If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11
years, what annual rate of interest will she be earning on her investment?
a. 8%
b. 8.5%
c. 9%
d. 10%
Answer:
Ward Corporation issues 5,000, 10-year, 8%, $1,000 bonds dated January 1, 2015, at
103. The journal entry to record the issuance will show a
a. debit to Cash of $5,000,000.
b. credit to Premium on Bonds Payable for $150,000.
c. credit to Bonds Payable for $5,030,000.
d. credit to Cash for $5,150,000.
Answer:
A three column form of account is so named because it has columns for
a. debit, credit, and account name.
b. debit, credit, and reference.
c. debit, credit, and balance.
d. debit, credit, and date.
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 stockholders’ equity section of Morton Corporation at December 31 is as follows.
Instructions
From a review of the stockholders’ equity section, answer the following questions.
(a) How many shares of common stock are outstanding?
(b) Assuming there is a stated value, what is the stated value of the common stock?
(c) What is the par value of the preferred stock?
(d) If the annual dividend on preferred stock is $15,000, what is the dividend rate on
preferred stock?
(e) If dividends of $30,000 were in arrears on preferred stock, what would be the
balance in Retained Earnings?
Answer:
The adjusted trial balance of the Victoria Lane Paving Company includes the following
balance sheet accounts that frequently require adjustment. For each account, indicate (a)
the type of adjusting entry (prepaid expenses, unearned revenues, accrued revenues, or
accrued expenses) and (b) the related account in the adjusting entry.
Answer:
Under a perpetual inventory system, acquisition of merchandise for resale is debited to
the
a. Inventory account.
b. Purchases account.
c. Supplies account.
d. Cost of Goods Sold account.
Answer:
The following financial statement information is available for Buil Corporation:
The current ratio for 2015 is
a. .31:1.
b. 3.2:1.
c. 1.5:1.
d. 4.24:1.
Answer:
Each of the following decreases retained earnings except
a. stock splits.
b. large stock dividends.
c. small stock dividends.
d. cash dividends.
Answer:
The normal balance of any account is the
a. left side.
b. right side.
c. side which increases that account.
d. side which decreases that account.
Answer:
In a lease contract,
a. the owner of the property is called the lessee.
b. the presence of a bargain purchase option indicates that it is a capital lease.
c. the renter of the property is called the lessor.
d. there is always a transfer of ownership at the end of the lease term.
Answer:
Netta Shutters has the following inventory information.
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Ending inventory under
FIFO is
a. $738.
b. $792.
c. $1,740.
d. $1,794.
Answer:
The percentage of receivables basis for estimating uncollectible accounts emphasizes
a. cash realizable value.
b. the relationship between accounts receivable and bad debt expense.
c. income statement relationships.
d. the relationship between sales and accounts receivable.
Answer:
Depletion is
a. a decrease in market value of natural resources.
b. the amount of spoilage that occurs when natural resources are extracted.
c. the allocation of the cost of natural resources to expense.
d. the method used to record unsuccessful patents.
Answer:
Presented below are various receivable transactions entered into by Beran Tool
Company. Indicate whether the receivables are reported as accounts receivable, notes
receivable, or other receivables on the balance sheet.
a. Loaned a company officer $5,000.
b. Accepted a $3,000 promissory note from a customer as payment on account.
c. Determined that a $10,000 income tax refund is due from the IRS.
d. Sold goods to a customer on account for $4,000.
e. Recorded $500 accrued interest on a note receivable due next year.
f. Advanced $1,400 to a trusted employee.
Answer:
On December 31, 2015 the adjusted trial balance of the Yellin Personnel Agency shows
the following selected data:
Accounts Receivable, $8,000
Service Revenue, $60,000
Interest Expense, $10,500
Interest Payable, $3,500
Utilities Expense, $4,800
Accounts Payable, $2,700
Analysis indicates that adjusting entries were made for [a) $8,000 of employment
commission revenue earned but not billed, [b) $3,500 of accrued but unpaid interest,
and [c) $2,700 of utilities expense accrued but not paid.
Instructions
[a] Prepare the closing entries at December 31, 2015.
[b] Prepare the reversing entries on January 1, 2016.
[c] Enter the adjusted trial balance data in T-accounts. Post the entries in [a) and [b) and
rule and balance the accounts.
[d] Prepare the entries to record [1) the collection of the accrued commission on
January 8, [2) payment of the utility bill on January 10, and [3) payment of all the
interest due [$4,000) on January 15.
[e] Post the entries in [d) to the temporary accounts.
[f] What is the interest expense for the month of January 2016?
Answer:
Interest is usually associated with
a. accounts receivable.
b. notes receivable.
c. doubtful accounts.
d. bad debts.
Answer:
Which of the following should not be included in the plant assets (property, plant, and
equipment) classification?
a. Land on which warehouse sits
b. Building housing corporate headquarters
c. Parking lot used by visitors
d. All of these answers should be included
Answer:
If a company uses a multiple-column purchases journal, which of the following possible
headings for debit columns of the journal would not be appropriate?
a. Accounts Payable
b. Inventory
c. Supplies
d. Other Accounts
Answer:
The discontinued operations section of the income statement refers to
a. discontinuance of a product line.
b. the income or loss on products that have been completed and sold.
c. obsolete equipment and discontinued inventory items.
d. the disposal of a significant component of a business.
Answer:
Romanoff Industries had the following inventory transactions occur during 2015:
The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s after-tax income using LIFO?
(rounded to whole dollars)
a. $2,323
b. $2,486
c. $3,318
d. $3,552
Answer:
Expenses paid and recorded as assets before they are used are called
a. accrued expenses.
b. interim expenses.
c. prepaid expenses.
d. unearned expenses.
Answer:
If a gain of $12,000 is incurred in selling (for cash) office equipment having a book
value of $110,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
a. $98,000.
b. $122,000.
c. $110,000.
d. $12,000.
Answer:
The interest charged on a $400,000, 90-day note payable, at the rate of 8%, would be
a. $32,000.
b. $17,776.
c. $8,000.
d. $2,666.
Answer:
The first-in, first-out (FIFO) inventory method results in an ending inventory valued at
the most recent cost.
Answer:
When no-par value stock does not have a stated value, the entire proceeds from the
issuance of the stock becomes legal capital.
Answer:
On February 1, Results Income Tax Service received a $3,000 cash retainer for tax
preparation services to be rendered equally over the next 4 months. The full amount
was credited to the liability account Unearned Service Revenue. Assuming that the
revenue is recognized equally over the 4-month period, what balance would be reported
on the February 28 balance sheet for Unearned Service Revenue?
Answer:
In developing an accounting information system, it is important to establish procedures
whereby all transactions that affect the components of the accounting equation are
recorded. Why then, is it often necessary to adjust the accounts before financial
statements are prepared even in a properly designed accounting system? Identify the
major types of adjustments that are frequently made and give a specific example of
each.
Answer:
At the beginning of the year, Shaolin Company had total assets of $520,000 and total
liabilities of $210,000. Answer the following questions viewing each situation as being
independent of the others.
Answer:
Accounting information is used only by external users with a financial interest in a
business enterprise.
Answer: