In a periodic inventory system, a return of defective merchandise to a supplier is
recorded by crediting
a. Accounts Payable.
b. Inventory.
c. Purchases.
d. Purchase Returns and Allowances.
Answer:
Which of the following would not be needed to determine net cash provided by
operating activities?
a. Depreciation expense
b. Change in accounts receivable
c. Payment of cash dividends
d. Change in prepaid expenses
Answer:
Cost of goods available for sale is computed by adding
a. beginning inventory to net purchases.
b. beginning inventory to the cost of goods purchased.
c. net purchases and freight-in.
d. purchases to beginning inventory.
Answer:
Using prenumbered checks and having an approved invoice for each check is an
example of
a. establishment of responsibility.
b. segregation of duties.
c. documentation procedures.
d. independent internal verification.
Answer:
All of the following intangible assets are amortized except
a. copyrights.
b. limited-life franchises.
c. patents.
d. trademarks.
Answer:
If the retained earnings account increases from the beginning of the year to the end of
the year, then
a. net income is less than dividends.
b. a net loss is less than dividends.
c. the company must have sold stock.
d. net income is greater than dividends.
Answer:
Identify the effect the declaration and distribution of a stock dividend has on the par
value per share.
Par Value per Share
a. Increase
b. Decrease
c. Increase or decrease
d. No effect
Answer:
A bank statement
a. lets a depositor know the financial position of the bank as of a certain date.
b. is a credit reference letter written by the depositor’s bank.
c. is a bill from the bank for services rendered.
d. shows the activity which increased or decreased the depositor’s account balance.
Answer:
The size of the petty cash fund is dependent on
a. the wishes of the custodian of the fund.
b. anticipated disbursements for the year.
c. anticipated disbursements for a three- to four-week period.
d. the size of the regular cash account.
Answer:
The two methods of accounting for uncollectible accounts are (a) percentage of sales
and (b) percentage of receivables.
Answer:
Which statement is correct?
a. As long as a company consistently uses the cash basis of accounting, generally
accepted accounting principles allow its use.
b. The use of the cash basis of accounting violates both the revenue recognition and
expense recognition principles.
c. The cash basis of accounting is objective because no one can be certain of the amount
of revenue until the cash is received.
d. As long as management is ethical, there are no problems with using the cash basis of
accounting.
Answer:
Which of the following statements reflects the transferability of ownership rights in a
corporation?
a. If a stockholder decides to transfer ownership, he must transfer all of his shares.
b. A stockholder may dispose of part or all of his shares.
c. A stockholder must obtain permission from the board of directors before selling
shares.
d. A stockholder must obtain permission from at least three other stockholders before
selling shares.
Answer:
Arm, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and
100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the
board of directors declares a $200,000 dividend, the
a. preferred stockholders will receive 1/10thof what the common stockholders will
receive.
b. preferred stockholders will receive the entire $200,000.
c. $50,000 will be held as restricted retained earnings and paid out at some future date.
d. preferred stockholders will receive $50,000 and the common stockholders will
receive $150,000.
Answer:
Which one of the following items is not generally used in preparing a statement of cash
flows?
a. Adjusted trial balance
b. Comparative balance sheets
c. Current income statement
d. Additional information
Answer:
In accounting for stock investments between 20% and 50%, the _______ method is
used.
a. consolidated statements
b. controlling interest
c. cost
d. equity
Answer:
Equipment was purchased for $150,000. Freight charges amounted to $7,000 and there
was a cost of $20,000 for building a foundation and installing the equipment. It is
estimated that the equipment will have a $30,000 salvage value at the end of its 5-year
useful life. Depreciation expense each year using the straight-line method will be
a. $35,400.
b. $29,400.
c. $24,600.
d. $24,000.
Answer:
A plant asset was purchased on January 1 for $100,000 with an estimated salvage value
of $20,000 at the end of its useful life. The current year’s Depreciation Expense is
$10,000 calculated on the straight-line basis and the balance of the Accumulated
Depreciation account at the end of the year is $50,000. The remaining useful life of the
plant asset is
a. 10 years.
b. 8 years.
c. 5 years.
d. 3 years.
Answer:
Accountants refer to an economic event as a
a. purchase.
b. sale.
c. transaction.
d. change in ownership.
Answer:
The Sales Returns and Allowances account is classified as a(n)
a. asset account.
b. contra asset account.
c. expense account.
d. contra revenue account.
Answer:
On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office
furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is
recorded by the straight-line method over 10 years with a salvage value of $75,000.
What gain should be recognized on the sale?
a. $22,500.
b. $45,000.
c. $47,500.
d. $90,000.
Answer:
Clooney Department Store estimates inventory by using the retail inventory method.
The following information was developed:
The estimated cost of the ending inventory is
a. $280,000.
b. $336,000.
c. $420,000.
d. $466,667.
Answer:
The amount of sales tax collected by a retail store when making sales is
a. a miscellaneous revenue for the store.
b. a current liability.
c. not recorded because it is a tax paid by the customer.
d. recorded as an operating expense.
Answer:
Research and development costs
a. are classified as intangible assets.
b. must be expensed when incurred under generally accepted accounting principles.
c. should be included in the cost of the patent they relate to.
d. are capitalized and then amortized over a period not to exceed 40 years.
Answer:
The following financial statement information is available for Long Corporation:
The times interest earned for 2015 is
a. 7.4 times.
b. 6.4 times.
c. 9.1 times.
d. 7.8 times.
Answer:
The journal entry to record a return of merchandise purchased on account under a
perpetual inventory system would credit
a. Accounts Payable.
b. Purchase Returns and Allowances.
c. Sales Revenue.
d. Inventory.
Answer:
A worksheet is an optional working tool used by accountants to facilitate the
preparation of financial statements. Consider the steps followed in preparing a
worksheet. How does the use of a worksheet assist the accountant. Could financial
statements be prepared without a worksheet? Evaluate how the process would differ.
Consider factors such as timeliness, accuracy, and efficiency in your evaluation.
Answer:
When a parent company acquires a wholly owned subsidiary for an amount in excess of
the book value of the net assets acquired, the excess is always allocated to goodwill.
Answer:
The going concern assumption is that the business will continue in operation long
enough to carry out its existing objectives and commitments.
Answer:
Answer:
Cash realizable value is determined by subtracting Allowance for Doubtful Accounts
from Net Sales.
Answer:
Answer:
On January 14, Balcom Corporation purchased 20, 11%, $1,000 Eiger Company bonds for
$20,000. On November 30, the company sold 10 of the Eiger Company bonds for $11,600.
Prepare journal entries for the purchase and sale of the Eiger Company bonds.
Answer: