The amount you must deposit now in your savings account, paying 6% interest, in order
to accumulate $6,000 for a down payment 5 years from now on a new car is
a. $1,200.
b. $4,484.
c. $4,477.
d. $4,200.
Answer:
Prepare the necessary journal entries to record the following transactions, assuming
Dakin Company uses a perpetual inventory system.
(a) Purchased $35,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $700 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.
Answer:
Net income results when
a. Assets > Liabilities.
b. Revenues = Expenses.
c. Revenues > Expenses.
d. Revenues < Expenses.
Answer:
Financial accounting provides economic and financial information for all of the
following except
a. creditors.
b. investors.
c. managers.
d. other external users.
Answer:
In the stockholders’ equity section of the balance sheet, the classification of capital
stock consists of
a. additional paid-in capital and common stock.
b. common stock and treasury stock.
c. common stock, preferred stock, and treasury stock.
d. common stock and preferred stock.
Answer:
Which one of the following items is not considered a part of the cost of a truck
purchased for business use?
a. Sales tax
b. Truck license
c. Freight charges
d. Cost of lettering on side of truck
Answer:
Your friend, Dean, has opened a movie theater. Dean states that he does not have time
to develop and implement a system of internal controls.
a. Provide Dean with the objectives of a system of internal controls.
b. Explain to Dean why he should develop a system of internal controls.
Answer:
Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and
agreed to pay the balance in 30 days. The journal entry to record this transaction would
include a debit to an asset account for $1,000, a credit to a liability account for $600.
Which of the following would be the correct way to complete the recording of the
transaction?
a. Credit an asset account for $400.
b. Credit another liability account for $400.
c. Credit the retained earnings account for $400.
d. Debit the retained earnings account for $400.
Answer:
A balance sheet shows
a. revenues, liabilities, and stockholders’ equity.
b. expenses, dividends, and stockholders’ equity.
c. revenues, expenses, and dividends.
d. assets, liabilities, and stockholders’ equity.
Answer:
For companies that use a perpetual inventory system, all of the following are purposes
for taking a physical inventory except
a. to check the accuracy of the records.
b. to determine the amount of wasted raw materials.
c. to determine losses due to employee theft.
d. to determine ownership of the goods.
Answer:
The cash records of Barry Company show the following:
1> In September, deposits per the bank statement totaled $38,600; deposits per books
$39,000; and deposits in transit at September 30 were $4,600.
2> In September, cash disbursements per books were $36,500; checks clearing the bank
were $39,800; and outstanding checks at September 30 were $3,100.
There were no bank debit or credit memoranda and no errors were made by either the
bank or Barry Company.
Answer the following questions:
(a) What were the deposits in transit at August 31?
(b) What were the outstanding checks at August 31?
Answer:
Profit margin is calculated by dividing
a. sales by cost of goods sold.
b. gross profit by net sales.
c. net income by stockholders’ equity.
d. net income by net sales.
Answer:
Short-term investments are securities that are readily marketable and
intended to be converted into cash within the next
a. year.
b. two years.
c. year or operating cycle, whichever is shorter.
d. year or operating cycle, whichever is longer.
Answer:
Jeff Retailers accepted $75,000 of Citibank Visa credit card charges for merchandise
sold on July 1. Citibank charges 2% for its credit card use. The entry to record this
transaction by Jeff Retailers will include a credit to Sales Revenue of $75,000 and a
debit(s) to
a. Cash $73,500 and Service Charge Expense $1,500.
b. Accounts Receivable $73,500 and Service Charge Expense $1,500.
c. Cash $73,500 and Interest Expense $1,500.
d. Accounts Receivable $75,000.
Answer:
Which of the following is not true of ordinary repairs?
a. They primarily benefit the current accounting period.
b. They can be referred to as revenue expenditures.
c. They maintain the expected productive life of the asset.
d. They increase the productive capacity of the asset.
Answer:
The time period assumption is used under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.
Answer:
Accumulated Depreciation is
a. an expense account.
b. a stockholders’ equity account.
c. a liability account.
d. a contra asset account.
Answer:
For each of the following accounts indicate the effect of a debit or a credit on the
account and the normal balance. Increase (+), Decrease (‘“).
Debit_ _Credit_ Normal Balance
1> Salaries and wages expense.
2> Accounts receivable.
3> Service revenue.
4> Common stock.
5> Dividends.
Answer:
The comparative balance sheet for Lane Company appears below:
The income statement for the year is as follows:
Cash dividends of $15,000 were paid during the year. Land costing $15,000 was
acquired by the issuance of common stock. The property was subsequently sold for
$17,500 cash.
Instructions
Prepare a statement of cash flows for the year ended December 31, 2015 using the
indirect method.
Answer:
Analysis of the changes in all of the noncash balance sheet accounts will explain the
change in the Cash account.
Answer:
The following payroll liability accounts are included in the ledger of Clementine
Company on January 1, 2015:
In January, the following transactions occurred:
Instructions
Journalize the January transactions
Answer:
The time period assumption states that the economic life of a business entity can be
divided into artificial time periods.
Answer:
The accounting profession provides many career opportunities for individuals. Identify
the major fields that exist in accounting and comment on the major functions performed
by individuals in each of these areas.
Answer:
Accounting for inventories is important because inventories affect the ______________
section of the balance sheet and the ______________ section on the income statement.
Answer:
The expense recognition principle requires that the cost of goods sold be matched
against the ending merchandise inventory in order to determine income.
Answer: