A corporation issues bond certificates to
A. owners.
B. principals.
C. creditors.
D. debtors.
The following facts pertain to Alameda Corporation for 20×5:
Based on the above facts, net income for 20×5 for Alameda Corporation amounted to
A. $207,500.
B. $182,500.
C. $232,500.
D. $257,500.
Each of the following statements is justified by a concept or convention of accounting.
Write the letter in the blank next to each statement corresponding to the concept or
convention involved.
On April 12, Vancouver Company returned of $500 of merchandise it purchased on
account from Rupert Co. This transaction will result in
A. a $500 debit to the controlling account, Accounts Payable, and a $500 debit to the
individual account in the subsidiary ledger.
B. the subsidiary ledger total being $500 less than the controlling account total.
C. a $500 debit to the subsidiary ledger and a $500 credit to the controlling account,
Accounts Payable.
D. the subsidiary ledger total being $500 more than the controlling account total.
If Grant Corporation has 120,000 shares of common stock authorized, 75,000 shares of
common stock issued, and holds 3,000 shares of common stock as treasury stock, the
total number of outstanding shares of Grant Corporation amounts to
A. 48,000.
B. 117,000.
C. 72,000.
D. 54,000.
The allowance for uncollectible accounts is necessary because
A. a liability results when a credit sale is made.
B. when recording uncollectible accounts expense, it is not possible to predict
specifically which accounts will not be collected.
C. management should know how many credit losses have been sustained over the
years.
D. uncollected accounts that are written off must be accumulated in a separate account.
Liquidity ratios are an indication of a company’s
A. ability to effectively employ its resources.
B. overall debt to equity position.
C. overall debt position.
D. ability to pay bills when they are due and to meet unexpected needs for cash.
A company purchases 800 shares of its $50 par value common stock at $55 per share. It
then reissues 120 shares at $58 per share. The entry upon reissue of the stock is :
A. Cash 6,960
Treasury Stock-Common 6,600
Paid-in Capital, Treasury Stock 360
B. Cash 6,960
Treasury Stock-Common 6,960
C. Cash 6,960
Paid-in Capital, Treasury Stock 6,96
D. Cash 6,960
A short-term investment in a U.S. Treasury bill costs $24,400 and will mature six
months later at $25,000. Management intends to hold the investment until it matures.
The entry to record the initial investment is:
A. Short-Term Investments 25,000
Cash 25,000
B. Cash 24,400
Short-Term Investments 24,400
C. Short-Term Investments 24,400
Cash 24,400
D. Cash 25,000
Which of the following pairs of accounts could possibly appear in the same adjusting
entry?
A. Interest Income and Interest Payable.
B. Revenue from Services and Cash.
C. Service Revenue and Unearned Revenue.
D. Rent Expense and Depreciation Expense.
In a small business, because it is often cost-prohibitive to hire extra employees, the lack
of certain separations of duties can best be overcome by
A. bonding the employees.
B. getting the owner actively involved.
C. hiring only honest employees.
D. holding one person responsible for a given set of transactions.
Linkletter obtained a five-year sublease and paid $25,000 to the current tenant on
January 1, 20X1. The entry to record the transaction is:
A. Leasehold 25,000
Cash 25,000
B. Lease Expense 25,000
Cash 25,000
C. Leasehold 20,000
Lease Expense 5,000
Cash 25,000
D. Leasehold 5,000
In a period of rising prices, which inventory method is best to use for tax purposes?
A. FIFO
B. Average-cost
C. Specific identification
D. LIFO
A partnership agreement should include
A. the method of allocating profits and losses.
B. investments of each partner.
C. procedures for admitting partners.
D. All of these choices.
A $50,000 bond issue with a carrying value of $47,000 is called at 102 and retired. The
entry to record the retirement of bonds is:
A. Bonds Payable 50,000
Loss on Retirement
of Bonds 4,000
Unamortized Bond
Discount 3,000
Cash 51,000
B. Bonds Payable 47,000
Cash 51,000
C. Bonds Payable 50,000
Gain on Retirement
of Bonds 3,000
Cash 47,000
D. Bonds Payable 50,000
Which of the following accounts might appear in the adjusted trial balance but not in
the post-closing trial balance?
A. Depreciation Expense–Equipment
B. Owner’s Capital
C. Unearned Revenue
D. Income Summary
Discuss reversing entries by addressing each of the following questions:
a. Are reversing entries required?
b. When are reversing entries prepared?
c. Are reversing entries posted to the ledger?
d. What is the purpose of reversing entries?
e. Can all adjusting entries be reversed? If not, which adjusting entries can be reversed?
On July 1, 20×5, Augusta Enterprises issued bonds with a face value of $1,000,000. The
bonds carry a face interest rate of 10 percent that is payable each July 1 and January 1.
a. Prepare the entry in journal form without explanation for the issuance assuming the
bonds are issued at 97.
b. Prepare the entry in journal form without explanation for the issuance assuming the
bonds are issued at 102.
On January 2, 20×5, Barham Corporation issued ten-year bonds payable with a face
value of $400,000 and a face interest rate of 9 percent. The bonds were issued to yield a
market interest rate of 10 percent. Interest is payable semiannually on January 2 and
July 1. In calculating the present value of the bond issue on January 2, 20×5,
A. the 9 percent rate will be used to calculate the present value of the face amount and
the present value of the periodic interest payments.
B. a 5 percent rate will be used to calculate the present value of the face amount and the
present value of the periodic interest payments.
C. the 10 percent rate will be used to calculate the present value of the face amount and
the present value of the periodic interest payments.
D. the 10 percent rate will be used to calculate the present value of the face amount and
a 5 percent rate will be used to calculate the present value of the periodic interest
payments.
An employee has gross earnings of $1,200 and withholdings of $91.80 for Social
Security and Medicare taxes and $120 for income taxes. The employer pays $91.80 for
Social Security and Medicare taxes, $9.60 for FUTA, and $64.80 for SUTA. The total
cost of this employee to the employer is
A. $1,301.40
B. $1,200.00
C. $1,366.20
D. $1,578.00
If a corporation has issued common stock at various prices that exceed par value, legal
capital will be made up of the
A. par value of the shares issued.
B. total stockholders’ equity plus total liabilities.
C. total amount of contributed capital.
D. total amount of contributed capital plus retained earnings.
Use this information pertaining to Tucson Company to answer the following question.
1) The corporation’s Supplies account showed a beginning debit balance of $400 and
supplies purchased of $1,600. There were $600 of supplies on hand at year end.
2)Depreciation on a building is estimated to be $10,000.
3)A one-year insurance policy was purchased for $4,800. Five months have passed
since the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be
performed. By the end of the year, one-third of the services had been performed.
The adjusting entry to record the accrued interest on the note is
A. Interest Expense 200
Interest Receivable 200
B. Interest Payable 200
Interest Expense 200
C. Interest Receivable 200
Interest Income 200
D. Interest Income 200
The ability of a partner to enter into a contract on behalf of all partners is called
A. the partnership agreement
B. voluntary association
C. mutual agency
D. unlimited liability
Use this information to answer the following question.
The total amount of working capital is
A. $150,000.
B. $370,000.
C. $100,000.
D. $60,000.
Use the following adjusted trial balance to answer the question below.
Which account bypasses the Income Summary account in the closing process?
A. John Clair, Withdrawals
B. Jet Ski Rentals
C. Depreciation Expense–Building
D. Wages Expense
Which of the following accounts could appear in an adjusting entry, closing entry, and
reversing entry?
A. Accumulated Depreciation–Buildings
B. Interest Income
C. Salaries Payable
D. Depreciation Expense–Buildings
In July, a company pays three years’ insurance in advance. The December 31 adjusting
entry is
A. Insurance Expense – Debit; Prepaid Insurance – Credit
B. Prepaid Insurance – Debit; Insurance Expense – Credit
C. Insurance Expense – Debit; Cash – Credit
D. Prepaid Insurance – Debit; Cash – Credit
Cash flows to sales and cash flows to assets are measured in terms of
A. times.
B. a percentage.
C. dollars.
D. days.
When there is a net loss, the entry to close the Income Summary account is
A. debit Owner’s Capital and credit Income Summary.
B. debit Income Summary and credit Owner’s Capital.
C. debit Net Loss and credit Income Summary.
D. debit Income Summary and credit Net Loss.
Which of the following is incorrect regarding partnerships?
A. Legally, there is no economic separation between a partnership and its owners.
B. A partnership is a voluntary association of individuals.
C. If the partnership agreement does not describe the method of income and loss
distribution, the partners must share income and losses equally.
D. When individuals invest property in a partnership, they co-own the property with the
partnership.
A graph depicting yearly depreciation expense under the production method will
contain a line that
A. goes horizontally across.
B. goes down as one goes from left to right.
C. cannot be predicted.
D. goes up as one goes from left to right.
The Additional Paid-in Capital account normally arises in the accounting records when
A. the number of shares issued exceeds par value.
B. the stated value of capital stock is greater than the par value.
C. the market value of the stock rises above par value.
D. capital stock is issued at an amount greater than par value.
The principal difference between depreciation expense and most other types of
expenses is that
A. depreciation expense can be avoided if the asset is worth at least what the company
paid for it.
B. depreciation expense requires an annual outlay of cash.
C. the total amount of depreciation expense for the asset is reported on the balance
sheet.
D. depreciation expense is subject to more precise measurement than most other
expenses.
Compute the book values per share for (a) preferred and (b) common stock for Electra
Corporation, whose stockholders’ equity as of December 31, 20×5, was as follows.