Several investors are anticipating an investment in a company that has performed quite
well over the past few years. Which of the following income statement amounts will
likely be the best indicator of the company′s future performance?
a.Gross profit
b.Sustainable earnings
c.Net income
d.Comprehensive income
The expense recognition
a.requires that all credit losses be recorded when an individual customer cannot pay.
b.necessitates the recording of an estimated amount for bad debts.
c.results in the recording of a known amount for bad debt losses.
d.is not involved in the decision of when to expense a credit loss.
Which one of the following is an advantage of the corporate form of entity?
a.Limited life
b.Government regulation
c.Ownership rights are restricted to the same shareholders
d.Ability to acquire capital
The following is selected information from C Corporation for the fiscal year ending
October 31, 2014
Based on the accrual basis of accounting, what is C Corporation’s net income for the
year ending October 31, 2014?
a.$102,000
b.$86,000
c.$76,000
d.$110,000
Windsor Corporation sells its goods on terms of 2/10, n/30. It has an accounts
receivable turnover of 8. What is its average collection period (days)?
a.80
b.30
c.46
d.36
In reviewing the accounts receivable, the cash receivable value is $21,000 before the
write-off of a $1,500 account. What is the cash receivable value after the write-off?
a.$21,000
b.$1,500
c.$22,500
d.$19,500
During 2014 Sedgewick Inc. had sales on account of $264,000, cash sales of $108,000,
and collections on account of $168,000. In addition, they collected $2,900 which had
been written off as uncollectible in 2013. As a result of these transactions the change in
the accounts receivable balance indicates a
a.$201,100 increase.
b.$ 96,000 increase.
c.$ 93,100 increase.
d.$204,000 increase.
Sparks Company received proceeds of $423,000 on 10-year, 8% bonds issued on
January 1, 2013. The bonds had a face value of $400,000, pay interest annually on
December 31st, and have a call price of 102. Sparks uses the straight-line method of
amortization. What is the amount of interest expense Sparks will show with relation to
these bonds for the year ended December 31, 2014?
a.$32,000
b.$33,840
c.$29,700
d.$25,100
On April 5 Donna’s Boutique accepted a Visa card for a $600 purchase. Visa charges a
2% service fee. The entry to record this transaction would include a
a.credit to Cash of $588.
b.debit to Cash of $600.
c.debit to Service Charge Expense of $12.
d.credit to Service Charge Expense of $12.
The accounting equation may be expressed as
a.Assets = Stockholders’ Equity – Liabilities.
b.Assets = Liabilities + Stockholders’ Equity.
c.Assets + Liabilities = Stockholders’ Equity.
d.Assets + Stockholders’ Equity = Liabilities.
Conway Company purchased merchandise inventory with an invoice price of $9,000
and credit terms of 2/10, n/30. What is the net cost of the goods if Conway Company
pays within the discount period?
a.$9,000
b.$8,820
c.$8,100
d.$8,280
XYZ Company accepted a national credit card for a $7,500 purchase. The cost of the
goods sold is $6,000. The credit card company charges a 3% fee. What is the impact of
this transaction on net operating income?
a.Increase by $1,455.
b.Increase by $1,500.
c.Increase by $1,275.
d.Increase by $7,275.
Dole Industries had the following inventory transactions occur during 2014:
The company sold 204 units at $126 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, and operating expenses of $2,000, what is the
company’s after-tax income using LIFO? (rounded to whole dollars)
a.$4,176
b.$4,323
c.$3,349
d.$2,923
A sales invoice is prepared when goods
a.are sold for cash.
b.are sold on credit.
c.sold on credit are returned.
d.are sold on credit or for cash.
If a company has an extraordinary gain of $20,000 and a 32% tax rate, what is the effect
on net income?
a.Increase of $20,000.
b.Increase of $13,600.
c.Increase of $6,400.
d.No effect.
Which three items affect retained earnings, and how do they affect it?
Determine the missing items.
On September 4, Roberta’s Knickknacks buys merchandise on account from Dolan
Company. The selling price of the goods is $900 and the cost of goods is $600. Both
companies use the perpetual inventory systems Journalize the transactions on the books
of both companies.
Which of the following is the appropriate general journal entry to record the declaration
of cash dividends?
For the items listed below, fill in the appropriate code letter to indicate whether the item
is an asset, liability, or stockholders’ equity item.
SBB Company issued 11%, 5-year, $600,000 face value bonds that pay interest
semi-annually on October 1 and April 1. The bonds are dated April 1, 2014, and are
issued on that date. The discount rate of interest for such bonds on April 1, 2014, is
10%. What cash proceeds did SBB Company receive from issuance of the bonds?
Assume that Mitchell Company uses a periodic inventory system and has these account
balances: Purchases $570,000; Purchase Returns and Allowances $14,000; Purchases
Discounts $9,000; and Freight-In $15,000. Determine net purchases and cost of goods
purchased.