Global Commerce Corporation purchased trading debt investments for $49,000 on
December 31, 2018. There is a decrease of $3800 in the fair value of the trading debt
investments by the end of the year 2019. Which of the following is the correct journal
entry?
A)
B)
C)
D)
The current portion of long-term notes payable is ________.
A) the amount of principal that will be paid within five years
B) typically included with the long-term liabilities on the balance sheet
C) recorded as an adjusting entry
D) reclassified as current for reporting purposes on the balance sheet
Washington Company is preparing its statement of cash flows using the indirect
method. Refer to the following portion of the comparative balance sheet:
Washington Company
Comparative Balance Sheet
December 31, 2019 and 2018
Additional information provided by the company includes the following:
1. During 2019, the company repaid $35,000 of long-term notes payable.
2. During 2019, the company borrowed $24,000 on a new long-term note payable.
Based on the above information only, what amount of net cash flow would be shown in the
financing section of the statement of cash flows?
A) $(11,000)
B) $11,000
C) $59,000
D) $(59,000)
A company purchased 130 units for $20 each on January 31. It purchased 190 units for
$25 each on February 28. It sold 190 units for $60 each from March 1 through
December 31. If the company uses the weighted-average inventory costing method,
calculate the amount of Cost of Goods Sold on the income statement for the year ending
December 31. (Assume the company uses the perpetual inventory system. Round any
intermediate calculations two decimal places, and your final answer to the nearest
dollar.)
A) $7,350
B) $4,364
C) $2,600
D) $4,750
Hudson Landscaping Service bought equipment for $9,600 on January 1, 2019. It has
an estimated useful life of five years and zero residual value. Hudson uses the
straight-line method to calculate depreciation and records depreciation expense in the
books at the end of every month. As of June 30, 2019, the book value of this equipment
shown on its balance sheet will be ________.
A) $8,640
B) $9,600
C) $10,560
D) $9,760
Under the weighted-average method for inventory costing, the cost per unit is
determined by ________.
A) dividing the cost of goods available for sale by the number of units available for sale
B) dividing the cost of goods available for sale by the number of units in beginning
inventory
C) multiplying the number of units purchased with the weighted-average cost
D) multiplying the cost of goods available for sale by the ending weighted-average cost
of the previous accounting period
In preparing a statement of cash flows using the indirect method, the Depreciation
Expense ________.
A) is added back as an adjustment to Net Income in the operating activities section
B) is shown as a negative cash flow in the investing activities section
C) is added back to Purchases of Plant Assets under investing activities
D) is shown as a negative cash flow under operating activities
State unemployment compensation tax (SUTA) is not withheld from employees’ gross
earnings.
Which of the following concepts represent the time value of money?
A) the concept that money becomes obsolete over time
B) the concept that money earns interest over time
C) the concept that money loses its purchasing power over time
D) the concept that money can be converted into other currencies over time
Which of the following is a major reason why corporate ownership is popular in the
United States?
A) Stockholders have limited liability for the debts of the corporation.
B) Most corporations are small- or medium-sized.
C) The life of a corporation is limited by the death of the owner.
D) A corporation is usually managed by the owners.
Milton, Inc. had the following transactions in 2019, its first year of operations:
• Issued 8000 shares of common stock. Stock has par value of $0.01 per share and was
issued at $40.00 per share.
• Earned net income of $200,000.
• Paid dividends of $8.00 per share.
At the end of 2019, what is total stockholders’ equity?
A) $320,000
B) $456,000
C) $136,000
D) $584,000
National, Inc. provides the following data:
For the year ending December 31, 2019:
Calculate the accounts receivable turnover ratio for 2019. (Round your answer to two
decimal places.)
A) 5.00 times
B) 3.28 times
C) 2.50 times
D) 1.81 times
The accountant for Barnes Auto Repair, Inc. failed to make an adjusting entry to record
$5,000 of unpaid salaries for the last two weeks of the year. Which of the following is
an effect of this omission?
A) The net income will be overstated.
B) The total assets will be understated.
C) The net income will be understated.
D) The total assets will be overstated.
Which of the following financial statements is used to report the economic resources,
debt, and overall financial position of a company?
A) income statement
B) balance sheet
C) statement of cash flows
D) statement of retained earnings
In a good internal control system, which of the following sets of documents is required
for proper approval of a payment to a supplier?
A) a journal entry, a supplier invoice, and a description of the goods being purchased
B) a receiving report, an invoice, and a purchase order
C) a purchase order, a journal entry, and a price catalog
D) a supplier invoice, a bill of lading, and the supplier’s financial statements
Auto Parts, Inc. uses a periodic inventory system. Use the following details to calculate
net purchases.
A) $23,100
B) $18,900
C) $23,900
D) $20,100
________ represent the right to receive cash in the future from customers for goods
sold or for services performed.
A) Accounts Receivable
B) Accounts Payable
C) Equity
D) Expenses
Emerald Investments, Inc. purchased 40% of the common stock of Diamond
Corporation on March 1, 2018. Diamond Corporation reports a net income of $675,000
for the year 2019. Which of the following is true of the balance sheet on December 31,
2019?
A) Total assets will remain unchanged.
B) Total liabilities will decrease.
C) Total equity will increase.
D) Cash will increase.
Which of the following statements is true for financial leverage?
A) The asset turnover ratio measures financial leverage.
B) Financial leverage always increases profitability.
C) Financial leverage is measured in the proportion of total assets relative to total
equity.
D) The higher the debt to equity ratio, the higher the financial leverage.
Which of the following transactions would be shown in the non-cash investing and
financing activities section of the statement of cash flows?
A) sold equipment with book value of $15,000 in exchange for $15,000 cash
B) retired company bonds before the maturity date by paying a negotiated amount
C) issued 50,000 shares of stock at $2 per share
D) purchased land by signing a 10-year note for $500,000
Regarding the time value of money, which of the following statements is incorrect?
A) The time value of money is recognition that money earns interest over time.
B) The time value of money affects bond prices.
C) Present value is always greater than future value.
D) Future value is the value of an investment at the end of a specific time frame.
Which of the following methods does NOT require an adjusting entry to recognize bad
debts?
A) percent-of receivables
B) aging-of-receivables
C) percent-of-sales
D) direct write-off
Claxton, Inc. purchased a van on January 1, 2018, for $800,000. Estimated life of the
van was five years, and its estimated residual value was $98,000. Claxton uses the
straight-line method of depreciation. At the beginning of 2020, the company revised the
total estimated life of the asset from five years to four years. The estimated residual
value remained the same as estimated earlier. Calculate the depreciation expense for
2020.
A) $259,600
B) $210,600
C) $105,300
D) $129,800
Under the perpetual inventory system, discounts taken on an invoice by the buyer
would be ________.
A) debited to Merchandise Inventory
B) credited to Merchandise Inventory
C) debited to Cost of Goods Sold
D) credited to Cost of Goods Sold
Investors and creditors can evaluate a company by examining only one year of data.
Realized gains or losses on available-for-sale debt investments represent the difference
between the ________.
A) historical cost and the average market value of the investment
B) fair value and the current market value of the investment
C) cash received at time of disposition and the fair value of the investment
D) cash received at time of disposition and the cost of the investment
The information related to interest expense of Classic Music, Inc. is given below:
Based on the above data, which of the following is the times-interest-earned ratio? (Round
the final answer to two decimal places.)
A) 4.08 times
B) 4 times
C) 6.62 times
D) 5 times
From the following details of a merchandiser, calculate the cost of goods sold. (Assume
the merchandiser uses the periodic inventory system.)
A) $115,650
B) $59,800
C) $113,800
D) $51,650
Which of the following financial statements is used to report cash receipts for services
provided?
A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows
Which of the following is shown on the balance sheet as well as the statement of cash
flows?
A) Stockholders’ equity (ending balance)
B) Net income
C) Total assets (ending balance)
D) Cash (ending balance)
Which of the following transactions will affect the balance of Retained Earnings?
A) issued common stock for cash
B) paid rent expense for the month
C) purchased land for cash
D) collection on account
A posting reference column is used ________.
A) while preparing the trial balance using the ledger
B) when the information is transferred from the journal to the ledger
C) when the information is transferred from the ledger to the post-closing trial balance
D) while preparing the balance sheet using the trial balance
The following information is needed to reconcile the cash balance for Discount Dry
Cleaning, Inc.
• A deposit of $5,600 is in transit.
• Outstanding checks total $1,300.
• The book balance is $6,300 at February 28, 2019.
• The bookkeeper recorded a $1,600 check as $17,400 in payment of the current
month’s rent.
• The bank balance at February 28, 2019 was $17,930.
• A deposit of $400 was credited by the bank for $4,000.
• A customer’s check for $3,400 was returned for nonsufficient funds.
• The bank service charge is $70.
What was the adjusted book balance?
A) $18,700
B) $18,000
C) $18,630
D) $18,770
A receivable occurs when a business ________.
A) loans money to another party
B) sells goods or services to another party on account
C) has a monetary claim against a business or individual
D) All of the statements are correct.