Langer Company has the following inventory information.
Assuming that a perpetual inventory system is used, what is the ending inventory
(round all calculations to nearest dollar) under the moving-average cost method?
a. $2,930
b. $2,966
c. $2,986
d. $3,054
Answer:
Using the following information:
During 2015, sales on account were $145,000 and collections on account were
$100,000. Also during 2015, the company wrote off $4,000 in uncollectible accounts.
An analysis of outstanding receivable accounts at year end indicated that uncollectible
accounts should be estimated at $40,000.
Bad debt expense for 2015 is
a. $4,000.
b. $5,000.
c. $9,000
d. $40,000.
Answer:
Dividends in arrears on cumulative preferred stock
a. are shown in stockholders’ equity of the balance sheet.
b. must be paid before common stockholders can receive a dividend.
c. should be recorded as a current liability until they are paid.
d. enable the preferred stockholders to share equally in corporate earnings with the
common stockholders.
Answer:
Adjustments would not be necessary if financial statements were prepared to reflect net
income from
a. monthly operations.
b. fiscal year operations.
c. interim operations.
d. lifetime operations.
Answer:
The cash account shows a balance of $90,000 before reconciliation. The bank statement
does not include a deposit of $5,000 made on the last day of the month. The bank
statement shows a collection by the bank of $2,400 and a customer’s check for $640
was returned because it was NSF. A customer’s check for $900 was recorded on the
books as $1,080, and a check written for $138 was recorded as $192. The correct
balance in the cash account was
a. $91,580.
b. $91,634.
c. $92,400.
d. $96,634.
Answer:
An error in the physical count of goods on hand at the end of the current period resulted
in a $3,000 understatement of the ending inventory. The effect of this error in the
current period is to
a. overstate cost of goods sold.
b. understate cost of goods available for sale.
c. overstate gross profit.
d. overstate net income.
Answer:
A factor which distinguishes the corporate form of organization from a sole
proprietorship or partnership is that a
a. corporation is organized for the purpose of making a profit.
b. corporation is subject to more federal and state government regulations.
c. corporation is an accounting economic entity.
d. corporation’s temporary accounts are closed at the end of the accounting period.
Answer:
The trial balances of Orton Company follow with the accounts arranged in alphabetic
order. Analyze the data and prepare [a) the adjusting entries and [b) the closing entries
made by Orton Company.
Answer:
The entries recorded in the Other Accounts column of a cash payments journal
a. are posted to the accounts payable subsidiary ledger daily.
b. are posted individually to accounts in the general ledger.
c. are not posted individually but are posted as a column total to the general ledger.
d. do not require posting.
Answer:
. The account Unrealized Loss’”Income is reported
a. as a contra account in the stockholders’ equity section of the balance sheet.
b. in the other expenses and losses section of the income statement.
c. in the operating section of the income statement.
d. as a contra account in the current asset section of the balance sheet.
Answer:
The following financial statement information is available for Penn Corporation:
The return on common stockholders’ equity for 2015 is
a. 24.5%.
b. 32.9%.
c. 26%.
d. 29.4%.
Answer:
The tax that is paid equally by the employer and employee is the
a. federal income tax.
b. federal unemployment tax.
c. state unemployment tax.
d. FICA tax.
Answer:
Which of the following is not a reason one set of international accounting standards are
needed?
a. multinational corporations.
b. financial markets.
c. information technology.
d. all of the above are reasons one set of international accounting standards are needed.
Answer:
At the beginning of September 2015, Stella Company reported Inventory of $8,000.
During the month, the company made purchases of $35,600. At September 30, 2015, a
physical count of inventory reported $8,400 on hand. Cost of goods sold for the month
is
a. $35,200.
b. $35,600.
c. $36,000.
d. $43,600.
Answer:
A legal document which summarizes the rights and privileges of bondholders as well as
the obligations and commitments of the issuing company is called
a. a bond indenture.
b. a bond debenture.
c. trading on the equity.
d. a term bond.
Answer:
During February 2015 its first month of operations, the stockholders of Ariel Pink
Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid
expenses of $14,000. Assuming no other transactions impacted the cash account, what
is the balance in Cash at February 28?
a. $4,000 credit
b. $4,000 debit
c. $46,000 debit
d. $54,000 debit
Answer:
Advances from customers are classified as a(n)
a. revenue.
b. expense.
c. current asset.
d. current liability.
Answer:
A correcting entry
a. must involve one balance sheet account and one income statement account.
b. is another name for a closing entry.
c. may involve any combination of accounts.
d. is a required step in the accounting cycle.
Answer:
The average collection period is computed by dividing
a. net credit sales by average gross accounts receivable.
b. net credit sales by ending gross accounts receivable.
c. the accounts receivable turnover by 365 days.
d. 365 days by the accounts receivable turnover.
Answer:
Which of the following statements is true regarding inventory cost flow assumptions?
a. A company may use more than one costing method concurrently.
b. A company must comply with the method specified by industry standards.
c. A company must use the same method for domestic and foreign operations.
d. A company may never change its inventory costing method once it has chosen a
method.
Answer:
Can financial statements be prepared directly from the adjusted trial balance?
a. They cannot. The general ledger must be used.
b. Yes, adjusting entries have been recorded in the general journal and posted to the
ledger accounts.
c. No, the adjusted trial balance merely proves the equality of the total debit and total
credit balances in the ledger after adjustments are posted. It has no other purpose.
d. They can because that is the only reason that an adjusted trial balance is prepared.
Answer:
Pan Inc. has an investment in available-for-sale securities of $70,000. This investment
experienced an unrealized loss of $6,000 during the current year. Assuming a 35% tax
rate, the effect of this loss on comprehensive income will be
a. no effect.
b. $70,000 increase.
c. $24,500 decrease.
d. $6,000 decrease.
Answer:
Financial statements for Kinder Corporation are presented below.
Additional Information: All sales were on account. The market price of Kinder’s
common stock was $42 on December 31, 2015.
Instructions: Compute the indicated ratios at December 31, 2015, or for the year ended
December 31, 2015, as appropriate. Report answers to two decimal places.
1> Return on assets is __.
2> Acid-test ratio is .
3> Profit margin ___.
4> Payout ratio is __.
5> Debt to assets ratio is .
6> Asset turnover is .
7> Accounts receivable turnover is .
8> Price-earnings ratio is .
9> Current ratio is __.
Answer:
One item is omitted in each of the following summaries of balance sheet and income
statement data for three different sole corporations, X, Y, and Z. Determine the amounts
of the missing items, identifying each corporation by letter.
Answer:
Maxim Corporation had the following transactions pertaining to debt investments.
Instructions
Prepare journal entries for the purchase and sale of the Woodrow Company bonds.
Answer:
Which of the following adjustments to convert net income to net cash provided by
operating activities is correct?
Answer:
The information in a statement of cash flows helps investors and creditors assess the
company’s ability to pay dividends and meet obligations.
Answer: