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If a plant asset is retired before it is fully depreciated and no salvage value is received,
a. a gain on disposal occurs.
b. a loss on disposal occurs.
c. either a gain or a loss can occur.
d. neither a gain nor a loss occurs.
Answer:
The inventory turnover is computed by dividing cost of goods sold by
a. beginning inventory.
b. ending inventory.
c. average inventory.
d. 365 days.
Answer:
Cost of goods sold is determined only at the end of the accounting period in
a. a perpetual inventory system.
b. a periodic inventory system.
c. both a perpetual and a periodic inventory system.
d. neither a perpetual nor a periodic inventory system.
Answer:
Switzer, Inc. has 8 computers which have been part of the inventory for over two years.
Each computer cost $600 and originally retailed for $900. At the statement date, each
computer has a current replacement cost of $400. What value should Switzer, Inc., have
for the computers at the end of the year?
a. $2,400.
b. $3,200.
c. $4,800.
d. $7,200.
Answer:
Sloman Corporation has 100,000 shares of $50 par value preferred stock authorized.
During the year, it had the following transactions related to its preferred stock.
(a) Issued 20,000 shares at $55 per share.
(b) Issued 10,000 shares for equipment having a $700,000 asking price. The stock had a
market value of $75 per share
Instructions
Journalize the transactions.
Answer:
Canton Manufacturing declared a 10% stock dividend when it had 150,000 shares of $3
par value common stock outstanding. The market price per common share was $12 per
share when the dividend was declared. The entry to record this dividend declaration
includes a credit to
a. Stock Dividends for $45,000.
b. Common Stock Dividends Distributable for $180,000.
c. Common Stock for $45,000.
d. Paid-in Capital in Excess of Par for $135,000.
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:
Carson Packaging Corporation began business in 2015 by issuing 30,000 shares of $3
par common stock for $8 per share and 12,000 shares of 6%, $10 par preferred stock for
par. At year end, the common stock had a market value of $12. On its December 31,
2015 balance sheet, Carson Packaging would report
a. Common Stock of $360,000.
b. Common Stock of $90,000.
c. Common Stock of $240,000.
d. Paid-In Capital of $90,000.
Answer:
Vertical analysis is also known as
a. perpendicular analysis.
b. common size analysis.
c. trend analysis.
d. straight-line analysis.
Answer:
Which of the following reflects the balances of prepayment accounts prior to
adjustment?
a. Balance sheet accounts are understated and income statement accounts are
understated.
b. Balance sheet accounts are overstated and income statement accounts are overstated.
c. Balance sheet accounts are overstated and income statement accounts are
understated.
d. Balance sheet accounts are understated and income statement accounts are
overstated.
Answer:
Each of the following may be shown on a supporting schedule instead of on the balance
sheet except the
a. current maturities of long-term debt.
b. conversion privileges.
c. interest rates.
d. maturity dates.
Answer:
The times interest earned is computed by dividing
a. net income by interest expense.
b. income before income taxes by interest expense.
c. income before interest expense by interest expense.
d. income before income taxes and interest expense by interest expense.
Answer:
Electrelane Company showed the following balances at the end of its first year:
What did Electrelene Company show as total credits on its trial balance?
a. $9,000
b. $44,000
c. $45,000
d. $49,000
Answer:
Determine the interest on the following notes:
(a) $2,000 at 6% for 90 days.
(b) $900 at 9% for 5 months.
(c) $3,000 at 8% for 60 days
(d) $1,600 at 7% for 6 months
Answer:
Dividends are predominantly paid in
a. earnings.
b. property.
c. cash.
d. stock.
Answer:
If total assets equal $345,000 and total stockholders' equity equal $140,000, then total
liabilities must equal
a. $485,000.
b. $205,000.
c. $140,000.
d. There is not enough information given to determine this.
Answer:
Bonds that have specific assets of the issuer pledged as collateral are
a. secured bonds.
b. callable bonds.
c. convertible bonds.
d. debenture bonds.
Answer:
Lyleen Boat Company's bank statement for the month of September showed a balance
per bank of $7,000. The company's Cash account in the general ledger had a balance of
$5,459 at September 30. Other information is as follows:
(1) Cash receipts for September 30 recorded on the company's books were $5,700 but
this amount does not appear on the bank statement.
(2) The bank statement shows a debit memorandum for $40 for check printing charges.
(3) Check No. 119 payable to Mann Company was recorded in the cash payments
journal and cleared the bank for $248. A review of the accounts payable subsidiary
ledger shows a $36 credit balance in the account of Mann Company and that the
payment to them should have been for $284.
(4) The total amount of checks still outstanding at September 30 amounted to $5,000.
(5) Check No. 138 was correctly written and paid by the bank for $409. The cash
payment journal reflects an entry for Check No. 138 as a debit to Accounts Payable and
a credit to Cash in Bank for $490.
(6) The bank returned an NSF check from a customer for $360.
(7) The bank included a credit memorandum for $2,560 which represents collection of a
customer's note by the bank for the company; principal amount of the note was $2,500
and interest was $60. Interest has not been accrued.
Instructions
(a) Prepare a bank reconciliation for Lyleen Boat Company at September 30.
(b) Prepare any adjusting entries necessary as a result of the bank reconciliation.
Answer:
The cost flow method that often parallels the actual physical flow of merchandise is the
a. FIFO method.
b. LIFO method.
c. average-cost method.
d. gross profit method.
Answer:
Fitzgerald Company wrote checks totaling $34,160 during October and $37,300 during
November. $32,480 of these checks cleared the bank in October, and $36,440 cleared
the bank in November. What was the amount of outstanding checks on November 30?
a. $2,860
b. $1,680
c. $2,540
d. $3,140
Answer:
If equal amounts are added to the numerator and the denominator of the current ratio,
the ratio will always
a. increase.
b. decrease.
c. stay the same.
d. equal zero.
Answer:
On January 1, 2015, $3,000,000, 5-year, 10% bonds, were issued for $2,916,000.
Interest is paid semiannually on January 1 and July 1. If the issuing corporation uses the
straight-line method to amortize discount on bonds payable, the monthly amortization
amount is
a. $14,000.
b. $16,800.
c. $700.
d. $1,400.
Answer:
Kelly Rice has a large consulting practice. New clients are required to pay one-half of
the consulting fees up front. The balance is paid at the conclusion of the consultation.
How does Rice account for the cash received at the end of the engagement?
a. Cash
Unearned Service Revenue
b. Cash
Service Revenue
c. Prepaid Service Fees
Service Revenue
d. No entry is required when the engagement is concluded.
Answer:
If the adjusting entry for depreciation is not made,
a. assets will be understated.
b. stockholders' equity will be understated.
c. net income will be understated.
d. expenses will be understated.
Answer:
Calculating financial ratios is a financial reporting requirement under generally
accepted accounting principles.
Answer:
If a retailer accepts a national credit card such as Visa, the retailer must maintain
detailed records of customer accounts.
Answer:
Prior period adjustments to income are reported in the current year's income statement.
Answer:
Galena Pharmacy reported cost of goods sold as follows:
Jim Holt, the bookkeeper, made two errors:
(1) 2015 ending inventory was overstated by $7,000.
(2) 2016 ending inventory was understated by $16,000.
Instructions
Assuming the errors had not been corrected, indicate the dollar effect that the errors had
on the items appearing on the financial statements listed below. Also indicate if the
amounts are overstated (O) or understated (U).
Answer:
Before month-end adjustments are made, the February 28 trial balance of Neutral Milk
Hotel contains revenue of $7,000 and expenses of $4,400. Adjustments are necessary
for the following items:
ï€ Depreciation for February is $1,800.
ï€ Revenue recognized but not yet billed is $2,700.
ï€ Accrued interest expense is $700.
ï€ Revenue collected in advance that is now recognized is $2,500.
ï€ Portion of prepaid insurance expired during February is $400.
Instructions
Calculate the correct net income for Neutral Milk Hotel's Income Statement for
February.
Answer:
A detailed stockholders' equity section in the balance sheet will list the names of
individuals who are eligible to receive dividends on the date of record.
Answer:
The principle of internal control that prevents one individual from being responsible for
all the related activities of a given task is ______________.
Answer:
