Pioneer’s adjusted trial balance as of December 31, 2018 is given below:
Compute the current ratio. (Round your answer to two decimal places.)
A) 8.16
B) 2.36
C) 1.75
D) 2.78
A business purchases equipment for $8,000 cash. Which of the following accounts is
credited?
A) Cash
B) Accounts Payable
C) Common Stock
D) Equipment
Which of the following is a measure of how quickly an item can be converted to cash?
A) Debt ratio
B) Return on assets ratio
C) Liquidity
D) Accounting cycle
The matching principle requires businesses to report Warranty Expense ________.
A) in the same period that the company records the revenue related to that warranty
B) in the period prior to which the company records the revenue related to that warranty
C) in the period after the related revenue is recorded
D) in the long-term assets section of the balance sheet
These independent companies had the following transactions:
a. Long Corporation issued 4,500 shares of its $6 stated value common stock to Jack
Smith Realty in exchange for land with a market value of $50,000
b. Short Corporation received $115,000 cash for 10,000 shares of its $10 par preferred
stock
c. Middle Corporation issued 7,000 shares of its no-par common stock at $15 per share
Requirement:
Prepare the journal entries for these transactions. Use proper account titles and omit
explanations.
A debt security ________.
A) represents a credit relationship with another company or governmental entity, and
typically pays interest for a fixed period
B) represents stock ownership in another company and sometimes pays dividends
C) is a standardized contract between two parties to buy or sell an underlying security at
a predetermined price on a specific date
D) is a cash market transaction in which the ownership of the underlying asset is
deferred until a specific date
Which of the following would be included in the journal to record an NSF check?
A) a debit to Accounts Payable and a credit to Cash
B) a debit to Accounts Receivable and a credit to Cash
C) a debit to Cash and a credit to Accounts Receivable
D) a debit to Bank Expense and a credit to Cash
Which of the following statements accurately describes the statement of cash flows?
A) It shows the relative proportion of debt and assets.
B) It is the link between the accrual-based income statement and the cash reported on
the balance sheet.
C) It indicates when long-term debt will mature.
D) It is the link between net income and earnings per share.
Which of the following items should be amortized?
A) natural resources
B) goodwill
C) patents, copyrights, trademarks
D) tangible property, plant, and equipment, other than land
Which of the following statements is true of a bond that is issued at a premium?
A) The bond will be issued at an amount above face value.
B) The stated interest rate is lower than the prevailing market interest rate.
C) At maturity, the bond will repay an amount that is greater than the face value.
D) The bond will be issued at par.
A machine that was purchased for $120,000 has accumulated depreciation of $90,000.
The business exchanges the machine for a new one. The new machine has a market
value of $130,000, and the business pays $120,000 cash. Assume the exchange has
commercial substance. This exchange results in a ________.
A) gain of $20,000
B) gain of $10,000
C) loss of $20,000
D) loss of $30,000
An asset was purchased for $37,000 on January 1, 2019. The asset’s estimated useful
life was five years, and its residual value was $9000. The straight-line method of
depreciation was used. Calculate the gain or loss if the asset is sold for $19,000 on
December 31, 2019, the last day of the accounting period.
A) $6200 gain
B) $12,400 loss
C) $12,400 gain
D) no gain or no loss
Which of the following values is considered the market value when valuing inventory at
lower-of-cost-or-market under U.S. GAAP?
A) sales price less the company’s normal mark-up percentage
B) current replacement cost
C) cost plus the company’s normal mark-up percentage
D) historic cost
A business that accepts payments by credit and debit cards ________.
A) is usually unable to attract more customers
B) must check each customer’s credit rating
C) generally receives proceeds from credit and debit card transactions 30-45 days after
the sale
D) almost always pays a fee to the processor to cover the processing costs
All City Realty, Inc. issued 7000 shares of $9 stated value common stock for $16 per
share. The journal entry to record this transaction includes a credit to ________.
A) Common Stock for $112,000
B) Paid-In Capital in Excess of Stated-Common for $63,000
C) Common Stock — $9 Stated Value for $49,000
D) Paid-In Capital in Excess of Stated-Common for $49,000
Which of the following is included in the cost of a plant asset?
A) amounts paid to make the asset ready for its intended use
B) regular repair and maintenance costs
C) replacement of damaged parts of the asset
D) wages of workers who use the asset in normal operations
On November 1, 2018, Cleveland Services issued $305,000 of five-year bonds with a
stated rate of 12%. The bonds were issued at par, and Cleveland makes semiannual
payments on April 30 and October 31. On December 31, 2018, Cleveland made an
adjusting entry to accrue interest at year-end. No further entries were made until April
30, 2019, when the first payment was made. What amount of interest expense was
recorded for the period of January 1 to April 30, 2019? (Do not round any intermediate
calculations, and round your final answer to the nearest dollar.)
A) $12,200
B) $36,600
C) $18,300
D) $29,280
The accountant of Reliable Consulting, Inc. failed to make an adjusting entry to record
$6,000 for unearned service revenues that were earned before the end of the fiscal year.
Assume the company initially recorded a liability. Which of the following statements is
true?
A) The total liabilities will be overstated.
B) The total liabilities will be understated.
C) The total assets will be overstated.
D) The total assets will be understated.
Metropolitan Casting Services started the year with total assets of $130,000 and total
liabilities of $45,000. The revenues and the expenses for the year amounted to $130,000
and $50,000, respectively. During the year, the company did not issue any common
stock, but it distributed dividends of $60,000. Calculate the amount of increase or
decrease in stockholders’ equity for the year.
A) a $20,000 increase
B) a $105,000 increase
C) a $85,000 decrease
D) a $60,000 increase
Which of the following costs related to a business car would be capitalized?
A) the cost to install an engine with higher horsepower
B) the cost to change the oil
C) the cost to replace a broken windshield
D) the cost of new tires
A company that uses the perpetual inventory system sold goods for $2,600 to a
customer on account. The company had purchased the inventory for $500. Which of the
following journal entries correctly records the cost of goods sold?
A)
B)
C)
D)
Mission Corporation reported the following equity section on its current balance sheet.
The common stock is currently selling for $18.00 per share.
After the declaration and distribution of a 12% stock dividend, what is the total number of
common shares issued?
A) 13,000
B) 160,160
C) 143,000
D) 17,160
The amount of income taxes ________.
A) required by the federal government for a corporation is calculated on a Form 1120
B) is calculated on a Form 1040 for a corporation
C) the corporation owes, but has not yet paid, is recorded as a debit to the Income Tax
Payable account
D) the corporation owes, but has not yet paid, is reported as a long-term liability on the
balance sheet
Which one of the following is true of a signature card?
A) It shows each authorized person’s signature for a bank account.
B) It is the same as a deposit receipt and acts as a proof of the deposit transaction.
C) It can be used as a debit card.
D) It can only be used for bank accounts of individuals, not for the bank accounts of
businesses.
Rotan, Inc. purchased a van on January 1, 2018, for $850,000. Estimated life of the van
was five years, and its estimated residual value was $94,000. Rotan uses the
straight-line method of depreciation. At the beginning of 2020, the corporation revised
the total estimated life of the asset from five years to six years. The estimated residual
value remained the same as estimated earlier. Calculate the depreciation expense for
2020.
A) $151,200
B) $136,900
C) $113,400
D) $75,600
At the beginning of 2019, Gourmet Cupcakes, Inc. has the following ledger balances:
Accounts Receivable $42,000 (Debit)
Allowance for Bad Debts $6,000 (Credit)
During the year, credit sales amounted to $840,000. Cash collected on credit sales
amounted to $750,000, and $17,000 has been written off. Gourmet Cupcakes uses the
aging-of-receivables method to record bad debts expense. The estimate of uncollectible
accounts was $28,000. The ending balance in the Allowance for Bad Debts is
________.
A) $39,000
B) $17,000
C) $28,000
D) $22,000
The petty cash fund at Brookshire Company has a designated balance of $350. The fund
currently holds $126 in cash and $226 in petty cash tickets. Based on this information,
which of the following statements is correct?
A) The total of the cash on hand plus petty cash tickets equals the designated fund
balance.
B) A shortage of $2 exists.
C) To replenish the petty cash fund, the company must write a check, payable to Petty
Cash, for $226.
D) The petty cash fund custodian must locate the $2 discrepancy.
Bridgeport Enterprises reported the following figures from its adjusted trial balance for
its first year of business, which ended on June 30, 2019.
Requirements:
a. Prepare a multi-step income statement.
b. Prepare the statement of retained earnings.
c. Prepare a classified balance sheet.
d. Compute the gross profit percentage.
Harrison, an employee of Safe Associates, Inc., has gross salary for March of $4,000.
The entire amount is under the OASDI limit of $118,500 and thus subject to FICA. He
is also subject to federal income tax at a rate of 18%. Harrison has a deduction of $320
for health insurance and $80 for United Way. Which of the following is included in the
entry to record the disbursement of his net pay?
A) credit to Salaries and Wages Payable
B) debit to United Way Payable
C) debit to FICA Taxes Payable
D) credit to Cash
Cash dividends and treasury stock purchases ________.
A) represent cash payments that are made to ensure higher reported profits
B) may be limited by creditors to ensure that the company maintains a minimum level
of stockholders’ equity
C) may be restricted as a way to lower federal income tax expense
D) make more resources available to pay liabilities
When there is an unrealized loss on trading debt investments, the ________ will
decrease.
A) total equity
B) cash
C) total liabilities
D) long-term investments
On June 30, 2018, Chris Brothers, Inc. showed the following data on the equity section
of their balance sheet:
On July 1, 2018, the company declared and distributed a 8% stock dividend. The market
value of the stock at that time was $17 per share. Following this transaction, what is the
balance of Paid-In Capital in Excess of Par—Common?
A) $227,640
B) $523,160
C) $271,000
D) $457,880
In regards to corporate income tax, which of the following statements is incorrect?
A) Federal income taxes are calculated on a corporate tax return.
B) Income Tax Expense is recorded when the federal income tax is incurred.
C) When the corporation makes payment for federal income taxes, the account Income
Tax Payable is credited.
D) The amount of income taxes that the corporation owes but has not yet paid is
classified as a current liability.
Colorado Company uses the indirect method to prepare the statement of cash flows.
Refer to the following section of the comparative balance sheet:
Colorado Company
Comparative Balance Sheet
December 31, 2019 and 2018
How will the change in Accrued Liabilities be shown on the statement of cash flows?
A) as an addition to Net Income
B) as a deduction from Net Income
C) as a deduction from operating cash flows
D) as an addition to investing cash flows
A check of $300,000, deposited by a company, was returned to the bank for
nonsufficient funds. How would this information be included on the bank
reconciliation?
A) a deduction on the bank side
B) an addition on the bank side
C) an addition on the book side
D) a deduction on the book side