A contra account is added to the account it offsets.
A stock that does not pay a dividend is an undesirable investment.
The acquisition of equipment in an exchange for a company ‘s stock would increase the
current ratio of the company.
Ending inventory = Beginning inventory + Purchases + Cost of goods sold
Dividends are subtracted from revenues on the income statement.
One of the purposes of the closing entries is to bring the balances in all asset, liability,
revenue, and expense accounts down to zero to start the next accounting period.
The gross profit percentage is computed by dividing operating income by net sales.
If a company forgot to prepare an adjusting entry to record salaries and wages incurred
but unpaid at the end of the period, Total Liabilities would be understated and Retained
Earnings would be overstated on the Balance Sheet.
At the maturity date, the carrying value of a bond should always be equal to the face
value.
In a perpetual inventory system, only one journal entry is required to record the sale of
inventory.
Major investing and financing activities that do not involve cash do not have to be
reported as part of the statement of cash flows.
The par value of stock indicates what the stock is worth.
In general, the cash flow from operating activities is considered by many to be the most
important component of the statement of cash flows.
The useful life of an asset is always measured in units of time, such as years or months.
Company Z has 8 million shares of common stock authorized with a par value of $1
and a market price of $72. There are 4 million outstanding shares and 1 million shares
held in treasury stock.
Required:
Part a. Prepare the journal entry if the company declares and distributes a 10% stock
dividend.
Part b. Show the effect of the 10% stock dividend on assets, liabilities, and
stockholders’ equity.
Part c. Prepare the journal entry if the company declares and distributes a 100% stock
dividend.
Part d. Show the effect of the 100% stock dividend on assets, liabilities, and
stockholders’ equity.
Countryside Corporation provides $6,000 worth of lawn care on account during the
month. Experience suggests that about 2% of net credit sales will not be collected. In
conformity with the expense recognition principle, the company should:
A) record an estimate of Bad Debt Expense in the same period as the lawn care is
provided.
B) not report the sales revenue until it collects payment.
C) increase the value of its liabilities with an adjustment.
D) wait until the accounts are determined to be uncollectible before making an entry to
record the related Bad Debt Expense.
The failure to record an accrual adjustment relating to salaries and wages would not
affect the:
A) balance sheet
B) income statement
C) statement of retained earnings
D) statement of cash flows
Wechsler Company uses the aging of accounts receivable method. The company
performed an aging of accounts receivable on December 31 and gathered the following
information:
What is the amount of Accounts Receivable, Net that will be reported on the balance
sheet at December 31?
A) $505,000
B) $496,000
C) $467,000
D) $516,000
A corporate charter specifies that the company may sell up to 20 million shares of
stock. The company issues 12 million shares to investors and later repurchases 3 million
shares. The number of issued shares after these transactions have been accounted for is:
A) 12 million shares.
B) 11 million shares.
C) 9 million shares.
D) 5 million shares.
Which of the following statements about stock dividends is correct?
A) Stock dividends are reported on the income statement.
B) Stock dividends are reported on the Statement of Stockholders’ Equity.
C) Stock dividends increase total stockholders’ equity.
D) Stock dividends decrease total stockholders’ equity.
A company buys footwear and clothing from manufacturers, which it resells to discount
stores in a large urban area. This company is an example of a:
A) wholesale merchandising company.
B) service company.
C) retail merchandising company.
D) secondary service company.
Tyler Corporation was organized in 2015. Its corporate charter authorized the issuance
of 50,000 shares of common stock, par value $5 per share, and 10,000 shares of 8%
preferred stock, par value $25 per share. The following transactions took place during
2015:
Required:
Part a. Prepare journal entries for each of the following transactions:
Part b. Compute the number of shares of common stock issued and outstanding at
December 31, 2015.
A company decides to start allowing its customers to pay with national credit cards and
PayPal. This decision would:
A) slow down its cash collection.
B) speeds up its cash collection, but increase losses from customers writing bad checks.
C) speeds up its cash collection and reduce losses from customers writing bad checks.
D) slow down its cash collection, but decrease losses from customers writing bad
checks
Which of the following are used to determine cash flows from financing activities?
A) Short-term debt, Accrued Liabilities, Common Stock, and Notes Payable
B) Long-term debt, Common Stock, and Retained Earnings
C) Short-term debt, Accrued Liabilities, Retained Earnings, and Bonds Payable
D) Long-term debt, Notes Payable, Interest Expense, and Bonds Payable
Which of the following statements regarding goodwill is not correct?
A) Goodwill is not amortized.
B) Goodwill is tested annually for impairment.
C) Goodwill is written down if its value is found to be impaired.
D) Private companies amortize goodwill using the straight-line method over 20 years or
less.
If inventory is updated perpetually, which of the equations is correct?
A) Cost of goods sold = Beginning inventory – Purchases – Ending inventory
B) Cost of goods sold = Beginning inventory + Purchases + Ending inventory
C) Ending inventory = Beginning inventory + Purchases – Cost of goods sold
D) Ending inventory = Beginning inventory + Purchases + Cost of goods sold
Your company orders and receives supplies in January, pays for them in February,
provides services to customers that use those supplies in March, and is paid by its
customers for the services in April. Using the accrual basis of accounting:
A) expenses are recorded in February and revenues are recorded in April.
B) expenses are recorded in February and revenues are recorded in March.
C) expenses and revenues are recorded in March.
D) expenses are recorded in January and revenues are recorded in April.
Which of the following statements about the par value of common stock is not correct?
A) The par value is not the same as the market value of the stock.
B) The par value is a nominal amount identified in the corporate charter.
C) The par value is the amount credited to the common stock account when the stock is
issued.
D) The par value is the amount credited to common stock when treasury stock is
reissued.
The purchase of $100,000 of equipment by issuing a note would be reported:
A) as a $100,000 investing inflow, and a $100,000 financing outflow.
B) as a$100,000 investing outflow, and a $100,000 financing inflow.
C) as a $100,000 operating inflow, and a $100,000 financing outflow.
D) in a supplementary schedule.
Considering current laws that deal with misstatements of financial results, which of the
following statements is correct?
A) Managers found guilty can escape paying fines if they declare bankruptcy.
B) Managers can be sentenced to maximum jail terms of up to 20 years for each
violation.
C) Managers found guilty may keep any bonuses or profits from the misrepresentation
if their fines are less than such bonuses or profits.
D) Whistleblowers who secretly submit concerns about questionable accounting
practices will be fired.
Which of the following would not be considered a contingent liability?
A) Products sold with a warranty
B) Pending lawsuits
C) Frequent flyer miles earned by passengers
D) Cash received from advance ticket sales
Company X has net sales revenue of $436,000, cost of goods sold of $343,000, and net
income of $3,000. If interest expense is $10,000 and income tax expense is $1,000, the
times interest earned ratio is closest to:
A) 1.4
B) 0.33
C) 1.3
D) 0.40
On September 1, 2016, a company issued a $50,000, 6-month, 9% note payable to
purchase equipment. At December 31, 2016, the company records an adjusting entry to
accrue interest incurred by not paid. The company pays the note with interest at the
maturity date.
Use the information above to answer the following question. What is the adjusting
journal entry at December 31 to record the accrued interest on the note payable?
A) Debit Interest Expense and credit Interest Payable for $1,500
B) Debit Interest Expense and credit Interest Payable for $2,000
C) Debit Interest Expense and credit Interest Payable for $4,500
D) Debit Interest Payable and credit Cash for $2,000
The comparative financial statements of B. Darin include the following data:
Use the information above to answer the following question. The fixed asset turnover
ratio for the current year is closest to:
A) 1.28
B) 1.24
C) 0.75
D) 1.64