In the reconciliation of the June bank statement, a deposit made on June 30 did not
appear on the June bank statement. In preparing the bank reconciliation, this deposit in
transit should be:
A.subtracted from the unadjusted book balance.
B.added to the unadjusted book balance.
C.subtracted from the unadjusted bank balance.
D.added to the unadjusted bank balance.
Earning revenue on account would be classified as a/an?
A.claims exchange transaction.
B.asset use transaction.
C.asset source transaction.
D.asset exchange transaction.
What transaction does the following general journal entry represent?
A.Provided services on account.
B.Paid cash owed to a supplier.
C.Collected cash from customers.
D.Borrowed money to support operating activities.
Which financial statement matches asset increases from operating a business with asset
decreases from operating the business?
A.Balance sheet.
B.Statement of changes in equity.
C.Income statement.
D.Statement of cash flows.
Blumenthal Company received cash of $2,000,000 by issuing 20-year bonds payable.
As a result of this transaction, the company’s current ratio will:
A. Decrease.
B.Increase.
C.Remain the same.
D. Cannot be determined.
Moreno Company began 2016 with a balance of $300 in Sales Tax payable. During the
year, the company recorded taxable sales of $92,500. The ending balance in Sales Tax
payable was $445 Moreno’s sales tax rate is 4%.
a) How much sales tax did Moreno collect during 2016?
b) How much sales tax did Moreno pay during 2016?
Which of the following is decreased with a credit?
A.Unearned revenue
B.Prepaid insurance
C.Accounts payable
D.Service revenue
Indicate whether each of the following statements about financial statement analysis is
true or false.
_____ a) The ratio, plant assets to long-term liabilities, is a measure of a company’s
ability to obtain additional long-term financing.
_____ b) Generally, a company’s current assets should be purchased using long-term
financing such as bonds payable.
_____ c) Ratios that measure a company’s profitability provide some measure of the
effectiveness of the company’s management.
_____ d) Net margin indicates the amount remaining from each sales dollar after cost of
goods sold has been subtracted out.
_____ e) Gross margin ratio is also sometimes called the return on sales ratio.
On January 1, 2016 Dinwiddie Company purchased a car that cost $45,000. The car had
an expected useful life of 6 years and a $10,000 salvage value. Based on this
information alone:
A. The total amount of depreciation expense recognized over the six year useful life
will be greater under the double declining balance method than the straight-line method.
B.The amount of depreciation expense recognized in 2019 would be greater if
Dinwiddie depreciates the car under the straight-line method than if the double
declining balance method is used.
C.At the end of 2018, the amount in accumulated depreciation account will be less if
the double declining balance method is used than it would be if the straight-line method
is used.
D.None of these statements is true.
Which of the following is not a component of the fraud triangle?
A.Reliance
B.Rationalization
C.Opportunity
D.Pressure
Ix Company issued 20,000 shares of $20 par value common stock at a market price of
$32. As a result of this accounting event, the amount of stockholders’ equity would
A.increase by $640,000.
B.be unaffected.
C.increase by $240,000.
D.increase by $400,000.
In preparing the April bank reconciliation for Oscar Company, it was discovered that on
April 10 a check was written to pay delivery expense of $45 but the check was
erroneously recorded as $54 in the company’s books. The journal entry required to
correct the error is
A.
B.
C.
D.
Indicate whether each of the following statements is true or false.
_____ a) MACRS is an accelerated depreciation method commonly used for tax
purposes.
_____ b) The half-year convention is a semi-annual meeting of accountants and
educators.
_____ c) MACRS requires that the taxpayer estimate the salvage value of assets.
_____ d) The use of MACRS provides tax benefits in the early years of an asset’s life,
compared to use of the straight-line method.
_____ e) Most companies use the same depreciation method for both financial reporting
and tax reporting.
Barker Company paid cash to purchase two identical inventory items. The first
purchase cost $18.00 cash and the second cost $20.00 cash. Barker sold one inventory
item for $30.00 cash. Based on this information alone, without considering the effect of
income tax,:
A.cash flow from operating activities is $11.00 assuming a weighted average cost flow.
B.cash flow from operating activities is $12.00 assuming a FIFO cost flow.
C.cash flow from operating activities is $10.00 assuming a LIFO cost flow.
D.the amount of cash flow from operating activities is not affected by the cost flow
method.
Which of the following items is not classified as a current asset?
A.Office equipment.
B.Merchandise inventory.
C.Office supplies.
D.Prepaid rent.
If cash from operations was $48,000, cash used for investing activities was ($88,000)
and the net change in cash was $96,000, what was cash from/used for financing
activities?
A.($144,000)
B.$48,000
C.$136,000
D.$96,000
Anton Company paid cash to prolong the life of one of its assets. Which of the
following choices accurately reflects how this event would affect Anton’s financial
statements?
A.
B.
C.
D.
The Mercury Company rents out a portion of its office space to another company. At the
beginning of 2016 the balance in the Unearned Rent Revenue account was $3,400.
During 2016, Mercury recognized $16,600 of rent revenue. If the ending balance of
Unearned Rent Revenue is $2,600, how much cash was received from the tenant for
rent during 2016?
A.$14,000
B.$16,600
C.$17,400
D.$15,800
What term is used to describe the situation where the value of an intangible asset may
be significantly diminished?
A.Amortization
B.Impairment
C.Depletion
D.Depreciation
Which of the following should be the main determinant for selection of the allocation
method for long-term operational assets?
A.The method that is most convenient to compute.
B.The method that best matches the pattern of asset use.
C.The method that provides the greatest return to the stockholders.
D.The method that provides the best tax advantage.
Indicate whether each of the following statements is true or false.
_____ a) A trademark has an identifiable legal lifetime.
_____ b) U.S. GAAP requires that research and development costs be capitalized as
assets and then expensed over a reasonable period of time.
_____ c) A patent is amortized over the longer of its legal or useful life.
_____ d) The entry to record the amortization of a patent includes a debit to
Amortization Expense, Patent and a credit to Patent.
_____e) The capitalized cost of a trademark includes the cost to develop the trademark
and to defend it.
The effects of transactions occurring during 2016 and their related end-of-year
adjustments have been recorded below using the accounting equation.
Required:
With your knowledge of transaction analysis using an accounting equation,
a) Prepare an income statement for 2016, and
b) Prepare a statement of cash flows for 2016.Precede a cash outflow amount with a
minus sign.
Indicate whether each of the following statements is true or false.
_____ a) An eight-month, 6% note for $10,000 will require the issuer to pay $600 in
interest.
_____ b) Interest expense is considered an operating expense on the income statement.
_____ c) Payment of interest is considered an operating activity on the statement of
cash flows.
_____ d) Payment of interest on a one-year note due on March 1 will include a
reduction in liabilities.
_____ e) The adjusting entry to recognize interest expense is an asset use transaction.
Select the incorrect statement regarding the quick ratio:
A.The quick ratio equals quick assets divided by total liabilities.
B.The quick ratio is also known as the acid-test ratio.
C.The quick ratio is a conservative variation of the current ratio.
D.The quick ratio ignores some current assets that are less liquid than others.
Which of the following statements is true?
A.The entry to record depreciation expense involves a credit to a liability.
B.The entry to record depreciation expense involves a credit to depreciation expense.
C.The entry to record depreciation expense involves a credit to the asset being
depreciated.
D.The entry to record depreciation expense involves a credit to a contra-asset.
Indicate whether each of the following statements is true or false.
_____ a) A merchandising company generates revenue primarily by selling goods to
customers.
_____ b) The supply of goods accumulated to deliver when sales are made is called
Supplies.
_____ c) Retail companies are firms that sell goods to other businesses.
_____ d) Product costs include all costs associated with the sale of products.
_____ e) WalMart is an example of a wholesale company.
If a $600 credit to Revenue was posted as a $600 debit to Salaries Expense:
A.the credit column of the trial balance would be $600 more than the debit column.
B.the debit column of the trial balance would be $1,200 more than the credit column.
C.the credit column of the trial balance would be $1,200 more than the debit column.
D.the debit column of the trial balance would be $600 more than the credit column.
The chief advantage of the periodic system is:
A.efficiency and ease of recording.
B.immediate feedback on the inventory on hand at any time during the period.
C.timely discovery of losses due to theft.
D.better control over inventory.
Which of the following is not an item deducted from salary expense to arrive at net
pay?
A.FICA tax for Social Security.
B.FICA tax for Medicare.
C.Federal unemployment tax.
D.These answer choices are all deducted from salary expense to arrive at net pay.
Which of the following is not a procedure to maintain internal controls over cash
payments?
A.A receipt should be provided to each cash customer.
B.Checks should be properly authorized with approval signatures.
C.All checks should be prenumbered.
D.Voided checks should be defaced and retained.
Bell Company has provided the following figures as of December 31, 2016: Sales,
$600,000; cost of goods sold, $320,000; net income, $120,000; inventory, $64,000.
Indicate whether each of the above statements pertaining to the Bell Company is true or
false.
_____ a) Bell’s inventory turnover is 5.0.
_____ b) Bell’s average number of days to sell inventory ratio is 39.5.
_____ c) Bell could increase its inventory turnover by increasing prices.
_____ d) Bell’s gross margin as a percentage of sales was 46.7%.
_____ e) A local competitor in the same line of business has an inventory turnover of
3.5. Assuming each firm has approximately the same gross margin rate, Bell Company
is likely to be more profitable than the competitor.
Use the following account numbers and corresponding account titles to answer the next
three questions.
Which accounts would appear on the balance sheet?
A.Account numbers 1, 2, 4, and 5.
B.Account numbers 1, 3, 7, and 8.
C.Account numbers 1, 2, and 6.
D.Account numbers 3, 4, 8, and 9.
Indicate whether each of the following statements regarding internal controls is true or
false.
_____ a) Internal controls are used to provide reasonable assurance that the objectives
of an enterprise will be accomplished.
_____ b) Internal controls can be divided into accounting controls and administrative
controls.
_____ c) The mechanics of internal control systems do not vary from company to
company.
_____ d) Accounting controls are concerned with the evaluation of performance and the
assessment of the degree of compliance with company policies and public laws.
_____ e) Administrative controls are composed of policies and procedures that are
designed to safeguard the assets and to assure that accounting records contain reliable
information.
If retained earnings decreased during the year, and no dividends were paid, which of the
following must be true?
A.Expenses for the year exceeded revenues
B.The company did not have enough cash to pay its expenses
C.Total equity decreased
D.Liabilities increased during the year
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts.
A transaction recorded as a debit to Cash and a credit to Unearned Revenue.
Indicate how each event affects the income statement and the statement of cash flows.
Record the amount of the effect in the box shown below each element. Use the letter “I”
to indicate increase, the letter “D” to indicate decrease, and the letter “N” to indicate no
effect. Use only one letter for each element.
On January 1, 2017, Howard Co. paid $10,000 to the Citizens Bank for accrued interest
expense that had been accrued in an adjusting entry at the end of 2016.
What is meant by the term “global GAAP”? How does it impact U.S. companies? What
body is responsible for setting global standards?
Maitland Corporation issued ten-year, $200,000, 8% bonds on July 1, 2016. The bonds
pay interest semiannually. Maitland made the following entry relating to the first
interest payment made on December 31, 2016:
Required:
Assuming that Maitland amortizes bond premiums using the straight line method, how
much cash did Maitland receive for the issuance of the bond on July 1, 2016?
What is the meaning of “par value” of stock?
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Enter only one
letter for each element. You do not need to enter amounts.
On November 1, 2016, Gable Company accepted a credit card as payment for $1,500 of
services rendered to one of its customers. Assume the credit card fee of 3% is recorded
on the date of the sale. Show the effect of this transaction on Gable’s financial
statements.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
Jim Caldwell and Pam Ennis, both CPAs, began their new partnership by each
contributing $50,000 to their business. Indicate the effects of this transaction on the
financial statements.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts. Enter only one letter for each element.
Charles Company paid salary expense for employees who are subject to tax
withholding. The salaries had not been previously accrued.
What is a deposit in transit?
Indicate how each event affects the income statement and the statement of cash flows.
Record the amount of the effect in the box shown below each element. Use the letter “I”
to indicate increase, the letter “D” to indicate decrease, and the letter “N” to indicate no
effect. Use only one letter for each element.
At the beginning of 2016, Howard Co. paid cash to purchase equipment costing
$80,000. There was $10,000 of depreciation expense recognized during the accounting
period. Show the combined effects of the events.
How do the issuance of a note payable, accrual of interest, and repayment of the note’s
principal and interest each affect a company’s Statement of Cash Flows?
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts. Enter only one letter for each element.
Sierra Mining is the defendant in a $3 million lawsuit involving damage to the
environment. Sierra’s attorneys have advised the company that the outcome of the
lawsuit is reasonably possible, but not probable.
Explain the concept of financial leverage.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts. Enter only one letter for each element.
Kelly Co. sells goods to customers with a three-year warranty. During 2015, Kelly sold
$800,000 of goods. On December 31, 2015, Kelly made the appropriate year-end
adjustment to record the warranty expense related to the goods sold during the year.
During 2016, Kelly paid $4,000 cash to satisfy warranty claims. Show the effects of the
2015 adjustment to record warranty expense.
Explain the difference between horizontal analysis and vertical analysis of a company’s
financial statements.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
Sierra Co. issued 10,000 shares of common stock for $45 per share. The stock has a par
value of $10.
What is the importance of record date for a corporation that has declared dividends?