Which accounts in the general ledger are affected when the monthly posting is made
from the sales journal?
a. Accounts Receivable; accounts receivable subsidiary accounts
b. Accounts receivable subsidiary accounts; Sales Revenue
c. Accounts Receivable; Sales Revenue
d. Accounts Receivable; Inventory
Answer:
Stockholders’ equity can be described as
a. creditorship claim on total assets.
b. ownership claim on total assets.
c. benefactor’s claim on total assets.
d. debtor claim on total assets.
Answer:
Warranty expenses are reported on the income statement as
a. administrative expenses.
b. part of cost of goods sold.
c. contra-revenues.
d. selling expenses.
Answer:
A loss on the write down of obsolete inventory should be reported as
a. “other expenses and losses.”
b. part of discontinued operations.
c. an operating expense.
d. an extraordinary item.
Answer:
The two optional steps in the accounting cycle are preparing
a. a post-closing trial balance and reversing entries.
b. a worksheet and post-closing trial balances.
c. reversing entries and a worksheet.
d. an adjusted trial balance and a post-closing trial balance.
Answer:
Which of the following is an optional step in the accounting cycle?
a. Adjusting entries
b. Closing entries
c. Correcting entries
d. Reversing entries
Answer:
Which one of the following transactions does not affect cash?
a. Acquisition and retirement of bonds payable
b. Write-off of an uncollectible accounts receivable
c. Acquisition of treasury stock
d. Payment of cash dividend
Answer:
Squeeze Company reports the following:
If cost of goods sold for the year is $220,000, the amount of cash paid to suppliers is
a. $227,000.
b. $205,000.
c. $193,000.
d. $247,000.
Answer:
Under the allowance method, writing off an uncollectible account
a. affects only balance sheet accounts.
b. affects both balance sheet and income statement accounts.
c. affects only income statement accounts.
d. is not acceptable practice.
Answer:
If a loss of $25,000 is incurred in selling (for cash) office equipment having a book
value of $90,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
a. $65,000.
b. $90,000.
c. $115,000.
d. $25,000.
Answer:
The most important information needed to determine if companies can pay their current
obligations is the
a. net income for this year.
b. projected net income for next year.
c. relationship between current assets and current liabilities.
d. relationship between short-term and long-term liabilities.
Answer:
A company that receives an interest bearing note receivable will
a. debit Notes Receivable for the maturity value of the note.
b. credit Notes Receivable for the maturity value of the note.
c. debit Notes Receivable for the face value of the note.
d. credit Notes Receivable for the face value of the note.
Answer:
The income statement of Annette Co, for the month of July shows net income of $2,400
based on Service Revenue $7,200, Salaries and Wages Expense $2,900 Supplies
Expense $1,400, and Utilities Expense $500.In reviewing the statement, you discover
the following.
1> Insurance expired during July of $600 was omitted.
2> Supplies expense includes $300 of supplies that are still on hand at July 31.
3> Depreciation on equipment of $250 was omitted.
4> Accrued but unpaid salaries and wages at July 31 of $400 were not included.
5> Services performed but unrecorded totaled $700.
Instructions
A. Prepare a correct income statement for July 2015.
B. What effect do the corrections have on the amount reported as total assets on the
balance sheet?
C. What effect do the corrections have on the amount reported as total liabilities on the
balance sheet?
Answer:
Which one of the following items is not necessary in preparing a statement of cash
flows?
a. Determine the change in cash
b. Determine the cash provided by operations
c. Determine cash from financing and investing activities
d. Determine the cash in all bank accounts
Answer:
Cost allocation of an intangible asset is referred to as
a. amortization.
b. depletion.
c. accretion.
d. capitalization.
Answer:
Assume that all balance sheet amounts for Marley Company represent average balance
figures.
What is the return on common stockholders’ equity ratio for Marley?
a. 19.3%
b. 16.7%
c. 12.5%
d. 10.0%
Answer:
On January 1, Health Corporation issues $3,000,000, 5-year, 8% bonds at 96 with
interest payable on July 1 and January 1. The entry on December 31 to record accrued
bond interest and the amortization of bond discount using the straight-line method will
include a
a. debit to Interest Expense, $120,000.
b. debit to Interest Expense, $240,000.
c. credit to Discount on Bonds Payable, $12,000.
d. credit to Discount on Bonds Payable, $24,000.
Answer:
Ware Company had purchases of $260,000. The comparative balance sheet analysis
revealed a $15,000 decrease in inventory and a $25,000 increase in accounts payable.
What were Ware’s cash payments to suppliers?
a. $235,000
b. $220,000
c. $275,000
d. $300,000
Answer:
A typical organization chart showing delegation of authority would show
a. stockholders delegating to the board of directors.
b. the board of directors delegating to stockholders.
c. the chief executive officer delegating to the board of directors.
d. the controller delegating to the chief executive officer.
Answer:
Lakeland, Inc. has 25,000 shares of 6%, $100 par value, noncumulative preferred stock
and 50,000 shares of $1 par value common stock outstanding at December 31, 2015.
There were no dividends declared in 2014. The board of directors declares and pays a
$250,000 dividend in 2015. What is the amount of dividends received by the common
stockholders in 2015?
a. $0
b. $150,000
c. $250,000
d. $100,000
Answer:
A net loss
a. occurs if operating expenses exceed cost of goods sold.
b. is not closed to Retained Earnings if it would result in a debit balance.
c. is closed to Retained Earnings even if it would result in a debit balance.
d. is closed to the paid-in capital account of the stockholders’ equity section of the
balance sheet.
Answer:
Which one of the following is not an ownership right of a stockholder in a corporation?
a. To vote in the election of directors
b. To declare dividends on the common stock
c. To share in assets upon liquidation
d. To share in corporate earnings
Answer:
Angie’s Cookie Shop reported equipment at $240,000 and $48,000 accumulated
depreciation on its December 31, 2014, balance sheet. During 2015, the shop purchased
equipment costing $40,000 and sold equipment costing $10,000 (book value $7,200)
for $2,000. On December 31, 2015, net equipment was $174,800. Using the indirect
method, Angie’s would report depreciation expense on its statement of cash flows for
2015 of
a. $95,200.
b. $54,400.
c. $47,200.
d. $50,000.
Answer:
On a bank reconciliation, deposits in transit are
a. added to the bank balance.
b. deducted from the bank balance.
c. added to the book balance.
d. deducted from the book balance.
Answer:
Foley Company applied FIFO to its inventory and got the following results for its
ending inventory.
The cost of purchasing units at year-end was DVRs $71, DVD players $68, and iPods
$78.
Instructions
Determine the amount of ending inventory at lower-of-cost-or-market.
Answer:
Peter Cook, CPA, was asked by Carol Kane to review the accounting records and
prepare the financial statements for her upholstering shop. Peter reviewed the records
and found three errors.
1> Cash paid on accounts payable for $930 was recorded as a debit to Accounts Payable
$390 and a credit to Cash $390.
2> The purchase of supplies on account for $600 was debited to Equipment $600 and
credited to Accounts Payable $600.
3> The company paid dividends of $1,300 and the bookkeeper debited Accounts
Receivable for $130 and credited Cash $130.
Instructions
Prepare an analysis of each error showing the
[a] incorrect entry.
[b] correct entry.
[c] correcting entry.
Answer:
Sasser Company uses a sales journal, a cash receipts journal, and a general journal to
record transactions with its customers. Record the following transactions in the
appropriate journals. The cost of all merchandise sold was 70% of the sales price.
Answer:
Indicate the respective effects of the declaration of a cash dividend on the following
balance sheet sections:
Answer:
Jose Reynolds deposited $10,000 in an account paying interest of 4% compounded
annually. What amount will be in the account at the end of 4 years?
Answer:
A credit balance in a liability account indicates that an error in recording has occurred.
Answer:
Gorman Mining invested $960,000 in a mine estimated to have 1,200,000 tons of ore
with no salvage value. During the first year, 200,000 tons of ore were mined and sold.
Instructions
Prepare the journal entry to record depletion expense.
Answer:
The accounting equation for Quattro Enterprises is as follows:
If Quattro purchases office equipment on account for $25,000, the accounting equation
will change to
Answer:
An aging schedule is prepared only for old accounts receivables that have been past due
for more than one year.
Answer: