Delta72 Company received a cash advance of $700 from a customer. As a result of this
event,
a. assets increased by $700.
b. stockholders’ equity increased by $700.
c. liabilities decreased by $700.
d. assets and stockholders’ equity increased by $700.
Answer:
When a worksheet is used, all but one of the following statements is correct. The
incorrect statement is
a. Reconciling items on the worksheet are not journalized or posted.
b. The bottom portion of the worksheet shows the statement of cash flows effects.
c. The balance sheet accounts portion of the worksheet is divided into two parts: assets,
and liabilities and stockholders’ equity.
d. Each line pertaining to a balance sheet account should foot across.
Answer:
A basic assumption of accounting that requires activities of an entity be kept separate
from the activities of its owner is referred to as the
a. stand alone concept.
b. monetary unit assumption.
c. corporate form of ownership.
d. economic entity assumption.
Answer:
A subsidiary ledger frees the general ledger from details of
a. individual balances.
b. external transactions.
c. internal transactions.
d. the control account.
Answer:
Postings are made daily to subsidiary ledgers so that
a. employees are kept busy.
b. debits equal credits.
c. individual account information is kept current.
d. the control account will balance to the subsidiary ledger.
Answer:
Comparisons can be made on each of the following bases except
a. industry averages.
b. intercompany basis.
c. intracompany basis.
d. Each of these is a basis for comparison.
Answer:
A factory machine was purchased for $375,000 on January 1, 2015. It was estimated
that it would have a $75,000 salvage value at the end of its 5-year useful life. It was
also estimated that the machine would be run 40,000 hours in the 5 years. The company
ran the machine for 4,000 actual hours in 2015. If the company uses the
units-of-activity method of depreciation, the amount of depreciation expense for 2015
would be
a. $37,500.
b. $60,000.
c. $75,000.
d. $30,000.
Answer:
Indicate which one of the following would appear on the income statement of both a
merchandising company and a service company.
a. Gross profit
b. Operating expenses
c. Sales revenues
d. Cost of goods sold
Answer:
Under income is defined as
a. revenue less expenses.
b. revenues and gains, less expenses and losses.
c. revenues and gains.
d. revenues, gains, and contributions by owners.
Answer:
The fraud triangle applies to
a. U.S companies but not international companies.
b. international companies but not U.S. companies.
c. U.S. and Canadian companies but not other international companies.
d. U.S and international companies.
Answer:
Comanic Corp. has common stock of $5,400,000, retained earnings of $2,000,000,
unrealized gains on trading securities of $100,000 and unrealized losses on
available-for-sale securities of $200,000. What is the total amount of its stockholders’
equity?
a. $7,200,000
b. $7,400,000
c. $7,300,000
d. $7,500,000
Answer:
The acquisition of treasury stock by a corporation
a. increases its total assets and total stockholders’ equity.
b. decreases its total assets and total stockholders’ equity.
c. has no effect on total assets and total stockholders’ equity.
d. requires that a gain or loss be recognized on the income statement.
Answer:
Shelly Company reported the following financial information:
Compute (a) the accounts receivable turnover and (b) the average
collection period for 2015.
Answer:
The current ratio is
a. calculated by dividing current liabilities by current assets.
b. used to evaluate a company’s liquidity and short-term debt paying ability.
c. used to evaluate a company’s solvency and long-term debt paying ability.
d. calculated by subtracting current liabilities from current assets.
Answer:
The preparation of closing entries
a. is an optional step in the accounting cycle.
b. results in zero balances in all accounts at the end of the period so that they are ready
for the following period’s transactions.
c. is necessary before financial statements can be prepared.
d. results in transferring the balances in all temporary accounts to retained earnings.
Answer:
The two fundamental qualities of useful information are
a. verifiability and timeliness.
b. relevance and faithful representation.
c. comparability and flexibility.
d. understandability and consistency.
Answer:
Comparisons of data within a company are an example of the following comparative
basis:
a. Industry averages
b. Intercompany
c. Intracompany
d. Interregional
Answer:
The debt to assets ratio measures
a. the company’s profitability.
b. whether interest can be paid on debt in the current year.
c. the proportion of interest paid relative to dividends paid.
d. the percentage of the total assets provided by creditors.
Answer:
The entry to record the dishonor of a note receivable assuming the payee expects
eventual collection includes a debit to
a. Notes Receivable.
b. Cash.
c. Allowance for Doubtful Accounts.
d. Accounts Receivable.
Answer:
Revenue recognition under IFRS is
a. substantially different from revenue recognition under GAAP.
b. generally the same as revenue recognition under GAAP, but with more detailed
guidance.
c. generally the same as revenue recognition under GAAP, but with less detailed
guidance.
d. exactly the same as revenue recognition under GAAP.
Answer:
Comparisons of financial data made within a company are called
a. intracompany comparisons.
b. interior comparisons.
c. intercompany comparisons.
d. intramural comparisons.
Answer:
A patent
a. has a legal life of 40 years.
b. is nonrenewable.
c. can be renewed indefinitely.
d. is rarely subject to litigation because it is an exclusive right.
Answer:
The first part of the accounting process is
a. communicating.
b. identifying.
c. processing.
d. recording.
Answer:
Instructions: Journalize the following transactions for Fortier Company.
1> Issued 7,000 shares of no-par common stock. The market price of the stock is $12
per share.
2> Issued 3,000 shares of 5%, $100 par, cumulative preferred stock for $122 per share.
3> Declared dividends on preferred dividend of 5% per share.
4> Purchased 500 shares of common stock at $14 for treasury.
5> Paid preferred dividend declared in #3.
Answer:
The process of entering an amount on the left side of an account is called
____________ the account, and making an entry on the right side is called
_________________ the account.
Answer:
The reconciling entry for depreciation expense in a worksheet is a credit to
Accumulated Depreciation and a debit to Operating-Depreciation Expense.
Answer:
Your former college roommate is opening a new retail store and asks you ‘Which
inventory costing method should I use?’
What is your response? Include a comparison of the tax effect, balance sheet effect, and
income statement effect for FIFO versus LIFO.
Answer:
Kim Black plans to buy a truck for $24,000 after 3 years. If the interest rate is 6%, how
much money should Kim set aside today for the purchase?
Answer:
Record the following transactions for Adcock Company.
1> On April 12, sold $11,000 of merchandise to Milton Inc., terms 2/10, n/30.
2> On April 15, Milton returned $2,000 of merchandise.
3> On April 22, Milton paid for the merchandise.
Answer:
New Slang Pest Control has the following balances in selected accounts on December
31, 2014.
All of the accounts have normal balances. The information below has been gathered at
December 31, 2015.
1> Depreciation on the equipment for 2015 is $1,300.
2> New Slang Pest Control borrowed $20,000 by signing a 10%, one-year note on July
1, 2015.
3> New Slang Pest Control paid $2,220 for 12 months of insurance coverage on
October 1, 2015.
4> New Slang Pest Control pays its employees total salaries of $11,000 every Monday
for the preceding 5-day week (Monday-Friday). On Monday, December 27, 2015,
employees were paid for the week ending December 24, 2015. All employees worked
the five days ending December 31, 2015.
5> New Slang Pest Control performed disinfecting services for a client in December
2015. The client will be billed $3,200.
6> On December 1, 2015, New Slang Pest Control collected $30,000 for disinfecting
processes to be performed from December 1, 2015, through May 31, 2015.
7> A count of supplies on December 31, 2015, indicates that supplies of $850 are on
hand.
Instructions
Prepare in journal form with explanations, the adjusting entries for the seven items
listed for New Slang Pest Control.
Answer:
A common application of materiality is weighing the factual nature of cost figures
versus the relevance of fair value.
Answer: