Which of the following is not true of the terms debit and credit?
a. They can be abbreviated as Dr. and Cr.
b. They can be interpreted to mean increase and decrease.
c. They can be used to describe the balance of an account.
d. They can be interpreted to mean left and right.
Answer:
The indirect and direct methods of preparing the statement of cash flows are identical
except for the
a. significant noncash activity section.
b. operating activities section.
c. investing activities section.
d. financing activities section.
Answer:
Aire Corporation retires its bonds at 106 on January 1, following the payment of
semi-annual interest. The face value of the bonds is $800,000. The carrying value of the
bonds at the redemption date is $842,000. The entry to record the redemption will
include a
a. credit of $42,000 to Loss on Bond Redemption.
b. debit of $48,000 to Premium on Bonds Payable.
c. credit of $7,000 to Gain on Bond Redemption.
d. debit of $42,000 to Premium on Bonds Payable.
Answer:
All of the following are contra revenue accounts except
a. sales revenue.
b. sales allowances.
c. sales discounts.
d. sales returns.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
The sub-classifications for assets on the company’s classified balance sheet would
include all of the following except
a. Current Assets.
b. Property, Plant, and Equipment.
c. Intangible Assets.
d. Long-term Assets.
Answer:
When the allowance method of accounting for uncollectible accounts is used, Bad Debt
Expense is recorded
a. in the year after the credit sale is made.
b. in the same year as the credit sale.
c. as each credit sale is made.
d. when an account is written off as uncollectible.
Answer:
The acid-test (quick) ratio
a. is used to quickly determine a company’s solvency and long-term debt paying ability.
b. relates cash, short-term investments, and net receivables to current liabilities.
c. is calculated by taking one item from the income statement and one item from the
balance sheet.
d. is the same as the current ratio except it is rounded to the nearest whole percent.
Answer:
An employee authorized to sign checks should not record
a. owner cash contributions.
b. mail receipts.
c. cash disbursement transactions.
d. sales transactions.
Answer:
Under the equity method of accounting for long-term investments in common stock,
when a dividend is received from the investee company,
a. the Dividend Revenue account is credited.
b. the Stock Investments account is increased.
c. the Stock Investments account is decreased.
d. no entry is necessary.
Answer:
Blaney Clothing Store had a balance in the Accounts Receivable account of $437,500 at
the beginning of the year and a balance of $500,000 at the end of the year. Net credit
sales during the year amounted to $3,000,000. The average collection period of the
receivables in terms of days was
a. 53.2 days.
b. 365 days.
c. 60.1 days.
d. 57 days.
Answer:
On January 1, 2015, the stockholders’ equity section of Nance Corporation shows:
Common stock ($5 par value) $1,500,000; paid-in capital in excess of par value
$1,000,000; and retained earnings $1,200,000. During the year, the following treasury
stock transactions occurred.
Instructions
(a) Journalize the treasury stock transactions.
(b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per
share.
Answer:
At June 30, Yaddof Company has the following bank information: cash balance per
bank $1,800; outstanding checks $340; deposits in transit $275; credit memo for
interest $75; bank service charge $10. What is Mareska’s adjusted cash balance on June
30?
a. $1,735
b. $1,800
c. $1,810
d. $1,865
Answer:
The third (final) step in preparing the statement of cash flows is to
a. analyze changes in noncurrent asset and liability accounts.
b. compare the net change in cash with the change in the cash account reported on the
balance sheet.
c. determine net cash provided by operating activities.
d. list the noncash activities.
Answer:
Which of the following is not a reason one set of international accounting standards are
needed?
a. multinational corporations.
b. financial markets.
c. information technology.
d. all of the above are reasons one set of international accounting standards are needed.
Answer:
The following selected amounts are available for Clark Company.
What is its ending retained earnings balance?
a. $750
b. $800
c. $550
d. $700
Answer:
The reference column of a multiple-column cash payments journal after posting
a. will only contain check marks.
b. will be blank.
c. will only contain account numbers.
d. may contain either account numbers or check marks.
Answer:
An analysis of the transactions made by Cookie Mountain Legal, a law firm, for the
month of July is shown below. Each increase and decrease in stockholders’ equity is
explained.
Instructions
(a) Prepare an income statement for the month ending July 31, 2015.
(b) Prepare a retained earnings statement for the month ending July 31, 2015.
Answer:
Which of the following statements about dividends is not accurate?
a. Many companies declare and pay cash quarterly dividends.
b. Low dividends may mean high stock returns.
c. The board of directors is obligated to declare dividends.
d. A legal dividend may not be a feasible one.
Answer:
The interest charged on a $90,000, 3-month note payable, at the rate of 8%, would be
a. $7,200.
b. $3,600.
c. $1,800.
d. $1,200.
Answer:
Richter Company sells merchandise on account for $2,500 to Lynch Company with
credit terms of 3/10, n/60. Lynch Company returns $200 of merchandise that was
damaged, along with a check to settle the account within the discount period. What
entry does Richter Company make upon receipt of the check and the damaged
merchandise?
Answer:
The inventory methods that result in the most current costs in the income statement and
balance sheet are
Answer:
A new account is opened for each transaction entered into by a business firm.
Answer:
Hutton Cape Company, which prepares annual financial statements, is preparing
adjusting entries on December 3 Analysis indicates the following:
1> The company is the defendant in an employee discrimination lawsuit involving
$50,000 of damages. Legal counsel believes it is unlikely that the company will have to
pay any damages.
2> Employees are entitled to one day’s vacation for each month worked. The company
employs 50 people who earn $120 per day and 30 who earn $160 per day. All
employees worked the entire year.
3> The company is a defendant in a $500,000 product liability lawsuit. Legal counsel
believes that the company probably will have to pay the amount requested.
4> The company has a defined benefit pension plan in which total pension expense for
December is $50,000. The company funds one half of the expense and records a
liability or the balance due.
Instructions
Prepare any adjusting entries necessary at the end of the year.
Answer:
The following information is available for Elwes Company for the year ended
December 31, 2015:
Instructions
Use the above information to prepare a classified balance sheet for the year ended
December 31, 2015.
Answer:
A simple journal entry requires only one debit to an account and one credit to an
account.
Answer:
The duties of approving an item for payment and paying the item should be done by
different departments or individuals.
Answer:
State whether each situation is a prepaid expense (PE), unearned revenue (UR), accrued
revenue (AR) or an accrued expense (AE).
1> Unrecorded interest on savings bonds is $245.
2> Property taxes that have been incurred but that have not yet been paid or recorded
amount to $300.
3> Legal fees of $1,000 were collected in advance. By year end 60 percent were still
unearned.
4> was still unexpired.
Answer:
Transactions that cannot be entered in a special journal are recorded in the
_______________, and if control and subsidiary accounts are involved, there must be a
_______________ posting.
Answer:
Which of the following adjustments to convert net income to net cash provided by
operating activities is correct?
Answer: