If the equity method is being used, the Revenue from Stock Investments account is
a. just another name for a Dividend Revenue account.
b. credited when dividends are declared by the investee.
c. credited when net income is reported by the investee.
d. debited when dividends are declared by the investee.
Answer:
Winter Gloves Company had checks outstanding totaling $12,800 on its May bank
reconciliation. In June, Winter Gloves Company issued checks totaling $79,800. The
July bank statement shows that $71,400 in checks cleared the bank in July. A check
from one of Winter Gloves Company’s customers in the amount of $2,000 was also
returned marked “NSF.” The amount of outstanding checks on Winter Gloves
Company’s July bank reconciliation should be
a. $8,400.
b. $19,200.
c. $21,200.
d. $23,200.
Answer:
Short-term investments are listed on the balance sheet immediately below
a. cash.
b. inventory.
c. accounts receivable.
d. prepaid expenses.
Answer:
Entries in a sales journal
a. are made from sales invoices.
b. will indicate the invoice number in the reference column of the sales journal.
c. will occupy two lines of the sales journal.
d. indicate either a cash debit or accounts receivable debit.
Answer:
Evergreen Manufacturing Corporation purchased 5,000 shares of its own previously
issued $10 par common stock for $115,000. As a result of this event,
a. Evergreen’s Common Stock account decreased $50,000.
b. Evergreen’s total stockholders’ equity decreased $115,000.
c. Evergreen’s Paid-in Capital in Excess of Par account decreased $65,000.
d. All of these answers are correct.
Answer:
The accounting for each of the following is the same under IFRS and GAAP except for
a. extraordinary items.
b. discontinued operations.
c. changes in accounting principles.
d. changes in accounting estimates.
IFRS:
Answer:
On January 1, 2015, Cat Power Company reported stockholders’ equity of $705,000.
During the year, the company paid dividends of $30,000. At December 31, 2015, the
amount of stockholders’ equity was $825,000. What amount of net income or net loss
would the company report for 2015?
a. Net loss of $30,000
b. Net income of $90,000
c. Net income of $120,000
d. Net income of $150,000
Answer:
Which of the following is not part of the accounting process?
a. Recording
b. Identifying
c. Financial decision making
d. Communicating
Answer:
Each of the following is included in computing the acid-test ratio except
a. cash.
b. inventory.
c. receivables.
d. short-term investments.
Answer:
The White Stripes Animal Encounters operates a drive through tourist attraction. The
company adjusts its accounts at the end of each month. The selected accounts appearing
below reflect balances after adjusting entries were prepared on April 30. The adjusted
trial balance shows the following:
Other data:
1> Three months’ rent had been prepaid on April 1.
2> The buildings are being depreciated at $7,200 per year.
3> The unearned ticket revenue represents tickets sold for future visits. The tickets were
sold at $5.00 each on April 1. During April, thirty of the tickets were used by
customers.
Instructions
(a) Calculate the following:
1> Monthly rent expense.
2> The age of the buildings in months.
3> The number of tickets sold on April 1.
(b) Prepare the adjusting entries that were made by the White Stripes Animal
Encounters on April 30.
Answer:
The chief accounting officer in a corporation is the
a. treasurer.
b. president.
c. controller.
d. vice-president of finance.
Answer:
The use of special journals to record transactions
a. eliminates the need for a general ledger.
b. can save time in the posting process.
c. eliminates the need for a general journal.
d. should only be used if the volume of transactions is small.
Answer:
The current ratio is
a. current assets plus current liabilities.
b. current assets minus current liabilities.
c. current assets divided by current liabilities.
d. current assets multiplied by current liabilities.
Answer:
Callis Company reported net income of $140,000 for 2015. The income statement also
indicates that interest expense for 2015 was $50,000. Assuming an income tax rate of
30%, the times interest earned for 2015 was
a. 4 times.
b. 5 times.
c. 3.8 times.
d. 2.8 times.
Answer:
An aging of a company’s accounts receivable indicates that $3,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $800 debit balance, the
adjustment to record bad debts for the period will require a
a. debit to Bad Debt Expense for $2,200.
b. debit to Bad Debt Expense for $3,000.
c. debit to Bad Debt Expense for $3,800.
d. credit to Allowance for Doubtful Accounts for $800.
Answer:
A company spends $15 million dollars for an office building. Over what period should
the cost be written off?
a. When the $15 million is expended in cash.
b. All in the first year.
c. Over the useful life of the building.
d. After $15 million in revenue is recognized.
Answer:
Newell Company completed the following transactions in October:
Instructions
(a) Indicate the cash received for each collection. Show your calculations.
(b) Prepare the journal entry for the
(1) Oct. 17 sale. The merchandise sold had a cost of $3,500.
(2) Oct. 23 sales return. The merchandise returned had a cost of $140.
(3) Oct. 28 collection.
Newell uses a perpetual inventory system.
Answer:
Working capital is
a. current assets plus current liabilities.
b. current assets minus current liabilities.
c. current assets divided by current liabilities.
d. current assets multiplied by current liabilities.
Answer:
A company that owns more than 50% of the common stock of another company is
known as the
a. charge company.
b. subsidiary company.
c. parent company.
d. management company.
Answer:
The Freight-In account
a. increases the cost of merchandise purchased.
b. is contra to the Purchases account.
c. is a permanent account.
d. has a normal credit balance.
Answer:
The account, Supplies, will appear in the following debit columns of the worksheet.
a. Trial balance
b. Adjusted trial balance
c. Balance sheet
d. All of these answer choices are correct
Answer:
A computer company has $2,800,000 in research and development costs. Before
accounting for these costs, the net income of the company is $2,000,000. What is the
amount of net income or loss after these R & D costs are accounted for?
a. $800,000 loss
b. $2,000,000 net income
c. $0
d. Cannot be determined from the information provided.
Answer:
At May 1, 2015, Kibbee Company had beginning inventory consisting of 200 units with
a unit cost of $7. During May, the company purchased inventory as follows:
800 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Kibbee uses the
average cost method. The value of Kibbee’s inventory at May 31, 2015 is
a. $3,000.
b. $4,425.
c. $4,500.
d. $7,500.
Answer:
On January 1, Skills Company purchased as a short-term investment a $1,000, 6% bond
for $1,000. The bond pays interest on January 1 and July 1. The bond is sold on October
1 for $1,200 plus accrued interest. Interest has not been accrued since the last interest
payment date. What is the entry to record the cash proceeds at the time the bond is sold?
Answer:
A ratio can be expressed as a percentage, a rate, or a proportion.
Answer:
On February 7, Jackson Company sold goods on account to Phillips Enterprises for
$5,200, terms 2/10, n/30. On March 9, Phillips gave Jackson a 60-day, 12% promissory
note in settlement of the account. Record the sale and the acceptance of the promissory
note on the books of Jackson Company.
Answer:
The economic entity assumption states that economic events can be identified with a
particular unit of accountability.
Answer:
On July 9, Sheb Company sells goods on credit to Wooley Company for $5,000, terms
1/10, n/60. Sheb receives payment on July 18. The entry by Sheb on July 18 is:
Answer:
The retail inventory method requires a company to value its inventory on the balance
sheet at retail prices.
Answer:
Sam Geller had earned (accumulated) salary of $103,000 through November 30. His
December salary amounted to $9,500. Lara Lane began employment on December 1
and will be paid her first month’s salary of $6,000 on December 3 Income tax
withholding for December for each employee is as follows:
The following payroll tax rates are applicable:
*Less a credit equal to the state unemployment contribution
Instructions
Record the payroll for the two employees at December 31 and record the employer’s
share of payroll tax expense for the December 31 payroll. Round all calculations to the
nearest dollar.
Answer:
The following information is available for Young Corporation:
Instructions
Compute Young Corporation’s free cash flow.
Answer: