Milton, Inc. provides the following income statement for 2019:
Calculate the times-interest-earned ratio. (Round your answer to two decimal places.)
A) 73.00 times
B) 47.00 times
C) 42.00 times
D) 48.00 times
Which of the following statements regarding the allowance method of accounting for
uncollectible receivables is incorrect?
A) Bad debt expense is not estimated.
B) The Allowance for Bad Debts is used to hold the pool of “unknown” uncollectible
accounts.
C) The business does not wait to see which customers will not pay when estimating the
allowance for bad debts.
D) The allowance method is based on the matching principle.
Which of the following actions will decrease the amount of Total Stockholders’ Equity?
A) cash dividend declared
B) stock split
C) stock dividend declared
D) repayment of bond principal
The balances of select accounts of Donovan, Inc. as of December 31, 2018 are given
below.
What amount of total long-term assets would be shown on the balance sheet at December
31, 2018?
A) $120,000
B) $151,000
C) $153,000
D) $157,000
For each user of accounting information, identify if the user would use financial
accounting (FA) or managerial accounting (MA).
Which of the following statements is true of a trial balance?
A) A trial balance has the same format as a balance sheet.
B) A trial balance presents data in debit and credit format.
C) A trial balance shows the total amounts of assets and liabilities, but not equity.
D) A trial balance is prepared after the balance sheet.
For the year ended December 31, 2019, Davidson Mart had sales of $800,000 and cost
of goods sold of $600,000. Davidson estimates that approximately 2% of the
merchandise sold will be returned. The adjusting journal entry on December 31, 2019,
would include a ________.
A) debit to Cost of Goods Sold for $12,000
B) credit to Refunds Payable for $16,000
C) credit to Estimated Returns Inventory for $12,000
D) debit to Sales Revenue for $4,000
Which of the following statements is true of the Sarbanes-Oxley Act?
A) Accounting firms are allowed to provide both auditing services and a full range of
consulting services to their public company clients.
B) Those who commit securities fraud must be sentenced to 10 years in prison.
C) All private and foreign companies must issue an internal control report evaluated by
an outside auditor.
D) The Public Company Accounting Oversight Board oversees the work of auditors of
public companies.
On the balance sheet of a retailer, the Merchandise Inventory account ________.
A) is not included because it is an income statement account
B) is included in the current assets section
C) is listed after prepaid assets
D) represents the value of inventory that has been sold during the period
A business performs services for a customer for $26,000 on account. Which of the
following accounts is debited?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
Which of the following describes the environment in internal control?
A) Internal auditors monitor company controls to safeguard assets, and external
auditors monitor the controls to ensure that the accounting records are accurate.
B) The environment is the “tone at the top” of the business.
C) The environment is designed to ensure that the business earns profit.
D) A company must identify its risks.
The payment of interest on a loan is considered a ________ on a statement of cash
flows prepared using the direct method.
A) cash outflow for operating activities
B) cash outflow for investing activities
C) cash outflow for financing activities
D) non-cash activity
A business maintains subsidiary accounts for each of its customers. On May 15, the
business provides services on account: $1,900 to customer J. Anthony ; $4,900 to
customer A. Martin; and $1,300 to customer S. Lee. Which journal entry is needed to
record these transactions?
A)
B)
If there is no cash involved in a business transaction, the transaction should be recorded
in ________.
A) either the cash receipts journal or general journal
B) either the sales journal or purchases journal
C) the general journal only
D) sales journal, purchases journal, or general journal
A merchandiser purchased inventory on account for $17,000. In a periodic inventory
system, the journal entry to record the purchase would include ________.
A) a debit to Purchases for $17,000 and a credit to Accounts Payable for $17,000
B) a debit to Accounts Payable for $17,000 and a credit to Purchases for $17,000
C) a debit to Merchandise Inventory for $17,000 and a credit to Accounts Payable for
$17,000
D) a debit to Accounts Payable for $17,000 and a credit to Merchandise Inventory for
$17,000
On the maturity date of a bond investment, the journal entry includes ________.
A) a debit to Cash and a credit to Held-to-Maturity Debt Investments
B) a debit to Long-term Investments and a credit to Cash
C) a debit to the Interest Revenue and a credit to Cash
D) recording a gain or loss on disposition at maturity
Under the revenue recognition principle, a good or service is considered transferred
when ________.
A) all performance obligations have been satisfied
B) the customer obtains control of the good or service
C) the business has received cash from the customer
D) the transaction price has been determined
Extra compensation items that are not paid directly to an employee are called
________.
A) bonuses
B) benefits
C) wages
D) commissions
An automobile parts retailer purchases merchandise inventory on account. When using
a manual accounting information system, this transaction is recorded in the ________.
A) purchases journal
B) general journal
C) cash payments journal
D) sales journal
Which of the following states that a company must perform strictly proper accounting
only for items that are significant to the business’s financial statements?
A) conservatism
B) materiality concept
C) disclosure principle
D) consistency principle
Which of the following accounts will be credited by the borrower when a promissory
note is issued?
A) Note Payable
B) Note Receivable
C) Interest Payable
D) Cash
The sale of merchandise inventory for cash is recorded in the ________.
A) general journal
B) cash receipts journal
C) sales journal
D) accounts receivable journal
Wyoming Company uses the indirect method to prepare its statement of cash flows.
Refer to the following portion of the comparative balance sheet:
Wyoming Company
Comparative Balance Sheet
December 31, 2018 and 2017
Note:
1. There was no retirement of stock during the year.
2. There were no sales of treasury stock during the year.
Which of the following statements is correct?
A) There was zero net cash flow from transactions involving Common Stock.
B) There was a negative cash flow of $7700 from the issuance of Common Stock.
C) There was a positive cash flow of $7700 from the issuance of Common Stock.
D) There was positive cash flow of $20,000 from issuance of Common Stock.
Which of the following accounts increases with a credit?
A) Dividends
B) Common Stock
C) Accounts Receivable
D) Prepaid Expense
In a purchases journal, the total of the ________ column is not posted to the general
ledger.
A) Merchandise Inventory DR
B) Other Accounts DR, Amount
C) Accounts Payable CR
D) Office Supplies DR
Which of the following entries will be necessary to close the Insurance Expense
account at the end of the year?
A) debit Insurance Expense and credit Income Summary
B) debit Insurance Expense and credit Common Stock
C) debit Retained Earnings and credit Insurance Expense
D) debit Income Summary and credit Insurance Expense
Significant influence equity investments are reported as ________ on the balance sheet.
A) current assets
B) either current assets or current liabilities
C) long-term assets
D) either current assets or long-term assets
A business purchases $1,000 of office supplies on account. Which of the following
accounts is debited?
A) Cash
B) Accounts Payable
C) Office Supplies
D) Prepaid Asset
Under GAAP, which of the following is NOT an acceptable method of estimating the
amount of bad debt expense at the end of the accounting period?
A) percent-of-receivables
B) percent-of-sales
C) direct write-off
D) aging-of-receivables
Which of the following is a contra account?
A) Depreciation Expense
B) Accumulated Depreciation
C) Unearned Revenue
D) Book Value
Which of the following is true of data processing and storage in a computerized
information system?
A) In a computerized accounting information system, processing includes manually
journalizing transactions and posting to the accounts.
B) In a computerized accounting information system, there will be a main centralized
computer where data is stored, which cannot be accessed from any other computers.
C) In both computerized and manual systems, all data are contained in paper documents
and are often stored in filing cabinets and off-site document warehouses.
D) In a computerized accounting information system, companies are spending
increasingly large amounts of cash to ensure that their data and information are secure.
On January 21, 2019, Cressent, Inc. received merchandise from Neptune, Inc. On that
date, Cressent found a few of these goods to be damaged. On January 22, Cressent
returned the damaged goods to the seller. Such returns will be treated as ________ by
Cressent.
A) purchase returns
B) sales returns
C) purchase allowances
D) sales allowances