Use the information above to answer the following question. What journal entry will be
recorded by Flynn Company on November 6?
A) Debit Inventory and credit Accounts Payable for $5,800
B) Debit Cost of Goods Sold and credit Accounts Payable for $5,684
C) Debit Purchases and credit Accounts Payable for $5,800
D) Debit Inventory and credit Accounts Payable for $5,684
FAD Company uses a periodic inventory system and its inventory records for the period
contain the following information:
Use the information above to answer the following question. The journal entry
necessary at the end of the period to transfer beginning inventory and net purchases to
cost of goods sold will include which of the following?
A) Credit Inventory for $6,250
B) Debit Purchases for $11,250
C) Debit Inventory for $6,250
D) Debit Cost of Goods Sold for $11,250
Carl’s Catering just completed its first year of operations. During the year, the following
events took place.
Customer payments in the amount of $64,000 were received at the time the catering
services were performed.
Additional catering services totaling $35,000 were performed on account for customers;
payments amounting to $6,000 were received from those customers.
On the last day of the year, a local company paid $3,000 for catering services to be
performed in 30 days.
Employee wages totaled $25,000 and were paid in cash.
The costs of food, beverages, and supplies used when catering services were performed
amounted to $26,000 and were paid for in cash. (Note: Categorize these costs as “cost
of goods sold.”)
Unpaid bills for delivery costs during the year amounted to $1,000 and were on hand at
the end of the year.
On the last day of the year, the company paid $12,000 in advance for rent on office
space.
Required:
Part a. Determine the net income for Carl’s Catering on a cash basis.
Part b. Determine the net income for Carl’s Catering on an accrual basis.
If Cost of Goods Sold is $145,000 and the beginning and ending Inventory balances are
$18,000 and $13,000, respectively, inventory purchases equal:
A) $145,000.
B) $140,000.
C) $150,000.
D) $132,000.
How does an asset impairment loss impact a company’s financial statements?
A) It increases expenses and decreases both revenue and net income
B) It decreases assets, stockholders’ equity, and net income
C) It increases expenses and decreases net income with no effect on any other items
D) It increases liabilities and decreases stockholders’ equity
A check that was outstanding on last period ‘s bank reconciliation was not among the
cancelled checks returned by the bank this period. In preparing the bank reconciliation
for this period, the amount of this check should be
A) added to the bank balance of cash.
B) ignored in preparing this period ‘s bank reconciliation.
C) deducted from the bank balance of cash.
D) deducted from the company ‘s balance of cash.
A corporate charter specifies that the company may sell up to 20 million shares of
stock. The company sells 12 million shares to investors and later buys back 3 million
shares. The number of authorized shares after these transactions are accounted for is:
A) 12 million shares.
B) 20 million shares.
C) 9 million shares.
D) 17 million shares.
The internal control principle related to assigning responsibilities so that one employee
cannot make a mistake or commit a dishonest act without someone else discovering it is
referred to as:
A) duplication of responsibility.
B) mandatory vacations.
C) segregation of duties.
D) rotation of duties.
Equipment, beginning of year $170,000
Equipment, end of year 210,000
Accumulated depreciation, beginning of year 95,000
Accumulated depreciation, end of year 92,000
Equipment with a cost of $10,000 and a book value of $3,000 was sold during the year
for cash of $9,000. Additional equipment was purchased during the year for cash.
Use the information above to answer the following question. What was the amount of
cash paid for purchases of equipment during the year?
A) $40,000
B) $43,000
C) $50,000
D) $31,000
The Allowance for Doubtful Accounts will have a debit balance before adjustments
when:
A) the company increased its collection efforts.
B) the company recovered some accounts previously written off.
C) bad debts were underestimated at the end of the prior period.
D) bad debts were overestimated at the end of the prior period.
Which of the following statements about the format of financial statements is correct?
A) A double underline is drawn below the subtotal for Total Liabilities on the balance
sheet.
B) Dollar signs are omitted if the heading states that amounts are reported in U.S.
dollars.
C) Dividends are shown in parentheses on the statement of retained earnings.
D) The order of the items included in the heading of each financial statement is as
follows: the name of the business, the time period covered by the financial statement,
and the title of the report.
On a common size income statement for this year, what is the percentage that would be
shown next to the dollar amount of cost of goods sold?
A) 76%
B) 24%
C) 31%
D) 18%
As of November 29, it appears that Notel will report earnings per share (EPS) of $1.15
for the quarter ended November 30. Which of the following events would cause this
EPS number to decrease, assuming the event occurs the morning of November 30?
A) The company pays a supplier for inventory bought on account.
B) The company declares, but does not pay, a cash dividend.
C) The company purchases 10 shares of common stock in another company.
D) The company reissues the treasury stock it holds.
When a company sells a long-lived asset, stockholders’ equity will change by the:
A) amount of the sale.
B) amount of the asset’s book value.
C) amount of the asset’s Accumulated Depreciation.
D) difference between the sales price and the asset’s book value.
Customers made payments totaling $8,000 on their accounts. Which accounts are
affected by this transaction?
A) Service Revenue and Retained Earnings increase by $8,000.
B) Cash and Service Revenue increase by $8,000. Liabilities and Customer Expense
increase by $8,000.
C) Cash increases by $8,000 and Accounts Receivable decreases by $8,000. Revenue
and Retained Earnings are unchanged.
D) Cash and liabilities decrease by $8,000.
Which of the following statements about cash basis accounting and accrual basis
accounting is correct?
A) Using the accrual basis of accounting, if payment is received before delivery of
goods or a service, revenue is recorded at the time the payment is received.
B) Using the accrual basis of accounting, if payment is received after delivery of goods
or a service, an asset is recorded at the time the good or service was delivered.
C) Using the cash basis of accounting, if payment is received before delivery of goods
or a service, net income is affected when goods or services are delivered.
D) Using the cash basis, if payment is received after delivery of goods or a service,
unearned revenue is recorded.
A firm’s beginning inventory is $35,000, goods purchased during the period cost
$120,000, and the cost of goods sold for the period is $140,000. What is the amount of
its ending inventory?
A) $45,000
B) $20,000
C) $25,000
D) $15,000
A trend analysis to determine a year-to-year dollar amount change is calculated by
subtracting the:
A) previous period amount from the current amount.
B) current period amount from the previous period amount.
C) current period amount from the previous period amount and then dividing the result
by the previous period amount.
D) previous period amount from the current period amount and then dividing the result
by the current period amount.
In comparing the canceled checks on the bank statement with the entries in the
accounting records, it is found that check number 2889 for December’s utilities was
correctly written and drawn for $790 but was erroneously entered into the accounting
records as $970. The journal entry to adjust the books for the bank reconciliation would
include a debit to:A)Utility Expense and a credit to Cash for $180.B)Cash and a credit
to Utility Expense for $180.C)Utility Expense and a credit to Cash for $790.D)Cash and
a credit to Utility Expense for $790.