Adama Company reported a net loss of $6,000 for the year ended December 31, 2014.
During the year, accounts receivable increased $15,000, merchandise inventory
decreased $12,000, accounts payable decreased by $20,000, and depreciation expense
of $12,000 was recorded. During 2014, operating activities
a. used net cash of $17,000.
b. used net cash of $29,000.
c. provided net cash of $24,000.
d. provided net cash of $21,000.
Answer:
Depreciation expense for a period is the
a. original cost of an asset ‘“ accumulated depreciation.
b. book value of the asset ÷ useful life.
c. portion of an asset’s cost that expired during the period.
d. market value of the asset ÷ useful life.
Answer:
At March 1, 2015, Minutemen Corp. had supplies on hand of $500. During the month,
Minutemen purchased supplies of $1,200 and used supplies of $1,500. The March 31
adjusting journal entry should include a
a. debit to the supplies account for $1,500.
b. credit to the supplies account for $500.
c. debit to the supplies account for $1,200.
d. credit to the supplies account for $1,500.
Answer:
On July 1, Runner’s Sports Store paid $14,000 to Corona Realty for 4 months rent
beginning July 1. Prepaid Rent was debited for the full amount. If financial statements
are prepared on July 31, the adjusting entry to be made by Runner’s Sports Store is
a. Debit Rent Expense, $14,000; Credit Prepaid Rent, $3,500.
b. Debit Prepaid Rent, $3,500; Credit Rent Expense, $3,500.
c. Debit Rent Expense, $3,500; Credit Prepaid Rent, $3,500.
d. Debit Rent Expense, $14,000; Credit Prepaid Rent, $14,000.
Answer:
The authorized stock of a corporation
a. only reflects the initial capital needs of the company.
b. is indicated in its by-laws.
c. is indicated in its charter.
d. must be recorded in a formal accounting entry.
Answer:
In an exchange of plant assets that has commercial substance, any difference between
the fair value and the book value of the old plant asset is
a. recorded as a gain or loss.
b. recorded if a gain but is deferred if a loss.
c. recorded if a loss but is deferred if a gain.
d. deferred if either a gain or loss.
Answer:
Sales revenue less cost of goods sold is called
a. gross profit.
b. net profit.
c. net income.
d. marginal income.
Answer:
A 90-day note dated May 14 has a maturity date of
a. August 14.
b. August 12.
c. August 13.
d. August 15.
Answer:
A prior period adjustment that corrects income of a prior period requires that an entry
be made to
a. an income statement account.
b. a current year revenue or expense account.
c. the retained earnings account.
d. an asset account.
Answer:
Related selling activities do not include
a. ordering the merchandise.
b. making a sale.
c. shipping the goods.
d. billing the customer.
Answer:
With regard to the accounts used to record freight costs,
a. Freight-out is added to cost of goods sold.
b. Freight-out has a normal balance of debit.
c. Freight-out is recorded when freight terms are FOB shipping point.
d. Freight-out is a contra account to Sales.
Answer:
IFRS sometimes refers to allowances as
a. revenues.
b. discounts.
c. provisions.
d. reserves.
Answer:
A petty cash fund is generally established in order to
a. pay for all merchandise purchased on account.
b. pay employees’ wages.
c. make loans internally to employees.
d. pay relatively small expenditures.
Answer:
The 2015 financial statements of Marker Co. contain the following selected data (in
millions).
The debt to assets ratio is
a. 64.3%.
b. 53.3%.
c. 28.6%.
d. 147.4%.
Answer:
For each of the following oversights, state whether total assets will be understated (U),
overstated (O), or no affect (NA).
_____ 1> Failure to record revenue recognized but not yet received.
_____ 2> Failure to record expired prepaid rent.
_____ 3> Failure to record accrued interest on the bank savings account.
_____ 4> Failure to record depreciation.
_____ 5> Failure to record accrued wages.
_____ 6> Failure to record the recognized portion of unearned revenues.
Answer:
The necessity of making adjusting entries relates mostly to the
a. economic entity assumption.
b. time period assumption.
c. going concern assumption.
d. monetary unit assumption.
Answer:
Cash provided by operating activities
a. may be larger than net income.
b. equals the change in cash for the year.
c. summarizes cash flows relating to the purchase and sale of long-lived assets.
d. decreases when long-term debt is repaid.
Answer:
Suzy Douglas has been offered the opportunity of investing $73,540 now. The
investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.
How many years must Suzy wait to receive the $200,000?
a. 10
b. 11
c. 12
d. 13
Answer:
Financial statements are prepared directly from the
a. general journal.
b. ledger.
c. trial balance.
d. adjusted trial balance.
Answer:
If $30,000 is deposited in a savings account at the end of each year and the account
pays interest of 5% compounded annually, what will be the balance of the account at
the end of 10 years?
a. $48,867
b. $315,000
c. $377,337
d. $450,000
Answer:
The cost and fair value of an asset are the same at the time of acquisition and in all
subsequent periods.
Answer:
Assets that do not have a physical substance yet often are very valuable are called
______________ assets.
Answer:
All business transactions must be entered first in the general ledger.
Answer:
Cost and fair value data for the trading securities of McMahon Company at December
31, 2014, are $110,000 and $85,000, respectively. Which of the following correctly
presents the adjusting journal entry to record the securities at fair value?
Answer:
Iverson Company purchased a delivery truck for $45,000 on January 1, 2015. The truck
was assigned an estimated useful life of 5 years and has a residual value of $10,000.
Compute depreciation expense using the double-declining-balance method for the years
2015 and 2016.
Answer:
Operating expenses are different for merchandising and service enterprises.
Answer: