Profitability ratios include
a. times interest earned.
b. inventory turnover.
c. the payout ratio.
d. the acid-test ratio.
Answer:
The principles of internal control activities are used in the
a. U.S. but not globally.
b. internationally but not in the U.S.
c. in the U.S. and Canada but not globally.
d. globally.
Answer:
Treasury stock is generally accounted for by the
a. cost method.
b. market value method.
c. par value method.
d. stated value method.
Answer:
Stockholders are most interested in evaluating
a. liquidity and solvency.
b. profitability and solvency.
c. liquidity and profitability.
d. marketability and solvency.
Answer:
Long Company recently incurred the following costs:
Land should be recorded on Long’s books at
a. $280,000.
b. $294,000.
c. $333,000.
d. $363,000.
Answer:
The adjusted trial balance is prepared
a. after financial statements are prepared.
b. before the trial balance.
c. to prove the equality of total assets and total liabilities.
d. after adjusting entries have been journalized and posted.
Answer:
Stockholders’ equity is decreased by all of the following except
a. sales of stock.
b. net losses.
c. expenses.
d. dividends.
Answer:
Compound interest is the return on principal
a. only.
b. for one or more periods.
c. plus interest for two or more periods.
d. for one period.
Answer:
Nicklaus Company has decided to sell one of its old machines on June 30, 2015. The
machine was purchased for $200,000 on January 1, 2011, and was depreciated on a
straight-line basis for 10 years with no salvage value. If the machine was sold for
$65,000, what was the amount of the gain or loss recorded at the time of the sale?
a. $45,000.
b. $135,000.
c. $55,000.
d. $115,000.
Answer:
Balance sheet accounts are considered to be
a. temporary stockholders’ equity accounts.
b. permanent accounts.
c. equity accounts.
d. nominal accounts.
Answer:
The process of transferring transaction effects into the appropriate accounts is referred
to as
a. closing.
b. journalizing.
c. recording.
d. posting.
Answer:
An accountant has debited an asset account for $1,300 and credited a liability account
for $500. Which of the following would be an incorrect way to complete the recording
of the transaction?
a. Credit an asset account for $800.
b. Credit another liability account for $800.
c. Credit a Stockholders’ account for $800.
d. Debit a Stockholders’ account for $800.
Answer:
The cash records of Jasmin Company show the following four situations.
1> The June 30 bank reconciliation indicated that deposits in transit total $2,110.
During July the general ledger account Cash shows deposits of $23,620, but the bank
statement indicates that only $23,400 in deposits were received during the month.
2> The June 30 bank reconciliation also reported outstanding checks of $1,250. During
the month of July, Jasmin Company books show that $25,800 of checks were issued.
The bank statement showed that $24,600 of checks cleared the bank in July.
3> In September, deposits per the bank statement totaled $40,100, deposits per books
were $38,100, and deposits in transit at September 30 were $2,900.
4> In September, cash disbursements per books were $36,550, checks clearing the bank
were $37,500, and outstanding checks at September 30 were $3,200.
There were no bank debit or credit memoranda. No errors were made by either the bank
or Jasmin Company.
Instructions
Answer the following questions.
(a) In situation (1), what were the deposits in transit at July 31?
(b) In situation (2), what were the outstanding checks at July 31?
(c) In situation (3), what were the deposits in transit at August 31?
(d) In situation (4), what were the outstanding checks at August 31?
Answer:
Notes receivable are recognized in the accounts at
a. cash (net) realizable value.
b. face value.
c. gross realizable value.
d. maturity value.
Answer:
Cost of goods sold is computed from the following equation:
a. beginning inventory ‘“ cost of goods purchased + ending inventory.
b. sales ‘“ cost of goods purchased + beginning inventory ‘“ ending inventory.
c. sales + gross profit ‘“ ending inventory + beginning inventory.
d. beginning inventory + cost of goods purchased ‘“ ending inventory.
Answer:
Winter Company purchased a building on January 2 by signing a long-term $630,000
mortgage with monthly payments of $5,400. The mortgage carries an interest rate of 10
percent.
The entry to record the first monthly payment will include a
a. debit to the Cash account for $5,400.
b. credit to the Cash account for $5,250.
c. debit to the Interest Expense account for $5,250.
d. credit to the Mortgage Payable account for $5,400.
Answer:
The declining-balance method of depreciation produces
a. a decreasing depreciation expense each period.
b. an increasing depreciation expense each period.
c. a declining percentage rate each period.
d. a constant amount of depreciation expense each period.
Answer:
In the Augie Company, sales were $750,000, sales returns and allowances were
$30,000, and cost of goods sold was $450,000. The gross profit rate was
a. 36%.
b. 37.5%.
c. 40%.
d. 41.7%.
Answer:
Farr Company purchased a new van for floral deliveries on January 1, 2015. The van
cost $56,000 with an estimated life of 5 years and $14,000 salvage value at the end of
its useful life. The double-declining-balance method of depreciation will be used. What
is the depreciation expense for 2015?
a. $11,200
b. $8,400
c. $16,800
d. $22,400
Answer:
All of the following are reported as current liabilities except
a. accounts payable.
b. bonds payable.
c. notes payable.
d. unearned revenues.
Answer:
Rooney Company incurred $560,000 of research and development cost in its laboratory
to develop a patent granted on January 1, 2015. On July 31, 2015, Rooney paid $84,000
for legal fees in a successful defense of the patent. The total amount debited to Patents
through July 31, 2015, should be:
a. $560,000.
b. $84,000.
c. $644,000.
d. $476,000.
Answer:
In a capital lease, the amount capitalized is the
a. sum of the lease payments over the life of the lease.
b. fair value of the leased asset on the date the lease is signed.
c. present value of the lease payments.
d. future value of the asset as of the lease termination date.
Answer:
The present value of a $10,000, 5-year bond, will be less than $10,000 if the
a. contractual interest rate is less than the market interest rate.
b. contractual interest rate is greater than the market interest rate.
c. bond is convertible.
d. contractual interest rate is equal to the market interest rate.
Answer:
Netta Shutters has the following inventory information.
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Ending inventory under
LIFO is
a. $738.
b. $792.
c. $1,740.
d. $1,794.
Answer:
Prepare journal entries to record the following transactions entered into by Valente
Company:
Answer:
After closing entries have been journalized and posted, all temporary accounts in the
ledger should have zero balances.
Answer:
The following lettered items represent a classification scheme for a balance sheet, and
the numbered items represent accounts found on balance sheets. In the blank next to
each account, write the letter indicating to which category it belongs.
Answer:
Zimmer Company sold the following two machines in 2015:
Instructions
Journalize all entries required to update depreciation and record the sales of the two
assets in 2015. The company has recorded depreciation on the machines through
December 31, 2014.
Answer:
The board of directors may authorize more bonds than are issued.
Answer:
Match the ratios with the appropriate ratio computation by entering the appropriate
letter in the space provided.
Answer:
The book value of a plant asset is always equal to its fair market value.
Answer: