The closing entry process consists of closing
a. all asset and liability accounts.
b. out the retained earnings account.
c. all permanent accounts.
d. all temporary accounts.
Answer:
Prior period adjustments are reported
a. in the footnotes of the current year’s financial statements.
b. on the current year’s balance sheet.
c. on the current year’s income statement.
d. on the current year’s retained earnings statement.
Answer:
Glenn Company purchased merchandise inventory with an invoice price of $9,000 and
credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays
within the discount period?
a. $8,100
b. $8,280
c. $8,820
d. $9,000
Answer:
The information to prepare the statement of cash flows usually comes from each of the
following except
a. the comparative balance sheet.
b. the prior year’s income statement.
c. additional information.
d. the current income statement.
Answer:
Which of the following would not be true of a privately held corporation?
a. It is sometimes called a closely held corporation.
b. Its shares are regularly traded on the New York Stock Exchange.
c. It does not offer its shares for sale to the general public.
d. It is usually smaller than a publicly held company.
Answer:
When bonds are sold, the gain or loss on sale is the difference between the
a. sales price and the cost of the bonds.
b. net proceeds and the cost of the bonds.
c. sales price and the market value of the bonds.
d. net proceeds and the market value of the bonds.
Answer:
MECHE Company reports income before income taxes of $2,500,000 and had an
extra-ordinary loss of $800,000. If the tax rate is 35%,
a. the income before the extraordinary item is $1,190,000.
b. the extraordinary loss would be reported on the income statement at $800,000.
c. the income before the extraordinary item is $1,625,000.
d. the extraordinary loss will be reported at $280,000.
Answer:
Which of the following steps in the accounting cycle would not generally be performed
daily?
a. Journalize transactions
b. Post to ledger accounts
c. Prepare adjusting entries
d. Analyze business transactions
Answer:
A corporate board of directors does not generally
a. select officers.
b. formulate operating policies.
c. declare dividends.
d. execute policy.
Answer:
Of the various dividends types, the two most common types in practice are
a. cash and large stock.
b. cash and property.
c. cash and small stock.
d. property and small stock.
Answer:
The financial statement that summarizes the financial position of a company is the
a. income statement.
b. balance sheet.
c. operating statement.
d. retained earnings statement.
Answer:
Having one person responsible for the related activities of ordering merchandise,
receiving goods, and paying for them
a. increases the potential for errors and fraud.
b. decreases the potential for errors and fraud.
c. is an example of good internal control.
d. is a good example of safeguarding the company’s assets.
Answer:
The retained earnings account had a beginning balance of $40,000 and an ending
balance of $50,000. If $10,000 of dividends were paid during the period, net income
must have been
a. $20,000.
b. $40,000.
c. $10,000.
d. $30,000.
Answer:
In present value calculations, the process of determining the present value is called
a. allocating.
b. pricing.
c. negotiating.
d. discounting.
Answer:
Layton Company does not ring up sales taxes separately on the cash register. Total
receipts for October amounted to $29,400. If the sales tax rate is 5%, what amount must
be remitted to the state for October’s sales taxes?
a. $1,400
b. $1,470
c. $70
d. It cannot be determined.
Answer:
Major advantages of credit cards to the retailer include all of the following except the
a. issuer does the credit investigation of customers.
b. issuer undertakes the collection process.
c. retailer receives more cash from the credit card issuer.
d. All of these answers are correct.
Answer:
On June 1, 2015 Ted Leo buys a copier machine for his business and finances this
purchase with cash and a note. When journalizing this transaction, he will
a. use two journal entries.
b. make a compound entry.
c. make a simple entry.
d. list the credit entries first, which is proper form for this type of transaction.
Answer:
In general, adjusting entries are required each time financial statements are prepared.
Answer:
The following stockholders’ equity accounts, arranged alphabetically, are in the ledger
of Star Corporation at December 31, 2015.
Instructions
Prepare the stockholders’ equity section of the balance sheet at December 31, 2015.
Answer:
Rex Company reported retained earnings at December 31, 2014, of $410,000. Reese
had 180,000 shares of common stock outstanding throughout 2015.
The following transactions occurred during 2015.
1> An error was discovered in 2013, depreciation expense was recorded at $60,000, but
the correct amount was $50,000.
2> A cash dividend of $0.50 per share was declared and paid.
3> A 5% stock dividend was declared and distributed when the market price per share
was $15 per share.
4> Net income was $295,000.
Instructions
Prepare a retained earnings statement for 2015.
Answer:
If net sales are $800,000 and cost of goods sold is $600,000, the gross profit rate is
25%.
Answer:
Accountants believe that the write down from cost to market should not be made in the
period in which the price decline occurs.
Answer:
Aeroplane Insurance Agency prepares monthly financial statements. Presented below is
an income statement for the month of June that is correct on the basis of information
considered.
Additional Data: When the income statement was prepared, the company accountant
neglected to take into consideration the following information:
1>A utility bill for $2,500 was received on the last day of the month for electric and gas
service for the month of June.
2> A company insurance salesman sold a life insurance policy to a client for a premium
of $25,000. The agency billed the client for the policy and is entitled to a commission of
20%.
3> Supplies on hand at the beginning of the month were $3,000. The agency purchased
additional supplies during the month for $4,000 in cash and $2,200 of supplies were on
hand at June 30.
4> The agency purchased a new car at the beginning of the month for $22,000 cash.
The car will depreciate $5,400 per year.
5> Salaries owed to employees at the end of the month total $6,100. The salaries will be
paid on July 5.
Instructions
Prepare a correct income statement.
Answer:
The loss on bond redemption is the difference between the cash paid and the carrying
value of the bonds.
Answer:
The acquisition of a building by issuing bonds would be considered an investing and
financing activity that did not affect cash.
Answer: