A signature card shows the signature of only the person who authorizes others in the
company to sign checks.
Beginning inventory is adjusted by debiting Income Summary and crediting
Merchandise Inventory.
A purchases journal may be used to track inventory.
The final cash amount on the statement of cash flows does not have to match the cash
balance shown on the balance sheet.
Redemption value is the price at which a share of stock is bought and sold.
An employer can reduce the federal unemployment tax rate by paying the state
unemployment tax on time.
Reversing entries are done when assets or liabilities are increasing and have no previous
balance.
A human resource department would be a cost center.
In closing entries, the Income Summary account is closed to the Capital account before
Withdrawals.
If management wanted to determine if customers were returning goods at a higher rate
than usual, it could use the Sales Returns and Allowances account to analyze the
information.
When bonds are retired at an amount greater than book value, the company records a
loss on the retirement.
Accounts Receivable results from earning revenue on account.
When merchandise is purchased, the entry in the vouchers register is a debit to
Merchandise Inventory and a credit to Vouchers Payable. The company uses the
periodic method.
The terms payee and maker refer to the same entity.
When a customer returns defective office supplies the Sales Returns and Allowances
account will be debited.
Vouchers are recorded in alphabetical order.
A fiscal year is always January 1 through December 31.
Cost of Goods Sold is debited after items have been sold.
When a company goes to a bank and exchanges a note for cash, the process is called
note trading.
The amount of supplies used causes an increase in Supplies and a decrease in Expense.
Statement of owner’s equity shows the change in capital.
Indirect expenses may be allocated to departments based on the cost of goods sold in
each department.
The trial balance listing is in the same order as the chart of accounts.
The corporation will repay the principal amount of the bond on the maturity date.
Using correct cash handling procedures, deposits should be made by the end of the
week.
Premiums for worker’s compensation insurance may be adjusted based on actual payroll
amounts at the end of the year.
An example of a noncash expense would be depreciation expense.
The journal entry to record the payment of a discounted note at maturity is a debit to
Notes Payable and Interest Expense, and a credit to Cash.
A schedule of vouchers payable is prepared from the unpaid voucher file.
Reversing entries are the opposite of closing entries.
The accounts receivable subsidiary ledger shows the amount collected from each
customer.
On the worksheet, accumulated depreciation appears in the balance sheet columns.
A schedule of unpaid vouchers can be prepared from the tickler file at the end of the
month.
A form of analysis in which each item on a report is shown as a percent of net sales is
called a horizontal analysis of the income statement.
A stock certificate is released for issued stock.
The spreading or allocating of the cost of a long-term asset is called discounting.
In a shift of assets, the composition of the assets changes but total assets do not change.
The taxable earnings column of the payroll register records the tax due.
Accounts receivable on January 1 was $30,000 and, at the end of the year it was
$50,000. Net credit sales were $160,000. Accounts receivable turnover is:
A) 2 times.
B) 4 times.
C) 5 times.
D) 6.67 times.
Which method uses an aging of Accounts Receivable to calculate the Bad Debts
Expense?
A) Income statement approach
B) Aging the Accounts Receivable approach
C) Balance sheet approach
D) Direct write-off
Appropriations to retained earnings is:
A) recorded as an contra-asset.
B) disclosed in the notes to the financial statements.
C) recorded as a contra-liability.
D) a contra-stockholders’ equity.
The freight paid on goods purchased F.O.B. Shipping Point was not recorded. This error
will cause:
A) net income to be overstated.
B) net income to be understated.
C) net income to not be affected.
D) total liabilities to be overstated.
Which inventory account consists of manufacturing cost of goods that are complete?
A) Work-in-Process Inventory
B) Raw Material Inventory
C) Manufacturing Overhead
D) Finished Goods Inventory
Grammy’s Bakery had the following information for the pay period ending June 30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Given the above information, what would be the amount applied to FUTA Payable?
A) Debit $4.00
B) Credit $4.00
C) Debit $20.40
D) Credit $20.40
The bank would issue a credit memorandum to Mary’s Life Management when the
bank:
A) received the deposits in transit.
B) collects a note receivable from a customer.
C) discovered a check that was deposited was returned for nonsufficient funds.
D) None of these answers is correct.
Office Supplies (not used for resale) bought on account were returned for credit and
recorded with a debit to Accounts Payable and a credit to Purchase Returns and
Allowances. This error will cause:
A) net income to be overstated.
B) net income to be understated.
C) net income to not be affected.
D) total assets to be understated.
The entry to record a purchase of $5,000 on account, terms of 2/10, n/30, would include
a:
A) debit to Purchases Discount for $100.
B) credit to Accounts Payable for $5,000.
C) debit to Accounts Payable for $5,000.
D) credit to Cash for $5,000.
Which of the following transactions will cause one asset to be debited and another to be
credited when the periodic inventory system is in use?
A) Purchased merchandise on account
B) Purchased merchandise for cash
C) Purchased office supplies for cash
D) Returned merchandise inventory for credit
What type of account is Salaries Payable?
A) Asset
B) Contra-Asset
C) Liability
D) Owner’s equity
Bob Smith’s hourly rate is $35.00, and he worked 38 hours during the week. What is his
gross pay for the week?
A) $1,330
B) $780
C) $1,400
D) $975
With a beginning Accounts Receivable balance of $40,000, an ending balance of
$100,000, and net credit sales of $600,000, compute accounts receivable turnover ratio
(rounded to the nearest tenth).
A) 7.6
B) 11.4
C) 8.57
D) 3.8
Which of the following transactions effect owner’s equity?
A) Payment on account
B) Equipment purchase
C) Customer payment
D) A withdrawal
On June 15, Pinky Park purchased merchandise for the race track. The invoice was for
$5,000, terms 2/10, n/30. On June 20, Paradise Park returned $200 of merchandise for
credit. On June 25, it paid the amount owed. Fill in the blanks below.
a) The debit to Purchases on June 15 is ________.
b) The credit to Accounts Payable on June 15 is ________.
c) The credit to Purchases Returns and Allowances on June 20 is ________.
d) The credit to Cash on June 25 is ________.
e) The credit to Purchases Discount on June 25 is ________.
Prepare journal entries for the following transactions for Sysco Imports Company.
a) Purchased $6,000 of merchandise (periodic) from Clarke Industries Company on
account.
b) Gave Clarke Industries Company a 150-day, 6% note in settlement of the account
payable.
c) Sysco defaulted on its note on the maturity date.
d) Sysco paid the previously defaulted note plus $25 additional interest.
Jack’s Online Service on April 30 has the following account balances:
Net purchases for the period are:
A) $10,600.
B) $9,600.
C) $12,600.
D) $14,000.
If management wishes to evaluate how effectively the assets of a business are being
used, they could use the:
A) asset turnover.
B) rate of return on common stockholders’ equity.
C) acid test ratio.
D) debt to total stockholders’ equity.
The maximum number of shares of capital stock that a corporation can sell is known as:
A) issued capital stock.
B) outstanding capital stock.
C) authorized capital stock.
D) treasury capital stock.
What is the difference between an extraordinary repair and a betterment?
A) A betterment extends the life of the asset; an extraordinary repair does not.
B) An extraordinary repair is a capital expenditure; a betterment is not.
C) An extraordinary repair may extend the life of the asset; a betterment does not.
D) None of these answers is correct.
The book value of an asset is calculated by taking the:
A) market value of the asset less its accumulated depreciation.
B) cost of the asset less its accumulated depreciation.
C) residual value of the asset less its accumulated depreciation.
D) salvage value of the asset less its accumulated depreciation.
When using a subsidiary ledger, the Accounts Receivable account in the general ledger
is called the:
A) master account.
B) subsidiary account.
C) receivable account.
D) controlling account.
The weighted-average method:
A) calculates an average unit cost by dividing the total cost of goods sold by the total
units sold.
B) calculates an average unit cost by dividing the total cost of goods available for sale
by the total units of goods available for sale.
C) calculates an average unit cost by adding the total cost of goods available for sale to
the total units of goods available for sale.
D) None of these answers is correct.
The accumulated depreciation will appear in which of the following worksheet
statement columns?
A) The Income Statement debit
B) The Income Statement credit
C) The Balance Sheet debit
D) The Balance Sheet credit
Which of the following transactions would result in an accrual?
A) Salary expense has been incurred but unpaid.
B) Rent expired for the month.
C) Supplies used during the accounting period
D) Owner’s withdrawals
Jackson purchased $500 of goods and received credit terms of 2/10, n/30. How much
did he pay if payment was made during the discount period?
A) $450
B) $510
C) $500
D) $490
The recording of the cost of freight-in under the perpetual inventory system would
include a:
A) debit to Freight-In.
B) credit to Merchandise Inventory.
C) debit to Merchandise Inventory.
D) credit to Freight-In.
Using the aging method, estimated uncollectible accounts are $3,000. If the balance of
Allowance for Doubtful Accounts is $500 credit before adjustment, what is a Bad Debt
Expense for the period?
A) $3,500
B) $2,500
C) $3,000
D) $500
The balance sheet contains:
A) liabilities, expenses and capital.
B) assets, liabilities and revenues.
C) expenses, assets and cash.
D) None of the above is correct.
Logan’s Motor Sports buys $50,000 of supplies on credit. Which of the following is a
true statement?
A) Total assets increase.
B) Total assets are unchanged.
C) Total liabilities decrease.
D) Total liabilities are unchanged.
The arrangements between buyer and seller as to when payments for merchandise are to
be made are called:
A) credit terms.
B) net cash.
C) cash on demand.
D) discount period.
Which of the following is a characteristic of a sole proprietorship?
A) Business owned by more than one person
B) Easy to form
C) Each stockholder acts as an owner of the company
D) Can continue indefinitely
The estimated manufacturing overhead cost was $25,000 and estimated machine hours
were 10,000. Actual manufacturing overhead cost was $24,000 and actual machine
hours were 12,000. The overhead application rate per hour based on machine hours is:
A) $2.50.
B) $2.00.
C) $2.40.
D) $2.08.
List the purposes of Federal Insurance Contributions Act.
On January 1, 201X, Mayberry Company bought a patent for $50,000. Its estimated
useful life is five years. Record the amortization for the first two years.
The following data applies to the July 15 payroll for the Woodard Research Firm
(overtime is paid at 1 1/2)
Assume:
FICA-OASDI is 6.2% based on a limit of $117,000.
FICA-Medicare is 1.45%.
FUTA is .8% based on a limit of $7,000.
SUTA is 5.6% based on a limit of $7,000.
State income tax is 2.8%.
Compute the employees’ FICA-Medicare.
Given the following accounts:
[1] Expense accounts.
[2] Accounts receivable
[3] Finished goods inventory.
[4] Work in process inventory.
[5] Raw materials inventory.
[6] Factory supplies inventory.
[7] Manufacturing overhead applied
[8] Depreciation expense
[9] Accounts payable.
[10] Payroll
[11] Utilities expense
[12] Sales.
[13] Raw materials purchases.
[14] Manufacturing overhead-control.
[15] Cost of goods sold.
Indicate the account(s) to be debited and credited to record the following transactions.
Issued raw materials to production.
Debit ________ Credit ________
List at least five company policies that would be included in an internal control system.
For each of the following, identify in Column 1 the balance the account will have in the
adjusted trial balance columns (debit or credit), in Column 2 the financial statement
column(s) in which the account balance will be found (income statement or balance
sheet), and in Column 3 the effect the account will have on the determination of net
income (increase, decrease, or none).
For each of the following, identify in column 1 the category to which the account
belongs, in column 2 the normal balance for the account, in column 3 the financial
statement that the account in which the account balance is reported, and in column 4 the
account’s nature (permanent/temporary).
A discount bond’s ________ increases over time until it reaches face value.
Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 3% of credit sales
Accounts receivable balance $600,000
Allowance for bad debts balance (credit) $200
Net Credit Sales $215,000
$ ________
Evaluate the differences of the effect on the financial statements between the income
statement approach and the balance sheet approach for estimating bad debts expense on
the financial statement presentation.
Using the following accounts:
[1] Cash
[2] Dividends payable
[3] Preferred stock
[4] Common stock
[5] Common Stock dividend distributable
[6] Paid-in capital in excess of par value-common
[7] Paid-in capital in excess of par value – preferred
[8] Paid-in capital from treasury stock
[9] Retained earnings
[10] Appropriation for plant expansion
[11] Treasury stock
[12] Income summary
[13] Paid-in capital in excess of par value-Stock dividend
Indicate the account(s) to be debited and credited to record the following transactions.
Sold treasury stock at a price below cost when there was not enough paid-in capital
from treasury stock to absorb the difference between cost and selling price.
Debit ________ & ________ & ________ Credit ________
Given the following payroll items you are to identify whether they are the responsibility
of the employer and/or the employee by placing an X in the appropriate column.
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, and in Column 3 the financial
statement that the account in which the account balance is reported.
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
Identify whether the entries below are an adjusting entry (AE) or a closing entry (CE).
________
Indicate which effect(s) each situation will have:
1. New check written
2. Recorded in the general journal
3. Recorded in auxiliary petty cash record
4. Petty cash voucher prepared
________ Filled up the company’s truck with gas and used cash
Janie and Larry are partners, with beginning capital balances of $90,000 and $60,000
respectively. During the year, Janie withdrew $20,000 and Larry withdrew $15,000. The
year’s net income of $40,000 was distributed $15,000 to Janie and $25,000 to Larry.
Prepare a statement of Partners’ equity.
For each account listed, identify the category it belongs to, the normal balance (debit or
credit), and the financial statement the account appears.
