The information for preparing a trial balance on a worksheet is obtained from
a. financial statements.
b. general ledger accounts.
c. general journal entries.
d. business documents.
Answer:
IFRS requires the use of
a. the term balance sheet.
b. the term statement of financial position.
c. neither balance sheet nor statement of financial position, but recommends use of the
term balance sheet.
d. neither balance sheet nor statement of financial position, but recommends use of the
term statement of financial position.
Answer:
In a service-type business, revenue is considered recognized
a. at the end of the month.
b. at the end of the year.
c. when the service is performed.
d. when cash is received.
Answer:
Live Wire Hot Rod Shop follows the revenue recognition principle. Live Wire services
a car on July 31. The customer picks up the vehicle on August 1 and mails the payment
to Live Wire on August 5. Live Wire receives the check in the mail on August 6. When
should Live Wire show that the revenue was recognized?
a. July 31
b. August 1
c. August 5
d. August 6
Answer:
The custodian of a company asset should
a. have access to the accounting records for that asset.
b. be someone outside the company.
c. not have access to the accounting records for that asset.
d. be an accountant.
Answer:
Receivables might be sold to
a. lengthen the cash-to-cash operating cycle.
b. take advantage of deep discounts on the cash realizable value of receivables.
c. generate cash quickly.
d. finance companies at an amount greater than cash realizable value.
Answer:
The income statement approach to estimating uncollectible accounts expense is used by
Kerley Company. On February 28, the firm had accounts receivable in the amount of
$437,000 and Allowance for Doubtful Accounts had a credit balance of $2,140 before
adjustment. Net credit sales for February amounted to $3,000,000. The credit manager
estimated that uncollectible accounts expense would amount to 1% of net credit sales
made during February. On March 10, an accounts receivable from Kathy Black for
$6,100 was determined to be uncollectible and written off. However, on March 31,
Black received an inheritance and immediately paid her past due account in full.
Instructions
(a) Prepare the journal entries made by Kerley Company on the following dates:
1> February 28
2> March 10
3> March 31
(b) Assume no other transactions occurred that affected the allowance account during
March. Determine the balance of Allowance for Doubtful Accounts at March 31.
Answer:
A perpetual inventory system would likely be used by a(n)
a. automobile dealership.
b. hardware store.
c. drugstore.
d. convenience store.
Answer:
A debit is not the normal balance for which account listed below?
a. Dividends
b. Cash
c. Accounts Receivable
d. Service Revenue
Answer:
A company which uses special journals should record a transaction involving the
purchase of merchandise for cash in a
a. single-column purchases journal.
b. multiple-column purchases journal.
c. cash payments journal.
d. general journal.
Answer:
Which of the following statements is true?
a. The price-earnings ratio is a long-term solvency ratio.
b. High asset turnover is a sign of efficient use of assets.
c. The payout ratio measures the profitability of the owners’ investment.
d. The acid-test ratio applies to manufacturing companies but not to service or retailing
businesses.
Answer:
The following describes the process of identifying the economic events of an
organization
a. Keeping a chronological diary of particular events in an orderly and systematic
manner.
b. Selecting the economic activities relevant to a particular organization.
c. Preparing accounting reports, including financial statements.
d. Quantifying events in dollars and cents.
Answer:
Accounting consists of three basic activities which are related to economic events of an
organization. These include
a. identifying, recording, and communicating
b. identifying, calculating, and responding
c. classifying, numbering, and reporting
d. issuing, reporting, and classifying
Answer:
Sonic Youth Corporation purchased a one-year insurance policy in January 2015 for
$49,500. The insurance policy is in effect from March 2015 through February 2016. If
the company neglects to make the proper year-end adjustment for the expired insurance
a. net income and assets will be understated by $41,250.
b. net income and assets will be overstated by $41,250.
c. net income and assets will be understated by $8,250.
d. net income and assets will be overstated by $8,250.
Answer:
The income statement for the month of June, 2015 of Camera Obscura Enterprises
contains the following information:
At June 1, 2015, Camera Obscura reported retained earnings of $35,000. The company
had no dividends during June. At June 30, 2015, the company will report retained
earnings of
a. $29,300.
b. $35,000.
c. $36,300.
d. $42,000.
Answer:
A successful grocery store would probably have
a. a low inventory turnover.
b. a high inventory turnover.
c. zero profit margin.
d. low volume.
Answer:
A net loss will result during a time period when
a. liabilities exceed assets.
b. dividends exceed investments.
c. expenses exceed revenues.
d. revenues exceed expenses.
Answer:
The net amount expected to be received in cash from receivables is termed the
a. cash realizable value.
b. cash-good value.
c. gross cash value.
d. cash-equivalent value.
Answer:
In computing depreciation, salvage value is
a. the fair value of a plant asset on the date of acquisition.
b. subtracted from accumulated depreciation to determine the plant asset’s depreciable
cost.
c. an estimate of a plant asset’s value at the end of its useful life.
d. ignored in all the depreciation methods.
Answer:
The entry to record depletion expense
a. decreases stockholders’ equity and assets.
b. decreases net income and increases liabilities.
c. decreases assets and liabilities.
d. decreases assets and increases liabilities.
Answer:
The entry to record the payment of an interest-bearing note at maturity after all interest
expense has been recognized is
a. Notes Payable
Interest Payable
Cash
b. Notes Payable
Interest Expense
Cash
c. Notes Payable
Cash
d. Notes Payable
Cash
Interest Payable
Answer:
Troy, Inc. decided on January 1 to discontinue its telescope manufacturing division. On
July 1, the division’s assets with a book value of $1,260,000 are sold for $840,000.
Operating income from January 1 to June 30 for the division amounted to $130,000.
Ignoring income taxes, what total amount should be reported on Troy’s income
statement for the current year under the caption, Discontinued Operations?
a. $130,000
b. $290,000 loss
c. $420,000 loss
d. $550,000
Answer:
Communication of economic events is the part of the accounting process that involves
a. identifying economic events.
b. quantifying transactions into dollars and cents.
c. preparing accounting reports.
d. recording and classifying information.
Answer:
Unicycle Company developed the following reconciling information in preparing its
September bank reconciliation:
Determine the cash balance per books (before adjustments) for Unicycle Company.
a. $2,450.
b. $7,550.
c. $9,550.
d. $17,000.
Answer:
The explanation column of the general ledger
a. is completed without exception.
b. is nonexistent.
c. is used infrequently.
d. shows account titles.
Answer:
The rate of return on total assets will be greater than the rate of return on common
stockholders’ equity if the company has been successful in trading on the equity at a
gain.
Answer:
Cash register overages are deposited in the petty cash fund and cash shortages are
made-up from the petty cash fund.
Answer:
Conceptually, the cost allocation procedures for natural resources parallels that of plant
assets.
Answer:
A plant asset must be fully depreciated before it can be removed from the books.
Answer:
In a perpetual inventory system, the cost of goods sold under the FIFO method is based
on the cost of the latest goods on hand during the period.
Answer:
On October 10, the board of directors of Pattern Corporation declared a 15% stock
dividend. On October 10, the company had 10,000 shares of $1 par common stock
issued and outstanding with a market price of $16 per share. The stock dividend will be
distributed on October 31 to shareholders of record on October 25. Journalize the
entries needed for the declaration and distribution of the stock dividend.
Answer:
Listed below in alphabetical order are the balance sheet items of Madjack Company at
December 31, 2015. Prepare a balance sheet and include a complete heading.
Answer:
