Purple Corporation pays $536,000 to acquire 40% of the equity securities of Blue, Inc.
on May 5, 2019. In the journal entry to record this transaction ________.
A) Equity Investments—Blue Inc. will be credited for $536,000
B) Equity Investments—Blue Inc. will be debited for $536,000
C) Common Stock Holdings—Blue Inc. will be debited for $536,000
D) Revenue from Investments will be credited for $536,000
A business collects cash from a customer for services that were performed one month
earlier. Which of the following accounts is credited?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
The financial statement that reports assets, liabilities, and stockholders’ equity as of the
last day of the period is called the ________.
A) income statement
B) statement of retained earnings
C) balance sheet
D) unadjusted trial balance
Kelley, Inc. provided the following account balances for 2018:
Calculate the average number of days that inventory was held by Kelley, Inc. during 2018.
(Assume 365 days in a year. Round your intermediate calculations and final answer to two
decimal places.)
A) 191.10 days
B) 98.38 days
C) 92.64 days
D) 95.55 days
When the corporation declares a stock dividend, a stockholder’s percentage ownership
in the stock of the corporation ________.
A) will decrease
B) can increase or decrease
C) will increase
D) remains unchanged
A control account ________.
A) does not appear on the balance sheet
B) has a balance that equals the sum of the balances in a group of related accounts in a
subsidiary ledger
C) is equivalent to a contra account and represents the offsetting nature of debits and
credits on a firm’s financial statements
D) holds individual accounts that support a general ledger account
To accurately determine the financial performance of a company, it is necessary to
compare the company’s performance ________.
A) with a competing company
B) to the budget
C) with companies in different industries
D) only with profitable companies
Trinity Coatings Company uses the indirect method to prepare its statement of cash
flows. Refer to the following information for 2018:
The beginning balance in the Cash account was $2700.
Net cash provided by operating activities: $41,000
Net cash used for investing activities: $(28,000)
Net cash provided by financing activities: $1800
The statement of cash flows will show ________.
A) ending cash of $14,800
B) net cash provided by operating activities $42,900
C) net cash provided by investing and financing activities $(23,800)
D) ending cash of $17,500
Which of the following is paid by the employer only?
A) OASDI tax
B) Medicare tax
C) employee income tax
D) federal unemployment tax
Adams Service Company had a net income of $14,500 for the year ending December
31, 2018. The total assets on January 1, 2018 were $28,000. The total assets on
December 31, 2018 were $16,000.
Calculate Adam’s return on assets (ROA). Show your computations and label your
work. Round your answer to two decimal places.
Provide definitions for the following types of investments.
a. Controlling interest equity investment
b. Available-for-sale debt investment
c. No significant influence equity investment
Available-for-sale (AFS) debt investments are reported as ________ if the business
expects to sell them within one year.
A) current assets
B) equity
C) long-term assets
D) either current assets or long-term assets
A customer returned merchandise purchased with cash with a sales price of $4,500. The
cost of goods was $1,800. Which of the following represents the correct way to record
this transaction?
A)
B)
C)
D)
Which financial statement includes a specific date in its heading?
A) Statement of retained earnings
B) Statement of cash flows
C) Income statement
D) Balance sheet
Regarding gross and net pay, which of the following statements is correct?
A) Gross pay minus all deductions such as income tax withheld equals net pay.
B) Net pay represents the total salaries and wages expense to the employer.
C) For most businesses, gross pay equals net pay.
D) Employers are required to deposit net pay into the employee’s bank account.
The total assets and the total liabilities of Atlas Financial Services are shown below.
The company issued no common stock and paid no dividends during the year.
What was the amount of net income for the year?
A) $50,000
B) $10,000
C) $40,000
D) $60,000
The time span during which cash is paid for goods and services, which are then sold to
customers from whom the business collects cash, is called the ________.
A) production time
B) operating cycle
C) accounting cycle
D) sales time
Anthony Delivery Service has a weekly payroll of $35,000. December 31 falls on
Tuesday and Anthony will pay its employees the following Monday (January 6) for the
previous full week. Assume that Anthony has a five-day workweek and has an
unadjusted balance in Salaries Expense of $885,000 at December 31. What is the
December 31 balance of Salaries Expense after adjusting entries are recorded and
posted?
A) $885,000
B) $920,000
C) $906,000
D) $899,000
Mansfield Office Furniture Store reported the following selected items at December 31,
2019 (previous year – 2018 – amounts are also given as needed):
Compute Mansfield’s
(a) acid-test ratio;
(b) accounts receivable turnover ratio (round to 2 decimal places); and
(c) days’ sales in receivables for 2019 (round to the nearest day). Show your computations.
A debt that a business owes is called ________.
A) an asset
B) a liability
C) stockholders’ equity
D) revenue
A company using the perpetual inventory system purchased inventory worth $500,000
on account with credit terms of 3/15, n/45. Defective inventory of $50,000 was returned
3 days later, and the accounts were appropriately adjusted. If the company paid the
invoice 25 days later, the journal entry to record the payment would be ________.
A) $500,000 debit to Accounts Payable and $500,000 credit to Cash
B) $450,000 debit to Accounts Payable and $450,000 credit to Cash
C) $500,000 debit to Accounts Payable, $486,500 credit to Cash, and $13,500 credit to
Merchandise Inventory
D) $463,500 debit to Accounts Payable, $13,500 credit to Merchandise Inventory, and
$450,000 credit to Cash
On January 1, 2018, Benbrook Company purchased equipment and signed a six-year
mortgage note for $160,000 at 15%. The note will be paid in equal annual installments
of $42,278, beginning January 1, 2019. Calculate the balance of Mortgage Payable after
the payment of the first installment. (Round your answer to the nearest whole number.)
A) $24,000
B) $117,722
C) $141,722
D) $120,702
Jameson, Inc. had the following balances and transactions during 2019:
What would be reported for Cost of Goods Sold on the income statement for the year
ending December 31, 2019 if the perpetual inventory system and the last-in, first-out
inventory costing method are used?
A) $18,145
B) $13,825
C) $4,320
D) $16,920
Which of the following accounts is an asset?
A) Salaries Expense
B) Accounts Payable
C) Service Revenue
D) Prepaid Expense
Which of the following statements regarding a periodic inventory system is incorrect?
A) A periodic inventory system is simpler than a perpetual inventory system.
B) A periodic inventory system works well for small businesses in which inventory
costs can be controlled by visual inspection.
C) The only way to determine the ending merchandise inventory and cost of goods sold
in a periodic inventory system is to take a physical inventory.
D) The various inventory costing methods are not used in a periodic inventory system.
Journalize the following transaction for a merchandiser that uses the perpetual
inventory system.
Sold goods to A. Pitt, on account, $2,500 (cost, $1,750). Omit explanations.
Which of the following is true of a stock split and a stock dividend?
A) A stock split will increase total stockholders’ equity, but a stock dividend will not.
B) Neither a stock split nor a stock dividend will increase total stockholders’ equity.
C) A stock dividend will increase total stockholders’ equity, but a stock split will not.
D) A stock split will decrease retained earnings, but a stock dividend will not.
When bonds are retired at maturity, ________.
A) the bondholders are paid the face value plus the unamortized premium or less the
unamortized discount
B) the carrying value equals the face value plus the unamortized premium or less the
unamortized discount
C) the carrying value always equals the face value
D) the entry to retire the bonds may include a gain or loss on retirement of bonds
Lamar Corporation originally purchased land for $20,000. It later sold the land for
$20,000 in cash. Which of the following is true of the effect of the sale of land on the
accounting equation?
A) Assets increase and liabilities decrease by $20,000.
B) Assets and equity increase by $40,000.
C) Assets increase by $20,000; equity increases by $20,000.
D) The amount of total assets remains the same.
On a balance sheet for a merchandiser, Merchandise Inventory is listed as a(n)
________.
A) current asset
B) current liability
C) expense
D) revenue
Gross profit represents the mark-up on ________.
A) sales revenue
B) merchandise inventory
C) operating expenses
D) transportation cost