1) permanent accounts are not closed at the end of the accounting period.
2) an equity security represents a credit relationship with another company or
governmental entity.
3) in the journal entry for the dividends received for available-for-sale investments, the
dividend revenue account will be debited.
4) defective, damaged, or otherwise unsuitable merchandise that is returned to the seller
is referred to as purchase allowances by the purchaser.
5) notes receivable represents an undertaking by a debtor to pay a fixed amount along
with interest at a certain future date.
6) capitalizing the cost of an asset involves crediting the asset account.
7) the cash account is a temporary account.
8) benchmarking is the comparison of a company’s current year results with an earlier
year’s performance.
9) vertical analysis involves comparing each figure in the financial statements with a
corresponding figure of the previous year.
10) trading investments are categorized as noncurrent assets.
11) when a corporation sells 10,000 shares of $10 par value common stock for
$120,000, the common stock account is credited for $100,000.
12) gross pay is the total amount of salary, wages, commissions, and bonuses earned by
an employee during a pay period, after taxes or any other deductions.
13) the amazing widget company issues $500,000 of 6%, 10-year bonds at 103 on
march 31, 2014. the bonds pay interest on march 31 and september 30. assume that the
company uses the straight-line method for amortization. the journal entry to record the
issuance would include a ________.
a) debit to cash for $500,000
b) credit to bonds payable for $515,000
c) debit to premium on bonds payable for $15,000
d) debit to cash for $515,000
14) the net income of edwards corporation amounted to $74,000 for this year. the
beginning balance of stockholders’ equity was $32,000 and the ending balance was
$75,000. the company issued no common stock during the year. what was the amount of
dividends distributed during the year?
a) $75,000
b) $31,000
c) $149,000
d) $32,000
15) on april 1, 2015, banne services received a 6-month note for $10,000 at 8%.
calculate the amount of interest receivable on maturity.
a) $320
b) $460
c) $800
d) $400
16) a business purchases equipment by paying $8,000 in cash and issuing a note
payable of $12,000. which of the following occurs?
a) cash is credited for $8,000, equipment is credited for $20,000, and notes payable is
debited for $12,000
b) cash is credited for $8,000, equipment is debited for $20,000, and notes payable is
credited for $12,000
c) cash is debited for $8,000, equipment is debited for $12,000,and notes payable is
credited for $20,000
d) cash is debited for $8,000, equipment is credited for $12,000, and notes payable is
debited for $4,000
17) which of the following accounts increases with a debit?
a) cash
b) interest payable
c) accounts payable
d) common stock
18) rosewood inc. earned revenues of $15,000 and incurred expenses of $9,000. the
company declared and paid cash dividends of $3,000. what is the balance in the income
summary account after closing net income or loss to the retained earnings account?
a) debit balance of $15,000
b) credit balance of $9,000
c) credit balance of $6,000
d) balance of $0
19) the following data is available:
using the gross profit method, the cost of goods sold would be ________.
a) $12,000
b) $11,000
c) $13,000
d) $9,000
20) which of the following is representative of safeguarding assets?
a) keeping office supplies under lock and key
b) reducing expense to increase operating profit
c) increasing operating profit to increase net income
d) ensuring maximum use of resources
21) the entries that transfer the revenue, expense, and dividends balances to the retained
earnings account to prepare the company’s books for the next period are called
________.
a) closing entries
b) opening entries
c) adjusting entries
d) temporary accounts
22) which of the following transactions would be shown in the non-cash investing and
financing activities section of the statement of cash flows?
a) sold equipment with book value of $8,000 in exchange for $8,000 cash
b) borrowed $32,000 cash on a note payable
c) issued 15,000 shares of stock at $3 per share
d) purchased a building in exchange for 20,000 shares of common stock
23) roggers corp.’s beginning and ending total assets in the year 2015 were $18,000,000
and $22,000,000, respectively. its assets turnover ratio for the year was calculated to be
1.75 times. calculate the amount of net sales for the year 2015.
a) $27,000,000
b) $42,000,000
c) $35,000,000
d) $48,000,000
24) which of the following inventory costing methods yields the highest cost of goods
sold during a period of rising inventory costs?
a) specific identification
b) weighted-average
c) last-in, first-out
d) first-in, first-out
25) which of the following is true of retained earnings?
a) retained earnings decrease with payment of dividends
b) retained earnings increase with purchase of capital assets
c) retained earnings decrease with collection of revenue
d) retained earnings increase with payment on account
26) there were no sales of treasury stock during the year.
which of the following statements would be true?
a) there was zero net cash flow from transactions involving common stock
b) there was a negative cash flow of $4,000 from the issuance of common stock
c) there was a positive cash flow of $4,000 from the issuance of common stock
d) there was positive cash flow of $16,000 from issuance of common stock
27) the bookkeeper of fire steel inc. recorded a $1,524 check as $15,240 in payment of
the current month’s rent. which of the following journal entries is needed to adjust for
this error in the books of the company?
a)
b)
c)
d)
28) on january 2, 2014, mahoney sales issued $10,000 in bonds for $10,900. they were
5-year bonds with a stated rate of 4%, and pay semiannual interest. mahoney sales uses
the straight-line method to amortize bond premium. provide the journal entry for the
first interest payment to be made on june 30, 2014.
29) on january 1, 2013, davie services issued $20,000 of 8% bonds that mature in five
years. they were issued at par. provide the journal entry to issue bonds.
30) on december 1, 2015, parsons inc. sold machinery to a customer for $2,000. parsons
regularly sells machinery. the customer could not pay at the time of sale, but agreed to
pay 9 months later, and signed a 9-month note at 12% interest. give journal entry to
record the revenue at the time of sale. ignore the entry for cost of goods sold.
31) at the end of a month, a business shows the following balances in its ledger.
use this data to prepare a trial balance.
32) avatar company uses the indirect method to prepare its statement of cash flows.
using the worksheet shown below, enter the adjustments needed to record depreciation
expense for the year of 2014 of $12,000.
avatar company
spreadsheet for statement of cash flows
year ended december 31, 2014
33) hernandez carpets company buys a building on a plot of land for $115,000, paying
$30,000 cash and signing a 30-year mortgage note for $85,000 at 11%. the payment
will be made in equal monthly installments of $809. provide the journal entry for the
first monthly payment. (round your answers to nearest whole dollar number.)
34) felix sales inc. offers warranties on all its electronic goods. warranty expense is
estimated at 3.5% of sales revenue. in 2015, felix had $333,000 of sales. in the same
year, felix paid out $8,750 of warranty payments. provide the journal entry to record the
warranty expense.