Which of the following accounts is not included in the computation of net sales?
a. Sales Discounts
b. Sales
c. Sales Returns and Allowances
d. Freight Out
Answer:
The information in a statement of cash flows will not help investors to assess the
entity’s ability to
a. generate future cash flows.
b. obtain favorable borrowing terms at a bank.
c. pay dividends.
d. pay its obligations when they become due.
Answer:
Which of the following is a constraint in accounting?
a. Comparability.
b. Cost.
c. Consistency.
d. Relevance.
Answer:
Which of the following should not be included in the plant assets (property, plant, and
equipment) classification?
a. Land on which warehouse sits
b. Building housing corporate headquarters
c. Parking lot used by visitors
d. All of these answers should be included
Answer:
A trial balance will not balance if
a. a journal entry is posted twice.
b. a wrong amount is used in journalizing.
c. incorrect account titles are used in journalizing.
d. a journal entry is only partially posted.
Answer:
The accounting equation for Ally Elton, Inc. is:
Assets $120,000 = Liabilities $50,000 + Stockholders’ Equity $70,000.
If the company purchases supplies on account for $5,000, the new accounting equation
will be:
a. Assets $115,000 = Liabilities $50,000 + Stockholders’ Equity $70,000.
b. Assets $125,000 = Liabilities $55,000 + Stockholders’ Equity $70,000.
c. Assets $125,000 = Liabilities $50,000 + Stockholders’ Equity $75,000.
d. Assets $120,000 = Liabilities $55,000 + Stockholders’ Equity $65,000.
Answer:
Yanik Company’s delivery truck, which originally cost $84,000, was destroyed by fire.
At the time of the fire, the balance of the Accumulated Depreciation account amounted
to $57,000. The company received $48,000 reimbursement from its insurance company.
The gain or loss as a result of the fire was
a. $36,000 loss.
b. $21,000 loss.
c. $36,000 gain.
d. $21,000 gain.
Answer:
The White Stripes Animal Encounters operates a drive through tourist attraction. The
company adjusts its accounts at the end of each month. The selected accounts appearing
below reflect balances after adjusting entries were prepared on April 30. The adjusted
trial balance shows the following:
Other data:
1> Three months’ rent had been prepaid on April 1.
2> The buildings are being depreciated at $7,200 per year.
3> The unearned ticket revenue represents tickets sold for future visits. The tickets were
sold at $5.00 each on April 1. During April, thirty of the tickets were used by
customers.
Instructions
(a) Calculate the following:
1> Monthly rent expense.
2> The age of the buildings in months.
3> The number of tickets sold on April 1.
(b) Prepare the adjusting entries that were made by the White Stripes Animal
Encounters on April 30.
Answer:
Which one of the following is not a part of an account?
a. Credit side
b. Trial balance
c. Debit side
d. Title
Answer:
A company purchased factory equipment on June 1, 2015, for $160,000. It is estimated
that the equipment will have a $10,000 salvage value at the end of its 10-year useful
life. Using the straight-line method of depreciation, the amount to be recorded as
depreciation expense at December 31, 2015, is
a. $15,000.
b. $8,750.
c. $7,500.
d. $6,250.
Answer:
In 2015, Rondelli Company had net sales of $650,000 and cost of goods sold of
$455,000. Operating expenses were $150,000, and interest expense was $10,000.
Rondelli prepares a multiple-step income statement.
Instructions
(a) Compute Rondelli gross profit.
(b) Compute the gross profit rate.
(c) What is Rondelli income from operations and net income?
(d) If Rondelli prepared a single-step income statement, what amount would it report
for net income?
Answer:
The control principle related to not having the same person authorize and pay for goods
is known as
a. establishment of responsibility.
b. independent internal verification.
c. segregation of duties.
d. rotation of duties.
Answer:
The four subdivisions for plant assets are
a. land, land improvements, buildings, and equipment.
b. intangibles, land, buildings, and equipment.
c. furnishings and fixtures, land, buildings, and equipment.
d. property, plant, equipment, and land.
Answer:
Goods in transit should be included in the inventory of the
a. buyer when the terms are FOB destination.
b. buyer when the terms are FOB shipping point.
c. transportation company when the terms are FOB destination.
d. seller when the terms are FOB shipping point.
Answer:
Which one of the following events would not require a formal journal entry on a
corporation’s books?
a. 2 for 1 stock split
b. 100% stock dividend
c. 2% stock dividend
d. $1 per share cash dividend
Answer:
Mehring Company reported net sales of $540,000, net income of $72,000, beginning
total assets of $240,000, and ending total assets of $360,000. What was the company’s
asset turnover?
a. 2.3 times
b. 0.6 times
c. 1.8 times
d. 1.5 times
Answer:
Identify the impact on the accounting equation of the following transactions.
1> Purchased 36-month insurance policy for cash.
2> Purchased supplies on account.
3> Received utility bill to be paid at later date.
4> Paid utility bill previously accrued.
Answer:
Wayne Company reported net income of $265,000 for 2014. Wayne also reported
depreciation expense of $45,000 and a loss of $8,000 on the sale of equipment. The
comparative balance sheet shows a decrease in accounts receivable of $15,000 for the
year, a $17,000 increase in accounts payable, and a $6,000 decrease in prepaid
expenses.
Instructions
Prepare the operating activities section of the statement of cash flows for 2014. Use the
indirect method.
Answer:
The correction of an error in previously issued financial statements is known as a
_________________.
Answer:
On June 1, 2015, Secretly Canadian Company prepared a balance sheet that shows the
following:
Shortly thereafter, all of the assets were sold for cash. How would the balance sheet
appear immediately after the sale of the assets for cash for each of the following cases?
Answer:
Identify the impact on the accounting equation of each of the following transactions.
1> Purchase office supplies on account.
2> Paid secretary weekly salary.
3> Purchased office furniture for cash.
4> Received monthly utility bill to be paid at later time.
Answer:
At the beginning of 2015, Hold Steady Company had total assets of $520,000 and total
liabilities of $250,000. Answer each of the following questions.
1> If total assets increased $60,000 and stockholders’ equity decreased $90,000 during
the year, determine the amount of total liabilities at the end of the year.
2> During the year, total liabilities decreased $75,000 and stockholders’ equity
increased $50,000. Compute the amount of total assets at the end of the year.
3> If total assets decreased $100,000 and total liabilities increased $55,000 during the
year, determine the amount of stockholders’ equity at the end of the year.
Answer:
Vance Company received a bank statement for the month of October 2015, which
showed a balance per bank of $3,600. The company’s Cash account in the general
ledger showed a balance of $1,204 at October 3 Other information that may be relevant
in preparing a bank reconciliation for October follows:
1> The bank returned an NSF check from a customer for $280.
2> The company recorded cash receipts of $250 on October 31 but this amount does not
appear on the bank statement.
3> A check correctly written by Vance and paid by the bank for $1,740 was incorrectly
recorded in the cash payments journal for $1,470. The check was a payment on account.
4> Checks which were written in September but still had not been presented to the bank
for payment at October 31 amounted to $780.
5> The bank included a credit memorandum for $1,236, which represents a collection
of a customer’s note by the bank for the company; principal amount of the note was
$1,200 and the remainder was interest.
6> The bank included a $20 debit memorandum for service charges for the month of
October.
7> Checks written in October which have not been paid by the bank at October 31
amounted to $1,200.
Instructions
1> Prepare a bank reconciliation for Vance Company for October which reconciles the
balance per books and the balance per bank to their adjusted correct balances.
2> Prepare the necessary adjusting entries for Vance Company at October 31, 2015.
Answer:
A liability is classified as a current liability if the company is to pay it within the
forthcoming year.
Answer:
Pro forma income usually excludes items that the company thinks are unusual or
nonrecurring.
Answer: