Empire has a credit balance of $450 in its Allowance for Doubtful Accounts. The
balance in the Accounts Receivable account is $92,500, with $2,015 estimated to be
uncollectible after aging the accounts. Under the balance sheet approach, the debit to
Bad Debt Expense will be:
A) $450.
B) $2,465.
C) $2,015.
D) $1,565.
Which of the following statements is false about treasury stock?
A) It carries no right to dividends.
B) It carries no right to vote.
C) It is stock that is outstanding.
D) All of the statements are false.
The entry to close the Withdrawal account was entered in reversethe Withdrawal
account was debited and Capital credited. The result of this error is that:
A) before closing it, Income Summary will have a credit balance.
B) before closing it, Income Summary will have a debit balance.
C) the end of period capital will be understated.
D) the end of period capital will be overstated.
Rhubarb Corporation’s outstanding stock is 100 shares of $100, 11% cumulative
nonparticipating preferred stock and 2,000 shares of $12 par value common stock.
Rhubarb paid $2,200 cash dividends during the year. Common stockholders received:
A) $0.
B) $500.
C) $2,500.
D) $1,100.
A credit to a liability account was posted as a credit to an expense account. This error
would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) expenses to be overstated.
D) liabilities to be understated.
The entry to close Income Summary (net loss) was entered in reverseIncome Summary
was debited and Capital was credited. This error will cause:
A) Income Summary to have a credit balance.
B) Income Summary to have a debit balance.
C) the assets to be overstated.
D) the liabilities to be understated.
Workers’ compensation provides insurance for employees who are:
A) unemployed due to an economic downturn.
B) unemployed due to a plant closing.
C) injured while on the job.
D) injured while at home.
The journal entry to pay a cash dividend is to:
A) debit Dividends Payable; credit Cash.
B) debit Retained Earnings; credit Cash.
C) debit Dividends Payable; credit Retained Earnings.
D) debit Retained Earnings; credit Dividends Payable.
Mortgage Payable:
A) has a debit balance.
B) has a credit balance.
C) shows the amount paid on a mortgage.
D) is an unsecured loan.
FICA (OASDI and Medicare) and unemployment taxes are similar in that they:
A) are paid by the employee.
B) have the same maximum taxable wage base.
C) are a specified percent of federal income tax withholdings.
D) are payroll tax expenses of the employer.
A voucher system is designed to control a company’s:
A) cash receipts.
B) cash payments.
C) stock sales.
D) internal finances.
What would be the effect on the accounts if the business provided services to a
customer collecting cash?
A) An asset would be debited and an expense debited.
B) Capital would be credited and Revenue credited.
C) An asset would be debited and Revenue credited.
D) An asset would be debited and Capital credited.
Record the following selected transactions for January in a two-column journal,
identifying each entry by letter:
(a) Earned $8,000 fees; customer will pay later.
(b) Purchased equipment for $50,000, paying $20,000 in cash and the remainder on
credit
(c) Paid $3,000 for rent for January.
(d) Purchased $2,500 of supplies on account.
(e) A. Allen $1,000 investment in the company.
(f) Received $7,000 in cash for fees earned previously.
(g) Paid $1,500 to creditors on account.
(h) Paid wages of $6,250.
(i) Received $7,150 from customers on account.
(j) A. Allen withdrawal of $2,000.
Departmental reports are not useful for:
A) determining performance.
B) determining future revenue.
C) controlling.
D) All of the above are correct.
Which of the following errors would cause the trial balance to be out of balance?
A) The payment of utilities expense was recorded as a debit to Rent Expense for $57
and a credit to Cash for $57.
B) The payment of an account payable for $100 was recorded as a debit to Cash, $100,
and a credit to Accounts Payable, $100.
C) The collection of an account was not recorded.
D) The payment of an account payable for $400 was recorded as a debit to Accounts
Payable for $400 and a credit to Cash for $4,000.
Bond Interest Payable is reported as a:
A) current liability on the balance sheet.
B) current liability on the income statement.
C) contra-liability on the balance sheet.
D) contra-liability on the income statement.
Davis Law Firm is borrowing $15,000 at 10% interest for one year. The $15,000 is the:
A) principal.
B) proceeds.
C) amount of interest.
D) net amount.
If beginning and ending inventories are $175,000 and $125,000, respectively, and the
cost of goods sold is $450,000, what is the inventory turnover ratio?
A) 4.50
B) 3.00
C) 3.60
D) 0.28
Plant and Equipment is usually listed:
A) in alphabetical order.
B) in order of liquidity.
C) by how long they will last.
D) in order of purchase.
Sylvia’s, Inc., decreases Allowance for Doubtful Accounts $700 at year-end. As a result:
A) net assets decrease.
B) net income is unchanged.
C) net assets increase.
D) net realizable value of assets decreases.
The overhead application rate may be based on:
A) machine hours.
B) direct labor hours.
C) direct labor dollars.
D) All of these answers are correct.
Under the periodic inventory system, in addition to making the entry to record a sale, a
company would:
A) debit Merchandise Inventory and credit Cost of Goods Sold.
B) debit Cost of Goods Sold and credit Merchandise Inventory.
C) debit Cost of Goods Sold and credit Purchases.
D) make no additional entry.
Strawberry Supreme purchased new baking equipment for $17,000 subject to terms
3/15, n/45. The discount was taken. Additional costs included sales tax $700 and
installation $500. The total cost to be added to the equipment account is:
A) $17,000.
B) $18,200.
C) $17,690.
D) $17,190.
A purchase discount correctly taken was debited to Purchases at the time the entry was
recorded. This error will cause:
A) net income to be overstated.
B) net income to be understated.
C) net income to not be affected.
D) total assets to be overstated.
Withdrawals would most likely be found in which column of the worksheet?
A) Income statement
B) Balance sheet
C) Trial Balance
D) Withdrawals would not appear on the worksheet.
Closing entries will affect:
A) total assets.
B) Cash.
C) Owner’s Capital.
D) total liabilities.
The journal entry to record the estimated advance premium payment for workers’
compensation is:
A)
B)
C)
D)
A bond payable is similar to which of the following?
A) Accounts Payable
B) Accounts Receivable
C) Notes Payable
D) Cash
What type of an account is Wages and Salaries Payable?
A) Asset
B) Liability
C) Revenue
D) Expense
A company must pay Form 941 taxes electronically if:
A) they do business in multiple states.
B) they pay more than $2,500 in a given quarter.
C) they pay less than $2,500 in a given quarter.
D) The company would never have to pay electronically.
As Withdrawals increase:
A) owner’s equity decreases.
B) owner’s equity increases.
C) Cash increases.
D) expense increases.
Corporations can issue:
A) par value shares.
B) no-par value shares.
C) stated value shares.
D) All of these answers are correct.
A business has sales of $125,000 and a normal gross profit of 40%. The estimated cost
of goods sold is:
A) $100,000.
B) $50,000.
C) $75,000.
D) Cannot be determined.
For vertical analysis purposes, a base item on a balance sheet is:
A) total assets.
B) total equity.
C) total liabilities.
D) net equity.
The two major components of the Stockholders’ Equity section of the balance sheet are:
A) Paid-in Capital and Retained Earnings.
B) Stock and Retained Earnings.
C) Stock and Paid-in Capital.
D) Authorized Stock and Preferred Stock.