Eneri Company’s inventory records show the following data:
A physical inventory on December 31 shows 4,000 units on hand. Eneri sells the units
for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic
inventory method.
Under the FIFO method, the December 31 inventory is valued at
a. $28,000.
b. $32,267.
c. $32,960.
d. $36,800.
Answer:
As of June 30, 2015, Actual Tigers Company has assets of $100,000 and stockholders’
equity of $40,000. What are the liabilities for Actual Tigers Company as of June 30,
2015?
a. $40,000
b. $60,000
c. $100,000
d. $140,000
Answer:
Jolene is warehouse custodian and also maintains the accounting record of the
inventory held at the warehouse. An assessment of this situation indicates
a. documentation procedures are violated.
b. independent internal verification is violated.
c. segregation of duties is violated.
d. establishment of responsibility is violated.
Answer:
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt
Expense is debited
a. when a credit sale is past due.
b. at the end of each accounting period.
c. whenever a pre-determined amount of credit sales have been made.
d. when an account is determined to be uncollectible.
Answer:
Aim, Inc., has 10,000 shares of 4%, $100 par value, noncumulative preferred stock and
40,000 shares of $1 par value common stock outstanding at December 31, 2015. There
were no dividends declared in 2014. The board of directors declares and pays a
$120,000 dividend in 2015. What is the amount of dividends received by the common
stockholders in 2015?
a. $0
b. $40,000
c. $60,000
d. $80,000
Answer:
Carothers Company assembled the following information in completing its March bank
reconciliation: balance per bank $7,640; outstanding checks $1,550; deposits in transit
$2,500; NSF check $160; bank service charge $50; cash balance per books $8,800. As a
result of this reconciliation, Carothers will
a. reduce its cash account by $50.
b. reduce its cash account by $210.
c. reduce its cash account by $950.
d. increase its cash account by $110.
Answer:
Which of the following statements concerning accrual-basis accounting is incorrect?
a. Accrual-basis accounting follows the revenue recognition principle.
b. Accrual-basis accounting is the method required by generally accepted accounting
principles.
c. Accrual-basis accounting recognizes expenses when they are paid.
d. Accrual-basis accounting follows the expense recognition principle.
Answer:
Trent Corp. issued $800,000 of 8%, 5-year bonds at 102 on January 1, 2015. The
straight-line method of amortization is used and the bonds pay interest annually on
January 1. The amount of bond interest expense that Trent should report on its
December 31, 2015, income statement is
a. $64,000.
b. $65,280.
c. $60,800.
d. $67,200.
Answer:
If a company reports a net loss, it
a. may still have a net increase in cash.
b. will not be able to pay cash dividends.
c. will not be able to get a loan.
d. will not be able to make capital expenditures.
Answer:
Journalizing in a sales journal will not
a. require a debit to Accounts Receivable.
b. show a sales invoice number.
c. affect the reference column of the journal.
d. include a credit to the Sales Revenue account.
Answer:
The units-of-activity method is generally not suitable for
a. airplanes.
b. buildings.
c. delivery equipment.
d. factory machinery.
Answer:
A basic assumption of accounting assumes that the dollar is
a. unrelated to business transactions.
b. a poor measure of economic activities.
c. the common unit of measure for all business transactions.
d. useless in measuring an economic event.
Answer:
The following information is available for Zip Corporation:
The company accountant, in preparing financial statements for the year ending
December 31, 2015, has discovered the following information:
The company’s previous bookkeeper, who has been fired, had recorded depreciation
expense on equipment in 2013 and 2014 using the double-declining-balance method of
depreciation. The bookkeeper neglected to use the straight-line method of depreciation
which is the company’s policy. The cumulative effects of the error on prior years was
$35,000, ignoring income taxes. Depreciation was computed by the straight-line
method in 2015.
Instructions
(a) Prepare the entry for the prior period adjustment.
(b) Prepare the retained earnings statement for 2015.
Answer:
Grimwood Trucking purchased a tractor trailer for $171,500. Interline uses the
units-of-activity method for depreciating its trucks and expects to drive the truck
1,000,000 miles over its 12-year useful life. Salvage value is estimated to be $24,500. If
the truck is driven 90,000 miles in its first year, how much depreciation expense should
Grimwood record?
a. $12,250
b. $15,435
c. $13,230
d. $14,292
Answer:
Employee payroll deductions include each of the following except
a. federal unemployment taxes.
b. federal income taxes.
c. FICA taxes.
d. insurance and pensions.
Answer:
The principles of internal control include all of the following except
a. establishment of responsibility.
b. combining of duties.
c. physical, mechanical, and electronic controls.
d. independent internal verification.
Answer:
Wesley Hospital installs a new parking lot. The paving cost $40,000 and the lights to
illuminate the new parking area cost $25,000. Which of the following statements is true
with respect to these additions?
a. $40,000 should be debited to the Land account.
b. $25,000 should be debited to Land Improvements.
c. $65,000 should be debited to the Land account.
d. $65,000 should be debited to Land Improvements.
Answer:
In preparing a bank reconciliation, outstanding checks are ______________ from the
cash balance per ______________.
Answer:
Ryan Corporation entered into the following transactions:
1> Hewitt Car Rental leased a car to Ryan Corporation for one year. Terms of the
operating lease call for monthly payments of $750.
2> On January 1, 2015, Ryan Corporation entered into an agreement to lease 20
machines from Meeks Corporation. The terms of the lease agreement require an initial
payment of $210,000 and then three annual rental payments of $210,000 beginning on
December 31, 2015. The present value of the three rental payments is $522,238. The
lease is a capital lease.
Instructions
Prepare the appropriate journal entries to be made by Ryan Corporation in January
related to the lease transactions.
Answer:
A subsidiary ledger is a group of control accounts which provides information to the
managers for controlling the operation of the company.
Answer:
At the end of the month, the accountant for Slater Company prepared a schedule of
accounts receivable from the accounts receivable subsidiary ledger. Its total did not
agree with the balance in the Accounts Receivable control account in the general ledger.
Briefly describe the procedure that should be followed in reconciling the two balances.
Answer:
Variations among companies in the application of generally accepted accounting
principles may reduce quality of earnings.
Answer:
Horizontal, vertical, and circular analyses are the most common tools of financial
statement analysis.
Answer:
In order to accelerate the receipt of cash from receivables, owners may sell the
receivables to another company for cash.
Answer: