A work week is 180 hours in length.
If ending inventory is overstated this period, beginning inventory will be overstated in
the next period.
Under the indirect method, net income is considered the primary source of cash from
financing activities.
The post-closing trial balance contains the beginning figure for Capital.
The proper entry to make when a note is paid on the maturity date depends on whether
the note is an interest-bearing or non-interest-bearing note.
Rent expired at the end of an accounting period requires an adjustment.
The first entry to close accounts is to credit Revenue and debit Income Summary.
Original cost of equipment is adjusted on the worksheet.
The ending balances in the ledger after posting the adjusting entries, will be the same
amounts that are found on the worksheet in the adjusted trial balance column.
Tax form 940 is filed annually.
A journal is called the book of final entry.
A slide is evenly divisible by the number 8.
In the perpetual inventory system, it is not necessary to take a physical inventory at the
end of the period.
An interest allowance is based on a partner’s individual initial investment of capital.
If the assets owned by a business total $50,000, owner’s equity must also total $50,000.
The process of transferring the data from the journal to the ledger accounts is called
posting.
An important function of the worksheet is for the accountant to find and correct errors
before the financial statements are prepared.
Direct expenses are assigned to departments based on the actual expenses incurred.
The statement of owner’s equity shows revenue, liabilities and capital..
A low debt to total assets ratio reduces a creditor’s risk if liquidation occurs.
The second step in the preparation of the statement of cost of goods manufactured is to
add in and subtract out the two raw material inventory balances.
If a debit memorandum is issued, the buyer will reduce their accounts receivable.
Terms of 3/10, n/30 means that a customer is allowed a 3% discount if he or she pays
within 10 days of the invoice date.
The profit and loss ratio is not required to be equally divided between and among the
partners.
When expenses are less than revenue, net loss is the result.
Petty Cash is an asset shown on the income statement.
Paint used in painting the final product would be considered raw materials inventory.
The owner of a business paid personal rent with a company check. This payment
reduces Cash as well as increases the expenses of the firm.
The trial balance prepared after all of the temporary accounts have been closed is called
a post-closing trial balance.
Maturity value is Principal + Interest.
Vouchers Payable replaces Accounts Payable in the general ledger.
The ending inventory in Year 1 is not the beginning inventory in Year 2.
Before calculating salary and interest allowances, it is necessary to determine whether
net income will cover these expenses.
When a company tracks gross profit by department, the sales journal has one column
for Sales for each department.
Workers’ Compensation Insurance is:
A) paid by the employer to protect the employee against job-related injury or death.
B) paid by the employee to protect himself/herself against job-related accidents or
death.
C) paid by the employer to protect the employee against non-job-related injury or death.
D) paid by the employee to protect himself/herself against non-job-related accidents
and death.
Adjusting entries affect:
A) the balance sheet.
B) the income statement.
C) Neither of these answers is correct.
D) Both A and B are correct.
As the Unearned Rent Revenue is earned:
A) the liability account is decreased and the revenue account is increased.
B) the liability account is increased and the revenue account is decreased.
C) the liability account is decreased and the revenue account is not affected.
D) the liability account is not affected but the revenue account is decreased.
The adjustment to record supplies used during the period would be:
A) debit Supplies; credit Supplies Expense.
B) debit Supplies Expense; credit Cash.
C) debit Supplies Expense; credit Supplies.
D) debit Supplies; credit Cash.
Other Income is used to:
A) record payments from sales customers.
B) record any revenue from activities other than sales.
C) record all revenue.
D) record owner investments.
Alex returned all of the $2,000 purchase of equipment to James. The company uses the
voucher system. The entry to record this is:
A)
B)
C)
D) None of these answers is correct.
A credit to an asset account was posted as a credit to the Capital account. This error
would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) capital to be understated.
D) Both A and C are correct.
A partnership is a business which is:
A) easy to form.
B) ends with the death of a partner.
C) owned by more than one person.
D) All of these answers are correct.
Bob’s Auction House’s payroll for April includes the following data:
What is the employer’s portion of the taxes?
A) $1,072.10
B) $56.00
C) $272.10
D) $800.00
After closing the revenue and expense accounts, Income Summary showed a debit
balance of $1,500. Which of the following statements is true?
A) The company had a net loss of $1,500.
B) The company had a net income of $1,500.
C) The company’s cash increased $1,500.
D) None of these answers is correct.
All of the following are used to compute gross profit except:
A) sales.
B) sales returns and allowances.
C) accounts receivable.
D) purchases.
Samantha’s Design Studio showed office supplies available of $1,000. A count of the
supplies left on hand as of June 30 was $500. The adjusting journal entry is:
A)
B)
C)
D)
Tom’s Toys has a cash balance of $100,000; temporary investments of $40,000; net
receivables of $60,000; and inventory of $400,000. Tom’s current liabilities total
$125,000. His quick (acid test) ratio is:
A) 1.60 to 1.
B) 2.25 to 1.
C) 0.80 to 1.
D) 0.63 to 1.
Pittsburgh Tours collected $190 on an account that had been directly written off the
previous year. The journal entry to record the transaction would include:
A) a debit to Allowance for Doubtful Accounts.
B) a credit to Bad Debts Recovered.
C) a debit to Bad Debts Recovered.
D) a credit to Bad Debts Expense.
Bonds that may be redeemed at a certain price level are known as:
A) callable bonds.
B) debenture bonds.
C) serial bonds.
D) convertible bonds.
The side that increases the balance of the Sales Discount account is:
A) a credit.
B) a debit.
C) zero.
D) It does not have a normal balance.
The owner invested personal equipment in the business. To record this transaction:
A) debit Equipment and credit Revenue.
B) debit Accounts Payable and credit Equipment.
C) debit Equipment and credit Capital.
D) credit Equipment and debit Capital.
Harvey loaned $450 to Chase and received a promissory note. Harvey is the:
A) maker.
B) drawee.
C) payee.
D) debtor.
What is debited if State Unemployment Tax Payable (SUTA) is credited?
A) Payroll Tax Expense
B) SUTA Tax Payable
C) Salaries Payable
D) Salaries Expense
The replenishment of the petty cash fund was recorded twice. This would cause:
A) expenses to be overstated.
B) expenses to be understated.
C) petty cash to be overstated.
D) petty cash to be understated.
Marble Company discounts a customer’s 10%, $7,000, 90-day note dated August 1, on
September 20. The discount period is 40 days, and the bank discount rate is 15%. The
maturity value of the note is $7,175. The bank discount is:
A) $95.62.
B) $31.88.
C) $119.58.
D) $43.25.
Wages and Salaries Expense is:
A) equal to net pay.
B) equal to gross pay.
C) equal to the employer’s taxes.
D) equal to wages and Salaries paid in cash.
If Cash has been debited, it is likely that:
A) the owner made an investment.
B) a charge customer made a payment.
C) the business borrowed cash from the bank.
D) All of these are possible.
Carrie billed her legal clients $8,000 for legal work completed during the month. This
transaction will:
A) cause a $8,000 increase in revenues and liabilities.
B) cause a $8,000 increase in revenues and a decrease in liabilities.
C) cause a $8,000 increase in assets and revenues.
D) not be recorded until the cash is collected.
After aging the receivables, Tim’s Toys estimates that $1,900 will not be collected and
the allowance account has a debit balance of $525. The adjusting entry would be for:
A) $1,900.
B) $525.
C) $2,425.
D) $1,375.
Journal entries that are needed in order to update account balances for internal business
transactions (such as supplies and prepaid rent) at the end of the period are:
A) closing entries.
B) adjusting entries.
C) sales entries.
D) adjusting Cash.
Which form is used to report FICA taxes for the employer and employee, and also
federal income taxes for the employee?
A) Form 941
B) Form 944
C) Form 940
D) Form W-2
Provide an explanation for the following journal entries:
a) Prepaid Rent debited, Cash credited
b) Office supplies debited, Cash credited
c) Cash debited, Capital credited
d) Utility expense debited, Cash credited
e) Accounts Payable debited, Cash credited
The freight paid on goods purchased F.O.B. shipping point was debited to the Purchases
account. The company uses the periodic method. This error would cause:
A) the period end expenses to be understated.
B) the period end expenses to be overstated.
C) the period’s net income to be understated.
D) None of these is correct.
Reduction given to company customers for early payment is a:
A) sales returns and allowance.
B) purchase discount.
C) sales discount.
D) customer discount.
Partner C invested equipment in the partnership and the equipment was recorded at its
book value. This error would cause:
A) future period’s net income to be understated.
B) future period’s net income to be overstated.
C) this period end assets to be overstated.
D) None of these is correct.
Which of the following does NOT apply to both a W-2 and W-3?
A) Reports the total amount of wages, tips and compensation paid to the employee
B) Reports the total OASDI and Medicare taxes withheld
C) Sent to the Social Security Administration
D) Employees use both forms to prepare their personal tax returns.
Which of the following would be a direct expense for a shoe department in a
department store?
A) Depreciation expense
B) Sales salaries
C) Building expense
D) Administrative expense
The normal balance of Income Summary is:
A) debit.
B) credit.
C) The account does not have a normal balance.
D) It depends on the change of the inventory balance.
Given the income statement columns and the balance sheet columns of the worksheet,
prepare an income statement for the month of October 31, 20XX, for the company.
What is the purpose of a bond sinking fund?
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, and in Column 3 the financial
statement that the account in which the account balance is reported.
Define the expression accrued salaries.
Prepare a partial balance sheet for the Swanson Company at December 31, 201X, from
the following information:
Accounts Receivable $7,000
Prepaid Rent 500
Allowance for Doubtful Accounts 500
Bad Debt Expense 1,000
Cash 10,000
Merchandise Inventory 4,500
From the following, calculate the cost of raw materials used, total manufacturing costs
and cost of goods manufactured:
Raw Materials Inventory, Sep. 1 $10,000
Raw Materials Inventory, Sep. 30 6,000
Work-in-Process Inventory, Sep. 1 12,000
Work-in-Process Inventory, Sep. 30 15,000
Raw Materials Purchased 25,000
Direct Labor 20,000
Depreciation Expense 6,000
Factory Utilities 4,000
Given the following account balances, determine the total liabilities. Cash $320,
Accounts Receivable $250, supplies $310 and Capital $800.
$ ________
Determine the estimated net realizable (collectable) value:
Bad debts are estimated to be 3% of net credit sales.
Accounts receivable balance $95,000
Allowance for bad debts balance (credit) $675
Net Credit Sales $800,000
$ ________
Indicate which effect(s) each situation will have:
1. New check written
2. Recorded in the general journal
3. Recorded in auxiliary petty cash record
4. Petty cash voucher prepared
________ Replenishment of petty cash
Below is a list of departments; you are to identify each as either [1] a profit center or [2]
a cost center.
The jewelry department of a major retailer. ________
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 on which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
Using the following accounts:
[1] Cash
[2] Subscription receivable-common stock
[3] Machinery
[4] Building
[5] Land
[6] Organization costs
[7] Preferred stock
[8] Common stock
[9] Paid in capital in excess of par value – preferred
[10] Paid in capital in excess of par value – common
[11] Common stock subscribed
[12] Discount on common stock
[13] Organization Expense
Indicate the account(s) to be debited and credited to record the following transaction.
Sold preferred stock at a price equal to par value.
Debit ________ Credit ________
Given the following payroll items you are to identify whether they are the responsibility
of the employer and/or the employee by placing an X in the appropriate column.
Paid voucher #422, payment was within the discount period.
Debit ________ Credit ________ & ________
Given the following accounts:
[1] Cash
[2] Accounts receivable
[3] Allowance for doubtful accounts
[4] Merchandise inventory
[5] Store supplies
[6] Store equipment
[7] Accumulated depreciation
[8] Notes payable
[9] Accounts payable
[10] Able Partner’s, Capital
[11] Baker Partner’s, Capital
[12] Able Partner’s, withdrawals
[13] Baker Partner’s, withdrawals
[14] Income summary
[15] Service revenue
[16] Gain on realization
[17] Loss on realization
Indicate the account(s) to be debited and credited to record the following transaction.
Able accepted Baker into the partnership with an investment of cash, inventory, and
store equipment, including accumulated depreciation.
Debit ________ & ________ & ________ Credit ________ & ________
Prepare in proper form journal entries for the following transactions. Omit explanations.
The Black Bear Basketball Corporation has 7,000 shares of common stock issued and
outstanding. The board of directors declared a $1.00 per share cash dividend on January
9, payable on March 9, to stockholders of record on February 9. Prepare the appropriate
journal entries.
Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If
this is the only error in Years 1 and 2, fill in the items below, indicating which items
will be understated(U), overstated(O), or correctly(C) stated for Year 2.
Ending merchandise inventory Year 2 ________
Beginning merchandise inventory Year 2 ________
Cost of goods sold Year 2 ________
Gross profit Year 2 ________
Net income Year 2 ________
Ending owner’s capital Year 2 ________
Prepare general journal entries for Huckabee Corporation for the following
transactions:
201X
Dec. 1 Discounted its own $30,000, 4 month, 7% note at Colo Bank.
31 Accrued the interest expense on the discounted note.
201X
Apr. 1 Paid the discounted note.
