Sales Returns and Allowances is increased when
a. an employee does a good job.
b. goods are sold on credit.
c. goods that were sold on credit are returned.
d. customers refuse to pay their accounts.
Answer:
An account will have a credit balance if the
a. credits exceed the debits.
b. first transaction entered was a credit.
c. debits exceed the credits.
d. last transaction entered was a credit.
Answer:
Washington Bottom Company reports the following for the month of June.
Instructions
(a) Compute the cost of the ending inventory and the cost of goods sold under (1) FIFO
and (2) LIFO.
(b) Compute the cost of the ending inventory and the cost of goods sold using the
average-cost method.
Answer:
Prepare the journal entries to record the following transactions for Ogleby Company
which has a calendar year end and uses the straight-line method of depreciation.
a) On September 30, 2015, the company exchanged old delivery equipment and
$36,000 for new delivery equipment. The old delivery equipment was purchased on
January 1, 2013, for $126,000 and was estimated to have a $18,000 salvage value at the
end of its 5-year life. Depreciation on the delivery equipment has been recorded
through December 31, 2014. It is estimated that the fair value of the old delivery
equipment is $54,000 on September 30, 2015.
(b) On June 30, 2015, the company exchanged old office equipment and $40,000 for
new office equipment. The old office equipment originally cost $80,000 and had
accumulated depreciation to the date of disposal of $35,000. It is estimated that the fair
market value of the old office equipment on June 30 was $60,000. The transaction has
commercial substance.
Answer:
A numbering system for a chart of accounts
a. is prescribed by GAAP.
b. is uniform for all businesses.
c. usually starts with income statement accounts.
d. usually starts with balance sheet accounts.
Answer:
A company just starting in business purchased three merchandise inventory items at the
following prices. First purchase $64; Second purchase $76; Third purchase $68. If the
company sold two units for a total of $200 and used FIFO costing, the gross profit for
the period would be
a. $56.
b. $60.
c. $62.
d. $68.
Answer:
All of the following are characteristics of accounting information except
a. faithful representation.
b. comparability.
c. relevance.
d. flexibility.
Answer:
If accounting information has relevance, it is useful in making predictions about
a. future tax audits.
b. new accounting principles.
c. foreign currency exchange rates.
d. the future events of a company.
Answer:
Bond interest paid is
a. higher when bonds sell at a discount.
b. lower when bonds sell at a premium.
c. the same whether bonds sell at a discount or a premium.
d. higher when bonds sell at a discount and lower when bonds sell at a premium.
Answer:
A company purchases a remote site building for computer operations. The building will
be suitable for operations after some expenditures. The wiring must be replaced to
computer specifications. The roof is leaky and must be replaced. All rooms must be
repainted and recarpeted and there will also be some plumbing work done. Which of the
following statements is true?
a. The cost of the building will not include the repainting and recarpeting costs.
b. The cost of the building will include the cost of replacing the roof.
c. The cost of the building is the purchase price of the building, while the additional
expenditures are all capitalized as Building Improvements.
d. The wiring is part of the computer costs, not the building cost.
Answer:
If bonds with a face value of $140,000 are converted into common stock when the
carrying value of the bonds is $135,000, the entry to record the conversion will include
a debit to
a. Bonds Payable for $140,000.
b. Bonds Payable for $135,000.
c. Discount on Bonds Payable for $5,000.
d. Bonds Payable equal to the market price of the bonds on the date of conversion.
Answer:
Which of the following statements is not true?
a. Comparability means using the same accounting principles from year to year within a
company.
b. Faithful representation is the quality of information that gives assurance that it is free
from error.
c. Relevant accounting information must be capable of making a difference in the
decision.
d. The primary objective of financial reporting is to provide financial information that is
useful to investors and creditors for making decision.
Answer:
The sale of bonds above face value
a. is a rare occurrence.
b. will cause the total cost of borrowing to be less than the bond interest paid.
c. will cause the total cost of borrowing to be more than the bond interest paid.
d. will have no net effect on Interest Expense by the time the bonds mature.
Answer:
The following information is for Bright Eyes Auto Supplies:
The total dollar amount of assets to be classified as current assets is
a. $140,000.
b. $220,000.
c. $360,000.
d. $500,000.
Answer:
Allowance for Doubtful Accounts is reported in the
a. balance sheet as a contra asset.
b. balance sheet as a contra liability account.
c. income statement under other expenses and losses.
d. income statement under other revenues and gains.
Answer:
Distinguish between FOB shipping point and FOB destination. Identify the freight
terms that will result in a debit to Inventory by the purchaser and a debit to Freight-out
by the seller.
Answer:
If inventories are valued using the LIFO cost flow assumption, they should not be
classified as a current asset on the balance sheet.
Answer:
For each of the following, indicate whether the transaction increased (+), decreased (-),
or had no effect (NE) on assets, liabilities, and stockholders’ equity using the following
format.
Assets = Liabilities + Stockholders’ Equity
1> Issued stock in exchange for cash.
2> Billed customers for services performed.
3> Purchased equipment on account.
4> Paid dividends.
5> Paid for equipment purchased in 3. above.
Answer:
Under the cost method, Treasury Stock is debited at the price paid to reacquire the
shares, and the same amount is credited to Treasury Stock when the shares are sold.
Answer:
Morton Company had the following select transactions.
Instructions
Prepare journal entries to record the transactions. Morton prepares adjusting entries
once a year on December 31.
Answer:
Instructions: Prepare journal entries to record the following events:
Answer:
