Which of the following is true regarding the corporate form of business organization?
a. Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than partnerships and
proprietor-ships.
c. The revenues of corporations are greater than the combined revenues of partnerships
and proprietorships.
d. Corporations are separate legal entities organized exclusively under federal law.
Answer:
Cash equivalents are defined by IFRS as
a. cash on hand.
b. demand deposits.
c. cash on hand and demand deposits.
d. short-term, highly liquid investments that are readily convertible into known amounts
of cash.
IFRS
Answer:
The person responsible for maintaining the company’s cash position is the
a. controller.
b. treasurer.
c. vice-president.
d. president.
Answer:
Selected financial statement data for Mure Company are presented below.
During 2016, net sales were $950,000, and cost of goods sold was $770,000.
Instructions
Compute the following ratios at December 31, 2016:
(a) Current.
(b) Acid-test.
(c) Accounts receivable turnover.
(d) Inventory turnover.
Answer:
A reasonable amount of uncollectible accounts is evidence
a. that the credit policy is too strict.
b. that the credit policy is too lenient.
c. of a sound credit policy.
d. of poor judgments on the part of the credit manager.
Answer:
Significant noncash transactions would not include
a. conversion of bonds into common stock.
b. asset acquisition through bond issuance.
c. treasury stock acquisition.
d. exchange of plant assets.
Answer:
A gain on sale of a plant asset occurs when the proceeds of the sale are greater than the
a. salvage value of the asset sold.
b. market value of the asset sold.
c. book value of the asset sold.
d. accumulated depreciation on the asset sold.
Answer:
A debit to Sales Returns and Allowances is evidence of a
a. sale for cash received only.
b. return of goods originally purchased on account.
c. return of goods originally sold.
d. purchase of goods on account.
Answer:
In a period of rising prices, the inventory method that results in the lowest income tax
payment is
a. LIFO.
b. FIFO.
c. average cost.
d. specific identification.
Answer:
Which of the following assets does not decline in service potential over the course of its
useful life?
a. Equipment
b. Furnishings
c. Land
d. Fixtures
Answer:
Which of the following economic events would not be recorded in the cash receipts
journal?
a. Cash sales of merchandise
b. Collections of accounts receivable
c. Cash from sale of land
d. Cash purchases of merchandise
Answer:
Secured bonds are bonds that
a. are in the possession of a bank.
b. are registered in the name of the owner.
c. have specific assets of the issuer pledged as collateral.
d. have detachable interest coupons.
Answer:
When two accounts are required in one journal entry, the entry is referred to as a
a. balanced entry.
b. simple entry.
c. posting.
d. nominal entry.
Answer:
The Income Summary account is an important account that is used
a. during interim periods.
b. in preparing adjusting entries.
c. annually in preparing closing entries.
d. annually in preparing correcting entries.
Answer:
A company has the following assets:
The total amount reported under Property, Plant, and Equipment would be
a. $19,360,000.
b. $14,400,000.
c. $18,400,000.
d. $15,360,000.
Answer:
Hernandez Corporation issues 2,000, 10-year, 8%, $1,000 bonds dated January 1, 2015,
at 98. The journal entry to record the issuance will show a
a. debit to Cash of $2,000,000.
b. credit to Discount on Bonds Payable for $40,000.
c. credit to Bonds Payable for $2,040,000.
d. debit to Cash for $1,960,000.
Answer:
Which of the following statements concerning current liabilities is incorrect?
a. Current liabilities include unearned revenues.
b. A company that has more current liabilities than current assets is usually the subject
of some concern.
c. Current liabilities include prepaid expenses.
d. A current liability is a debt that can reasonably be expected to be paid out of existing
current assets or result in the creation of other current liabilities.
Answer:
If the transaction causes an asset account to decrease, which of the following related
effects may occur?
a. An increase of equal amount in the common stock account.
b. An increase in a liability account.
c. An increase of equal amount in another asset account.
d. An increase in the combined total of liabilities and stockholders’ equity.
Answer:
Under the FIFO method, the costs of the earliest units purchased are the first charged to
cost of goods sold.
Answer:
Depreciation is a ______________ allocation process rather than a process of
______________.
Answer:
Record the following transactions for Adcock Company.
1> On April 12, sold $11,000 of merchandise to Milton Inc., terms 2/10, n/30.
2> On April 15, Milton returned $2,000 of merchandise.
3> On April 22, Milton paid for the merchandise.
Answer:
The balances of the Depreciation Expense and the Accumulated Depreciation accounts
should always be the same.
Answer:
On September 1, Joe’s Painting Service borrows $150,000 from National Bank on a
4-month, $150,000, 6% note. What entry must Joe’s Painting Service make on
December 31 before financial statements are prepared?
Answer:
Treasury stock should not be classified as a current asset.
Answer:
Morton Company had the following select transactions.
Instructions
Prepare journal entries to record the transactions. Morton prepares adjusting entries
once a year on December 31.
Answer: