The calculation of depreciation using the declining balance method,
a. ignores salvage value in determining the amount to which a constant rate is applied.
b. multiplies a constant percentage times the previous year’s depreciation expense.
c. yields an increasing depreciation expense each period.
d. multiplies a declining percentage times a constant book value.
Answer:
Crawford Company has total proceeds (before segregation of sales taxes) from sales of
$7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue
is:
a. $7,155.
b. $6,726.
c. $7,584.
d. $6,750.
Answer:
On July 4, 2015, Wyoming Mining Company purchased the mineral rights to a granite
deposit for $1,600,000. It is estimated that the recoverable granite will be 400,000 tons.
During 2015, 100,000 tons of granite was extracted and 60,000 tons were sold. The
amount of the Depletion Expense recognized for 2015 would be
a. $200,000.
b. $120,000.
c. $240,000.
d. $400,000.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
What are total current assets at December 31, 2015?
a. $26,000
b. $32,000
c. $36,000
d. $42,000
Answer:
The amount of stockholders’ equity in a business is not affected by
a. The percentage of total assets held in cash.
b. Assets consumed in the process of earning revenues.
c. The profitability of the business.
d. The amount of dividends declared and paid to stockholders.
Answer:
Units-of-activity is an appropriate depreciation method to use when
a. it is impossible to determine the productivity of the asset.
b. the asset’s use will be constant over its useful life.
c. the productivity of the asset varies significantly from one period to another.
d. the company is a manufacturing company.
Answer:
Karl Corporation was organized on January 2, 2015. During 2015, Karl issued 40,000
shares at $24 per share, purchased 6,000 shares of treasury stock at $26 per share, and
had net income of $600,000. What is the total amount of stockholders’ equity at
December 31, 2015?
a. $1,280,000
b. $1,404,000
c. $1,416,000
d. $1,440,000
Answer:
In large companies, the independent internal verification procedure is often assigned to
a. computer operators.
b. management.
c. internal auditors.
d. outside CPAs.
Answer:
An auto manufacturer would classify vehicles in various stages of production as
a. finished goods.
b. merchandise inventory.
c. raw materials.
d. work in process.
Answer:
The recording process occurs
a. once a year.
b. once a month.
c. repeatedly during the accounting period.
d. infrequently in a manual accounting system.
Answer:
TNT has the following transactions during April of the current year. Indicate
(a) the effect on the accounting equation and (b) the debit-credit analysis.
Answer:
New Corp. issues 2,000 shares of $10 par value common stock at $16 per share. When
the transaction is recorded, credits are made to
a. Common Stock $20,000 and Paid-in Capital in Excess of Stated Value $12,000.
b. Common Stock $32,000.
c. Common Stock $20,000 and Paid-in Capital in Excess of Par $12,000.
d. Common Stock $20,000 and Retained Earnings $12,000.
Answer:
If a company incurs legal costs in successfully defending its patent, these costs are
recorded by debiting
a. Legal Expense.
b. an Intangible Loss account.
c. the Patent account.
d. a revenue expenditure account.
Answer:
On October 1, 2015, Greer Company signed a $20,000 six-month note payable that
bears interest at a rate of 6%. Since no interest has been previously accrued on this note,
the total interest to be accrued on this note at December 31, 2015, is
a. $100.
b. $300.
c. $600.
d. $1,200.
Answer:
Moroni Industries has the following inventory information.
Assuming that a periodic inventory system is used, what is the amount allocated to
ending inventory on a LIFO basis?
a. $11,500
b. $11,520
c. $33,960
d. $33,980
Answer:
Checks received through the mail should
a. immediately be endorsed “For Deposit Only.”
b. be sent to the accounts receivable subsidiary ledger clerk for immediate posting to
the customer’s account.
c. be cashed at the bank as soon as possible.
d. be “rung up” on a cash register immediately.
Answer:
Which of the following is an external user of accounting information?
a. Labor unions.
b. Finance directors.
c. Company officers.
d. Managers.
Answer:
A post-closing trial balance is prepared
a. after closing entries have been journalized and posted.
b. before closing entries have been journalized and posted.
c. after closing entries have been journalized but before the entries are posted.
d. before closing entries have been journalized but after the entries are posted.
Answer:
Closing entries
a. are prepared before the financial statements.
b. reduce the number of permanent accounts.
c. cause the revenue and expense accounts to have zero balances.
d. summarize the activity in every account.
Answer:
The cost of goods available for sale is allocated between
a. beginning inventory and ending inventory.
b. beginning inventory and cost of goods on hand.
c. ending inventory and cost of goods sold.
d. beginning inventory and cost of goods purchased.
Answer:
Another name for journal is
a. listing.
b. book of original entry.
c. book of accounts.
d. book of source documents.
Answer:
LRRP Company had credit sales of $650,000. The beginning accounts receivable
balance was $15,000 and the ending accounts receivable balance was $140,000. What
were the cash collections from customers during the period?
a. $775,000
b. $650,000
c. $525,000
d. $665,000
Answer:
Under the equity method of accounting for long-term investments in common stock,
when a dividend is received from the investee company,
a. the Dividend Revenue account is credited.
b. the Stock Investments account is increased.
c. the Stock Investments account is decreased.
d. no entry is necessary.
Answer:
Scott Company purchased merchandise with an invoice price of $3,000 and credit terms
of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent
in the credit terms?
a. 20%
b. 24%
c. 18%
d. 36%
Answer:
On January 1, 2013 Grier Company purchased and installed a telephone system at a
cost of $20,000. The equipment was expected to last five years with a salvage value of
$3,000. On January 1, 2014 more telephone equipment was purchased to tie-in with the
current system for $10,000. The new equipment is expected to have a useful life of four
years. Through an error, the new equipment was debited to Telephone Expense. Grier
Company uses the straight-line method of depreciation.
Instructions
Prepare a schedule showing the effects of the error on Telephone Expense, Depreciation
Expense, and Net Income for each year and in total beginning in 2014 through the
useful life of the new equipment.
Answer:
In a period of falling prices, the LIFO method results in a lower cost of goods sold than
the FIFO method.
Answer:
Sact Creek Company’s most recent financial statements showed dismal
performance. There was a net loss of $10,000 and the statement of cash
flows showed a net cash decrease in all categories. The company president
called all the managers together and asked them to do all they could to
make sure the next quarter’s performance was better.
Ted Flay, manager of the manufacturing division, sold off old
manufacturing equipment. He also reclassified several workers to part time
(30 hours per week) and hired additional temporary workers to take up the
slack. This saved the company money, since part-time workers do not have
the same insurance and other benefits as full-time workers.
Will Smith, financial manager, immediately suspended payments on all
accounts except those on which interest would accrue. He also instituted
aggressive collection procedures.
1> Were Ted Flay’s actions ethical? Explain.
2> Were Will Smith’s actions ethical? Explain.
3> Were the company president’s actions ethical? Explain.
Answer:
Using vertical analysis of the income statement, a company’s net income as a
percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales
must be 90%.
Answer:
The organization(s) primarily responsible for establishing generally accepted
accounting principles is(are) the
Answer:
Your friend, Angela, made this comment:
My major is biology and I plan to research for cures for major illnesses. Thus, I have no
need to study accounting.
What is your response to Angela?
Answer:
An exchange of plant assets has commercial substance if the future cash flows change
as a result of the exchange.
Answer: