during
March 2015.
1> Purchased office equipment for $23,000 from Business Equipment, Inc. on account.
2> Paid $3,000 cash for March rent on office furniture.
3> Received $15,000 cash from customers for legal work billed in February.
4> Provided legal services to Amy Construction Company for $3,500 cash.
5> Paid Northern States Power Co. $2,700 cash for electric usage in March.
6> Stockholders’ invested an additional $32,000 in the business.
7> Paid Business Equipment, Inc. for the office equipment purchased in (1) above.
8>Incurred advertising expense for March of $1,900 on account.
Instructions
Indicate with the appropriate letter whether each of the transactions above results in:
(a) an increase in assets and a decrease in assets.
(b) an increase in assets and an increase in stockholders’ equity.
(c) an increase in assets and an increase in liabilities.
(d) a decrease in assets and a decrease in stockholders’ equity.
(e) a decrease in assets and a decrease in liabilities.
(f) an increase in liabilities and a decrease in stockholders’ equity.
(g) an increase in stockholders’ equity and a decrease in liabilities.
Answer:
Alfalfa Company developed the following information about its inventories in applying
the lower-of-cost-or-market (LCM) basis in valuing inventories:
If Alfalfa applies the LCM basis, the value of the inventory reported on the balance
sheet would be
a. $343,000.
b. $347,000.
c. $358,000.
d. $362,000.
Answer:
Horizontal analysis is a technique for evaluating a financial statement item in the
current year with other items in the current year.
Answer:
Assume the indirect method is used to compute cash flows from operations. For each
item listed below, indicate the effect on net income in arriving at cash flows from
operations by choosing one of the following code letters.
1> Increase in accounts receivable
2> Increase in inventory
3> Decrease in prepaid expenses
4> Decrease in accounts payable
5> Increase in accrued liabilities
6> Increase in income taxes payable
7> Depreciation expense
8> Loss on sale of investment
9> Gain on disposal of equipment
10> Amortization expense
Answer:
The ________________ reports the assets, liabilities, and stockholders’ equity of a
business enterprise at a specific date.
Answer:
The following information is available for Edmiston Company.
Instructions
Compute the accounts receivable turnover and the average collection period.
Answer:
Closing revenue and expense accounts to the Income Summary account is an optional
bookkeeping procedure.
Answer: