If a corporation distributes cash to its stockholders, then
a. there has been a violation of accounting principles.
b. stockholders’ equity will increase.
c. stockholders’ equity will decrease.
d. there will be a new liability showing the stockholders owes money to the business.
Answer:
A company purchased office equipment for $40,000 and estimated a salvage value of
$8,000 at the end of its 5-year useful life. The constant percentage to be applied against
book value each year if the double-declining-balance method is used is
a. 20%.
b. 25%.
c. 40%.
d. 5%.
Answer:
All revenue and expense accounts have been closed at the end of the calendar year for
Patton Company. The Income Summary account has total debits of $530,000 and total
credits of $600,000. As of the same date, Retained Earnings has a balance of $115,000,
and the Dividends account has a balance of $48,000.
Instructions
[a) Journalize the entries required to complete the closing of the accounts.
[b) Prepare a retained earnings statement for the year ended December 31, 2015.
Answer:
On January 2, 2015, Pine Company purchased 100% of the outstanding common shares
of Seely Company for $520,000. Any excess of cost over the book value of the net
assets of Seely Company should first be allocated to Land $55,000, and Buildings
$40,000 and any remainder to goodwill.
Instructions
(a) Complete the following worksheet below for preparing a consolidated balance sheet
on the date of acquisition. You may add accounts to the worksheet that may be
necessary.
(b) Prepare a consolidated balance sheet for Pine Company and Subsidiary on January
2, 2015.
Answer:
In the month of May, Kijak Company Inc. wrote checks in the amount of $84,000. In
June, checks in the amount of $114,000 were written. In May, $75,000 of these checks
were presented to the bank for payment, and $99,000 in June. What is the amount of
outstanding checks at the end of May?
a. $9,000
b. $15,000
c. $24,000
d. $30,000
Answer:
The Accumulated Depreciation account is a(n)
a. contra asset account.
b. liability account.
c. asset account.
d. operating expense account.
Answer:
The interest on a $6,000, 6%, 60-day note receivable is
a. $60.
b. $120.
c. $180.
d. $360.
Answer:
Deerhoof Company purchases equipment for $2,700 and supplies for $400 from
Milkman Co. for $3,100 cash. The entry for this transaction will include a
a. debit to Equipment $2,700 and a debit to Supplies Expense $400 for Milkman.
b. credit to Cash for Milkman.
c. credit to Accounts Payable for Deerhoof.
d. debit to Equipment $2,700 and a debit to Supplies $400 for Deerhoof.
Answer:
The average collection period for accounts receivable is computed by dividing 365 days
by
a. net credit sales.
b. average accounts receivable.
c. ending accounts receivable.
d. accounts receivable turnover.
Answer:
Which one of the following is not necessarily a party to a check?
a. Maker
b. Buyer
c. Payee
d. Payer
Answer:
Equipment was purchased for $85,000 on January 1, 2015. Freight charges amounted to
$3,500 and there was a cost of $10,000 for building a foundation and installing the
equipment. It is estimated that the equipment will have a $15,000 salvage value at the
end of its 5-year useful life. What is the amount of accumulated depreciation at
December 31, 2016, if the straight-line method of depreciation is used?
a. $33,400
b. $16,700
c. $14,300
d. $28,600
Answer:
The financial statement that summarizes the financial position of a company is the
a. income statement.
b. balance sheet.
c. operating statement.
d. retained earnings statement.
Answer:
For each of the following oversights, state whether total assets will be understated (U),
overstated (O), or no affect (NA).
_____ 1> Failure to record revenue recognized but not yet received.
_____ 2> Failure to record expired prepaid rent.
_____ 3> Failure to record accrued interest on the bank savings account.
_____ 4> Failure to record depreciation.
_____ 5> Failure to record accrued wages.
_____ 6> Failure to record the recognized portion of unearned revenues.
Answer:
The board of directors must assign a per share value to a stock dividend declared that is
a. greater than the par or stated value.
b. less than the par or stated value.
c. equal to the par or stated value.
d. at least equal to the par or stated value.
Answer:
In accounting for available-for-sale securities, the Unrealized Loss’”Equity account
should be classified as a
a. liability on the balance sheet.
b. loss on the income statement.
c. deduction in the stockholders’ equity section of the balance sheet.
d. contra asset on the balance sheet.
Answer:
The percentage of sales basis of estimating expected uncollectibles
a. emphasizes the matching of expenses with revenues.
b. emphasizes balance sheet relationships.
c. emphasizes cash realizable value.
d. is not generally accepted as a basis for estimating bad debts.
Answer:
Financial information is presented below:
The gross profit rate would be
a. .133.
b. .400.
c. .600.
d. .733.
Answer:
The fraud triangle applies to
a. U.S companies but not international companies.
b. international companies but not U.S. companies.
c. U.S. and Canadian companies but not other international companies.
d. U.S and international companies.
Answer:
The two ways that a corporation can be classified by ownership are
a. publicly held and privately held.
b. stock and non-stock.
c. inside and outside.
d. majority and minority.
Answer:
Prepare the necessary journal entries for the following transactions:
(a) On September 1, Cole Company borrowed $300,000 from National Bank on a
6-month, 8% note.
(b) On December 31, Cole Company accrued interest (assume adjusting entries are only
made at the end of the year).
Answer:
Each payment on a mortgage note payable consists of
a. interest on the original balance of the loan only.
b. reduction of loan principal only.
c. interest on the original balance of the loan and reduction of loan principal.
d. interest on the unpaid balance of the loan and reduction of loan principal.
Answer:
Two individuals at a retail store work the same cash register. You evaluate this situation
as
a. a violation of establishment of responsibility.
b. a violation of segregation of duties.
c. supporting the establishment of responsibility.
d. supporting internal independent verification.
Answer:
A $600,000 bond was retired at 98 when the carrying value of the bond was $590,000.
The entry to record the retirement would include a
a. gain on bond redemption of $10,000.
b. loss on bond redemption of $10,000.
c. loss on bond redemption of $2,000.
d. gain on bond redemption of $2,000.
Answer:
When common stock is issued for services or non-cash assets, cost should be
a. only the fair value of the consideration given up.
b. only the fair value of the consideration received.
c. the book value of the common stock issued.
d. either the fair value of the consideration given up or the consideration received,
whichever is more clearly evident.
Answer:
The entry to record an installment payment on a long-term note payable is
a. Mortgage Payable
Cash
b. Interest Expense
Cash
c. Mortgage Payable
Interest Expense
Cash
d. Bonds Payable
Cash
Answer:
The carrying value of bonds at maturity should be equal to the face value of the bonds.
Answer:
Carter Company sells merchandise on account for $4,000 to Hannah Company with
credit terms of 2/10, n/30. Hannah Company returns $600 of merchandise that was
damaged, along with a check to settle the account within the discount period. What
entry does Carter Company make upon receipt of the check?
Answer:
The transactions of the Liberty Belle Store are recorded in the general journal below.
You are to post the journal entries to T-accounts.
General Ledger
Answer:
Shellhammer Company’s inventory records show the following data for the month of
September:
A physical inventory on September 30 shows 200 units on hand. Calculate the value of
ending inventory and cost of goods sold if the company uses FIFO inventory costing
and a periodic inventory system.
Answer:
A cash register tape shows cash sales of $1,800 and sales taxes of $126. The journal
entry to record this information is
Answer: