1) plant assets are long-lived, tangible assets used in the operation of a business.
2) reversing entries are dated on the first day of the new accounting period.
3) generally accepted accounting principles (gaap) require the use of accrual
accounting.
4) although the direct method is easier to use, the financial accounting standards board
(fasb) prefers the indirect method of reporting cash flows from operating activities.
5) the declaration and payment of cash dividends cause a decrease in both assets (cash)
and stockholders’ equity (retained earnings) for the corporation.
6) financial accounting focuses on information for decision makers outside of the
business, such as creditors and taxing authorities.
7) a business makes a cash payment of $12,000 to a supplier, for supplies purchased
two weeks earlier. which of the following accounts will be debited?
a) cash
b) accounts payable
c) bank
d) accounts receivable
8) the allowance for bad debts account has a credit balance of $2,000. the company’s
management estimates that 2% of net credit sales will be uncollectible for the year
2015. net credit sales for the year amounted to $250,000. what will be the amount of
bad debts expense reported on the income statement for 2015?
a) $5,000
b) $3,075
c) $2,875
d) $2,675
9) jade investments inc. purchased 40% of the common stock of ivory corporation on
march 1, 2014. ivory corporation reports a net income of $675,000 for the 2015 year.
based on the information provided, which of the following is true of the balance sheet
on december 31, 2015?
a) total assets will remain unchanged
b) total liabilities will decrease
c) total equity will increase
d) cash will increase
10) glitter services inc. pays $1,350,000 to acquire 35% of voting stock of grey
investments inc. on march 5, 2016. when this transaction is reported in the balance
sheet, the ________.
a) total equity will increase
b) total assets will increase
c) total assets will decrease
d) total cash will decrease
11) managerial accounting provides information to ________.
a) internal decision makers
b) outside investors and lenders
c) auditors
d) taxing authorities
12) the allowance for bad debts account has a debit balance of $9,000 before the
adjusting entry for bad debt expense. after analyzing the accounts in the accounts
receivable subsidiary ledger using the aging method, the company’s management
estimates that uncollectible accounts will be $15,000. what will be the amount of bad
debts expense reported on the income statement?
a) $4,000
b) $24,000
c) $6,000
d) $15,000
13) jumbo sales corporation offers warranties on all their electronic goods. warranty
expense is estimated at 3% of sales revenue. in 2013, the company had $595,000 of
sales. in the same year, it paid out $8,500 of warranty payments. which of the following
is the entry needed to record the estimated warranty expense?
a)
b)
c)
d)
14) rodriguez tint inc. uses the indirect method to prepare the statement of cash flows.
refer to the following income statement:
rodriguez inc.
income statement
year ended december 31, 2015
additional information provided by the company includes the following:
current assets, other than cash, decreased by $5,000
current liabilities increased by $2,000
how much is the net cash provided by operating activities?
a) $4,700
b) $7,300
c) $10,000
d) $(300)
15) the accounts receivable turnover ratio measures ________.
a) how well a company can pay its current liabilities with its current asset
b) how many days it takes, on average, to collect receivables
c) how many days it takes, on average, to sell the inventory
d) the number of times a company collects the average accounts receivable balance in a
year
16) a merchandiser returned inventory worth $2,000 that was purchased on account.
under the periodic inventory system, the journal entry to record such returns would
include ________.
a) a debit to purchase returns and allowances for $2,000 and a credit to accounts
payable for $2,000
b) a debit to accounts payable for $2,000 and a $2,000 credit to purchase returns and
allowances
c) a debit to purchases for $2,000 and a credit to accounts payable for $2,000
d) a debit to accounts payable for $2,000 and a credit to purchases for $2,000
17) the cost of an asset is $1,000,000 and its residual value is $100,000. estimated
useful life of the asset is four years. calculate depreciation for the first year using the
double-declining-balance method of depreciation.
a) $450,000
b) $500,000
c) $250,000
d) $225,000
18) glendale corporation had the following transactions in august:
earned $2,000 as revenues on account; collected $4,000 from a customer for goods sold
last month; incurred $600 of repair expense and paid cash; paid $200 to a supplier that
it owed from the previous month.
what is the net income in august?
a) $500
b) $5,700
c) $2,700
d) $1,400
19) prinkle corporation had purchased equipment for $50,000 on january 1, 2015. on
december 31, 2017, the corporation sold the equipment for $23,000. accumulated
depreciation as of december 31, 2017 was $25,000.
calculate gain or loss on sale.
a) $2,000 gain
b) $2,000 loss
c) no gain no loss
d) $25,000 loss
20) an accounting entry that is characterized by having multiple debits and/or multiple
credits is called a ________ entry.
a) balanced
b) posted
c) chart of accounts
d) compound journal
21) smart art is a new establishment. during the first year, there were credit sales of
$40,000 and collections of credit sales of $36,000. one account for $650 was written
off. the company decided to use the percent-of-sales method to account for bad debts
expense, and use a factor of 2% for their year-end adjustment of bad debts expense.
prepare the entry to record the bad debt expense.
22) a company purchased inventory for $2,200 on account, and recorded the following
journal entry:
the vendor’s invoice showed terms of 3/10, n/30. give the journal entry for the payment
of the invoice seventeen days after the invoice date.
23) on december 1, 2015, arther inc. had 200,000 shares of $1 par value common stock
issued and outstanding. the next day they declared and distributed a 50% stock
dividend. the market value of the stock on that date was $9 per share. provide the
journal entry for the transaction.
24) data for martin corp. and tante inc. as follows:
martintante
net sales$25,000$32,500
cost of goods sold18,50022,360
other expenses2,1505,000
net income$4,350$5,140
prepare a comparative common-size income statement for martin corp and tante inc. for
the year ending december 31, 2016. round off the percentages to two decimal places.
use a multi-step format for the income statement.
25) on november 1, 2015, ealys jewelers accepted a 3-month, 15% note for $6,000 in
settlement of an overdue account receivable. give the journal entry to record the
accrued interest at the year end.