The payroll information for a pay period is found in the payroll register.
To calculate gross profit, subtract operating expenses from net sales.
Debits must exceed credits on the Statement of Owner’s equity.
Sales is a revenue account.
Dividends paid to shareholders is an example of a financing activity.
All expenses are listed on the income statement of a manufacturer.
If a check marked NSF is returned from the bank, an adjusting entry debiting Cash is
needed.
Accumulated Depreciation is a contra-asset account.
An employee assigned the responsibility for overseeing the petty cash fund is called the
custodian.
If expenses are greater than revenue, a net income is incurred.
A department with sales of $120,000; cost of goods sold of $75,000; and operating
expenses of $20,000 has a gross profit of $25,000.
Prepaid Rent Expense is a contra-asset with a normal balance of a debit.
A discount amortization does not affect the amount of cash paid for bond interest.
When the equity of a partnership is less than amounts recorded in the accounting
records, an incoming partner may have to pay a bonus.
Land is listed first under Plant, Property and Equipment.
A stock split has no effect on retained earnings.
To calculate the double declining-balance rate, you would use half the straight line rate.
The death of an individual shareholder of the corporation will terminate the corporation.
Distribution of earnings to stockholders may be in the form of cash only.
Under the direct method, each line of the balance sheet is converted to cash paid or
received.
The three elements that make up a balance sheet are assets, liabilities and revenues.
The order of the flow of accounting data is to (1) record in a journal, (2) post in a
ledger, (3) prepare a trial balance.
When the terms are F.O.B. shipping point, the buyer is responsible for the cost of
shipping from the seller’s shipping point to the purchaser’s location but the title does not
pass until it is delivered.
Cash investments by the owner increases both liabilities and assets.
Appropriations of retained earnings are voted upon by the board of directors.
A transaction that involves more than one credit or more than one debit is called a
compound entry.
For tax purposes, the gain or loss on a traded asset is ignored when calculating the value
of the new asset.
A company would review the journal if an account balance was needed.
In a voucher system, a schedule of vouchers payable is not the same as a schedule of
accounts payable.
A department with sales of $120,000; cost of goods sold of $75,000; and operating
expenses of $20,000 has a gross profit of $45,000.
Corporations are subject to more government regulations than sole proprietorships and
partnerships.
Workers’ compensation insurance is deducted from employees’ checks.
A stock split will decrease total stockholders’ equity and the number of shares of stock
issued.
A bond sinking fund is reported as an asset on the balance sheet.
All states do not use the same percent for the state tax rate.
Two accounts are affected in every transaction.
A type of analysis that compares each item with the same item in other periods is called
horizontal analysis.
If beginning inventory is $5,000, ending inventory is $3,000, net purchases is $12,000
and Freight-in is $400, what is the Cost of Goods Available for Sale?
A) $17,400
B) $17,000
C) $14,400
D) $14,000
The total of all cash sales and credit sales equals:
A) net sales.
B) gross sales.
C) accounts receivable.
D) sales returns and allowances.
The purpose of posting is to:
A) record the transactions in chronological order in the journal.
B) provide an explanation of the transaction.
C) update the account balances in the ledger.
D) correct a previous entry.
One type of preferred stock that entitles its holders not only to a fixed dividend but also
to an opportunity to share in additional dividends with common stockholders is known
as:
A) participating.
B) cumulative.
C) non-cumulative.
D) common.
The following information is given for Nevada Times:
Net income $25,000
Depreciation expense 4,000
Increase in accounts receivable 2,000
Increase in supplies on hand 3,000
Sale of common stock 11,000
Proceeds from sale of equipment 5,000
Loan money to a customer 4,000
Decrease in accounts payable 1,000
The indirect method is used.
Required:
Answer the following questions with the information provided above.
a) The cash flow from operating activities is ________.
b) The cash flow from investing activities is ________.
c) The cash flow from financing activities is ________.
If you debit Prepaid Insurance, you most likely will:
A) credit Fees Earned.
B) credit capital.
C) credit Insurance Expense.
D) credit Cash.
To use the gross profit method to estimate the value of the ending inventory, the
company needs the following information:
A) average gross profit rate, net sales, ending inventory, and net purchases.
B) average gross profit rate, net sales, beginning inventory at cost, and net purchases at
retail.
C) average gross profit rate, net sales, ending inventory at retail, and net purchases at
retail.
D) average gross profit rate, net sales, beginning inventory at cost, and net purchases at
cost.
A unit or department that incurs costs but does not generate revenues is known as a:
A) cost center
B) profit center
C) revenue center
D) None of these answers is correct.
Prepare the journal entries for the following transactions for Dobson Industries
Company.
a) Dobson sold $8,000 of merchandise to Bolt Imports Company on account. The
company uses the periodic method.
b) Dobson accepted a 90-day, 7% note from Bolt in settlement of its account.
c) Bolt defaulted on its note on the maturity date.
d) Collected the previously defaulted Bolt note plus $25 additional interest.
Nathan invests $2,000 for 10% interest in a partnership that has total capital of $17,000
after admitting Nathan. Which of the following is true?
A) Nathan’s capital is $1,700.
B) The original partners received a bonus of $200.
C) Nathan received a bonus of $300.
D) The original partners’ capital in the business was $19,000 before admitting Nathan.
Camping for Fun purchased merchandise costing $1,000. Calculate the cost of goods
sold under the following different situations:
a) Beginning inventory $200 and no ending inventory.
b) Beginning inventory $250 and a $300 ending inventory.
c) No beginning inventory and a $150 ending inventory.
The May bank statement for Tax Services shows a balance of $5,300, but the balance
per books shows a cash balance of $6,980. Other information includes:
1. A check for $200 to pay the electric bill was recorded on the books as $20.
2. Included on the bank statement was a note collected by the bank for $400 plus
interest of $30.
3. Checks outstanding totaled $260.
4. Bank service charges were $50.
5. Deposits in transit were $2,140.
Which item(s) should be subtracted from the balance per books?
A) Deposits in transit
B) Checks outstanding and bank service charge
C) Bank service charge and the note collected by the bank
D) None of the above is correct.
Katie withdrew from the partnership of Katie, Courtney, and Nathan, and accepted
$10,000 cash. Her capital balance was $16,000 and the difference will be shared in a
ratio of 2:1 for Courtney and Nathan, respectively. The entry would be to:
A) debit Cash $10,000; credit Nathan, Capital $10,000.
B) debit Nathan, Capital $16,000; credit Cash $16,000.
C) debit Katie, Capital $16,000; credit Cash $10,000; credit Courtney, Capital $4,000;
credit Nathan, Capital $2,000.
D) debit Cash $16,000; debit Nathan, Capital $4,000; debit Courtney, Capital $2,000;
credit Katie, Capital $18,000.
The entry to establish the petty cash fund debited Misc. Expense. This would cause:
A) revenues to be overstated.
B) revenues to be understated.
C) expenses to be overstated.
D) expenses to be understated.
Which of the following items would be subtracted from Net Income to compute Net
Cash Flow from Operating Activities under the indirect method?
A) A decrease in Merchandise Inventory
B) An increase in Accrued Payables
C) A decrease in Accounts Payable
D) A decrease in Prepaid Insurance
Adjusting the supplies account will:
A) decrease the total assets and increase the total expenses.
B) decrease the total assets and decrease the total expenses.
C) increase the total assets and increase the total expenses.
D) increase the total assets and decrease the total expenses.
If an employer owes less than $2,500 for FICA (OASDI and Medicare) and FIT, they
can submit:
A) Form 941.
B) Form 940.
C) Form W-2.
D) Form W-3.
Prepaid Worker’s Compensation Insurance is what type of account?
A) Asset
B) Expense
C) Liability
D) Contra-asset
The May bank statement for Rental shows a balance of $6,300, but the balance per
books shows a cash balance of $7,980. Other information includes:
1. A check for $200 to pay the electric bill was recorded on the books as $20.
2. Included on the bank statement was a note collected by the bank for $400 plus
interest of $30.
3. Checks outstanding totaled $260.
4. Bank service charges were $50.
5. Deposits in transit were $2,140.
Which item(s) will require a journal entry to update the balance in the Cash account?
A) Checks outstanding and deposits in transit
B) Bank service charges, note collected by the bank, and deposits in transit
C) Bank service charges, note collected by the bank, and error made by Accounting
Services
D) None of these answers is correct.
An understatement of ending inventory in one period results in:
A) an overstatement of net income for the next period.
B) no effect on net income for the next period.
C) an overstatement of the ending inventory for the next period.
D) an understatement of net income for the next period.
If a display rack was purchased for the store, which of the following accounts would be
increased?
A) Store Equipment
B) Purchases
C) Capital
D) None of the above is correct.
Even though the cost of fuel oil is rising, management is considering using up the
business’s reserves and not ordering any more this period. How will this decision affect
the period’s cash flows from operationsindirect method?
A) It will increase this period’s cash flows from operations.
B) It will decrease this period’s cash flows from operations.
C) It will not affect this period’s cash flows from operations.
D) This does not affect cash flows from operations.
Equipment that originally cost $900 with no salvage value has accumulated
depreciation of $700. The equipment is discarded. The transaction to record the
discarding of the equipment would result in a:
A) loss of $900.
B) gain of $900.
C) loss of $200.
D) loss of $700.
Each share of capital stock of a corporation gives its owner the right to:
A) manage the daily operations of the business.
B) set company policy.
C) vote at stockholders’ meetings.
D) determine the amount of dividends to be paid.
Sold merchandise on account would be recorded with:
A) a debit to an asset account.
B) a debit to a liability account.
C) a debit to Capital.
D) None of these is correct.
An amount determined by the corporation board of directors and assigned to no-par
value stock is:
A) par value.
B) stated value.
C) book value.
D) market value.
A line on the income statement that indicates what a department has left after covering
cost of goods and sold and direct expenses is:
A) the gross margin.
B) the net income.
C) the contribution margin.
D) None of these answers is correct.
Statements that are often used to compare similar businesses are called:
A) comparative analysis.
B) vertical analysis.
C) horizontal analysis.
D) common-size statements.
Gross Accounts Receivable is $20,000. Allowance for Doubtful Accounts has a credit
balance of $400. Net credit sales for the year are $125,000. In the past, 2% of credit
sales had proved uncollectible, and an aging of the receivables indicates $1,500 is
doubtful. Under the balance sheet approach, Bad Debts Expense for the year is:
A) $1,900.
B) $2,900.
C) $2,500.
D) $1,100.
What would be the effect on the accounts if the business purchased office supplies for
cash?
A) An asset would be debited and an expense debited.
B) Expense would be debited and Revenue credited.
C) An asset would be debited and Revenue credited.
D) An asset would be debited and an asset credited.
Warner Enterprises was unable to collect a $1,500 note receivable plus $75 interest on
the maturity date, but hoped to collect the amount in the future. Warner should record
this as:
A) debit Bad Debts Expense $1,500; credit Notes Receivable $1,500.
B) debit Allowance for Doubtful Accounts $1,575; credit Notes Receivable $1,575.
C) debit Accounts Receivable $1,500; credit Interest Income $75; credit Cash $1,575.
D) debit Accounts Receivable $1,575; credit Interest Income $75; credit Notes
Receivable $1,500.
From the following information, calculate (a) cost of raw materials used and (b) total
manufacturing costs.
Raw Materials Inventory, June 1 $20,000
Raw Materials Inventory, June 30 15,000
Overhead 35,000
Finished Goods Inventory 17,000
Direct Labor 29,000
Raw Materials Purchased 75,000
a. ________
b. ________
The chart of accounts:
A) is a numbered list of all of the business’s accounts.
B) allows accounts to be located quickly.
C) can be expanded as the business grows.
D) All of the above are correct.
Prepaid expense would appear on which financial statement?
A) Balance Sheet
B) Income Statement
C) Owner’s Equity Statement
D) None of these answers is correct.
For each of the following items, indicate by placing an X in the appropriate column
whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column
3) debt, or (column 4) profitability.
For each of the following items, indicate by placing an X in the appropriate column
whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column
3) debt, or (column 4) profitability.
For each of the following items, indicate (by placing an X) whether the item would be
found on the statement of cash flows in column 1, the direct approach for determining
the cash flows from operating activities, column 2, the indirect approach for
determining the cash flows from operating activities, column 3, cash flows from
investing activities, column 4, cash flows from financing activities. If you identify that
an item affects the cash flows from operation, indirect method, also indicate whether it
will be increasing (+) or decreasing (-) the cash flows.
Kristi’s Mentoring had the following information for the pay period ending September
30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Employees contribute to their retirement fund at a rate of 5.5% of their gross earnings
Compute the employees’ FICA-OASDI.
A bond that has a face value of $200,000 with an annual interest rate of 7% paid
semiannually and sold at par would have an interest payment of ________
semiannually.
From the following information, prepare the bank reconciliation for Paula’s
Photography Studio for June.
Ending checkbook balance $40
Ending bank statement balance 30
Deposits in transit 90
Outstanding checks 90
Service Charge 10
Below is a list of expenses; you are to identify each as either [1] a direct expense or [2]
an indirect expense.
General employee insurance. ________
Determine the total cost of a purchase paid for within the discount period with an
invoice price of $7,000 and credit terms of 1/10, n/30 when $1,500 has already been
returned for credit. The goods were purchased with freight terms of F.O.B shipping
point and freight of $50.
$ ________
The Bixby Co. had the following transactions involving the purchase of merchandise.
Prepare the necessary general journal entries. Any applicable freight costs are prepaid
by the seller. The perpetual inventory method is in use.
June 16 Purchased merchandise having a price of $6,000 from the Shelby
Manufacturing Co.
on account with credit terms 2/10, n/30. Transportation terms F.O.B destination.
June 16 Purchased merchandise having a price of $9,000 from the Ajax Supply House
on account with credit terms 2/10, n/30. Transportation terms F.O.B shipping point.
The freight costs of $175 were added to the invoice. Merchandise was shipped June 16.
June 17 Received the goods from Shelby.
June 17 Received the goods from Ajax.
June 20 Returned for credit merchandise with an invoice price of $800 to Ajax.
June 25 Paid Shelby the amount owed.
June 28 Paid Ajax the amount owed.
June 30 Returned for cash, merchandise with an invoice price of $400 to Shelby.
Prepare the necessary general journal entry for June 17. Received the goods from
Shelby.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement in which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement in which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
The intangible that is recorded when a business is purchased for more than the fair
value of the net assets is known as ________.
Why is the effective rate of interest always higher than the interest rate of the loan on a
discounted note?
Carmen Corporation issued 200 shares of its $5 par value stock to an attorney. The
shares are in full settlement for $10,000 of legal services to help set up the company.
Prepare the journal entry for the stock issuance.
Given the following accounts:
[1] Expense accounts.
[2] Accounts receivable
[3] Finished goods inventory.
[4] Work in process inventory.
[5] Raw materials inventory.
[6] Factory supplies inventory.
[7] Manufacturing overhead applied
[8] Depreciation expense
[9] Accounts payable.
[10] Payroll
[11] Utilities expense
[12] Sales.
[13] Raw materials purchases.
[14] Manufacturing overhead-control.
[15] Cost of goods sold.
Indicate the account(s) to be debited and credited to record the following transactions.
Purchased raw materials on account.
Debit ________ Credit ________
The Tiger Football Corporation has 9,000 shares of $1.50 par value common stock
issued and outstanding. The board of directors declared a 3-for-1 stock split May 10,
distributable on June 15, to stockholders of record on June 1. The Retained Earnings
account balance is $50,000 on May 10. Prepare the equity section of the balance sheet
on May 10 and June 15, before and after the stock split.
Journalize the transactions for the stock subscription plan for Nick Company. On
February 1, Nick received subscriptions for 100 shares of $10 par value common stock
at $12 per share. The buyer will pay two equal installments on March 1 and June 1.
Assume all payments are made as scheduled and the company issues the stock after the
June 1 collection.
Using the following accounts:
[1] Cash
[2] Dividends payable
[3] Preferred stock
[4] Common stock
[5] Common Stock dividend distributable
[6] Paid-in capital in excess of par value-common
[7] Paid-in capital in excess of par value – preferred
[8] Paid-in capital from treasury stock
[9] Retained earnings
[10] Appropriation for plant expansion
[11] Treasury stock
[12] Income summary
[13] Paid-in capital in excess of par value-Stock dividend
Indicate the account(s) to be debited and credited to record the following transactions.
Declared a stock dividend when the market price was above par.
Debit ________ Credit ________ & ________
Kristi’s Mentoring had the following information for the pay period ending September
30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Employees contribute to their retirement fund at a rate of 5.5% of their gross earnings
Compute the total deductions.