The standard format of a journal would not include
a. a reference column.
b. an account title column.
c. a T-account.
d. a date column.
Answer:
The stockholders’ equity section of Barrel Corporation’s balance sheet at December 31,
2014, appears below:
During 2015, the following stock transactions occurred:
Instructions
(a) Prepare the journal entries to record the above stock transactions.
(b) Prepare the stockholders’ equity section of the balance sheet for Barrel Corporation
at December 31, 2015. Assume that net income for the year was $150,000 and that no
dividends were declared.
Answer:
Kingston Company purchased a piece of equipment on January 1, 2015. The equipment
cost $200,000 and had an estimated life of 8 years and a salvage value of $25,000.
What was the depreciation expense for the asset for 2016 under the
double-declining-balance method?
a. $21,667.
b. $37,500.
c. $50,000.
d. $39,063.
Answer:
Assume that the payroll records of Erroll Oil Company provided the following
information for the weekly payroll ended November 30, 2015.
Additional information: All employees are paid overtime at time and a half for hours
worked in excess of 40 per week. The FICA tax rate is 7.65% for the first $110,100 of
each employee’s annual earnings and 1.45% in excess of $110,100. The employer pays
unemployment taxes of 6.2% (5.4% for state and .8% for federal) on the first $7,000 of
each employee’s annual earnings.
Instructions
(a) Prepare the payroll register for the pay period.
(b) Prepare general journal entries to record the payroll and payroll taxes.
Answer:
At January 1, 2014, Benny Enterprises reported a balance in the Equipment account of
$45,000. During the year the company purchased equipment with a cost of $60,000 and sold
equipment with a book value of $30,000. The company reported a loss on the sale of
equipment of $4,000. Assume the indirect method is used.
Instructions
Determine what amount will be reported in (a) the operating activities section
and (b) the investing activities section with regard to the purchase and sale of
equipment.
Answer:
The first required step in the accounting cycle is
a. reversing entries.
b. journalizing transactions in the book of original entry.
c. analyzing transactions.
d. posting transactions.
Answer:
Eneri Company’s inventory records show the following data:
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units
for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic
inventory method. What is the difference in taxes if LIFO rather than FIFO is used?
a. $1,760 additional taxes
b. $992 additional taxes
c. $786 additional taxes
d. $992 tax savings
Answer:
On February 1, Andrews Company purchased printing supplies of $2,500. A month end
inventory shows that the company has supplies of $600 on hand. The adjusting entry for
this prepaid expense will include
a. a debit to Supplies for $600 and a credit to Supplies Expense for $600
b. a debit to Supplies Expense and a credit to Cash for $1,900
c. a debit to Supplies Expense and a credit to Supplies for $1,900
d. a debit to Supplies and a credit to Cash for $600
Answer:
The following information is available for Oakland Company:
The accounts receivable turnover ratio for 2015 is
a. 1.4 times.
b. 6.2 times.
c. 6.0 times.
d. 5.8 times.
Answer:
The primary accounting standard-setting body in the United States is the
a. Securities and Exchange Commission.
b. Accounting Principles Board.
c. Financial Accounting Standards Board.
d. Internal Revenue Service.
Answer:
All of the following statements about short-term investments are true
except:
a. Short-term investments are also called marketable securities
b. Trading securities are always classified as short-term investments.
c. Short-term investments are listed below accounts receivable in the
current asset section of the balance sheet.
d. Short-term assets must be readily marketable.
Answer:
Penner, Inc. has 15,000 shares of 6%, $100 par value, noncumulative preferred stock
and 30,000 shares of $1 par value common stock outstanding at December 31, 2015.
There were no dividends declared in 2014. The board of directors declares and pays a
$170,000 dividend in 2015. What is the amount of dividends received by the common
stockholders in 2015?
a. $0
b. $80,000
c. $170,000
d. $90,000
Answer:
Waters Hardware reported cost of the goods sold as follows.
Waters made two errors: (1) 2014 ending inventory was overstated $5,000, and (2) 2015
ending inventory was understated $8,000
Instructions
(a) Compute the correct cost of goods sold for each year.
(b) What correcting entry would Waters make for error (2)?
Answer:
The direct write-off method of accounting for bad debts
a. uses an allowance account.
b. uses a contra-asset account.
c. does not require estimates of bad debt losses.
d. is the preferred method under generally accepted accounting principles.
Answer:
Closing entries are journalized and posted
a. before the financial statements are prepared.
b. after the financial statements are prepared.
c. at management’s discretion.
d. at the end of each interim accounting period.
Answer:
Postretirement benefits consist of payments by employers to retired employees for
a. health care and life insurance only.
b. health care and pensions only.
c. life insurance and pensions only.
d. health care, life insurance, and pensions.
Answer:
The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to
record estimated uncollectible accounts
a. is relevant when using the percentage of receivables basis.
b. is relevant when using the percentage of sales basis.
c. is relevant to both bases of adjusting for uncollectible accounts.
d. will never show a debit balance at this stage in the accounting cycle.
Answer:
If bonds with a face value of $140,000 are converted into common stock when the
carrying value of the bonds is $135,000, the entry to record the conversion will include
a debit to
a. Bonds Payable for $140,000.
b. Bonds Payable for $135,000.
c. Discount on Bonds Payable for $5,000.
d. Bonds Payable equal to the market price of the bonds on the date of conversion.
Answer:
Car and Auto Sisters had retained earnings of $18,000 on the balance sheet but
disclosed in the footnotes that $3,000 of retained earnings was restricted for plant
expansion and $1,000 was restricted for bond repayments. Cash of $2,000 had been set
aside for the plant expansion. How much of retained earnings is available for
dividends?
a. $14,000
b. $15,000
c. $18,000
d. $12,000
Answer:
Profitability ratios include
a. times interest earned.
b. inventory turnover.
c. the payout ratio.
d. the acid-test ratio.
Answer:
If bonds sell at a premium, the interest expense recognized each year will be greater
than the contractual interest rate.
Answer:
A decline in the fair value of a trading security is recorded by debiting an unrealized
loss account and crediting the Fair Value Adjustment account.
Answer:
Which requires a two-tiered approach to test whether the value of loans and
receivables are impaired?
Answer:
Additions and improvements are costs incurred to increase the operating efficiency,
productive capacity, or expected useful life and are referred to as
__________________.
Answer:
The extent of internal control features adopted by a company must be evaluated in
terms of cost-benefit.
Answer:
Show Company had total operating expenses of $153,000 in 2014, which included
Depreciation Expense of $30,000. Also during 2014, prepaid expenses decreased by
$9,500 and accrued expenses increased by $8,500.
Instructions
Calculate the amount of cash payments for operating expenses in 2014 using the direct
method.
Answer:
Baden’s Hardware Store prepared the following analysis of cost of goods sold for the
previous three years:
Net income for the years 2014, 2015, and 2016 was $70,000, $60,000, and $55,000,
respectively. Since net income was consistently declining, Mr. Baden hired a new
accountant to investigate the cause(s) for the declines.
The accountant determined the following:
1> Purchases of $25,000 were not recorded in 2014.
2> The 2014 December 31 inventory should have been $24,000.
3> The 2015 ending inventory included inventory costing $5,000 that was purchased
FOB destination and in transit at year end.
4> The 2016 ending inventory did not include goods costing $4,000 that were shipped
on December 29 to Sampson Plumbing Company, FOB shipping point. The goods were
still in transit at the end of the year.
Instructions
Determine the correct net income for each year. (Show all computations.)
Answer: