Davis Corp. has three employees. Each earns $600 per week for a five day work week
ending on Friday. This month the last day of the month falls on a Wednesday. The
company should make which of the following adjusting entries?
a. Credit Wage Expense for $360 and debit Wages Payable for $360
b. Debit Wage Expense for $1,080 and credit Wages Payable for $1,080
c. Credit Wage Expense for $1,080 and debit Wages Payable for $1,080
d. Debit Wage Expense for $360 and credit Wages Payable for $360
A bill is received for electric service; the charge for the electricity is recorded, but
payment will be made later. For this transaction, identify the effect on the accounting
equation.
a. Assets increase and liabilities increase.
b. Assets increase and stockholders’ equity increases.
c. Liabilities increase and stockholders’ equity decreases.
d. Liabilities decrease and assets decrease.
When land and building are acquired for a lump sum, the purchase amount should be
allocated on the basis of the market values of the two assets.
a. True
b. False
All of the following statements regarding the gross profit ratio are true except :
a. The gross profit ratio alone is sufficient to determine a company’s profitability.
b. Managers, investors, and creditors use the gross profit ratio to measure one aspect of
profitability.
c. The gross profit ratio explains how many cents on every dollar are available to cover
expenses other than cost of goods sold and to earn a profit.
d. If a company’s net sales were $200,000 and cost of goods sold were $120,000, its
gross profit ratio would be 40%.
Seashell Company is considered “very liquid” for the year ended December 31, 2016.
This means that Seashell
a. has a small quick ratio.
b. must decrease its liquidity in order to appear favorable to stockholders.
c. should sell plant assets in order to remain in business.
d. is able to pay its current debts using its current assets.
Shidan Apartments purchased an apartment building to rent to university students on
November 18, 2015. The following costs were incurred during 2015, before the tenants
moved in: Purchase price of the building $220,000
Purchase price of the land 100,000
Transfer taxes 10,000
Interest incurred on the mortgage loan to purchase 4,000
Attorney and real estate agent’s fees 15,000
Repave the parking lot 6,000
How much will Shidan Apartments record as an asset? a. $320,000b. $345,000c.
$351,000d. $355,000
Match the terms to the definitions by selecting the letter of the term. Each term may be
used more than once or not at all.
a. cumulative feature
b. stock dividend
c. retired stock
d. retained earnings
e. callable feature
f. convertible feature
g. outstanding shares
h. treasury stock
i. participating feature
j. additional paid-in capital
The holders of this stock have the right to dividends in arrears before the current year
dividend is distributed.
Although businesses engage in a wide variety of activities, all of these activities can be
categorized into three types. Which of the following choices best reflects these three
types of business activities?
a. Operating, financing, reporting
b. Investing, reporting, financing
c. Operating, financing, investing
d. Investing, reporting, operating
Which one of the following items would be added to the balance per books in a bank
reconciliation?
a. Outstanding checks
b. Deposit in transit
c. Service charges
d. Interest on customer note
The following items appear on the balance sheet of The Piano Company at the end of
2016 and 2015:
Between 2015 and 2016
a. The Piano Company’s debt-to-equity ratio and current ratio both increased.
b. The Piano Company’s debt-to-equity ratio and current ratio both decreased.
c. The Piano Company’s debt-to-equity ratio increased and its debt-to-total assets ratio
decreased.
d. The Piano Company’s debt-to-equity ratio decreased and its debt-to-total assets ratio
increased.
From the following list, identify whether the change in the account balance during the
year would be reported as operating (O) cash flow, investing (I) cash flow, financing (F)
cash flow or not separately (N) reported on the statement of cash flows. Assume that the
indirect method is used to prepare the operating activities section. Use the following
response choices a-d.
a. operating (O) cash flow
b. investing (I) cash flow
c. financing (F) cash flow
d. not separately (N) reported on the statement of cash flows
Taxes payable
Taryn Corporation The accountant for Taryn Corporation prepared the following list of
account balances from the company’s records for the year ended December 31, 2014:
Read the information for Taryn Corporation. Prepare a balance sheet for Taryn
Corporation in good form.
The Stockholders’ Equity section of the balance sheet for High Five Design Company
appeared as follows before its recent stock dividend:
High Five declared a 10% stock dividend when the market price per share was $7. In
the space provided, write in the amounts of each of the components of the stockholders’
equity section, after the stock dividend was distributed.
Service-oriented companies have different needs than product-oriented companies when
analyzing financial statements.
Why is this true? Give an example of a financial ratio that is meaningless to a service
business.
Tony Venato opened Tony’s Best Brand Shop as a sole proprietorship by investing
$10,000 on January 1, 2015. During the first year, the business earned revenues of
$520,000 and incurred expenses of $360,000. Tony withdrew $50,000 for personal use.
Prepare Tony’s statement of owner’s equity for the year ended December 31, 2015.
are those investments that are readily convertible into known amounts of cash and that
have an original maturity to the investor of three months or less.