Eaton Company’s ledger at the end of the current year shows Accounts Receivable of
$150,000.
Instructions
a. If Allowance for Doubtful Accounts has a credit balance of $4,400 in the trial balance
and bad debts are expected to be 10% of accounts receivable, journalize the adjusting
entry for the end of the period.
b. If Allowance for Doubtful Accounts has a debit balance of $4,400 in the trial balance
and bad debts are expected to be 10% of accounts receivable, journalize the adjusting
entry for the end of the period.
Answer:
Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of
$15,000,000 for the year. The average inventory for the year amounted to $2,500,000.
Inventory turnover for the year is
a. 7.2 times.
b. 15 times.
c. 6 times.
d. 1.5 times.
Answer:
The right side of an account is always
a. the debit side.
b. the credit side.
c. the balance of that account.
d. carried forward to the next accounting period.
Answer:
Financial information is presented below:
The gross profit rate would be
a. .347.
b. .397.
c. .473.
d. .542.
Answer:
If an investment firm underwrites a stock issue, the
a. risk of being unable to sell the shares stays with the issuing corporation.
b. corporation obtains cash immediately from the investment firm.
c. investment firm has guaranteed profits on the sale of the stock.
d. issuance of stock is likely to be directly to creditors.
Answer:
Debt investments that are held to maturity are recorded at
a. amortized cost.
b. fair value.
c. original cost.
d. maturity value.
Answer:
The internal control standards applicable to Sarbanes-Oxley apply to
a. all U.S. and international companies.
b. U.S. and international companies listed on U.S. exchanges.
c. International companies listed on U.S. exchanges.
d. U.S. companies listed on U.S. exchanges.
Answer:
Silk Company issued $500,000 of 7%, 10-year bonds on one of its interest dates for
$431,850 to yield an effective annual rate of 9%. The effective-interest method of
amortization is to be used.
How much bond interest expense (to the nearest dollar) should be reported on the
income statement for the end of the first year?
a. $30,229
b. $38,867
c. $45,000
d. $35,000
Answer:
Under the retail inventory method, the estimated cost of ending inventory is computed
by multiplying the cost-to-retail ratio by
a. net sales.
b. goods available for sale at retail.
c. goods purchased at retail.
d. ending inventory at retail.
Answer:
Stewart Corporation’s balance sheet at December 31, 2013, showed the following:
Stewart Corporation’s trading portfolio of stock investments consisted of the following
at December 31, 2013:
During 2014, the following transactions took place:
At year end on December 31, 2014, the fair values per share were:
Instructions
(a) Prepare the journal entries to record the 2014 stock transactions.
(b) On December 31, 2014, prepare any adjusting entry that might be necessary relative
to the trading portfolio.
(c) Show how the stock investments will appear on Stewart Corporation’s balance sheet
at December 31, 2014.
Answer:
A company would not likely use subsidiary ledgers for
a. inventory.
b. retained earnings.
c. equipment.
d. accounts receivable.
Answer:
In computing depletion, salvage value is
a. always immaterial.
b. ignored.
c. impossible to estimate.
d. included in the calculation.
Answer:
Owner’s equity is best depicted by the following:
a. Assets = Liabilities.
b. Liabilities + Assets.
c. Residual equity + Assets.
d. Assets ‘“ Liabilities.
Answer:
IFRS, compared to GAAP, tends to be more
a. detailed.
b. rules-based.
c. principles-based.
d. full of disclosures requirements.
Answer:
The Inventory account balance appearing in a perpetual inventory worksheet represents
the
a. ending inventory.
b. beginning inventory.
c. cost of merchandise purchased.
d. cost of merchandise sold.
Answer:
Indicate where the payment of income taxes would appear, if at all, on the statement of
cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Answer:
If total liabilities increased by $30,000 and stockholders’ equity increased by $20,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase
Answer:
The ledger of Maxx Company at the end of the current year shown Accounts
Receivable $170,000, Sales $1,200,000, and Sales Returns and Allowances $50,000.
Instructions
(a) If Maxx uses the direct write-off method to account for uncollectible account,
journalize the adjusting entry at December 31, assuming Maxx determines that Barkley
Company’s $2,400 balance is uncollectible.
(b) If allowance for Doubtful account has a credit balance of 3,500 in the trial balance,
journalize the adjusting entry at December 31, assuming bad debts are expected to be
(1) 1% of net sales, and (2) 10% of account receivable.
(c) If allowance for Doubtful Accounts has a debit balance of $370 in the trial balance,
journalize the adjusting entry at December 31, assuming bad debts are expected to be
(1) 0.75% of net sales and (2) 6% of accounts receivable.
Answer:
Under a periodic inventory system, acquisition of merchandise is debited to the
a. Inventory account.
b. Cost of Goods Sold account.
c. Purchases account.
d. Accounts Payable account.
Answer:
The basic accounting equation is in balance when the creditor and ownership claims
against the business equal the assets.
Answer:
After closing entries have been journalized and posted, all temporary accounts in the
ledger should have zero balances.
Answer:
On January 2, 2015, Kerwin Company purchased a patent for $48,000. The patent has
an estimated useful life of 25 years and a 20-year legal life. What entry would the
company make at December 31, 2015 to record amortization expense on the patent?
Answer:
Prepare the necessary journal entry for the following transaction. Linton Company sold
$270,000 of its accounts receivables to a factor. The factor charges a 3% fee.
Answer:
The market value of a corporation’s stock is determined by the number of shares that the
corporation has been authorized to issue.
Answer:
Bookkeeping and accounting are one and the same because the bookkeeping function
includes the accounting process.
Answer:
A debit column for Sales Returns and Allowances may be found in the cash receipts
journal.
Answer: