A journal provides
a. the balances for each account.
b. information about a transaction in several different places.
c. a list of all accounts used in the business.
d. a chronological record of transactions.
Answer:
An increase in an expense
a. increases revenues.
b. increases assets.
c. decreases liabilities.
d. decreases stockholders’ equity.
Answer:
The accounting for warranty cost is based on the expense recognition principle, which
requires that the estimated cost of honoring warranty contracts should be recognized as
an expense
a. when the product is brought in for repairs.
b. in the period in which the product was sold.
c. at the end of the warranty period.
d. only if the repairs are expected to be made within one year.
Answer:
The procedures of the closing process are applicable to all companies when they are
using
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.
Answer:
In a recent year Cold Corporation had net income of $250,000, interest expense of
$50,000, and a times interest earned of 10. What was Cold Corporation’s income before
taxes for the year?
a. $550,000
b. $500,000
c. $450,000
d. None of the answers are correct.
Answer:
On January 1, Edison Corporation had 1,000,000 shares of $10 par value common stock
outstanding. On March 31, the company declared a 20% stock dividend. Market value
of the stock was $18/share. As a result of this event,
a. Edison’s Paid-in Capital in Excess of Par account increased $1,600,000.
b. Edison’s total stockholders’ equity was unaffected.
c. Edison’s Stock Dividends account increased $3,600,000.
d All of these answers are correct.
Answer:
Prepare the necessary journal entries on the books of Kelly Carpet Company to record
the following transactions, assuming a perpetual inventory system (you may omit
explanations):
(a) Kelly purchased $45,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $3,000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.
Answer:
In a perpetual inventory system, the amount of the discount allowed for paying for
merchandise purchased within the discount period is credited to
a. Inventory.
b. Purchase Discounts.
c. Purchase Allowance.
d. Sales Discounts.
Answer:
Era Company has 3,000 shares of 6%, $100 par non-cumulative preferred stock
outstanding at December 31, 2015. No dividends have been paid on this stock for 2014
or 2015. Dividends in arrears at December 31, 2015 total
a. $0.
b. $1,800.
c. $18,000.
d. $36,000.
Answer:
Which of the following statements concerning leases is true?
a. Capital leases are favored by lessees.
b. The appearance of the account, Leased Asset, on the balance sheet, signifies an
operating lease.
c. The portion of a lease liability expected to be paid in the next year is reported as a
current liability.
d. Present value is irrelevant in accounting for leases.
Answer:
The income statement for the year 2015 of Fugazi Co. contains the following
information:
At January 1, 2015, Fugazi reported retained earnings of $50,000. Dividends for the
year totalled $10,000. At December 31, 2015, the company will report retained earnings
of
a. $17,500.
b. $32,500.
c. $40,000.
d. $42,500.
Answer:
Which of the following is not performed by the payroll department?
a. Preparation of payroll checks
b. Maintaining payroll records
c. Signing of payroll checks
d. Preparation of payroll tax returns
Answer:
Townson Co. has outstanding $100 million of 7% bonds, due in 7 years, and callable at
104. The bonds were issued at par and are selling today at a market price of 94. If
Townson Co. calls $20 million of these bonds it will report:
a. A $1,400,000 gain.
b. A $800,000 loss.
c. An unrealized gain.
d. Neither gains nor losses are recognized on early retirements of debt.
Answer:
Land acquired from the issuance of common stock is reported
a. as a financing activity.
b. as an investing activity.
c. as an operating activity.
d. in a separate schedule at the bottom of the statement of cash flows.
Answer:
Crue Company had the following transactions during 2015:
ï€ Sales of $4,800 on account
ï€ Collected $2,000 for services to be performed in 2016
ï€ Paid $1,625 cash in salaries
ï€ Purchased airline tickets for $250 in December for a trip to take place in 2016
What is Crue’s 2015 net income using accrual accounting?
a. $2,925.
b. $3,175.
c. $4,925.
d. $5,175.
Answer:
Stockholders generally have the right to share in corporate _______________ and in
______________ upon liquidation.
Answer:
Gates Company maintains four special journals and a general journal to record its
transactions. Using the code below, indicate in the space provided the appropriate
journal for recording the transactions listed.
1> Stockholders invested cash in the business.
2> Purchased store supplies on account.
3> Sold merchandise to customer on account.
4> Purchased a 2-year fire insurance policy for cash.
5> Received a check from a customer as payment on account.
6> Paid for store supplies purchased in transaction 2.
7> Purchased merchandise on account.
8> Issued a credit memorandum to a customer who returned defective merchandise
previously sold on account.
9> Purchased office equipment for cash.
10> Made an adjusting entry for store supplies used during the period.
Answer:
If an investor owns between 20% and 50% of an investee’s common stock, it is
presumed that the investor has significant influence on the investee.
Answer:
A deposit ticket is a negotiable instrument that can be transferred to another party by
endorsement.
Answer:
A note is dishonored when it is not fully paid at maturity.
Answer: