A truck that cost $72,000 and on which $60,000 of accumulated depreciation has been
recorded was disposed of for $18,000 cash. The entry to record this event would include
a
a. gain of $6,000.
b. loss of $6,000.
c. credit to the Equipment account for $12,000.
d. credit to Accumulated Depreciation for $60,000.
Answer:
Expenses sometimes make their contribution to revenue in a different period than when
they are paid. When salaries and wages are incurred in one period and paid in the next
period, this often leads to which account appearing on the balance sheet at the end of
the time period?
a. Due from Employees.
b. Due to Employer.
c. Salaries and Wages Payable.
d. Salaries and Wages Expense.
Answer:
Vertical analysis is a technique which expresses each item within a financial statement
a. in dollars and cents.
b. in terms of a percentage of the item in the previous year.
c. in terms of a percent of a base amount.
d. starting with the highest value down to the lowest value.
Answer:
Debit postings to the individual accounts in an accounts receivable subsidiary ledger
generally come from the
a. sales journal.
b. cash receipts journal.
c. purchases journal.
d. cash payments journal.
Answer:
Earnings per share is calculated
a. only for common stock.
b. only for preferred stock.
c. for common and preferred stock.
d. only for treasury stock.
Answer:
A consolidated income statement will show
a. revenue and expense transactions between the consolidated entity and parties outside
the affiliated group.
b. only the parent company’s net income.
c. only the income of partially owned subsidiaries.
d. only the income of wholly owned subsidiaries.
Answer:
The following information is available for Heller Company:
Instructions
Compute each of the following:
(a) Inventory turnover.
(b) Days in inventory.
Answer:
IFRS uses each of the following terms to describe retained earnings except
a. accumulated profit or loss.
b. retained earnings.
c. retained profits.
d. share earnings.
Answer:
Indicate whether the following items would be reported as an ordinary or an
extraordinary item in Mallak Corporation’s income statement.
(a) Loss attributable to labor strike.
(b) Gain on sale of fixed assets.
(c) Loss from fire. Mallak is a chemical company.
(d) Loss from sale of short-term investments.
(e) Expropriation of property by a foreign government.
(f) Loss from hurricane damage. Mallak Corporation is located in the New Orleans
area.
(g) Loss from government condemnation of property through newly enacted law.
Answer:
The book value of a plant asset is the difference between the
a. replacement cost of the asset and its historical cost.
b. cost of the asset and the amount of depreciation expense for the year.
c. cost of the asset and the accumulated depreciation to date.
d. proceeds received from the sale of the asset and its original cost.
Answer:
If disposal of a plant asset occurs during the year, depreciation is
a. not recorded for the year.
b. recorded for the whole year.
c. recorded for the fraction of the year to the date of the disposal.
d. not recorded if the asset is scrapped.
Answer:
Korean Corporation issued $2 million, 10-year, 6% bonds on January 1, 2015.
Instructions
Prepare the entry to record the sale of these bonds, assuming they were issued
at
(a) 98.
(b) 103.
Answer:
The current ratio may also be referred to as the
a. short run ratio.
b. acid-test ratio.
c. working capital ratio.
d. contemporary ratio.
Answer:
At April 1, 2015, Spiderland Company reported a balance of $20,000 in the Retained
Earnings account. Spiderland Company earned revenues of $50,000 and incurred
expenses of $32,000 during April 2015. The company paid dividends of $10,000 during
the month.
(a) Prepare the entries to close Income Summary and the Dividends acccount at April
30, 2015.
(b) What is the balance in Retained Earnings on the April 30, 2015 post-closing trial
balance?
Answer:
A debit balance in Cash Over and Short is reported as a
a. contra asset.
b. miscellaneous asset.
c. miscellaneous expense.
d. miscellaneous revenue.
Answer:
Identify the item below where the terms are not related.
a. Equipment’”depreciation
b. Franchise’”depreciation
c. Copyright’”amortization
d. Oil well’”depletion
Answer:
Which one of the following amounts increases each period when accounting for
long-term notes payable?
a. Cash payment
b. Interest expense
c. Principal balance
d. Reduction of principal
Answer:
Fleming Company purchased a machine on January 1, 2015. In addition to the purchase
price paid, the following additional costs were incurred: (a) sales tax paid on the
purchase price, (b) transportation and insurance costs while the machinery was in transit
from the seller, (c) personnel training costs for initial operation of the machinery, (d)
annual city operating license, (e) major overhaul to extend the life of the machinery, (f)
lubrication of the machinery gearing before the machinery was placed into service, (g)
lubrication of the machinery gearing after the machinery was placed into service, and
(h) installation costs necessary to secure the machinery to the building flooring.
Instructions
Indicate whether the items (a) through (h) are capital or revenue expenditures in the
spaces provided: C = Capital, R = Revenue.
Answer:
A compound journal entry involves
a. two accounts.
b. three accounts.
c. three or more accounts.
d. four or more accounts.
Answer:
If Dolly Company had net income of $550,000 in 2016 and it experienced a 25%
increase in net income over 2015, what was its 2015 net income?
Answer:
Moyer Instruments is a rapidly growing manufacturer of medical devices. As a result of
its growth, the company’s management recently modified several of its procedures and
practices to improve internal control. Some employees are upset with the changes. They
have complained that all these changes just show that the company no longer trusts
them.
Answer:
The preparation of a bank reconciliation is an important cash control procedure. If a
company deposits cash receipts daily and makes all cash disbursements by check,
explain why the cash balance per books might not agree with the cash balance shown
on the bank statement. Identify specific examples that may cause differences between
the cash balance per books and the cash balance per bank.
Answer:
An adjusted trial balance proves the ______________ of the total debit and credit
balances after all ______________ entries have been made.
Answer:
If a merchandising company sells land at more than its cost, the gain should be reported
in the sales revenue section of the income statement.
Answer:
Glenda Good and Danny Rock are department managers in the housewares and shoe
departments, respectively, for Litwins, a large department store. Danny has observed
Glenda taking inventory from her own department home, apparently without paying for
it. He hesitates confronting Glenda because he is due to be promoted, and needs
Glanda’s recommendation. He also does not want to notify the company management
directly, because he doesn’t want an ethics investigation on his record, believing that it
will give him a ‘goody-goody’ image. This week, Glenda tried on several pairs of
expensive running shoes in his department before finding a pair that suited her. She did
not, however, buy them. That very pair was missing this morning.
Litwins recently replaced its old periodic inventory system with a perpetual inventory
system using scanners and bar codes. In addition, the annual inventory is to be replaced
by a monthly inventory conducted by an independent firm. On hearing the news of the
changes, Danny relaxes. “The system will catch Glenda now,” he says to himself.
Answer:
Gross profit is obtained by subtracting ________________ from ________________.
Answer: