Which of the following statements about the income statement is not correct?
A) Amounts received from customers for services performed in the current month
would be revenues on the income statement.
B) Costs incurred in the current month but not paid as of the end of the month would be
expenses on the income statement for the current month.
C) Amounts received from customers in payment of their accounts arising from service
in the prior period would be revenues in the income statement for the current period.
D) Amounts received from customer as deposits for services to be rendered next month
will not be recorded as revenues on the income statement for the current month.
Your company sells $40,000 of one-year, 10% bonds for an issue price of $39,000. The
journal entry to record this transaction will include a credit to Bonds Payable in the
amount of:
A) $39,000.
B) $40,000.
C) $43,000.
D) $44,000.
Permanent accounts:
A) are not permitted under GAAP .
B) have their balances zeroed-out at the end of each accounting year.
C) do not have their year-end balance carried into the next year.
D) are Balance Sheet accounts.
A decrease in receivables turnover ratio is indicative of:
A) an increase in sales revenue.
B) slower-selling inventory.
C) an increase in accounts receivable.
D) a decline in cost of goods sold.
On the declaration date, the company:
A) debits Dividends and credits Dividends Payable for the amount of the dividend.
B) debits Dividend Expense and credits Cash for the dividend amount.
C) debits Dividends Payable and credits Cash for the dividend amount.
D) establishes who will receive the dividend payment.
Which of the following would not be added to net income in calculating cash flows
from operating activities on a statement of cash flows prepared using the indirect
method?
A) Amortization Expense
B) A decrease in Accounts Receivable
C) An increase in Salaries and Wages Payable
D) A gain on sale of equipment
A real estate management company buys land that contains an abandoned apartment
building for $4.5 million. It pays a construction company $500,000 to demolish the
apartment building. Which of the following is correct?
A) The company would record $5 million as the cost of the land.
B) The company would record $4.5 million as the cost of the land.
C) The company would record $4 million as the cost of the land.
D) The company would record $500,000 as demolition expense.
If a company capitalizes costs that should be expensed, how is its income statement for
the current period impacted?
A) Net income is understated.
B) Revenues are understated.
C) Expenses are understated.
D) Assets are understated.
Ambiance Inc. buys back 3,000 shares of its $10 par value common stock from
investors at $45 per share. This stock repurchase would be recorded with a debit to:
A) Cash and a credit to Treasury Stock for $135,000.
B) Treasury Stock and a credit to Cash for $30,000.
C) Treasury Stock and a credit to Cash for $135,000.
D) Treasury Stock for $30,000, a debit to Additional Paid-in Capital for $105,000, and a
credit to Cash for $135,000.
Generally, which inventory costing method approximates most closely the current cost
for each of the following?
Ending Inventory Cost of Goods Sold
A) FIFO LIFO
B) LIFO LIFO
C) FIFO FIFO
D) LIFO FIFO
Coachlight Inc. has a periodic inventory system. The company purchased 200 units of
inventory at $9 per unit and 300 units at $10 per unit. What is the weighted average unit
cost for these purchases of inventory?
A) $9.00.
B) $9.50.
C) $9.60.
D) $10.00.
Jackson and O’Neill form a partnership that produces gates. Jackson provides $30,000
of capital while O’Neill contributes $90,000 of capital; they agree to split net income by
the same proportion. The partnership’s net income is $80,000 for the first year. They did
not draw any income out of the business or add any additional capital during the first
year. At the end of the year, the partners’ equity is:
A) $70,000 for Jackson and $130,000 for O’Neill for a total of $200,000.
B) $200,000 minus income tax expense for the partnership.
C) $200,000 minus the income tax paid by each partner.
D) $50,000 for Jackson and $150,000 for O’Neill for a total of $200,000.
Which of the following statements about the declaration and payment of cash dividends
is correct?
A) Declaration and payment of cash dividends will reduce the amount of net income.
B) Declaration and payment of cash dividends will not reduce the Retained Earnings
balance.
C) Declaration and payment of cash dividends will reduce the amount of cash available
to invest in assets.
D) Declaration and payment of cash dividends is calculated on the amount of shares of
stock issued, not the amount of shares outstanding.
Net income appears on which of the following financial statements?
A) Balance sheet and income statement
B) Balance sheet and statement of retained earnings
C) Balance sheet and statement of cash flows
D) Income statement and statement of retained earnings
The balance of which of the following accounts appear in the credit column of an
adjusted trial balance?
A) Income Tax Payable
B) Depreciation Expense
C) Prepaid Insurance
D) Interest Receivable