Debit postings to the individual accounts in an accounts receivable subsidiary ledger
generally come from the
a. sales journal.
b. cash receipts journal.
c. purchases journal.
d. cash payments journal.
Answer:
A $100 petty cash fund has cash of $16 and receipts of $82. The journal entry to
replenish the account would include a
a. debit to Cash for $82.
b. credit to Petty Cash for $84.
c. debit to Cash Over and Short for $2.
d. credit to Cash for $82.
Answer:
Cost allocation of an intangible asset is referred to as
a. amortization.
b. depletion.
c. accretion.
d. capitalization.
Answer:
A company that acquires less than 20% ownership interest in another company should
account for the stock investment in that company using
a. the cost method.
b. the equity method.
c. the significant method.
d. consolidated financial statements.
Answer:
Employees at Tengo Corporation are paid $15,000 cash every Friday for working
Monday through Friday. The calendar year accounting period ends on Wednesday,
December 31. How much salaries and wages expense should be recorded two days later
on January 2?
a. $15,000
b. $9,000
c. $6,000
d. None, matching requires the weekly salary to be accrued on December 31.
Answer:
Cash receipts from interest and dividends are classified as
a. financing activities.
b. investing activities.
c. operating activities.
d. either financing or investing activities.
Answer:
Under the LCM approach, the market value is defined as
a. FIFO cost.
b. LIFO cost.
c. current replacement cost.
d. selling price.
Answer:
The periodicity assumption states that the economic life of a business can be divided
into
a. equal time periods.
b. cyclical time periods.
c. artificial time periods.
d. perpetual time periods.
Answer:
Cobb Company’s accounting records show the following at the year ending on
December 31, 2015:
Using the periodic system, the cost of goods sold is
a. $378,000.
b. $383,000.
c. $393,600.
d. $404,200.
Answer:
The relationship of current assets to current liabilities is used in evaluating a company’s
a. operating cycle.
b. revenue-producing ability.
c. short-term debt paying ability.
d. long-range solvency.
Answer:
Nick’s Place recorded the following data:
The weighted average unit cost of the inventory at January 31 is:
a. $2.50.
b. $2.75.
c. $2.81.
d. $3.400.
Answer:
Hunt Company purchased factory equipment with an invoice price of $90,000. Other
costs incurred were freight costs, $1,100; installation wiring and foundation, $2,200;
material and labor costs in testing equipment, $700; oil lubricants and supplies to be
used with equipment, $500; fire insurance policy covering equipment, $1,400. The
equipment is estimated to have a $5,000 salvage value at the end of its 8-year useful
service life.
Instructions
(a) Compute the acquisition cost of the equipment. Clearly identify each element of
cost.
(b) If the double-declining-balance method of depreciation was used, the constant
percentage applied to a declining book value would be __________.
Answer:
Short-term notes receivable are reported at
a. cash (net) realizable value.
b. face value.
c. gross realizable value.
d. maturity value.
Answer:
In 2015 Rome Corporation reported net income $190,000, interest expense $60,000,
and income tax expense $40,000. Rome’s times interest earned ratio was:
a. 4.2 times.
b. 3.8 times.
c. 3.2 times.
d. 4.8 times.
Answer:
Bond discount should be amortized to comply with
a. the historical cost principle.
b. the matching principle.
c. the revenue recognition principle.
d. conservatism.
Answer:
Indicate how each of the following items would be shown on a bank reconciliation.
1> Bank error (The bank charged our account with another company’s check)
2> Check printing charge
3> Deposits in transit
4> Note collected by the bank
5> NSF checks
6> Outstanding checks
Answer:
Stocks traded on the New York Stock Exchange are considered readily
marketable.
Answer:
Nonoperating activities exclude revenues and expenses that result from secondary or
auxiliary operations.
Answer:
Inventories are reported in the current assets section of the balance sheet immediately
below receivables.
Answer:
Kim Black plans to buy a truck for $24,000 after 3 years. If the interest rate is 6%, how
much money should Kim set aside today for the purchase?
Answer:
The cost of goods available for sale consists of the beginning inventory plus the cost of
goods purchased.
Answer:
The adjusted trial balance of Hanson Hawk Company at September 30, 2015 includes
the following accounts: Retained Earnings $27,700; Dividends $9,750; Service
Revenue $46,800; Insurance Expense $1,950; Salaries Expense $18,000; Rent Expense
$3,000; Supplies Expense $650; and Depreciation Expense $1,100. Prepare a retained
earnings statement for the year.
Answer:
An inexperienced accountant for Morgan Company made the following incorrect
entries.
Facts: Accepted a $20,000, 1 year, 8% note from Joe Wood Company for balance due
on
account.
Facts: Accepted Visa credit card for $20,000; the service fee is 2%.
3>
Facts: M. Adler dishonored a $12,000, 10%, 3-month note because of bankruptcy. Adler
is expected to pay. No interest had been accrued on the note.
Instructions
Prepare entries to correct Morgan Company’s books based on the facts given. Do not
reverse out incorrect entries that were recorded above, but rather correct the account
balances so that they reflect the proper amounts.
Answer: