Crawford Company has total proceeds (before segregation of sales taxes) from sales of
$7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue
is:
a. $7,155.
b. $6,726.
c. $7,584.
d. $6,750.
Answer:
If there is a loss on bonds redeemed early, it is
a. debited directly to Retained Earnings.
b. reported as an “Other Expense” on the income statement.
c. reported as an “Extraordinary Item” on the income statement.
d. debited to Interest Expense, as a cost of financing.
Answer:
Bonds payable of $1,000,000 sold at 98 would yield proceeds of
a. $900,000.
b. $980,000.
c. $1,000,000.
d. $1,080,000.
Answer:
Carey Company buys land for $50,000 on 12/31/14. As of 3/31/15, the land has
appreciated in value to $50,700. On 12/31/15, the land has an appraised value of
$51,800. By what amount should the Land account be increased in 2015?
a. $0
b. $700
c. $1,100
d. $1,800
Answer:
Pare Company reported a net loss of $30,000 for the year ended December 31, 2014.
During the year, accounts receivable decreased $15,000, merchandise inventory
increased $25,000, accounts payable increased by $30,000, and depreciation expense of
$20,000 was recorded. During 2014, operating activities
a. used net cash of $10,000.
b. used net cash of $25,000.
c. provided net cash of $10,000.
d. provided net cash of $25,000.
Answer:
The ratio that uses weighted average common shares outstanding in the denominator is
the
a. price-earnings ratio.
b. return on common stockholders’ equity.
c. earnings per share.
d. payout ratio.
Answer:
Classify each of the following as a(n):
A. Operating Activity
B. Investing Activity
C. Financing Activity
_____ 1> Issuance of bonds.
_____ 2> Sale of equipment.
_____ 3> Amortization expense.
_____ 4> Purchase of treasury stock.
_____ 5> Receipt of dividends on investment.
_____ 6> Purchase of land.
Answer:
Entries are made to the Petty Cash account when
a. establishing the fund.
b. making payments out of the fund.
c. recording shortages in the fund.
d. replenishing the fund.
Answer:
Using the percentage-of-receivables basis, the uncollectible accounts for the year is
estimated to be $38,000. If the balance for the Allowance for Doubtful Accounts is a
$7,000 debit before adjustment, what is the amount of bad debt expense for the period?
a. $7,000
b. $31,000
c. $38,000
d. $45,000
Answer:
The equity method of accounting for an investment in the common stock of another
company should be used by the investor when the investment
a. is composed of common stock and it is the investor’s intent to vote the common
stock.
b. ensures a source of supply of raw materials for the investor.
c. enables the investor to exercise significant influence over the investee.
d. is obtained by an exchange of stock for stock.
Answer:
Recording depreciation each period is necessary in accordance with the
a. going concern principle.
b. historical cost principle.
c. expense recognition principle.
d. asset valuation principle.
Answer:
Financial accounting ethics violations are
a. not a problem in the U.S. or internationally.
b. much more common in the U.S. than internationally.
c. much more common internationally than in the U.S.
d. a major problem both in the U.S. and internationally.
Answer:
Inventory is reported in the financial statements at
a. cost.
b. market.
c. the higher-of-cost-or-market.
d. the lower-of-cost-or-market.
Answer:
Retailers generally consider sales from the use of national credit card sales as a
a. credit sale.
b. collection of an accounts receivable.
c. cash sale.
d. collection of a note receivable.
Answer:
Restricting retained earnings for the cost of treasury stock purchased is a
a. contractual restriction.
b. legal restriction.
c. stock restriction.
d. voluntary restriction.
Answer:
Assume the following sales data for a company:
If 2014 is the base year, what is the percentage increase in sales from 2014 to 2015?
a. 76.9%
b. 30%
c. 40%
d. 71.4%
Answer:
Adjusting entries are recorded
a. only on the work sheet.
b. only in the general ledger.
c. in the general journal.
d. in the special journals.
Answer:
When a petty cash fund is in use,
a. an entry must be made to the appropriate expense, asset, etc. account when a
disbursement is made.
b. the size of the fund should be such that it can be used to cash employees’ bi-monthly
payroll checks.
c. entries are generally made to Petty Cash only when it is initially set up or the
stipulated amount of the fund is changed.
d. an entry is made to Petty Cash when the fund is replenished to its original amount.
Answer:
The proprietorship form of business organization
a. must have at least three owners in most states.
b. represents the largest number of businesses in the United States.
c. combines the records of the business with the personal records of the owner.
d. is characterized by a legal distinction between the business as an economic unit and
the owner.
Answer:
Which of the following are accounted for at amortized cost under IFRS?
a. Available-for-sale investments
b. Trading investments
c. Non-trading equity investments
d. Held-for-collection investments
IFRS:
Answer:
During February 2015 its first month of operations, the stockholders of Ariel Pink
Enterprises invested cash of $50,000. Ariel had cash revenues of $10,000 and paid
expenses of $14,000. Assuming no other transactions impacted the cash account, what
is the balance in Cash at February 28?
a. $4,000 credit
b. $4,000 debit
c. $46,000 debit
d. $54,000 debit
Answer:
Comprehensive income under IFRS
a. includes unrealized gains and losses included in net income, in contrast to GAAP.
b. includes unrealized gains and losses included in net income, similar to GAAP.
c. excludes unrealized gains and losses included in net income, in contrast to GAAP.
d. excludes unrealized gains and losses included in net income, similar to GAAP.
Answer:
In the financial statements, organization costs appears
a. immediately below Retained Earnings in the stockholders’ equity section.
b. in the income statement.
c. as part of paid-in capital in the stockholders’ equity section.
d. as an intangible asset.
Answer:
A company purchased factory equipment for $700,000. It is estimated that the
equipment will have a $70,000 salvage value at the end of its estimated 5-year useful
life. If the company uses the double-declining-balance method of depreciation, the
amount of annual depreciation recorded for the second year after purchase would be
a. $280,000.
b. $168,000.
c. $252,000.
d. $120,960.
Answer:
The expense recognition principle matches
a. customers with businesses.
b. expenses with revenues.
c. assets with liabilities.
d. creditors with businesses.
Answer:
On October 1, Steve’s Carpet Service borrows $350,000 from First National Bank on a
3-month, $350,000, 8% note. What entry must Steve’s Carpet Service make on
December 31 before financial statements are prepared?
Answer:
Ernest Company uses an imprest petty cash system. The fund was established on March
1 with a balance of $200. During March the following petty cash receipts were found in
the petty cash box.
The fund was replenished on March 15 when the fund contained $9 in cash. On March
20, the amount in the fund was increased to $300.
Instructions
Journalize the entries in March that pertain to the operation of the petty cash fund.
Answer:
Martin Company issued $900,000, 10-year bonds and agreed to make annual sinking
fund deposits of $72,000. The deposits are made at the end of each year to a fund
paying 5% interest compounded annually. What amount will be in the sinking fund at
the end of the 10 years?
Answer:
Three plans for financing a $20,000,000 corporation are under consideration by its
organizers. Under each of the following plans, the securities will be issued at their par
or face amount and the income tax rate is estimated at 30%.
It is estimated that income before interest and taxes will be $5,000,000.
Instructions
Determine for each plan, the expected net income and the earnings per share on
common stock.
Answer:
When no-par value stock does not have a stated value, the entire proceeds from the
issuance of the stock becomes legal capital.
Answer:
The responsibility for ordering, receiving, and paying for merchandise should be
assigned to different individuals.
Answer: