Cost of goods sold is determined only at the end of the accounting period in
a. a perpetual inventory system.
b. a periodic inventory system.
c. both a perpetual and a periodic inventory system.
d. neither a perpetual nor a periodic inventory system.
Answer:
English Company billed its customers a total of $1,785,000 for the month of November.
The total includes a 5% state sales tax.
Instructions
(a) Determine the proper amount of revenue to report for the month.
(b) Prepare the general journal entry to record the revenue and related liabilities for the
month.
Answer:
At October 1, Arcade Fire Enterprises reported stockholders’ equity of $70,000. During
October, common stock of $10,000 was issued and the company posted a net loss of
$4,000. If stockholders’ equity at October 31 totals $70,000, what amount of dividends
were paid during the month?
a. $0
b. $4,000
c. $6,000
d. $10,000
Answer:
Intangible assets
a. should be reported under the heading Property, Plant, and Equipment.
b. are not reported on the balance sheet because they lack physical substance.
c. should be reported as Current Assets on the balance sheet.
d. should be reported as a separate classification on the balance sheet.
Answer:
The average collection period is computed by dividing
a. net credit sales by average gross accounts receivable.
b. net credit sales by ending gross accounts receivable.
c. the accounts receivable turnover by 365 days.
d. 365 days by the accounts receivable turnover.
Answer:
In preparing a statement of cash flows, a conversion of bonds into common stock will
be reported in
a. the financing section.
b. the “extraordinary” section.
c. a separate schedule or note to the financial statements.
d. the stockholders’ equity section.
Answer:
Under IFRS, liabilities
a. must be legally enforceable by a contract.
b. must be legally enforceable by law.
c. may be legally enforceable by a contract or law but need not be.
d. are defined differently than under GAAP.
Answer:
Misra Company compiled the following financial information as of December 31,
2015:
Misra’s assets on December 31, 2015 are
a. $180,000.
b. $250,000.
c. $360,000.
d $490,000.
Answer:
Outstanding stock of the Zone Corporation included 20,000 shares of $5 par common
stock and 5,000 shares of 6%, $10 par noncumulative preferred stock. In 2014, Zone
declared and paid dividends of $2,000. In 2015, Zone declared and paid dividends of
$6,000. How much of the 2015 dividend was distributed to preferred shareholders?
a. $2,000
b. $4,000
c. $3,000
d. None of these answers are correct
Answer:
The following information is for Sunny Day Real Estate:
The total dollar amount of assets to be classified as current assets is
a. $105,000.
b. $175,000.
c. $190,000.
d. $260,000.
Answer:
If accounts receivable have increased during the period,
a. revenues on an accrual basis are less than revenues on a cash basis.
b. revenues on an accrual basis are greater than revenues on a cash basis.
c. revenues on an accrual basis are the same as revenues on a cash basis.
d. expenses on an accrual basis are greater than expenses on a cash basis.
Answer:
The one characteristic that all entries recorded in a multiple-column purchases journal
have in common is a
a. credit to the Cash account.
b. debit to the Cash account.
c. debit to the Accounts Payable account.
d. credit to the Accounts Payable account.
Answer:
When constructing a worksheet, accounts are often needed that are not listed in the trial
balance already entered on the worksheet from the ledger. Where should these
additional accounts be shown on the worksheet?
a. They should be inserted in alphabetical order into the trial balance accounts already
given.
b. They should be inserted in chart of account order into the trial balance already given.
c. They should be inserted on the lines immediately below the trial balance totals.
d. They should not be inserted on the trial balance until the next accounting period.
Answer:
In 2015, Chandler Company had net credit sales of $1,125,000. On January 1, 2015,
Allowance for Doubtful Accounts had a credit balance of $27,000. During 2015,
$42,000 of uncollectible accounts receivable were written off. Past experience indicates
that the allowance should be 10% of the balance in receivables (percentage of
receivables basis). If the accounts receivable balance at December 31 was $380,000,
what is the required adjustment to the Allowance for Doubtful Accounts at December
31, 2015?
a. $23,000
b. $38,000
c. $53,000
d. $97,500
Answer:
All of the following intangible assets are amortized except
a. copyrights.
b. limited-life franchises.
c. patents.
d. trademarks.
Answer:
Which accounting assumption assumes that an enterprise will continue in operation
long enough to carry out its existing objectives and commitments?
a. Monetary unit assumption.
b. Economic entity assumption.
c. Periodicity assumption.
d. Going concern assumption.
Answer:
Under IFRS, some companies present which section of the cash flow statement as a
single line item?
a. Operating activities
b. Investing activities
c. Financing activities
d. Noncash investing and financing activities
Answer:
The balance of a control account in the general ledger
a. must always be zero.
b. must equal the amount of total assets.
c. is always greater than the composite balance of individual accounts in a related
subsidiary ledger.
d. must equal the composite balance of individual accounts in a related subsidiary
ledger.
Answer:
Which of the following accounts is not closed to Income Summary?
a. Cost of Goods Sold
b. Inventory
c. Sales Revenue
d. Sales Discounts
Answer:
During an accounting period, a business has numerous transactions affecting each of the
following accounts. State for each account whether it is likely to have (a) debit entries
only, (b) credit entries only, or (c) both debit and credit entries.
Answer:
The sales revenue section of an income statement for a retailer would not include
a. Sales discounts.
b. Sales revenue.
c. Net sales.
d. Cost of goods sold.
Answer:
The bank statement that a depositor receives from the bank includes
a. notification of amounts deducted by the bank to cover such things as the cost of a
supply of new checks ordered by the depositor.
b. a designation of which checks are still outstanding at the end of the month.
c. a designation of which deposits are in transit at the end of the month.
d. notification of errors made by the depositor in recording checks written during the
month in the depositor’s accounts.
Answer:
Which of the following is not true of ordinary repairs?
a. They primarily benefit the current accounting period.
b. They can be referred to as revenue expenditures.
c. They maintain the expected productive life of the asset.
d. They increase the productive capacity of the asset.
Answer:
Items waiting to be used in production are considered to be
a. raw materials.
b. work in progress.
c. finished goods.
d. merchandise inventory.
Answer:
MNolan Company entered into the transactions listed below during 2015. Prepare the
appropriate journal entries for Nolan Company. You may omit journal entry
explanations but you should show computations.
Answer:
At December 31, 2014, Delta Inc. has these data on its security investments:
If the available-for-sale securities are held as long-term investments, which of the
following will be recorded to adjust the securities to fair value?
Answer:
Net income for the period is determined by subtracting total expenses and drawings
from total revenues.
Answer:
Retailers and wholesalers are both considered merchandisers.
Answer:
Identify the accounts to be debited and credited for each of the following
transactions.
1> Invested $8,000 cash in the business in exchange for stock.
2> Purchased supplies on account for $1,000.
3> Billed customers $2,000 for services performed.
4> Paid salaries of $1,200.
Answer:
Checks from customers who pay their accounts promptly are called outstanding checks.
Answer:
Bank returns deposited check marked NSF.
6> Bank collects notes receivable and interest for depositor.
7> Bank debit memorandum for check printing fees.
8> Petty cash custodian has $91 in paid petty cash vouchers that have not been
reimbursed.
9> Bank charged a check against the company which should have been charged to
another company.
10> A check for $246 was correctly paid by the bank but was incorrectly entered in the
cash payments journal for $264.
Answer:
When three or more accounts are required in one journal entry, the entry is referred to
as a ________________ entry.
Answer:
Cody Industries owns 35% of Macarthy Company. For the current year, Macarthy
reports net income of $250,000 and declares and pays a $60,000 cash dividend. Which
of the following correctly presents the journal entries to record Cody’s equity in
Macarthy’s net income and the receipt of dividends from Macarthy?
Answer:
On February 1, 2015, Fugit Company sells merchandise on account to Armen Company
for $6,500. The entry to record this transaction by Fugit Company is
Answer: