The payment of employee salaries has what effect on the accounting equation?
a. Assets decrease and stockholders’ equity decreases.
b. Liabilities decrease and stockholders’ equity decreases.
c. Assets decrease and liabilities increase.
d. Assets increase and liabilities decrease.
In the reconciliation of a bank statement, “deposits in transit” should be:
a. added to the unadjusted book balance
b. subtracted from the unadjusted bank balance
c. added to the unadjusted bank balance
d. subtracted from the unadjusted bank balance
Darrin Brown bought a pub. The purchase price was $695,000. An appraiser provided
the following appraisal values: land $320,000: building $370,000 and equipment
$60,000. What cost should be allocated to the building? a. $370,000
b. $695,000
c. $342,867
d. $399,281
Select the account that would be increased to show each of the following costs.
a. Land
b. Land Improvements
c. Buildings
d. Machinery and Equipment
e. An Expense Account
The interest costs incurred during the construction period of a new building built by a
company for its own use
Quan uses a periodicinventory system. At the end of April, Quan had 20 units on hand.
If Quan uses the LIFO inventory method, how much is inventory on the balance sheet
as of April 30?
a. $40
b. $50
c. $58
d. $60
Which balance sheet accounts are most affected by financing activities?
a. Current assets
b. Current liabilities
c. Long-term assets
d. LongÂterm liabilities and stockholders’ equity
Match the following characteristics with the statements about each qualitative character
istic’s importance.
a. Consistency
b. Materiality
c. Conservatism
d. Comparability
e. Reliability
f. Relevance
g. Understandability
Users must be able to compare accounting information of a firm with its prior year
information.
When the owner of a sole proprietorship withdraws assets from the business for
personal use
a. it is treated like a noncash dividend.
b. it is illegal because the assets belong to the separate entity, the proprietorship.
c. it would be recorded as a loss by the proprietorship.
d. it is recorded as a reduction of owner’s equity.
Curtain Corp. stands to receive a sufficient cash settlement from a law suit. Curtain
needs to record this on its accounting records.
a. True
b. False
Oreo Company has current assets of $20,000, current liabilities of $8,000, and
long-term liabilities of $3,000. Oreo wants to buy new equipment. How much of its
existing cash can Oreo use to acquire equipment without allowing its current ratio to
decline below 2.0 to 1?
a. $ 4,000
b. $ 8,000
c. $ 10,000
d. $ 12,000
When treasury stock is resold for an amount less than its cost, the difference between
the sales price and the cost is deducted from the Additional PaidÂIn Capital-Treasury
Stock account or the Retained Earnings account (if the Additional PaidÂIn
Capital-Treasury Stock account does not exist).
a. True
b. False
Which of the following profitability ratios is most useful in indicating the “quality” of a
company’s earnings?
a. Price/earnings ratio
b. Gross profit ratio
c. Dividend payout ratio
d. Dividend yield ratio
Greer Company purchased land for $256,000. Additional costs include a $15,300 fee to
a broker, a survey fee of $2,400, $1,750 to construct a fence and a legal fee of $8,500.
What is the cost of the land?
a. $256,000
b. $282,200
c. $284,600
d. $281,000