At the time of acquisition of a debt investment,
a. no journal entry is required.
b. the historical cost principle applies.
c. the Stock Investments account is debited when bonds are purchased.
d. the Investment account is credited for its cost plus brokerage fees.
Answer:
A merchandising company that sells directly to consumers is a
a. retailer.
b. wholesaler.
c. broker.
d. service company.
Answer:
Ultramega Company collected $19,600 in May of 2015 for 4 months of service which
would take place from October of 2015 through January of 2016. The revenue reported
from this transaction during 2015 would be
a. 0.
b. $4,900.
c. $14,700.
d. $19,600.
Answer:
Ron’s Quik Shop bought machinery for $75,000 on January 1, 2014. Ron estimated the
useful life to be 5 years with no salvage value, and the straight-line method of
depreciation will be used. On January 1, 2015, Ron decides that the business will use
the machinery for a total of 6 years. What is the revised depreciation expense for 2015?
a. $12,000
b. $ 6,000
c. $10,000
d $15,000
Answer:
Correcting entries are journalized in
a. a special journal.
b. the general journal.
c. the general ledger.
d. a correcting journal.
Answer:
(a) Brown Company purchased equipment in 2008 for $150,000 and estimated a
$10,000 salvage value at the end of the equipment’s 10-year useful life. At December
31, 2014, there was $98,000 in the Accumulated Depreciation account for this
equipment using the straight-line method of depreciation. On March 31, 2015, the
equipment was sold for $40,000.
Prepare the appropriate journal entries to remove the equipment from the books of
Brown Company on March 31, 2015.
(b) Finney Company sold a machine for $15,000. The machine originally cost $35,000
in 2012 and $8,000 was spent on a major overhaul in 2015 (charged to the Equipment
account). Accumulated Depreciation on the machine to the date of disposal was
$28,000.
Prepare the appropriate journal entry to record the disposition of the machine.
(c) Stanley Company sold office equipment that had a book value of $12,000 for
$16,000. The office equipment originally cost $40,000 and it is estimated that it would
cost $50,000 to replace the office equipment.
Prepare the appropriate journal entry to record the disposition of the office equipment.
Answer:
“GAAP” refers to
a. General Accounting and Auditing Principles.
b. Guidelines for American Accounting Procedures.
c. General Association of Accounting Practitioners.
d. None of these answer choices are correct.
Answer:
After gross profit is calculated, operating expenses are deducted to determine
a. gross margin.
b. net income.
c. gross profit on sales.
d. net margin.
Answer:
On October 1, 2015, Holt Company places a new asset into service. The cost of the
asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of
its useful life. What is the depreciation expense for 2015 if Holt Company uses the
straight-line method of depreciation?
a. $4,500
b. $24,000
c. $6,000
d. $12,000
Answer:
A chart of accounts for a business firm
a. is a graph.
b. indicates the amount of profit or loss for the period.
c. lists the accounts and account numbers that identify their location in the ledger.
d. shows the balance of each account in the general ledger.
Answer:
The most important information needed to determine if companies can pay their current
obligations is the
a. net income for this year.
b. projected net income for next year.
c. relationship between current assets and current liabilities.
d. relationship between short-term and long-term liabilities.
Answer:
The acquisition of land by issuing common stock is
a. a noncash transaction which is not reported in the body of a statement of cash flows.
b. a cash transaction and would be reported in the body of a statement of cash flows.
c. a noncash transaction and would be reported in the body of a statement of cash flows.
d. only reported if the statement of cash flows is prepared using the direct method.
Answer:
Last Inc., has 2,000 shares of 6%, $50 par value, cumulative preferred stock and
100,000 shares of $1 par value common stock outstanding at December 31, 2015, and
December 31, 2014. The board of directors declared and paid a $4,000 dividend in
2014. In 2015, $24,000 of dividends are declared and paid. What are the dividends
received by the preferred stockholders in 2015?
a. $16,000
b. $12,000
c. $8,000
d. $6,000
Answer:
The two key parties to a promissory note are the
a. maker and a bank.
b. debtor and the payee.
c. maker and the payee.
d. sender and the receiver.
Answer:
Radio Moscow Industries purchased supplies for $1,000. They paid $400 in cash and
agreed to pay the balance in 30 days. The journal entry to record this transaction would
include a debit to an asset account for $1,000, a credit to a liability account for $600.
Which of the following would be the correct way to complete the recording of the
transaction?
a. Credit an asset account for $400.
b. Credit another liability account for $400.
c. Credit the retained earnings account for $400.
d. Debit the retained earnings account for $400.
Answer:
The following information is available for Sheldon Leonard Company:
Instructions
Compute each of the following:
(a) Net sales
(b) Gross profit
(c) Income from operations
Answer:
An _______________ is a record of increases and decreases in specific assets,
liabilities, and stockholders’ items.
Answer:
Hogan Enterprises reported cash flow from operations of $275,000. The company made
capital expenditures of $110,000 and paid dividends of $35,000.
Instructions
Compute free cash flow.
Answer:
An inexperienced accountant made the following entries. In each case, the explanation
to the entry is correct.
Instructions
Prepare the correcting entries.
Answer:
On January 1, Hamm Company purchased as an investment a $1,000, 6% bond for
$1,020. The bond pays interest on January 1 and July 1. What is the entry to record the
interest accrual on December 31?
Answer:
The cost of natural resources is not allocated to expense because the natural resources
are replaceable only by an act of nature.
Answer:
The long-term liability section of Escovedo Company’s Balance Sheet includes the
following accounts:
Escovedo Company is an established company and does not experience any financial
difficulties or have any cash flow problems. Discuss at least two items that are
questionable as long-term liabilities.
Answer:
The relationship between current liabilities and current assets is important in evaluating
a company’s ability to pay off its long-term debt.
Answer:
Sales returns and allowances and sales discounts are subtracted from sales in reporting
net sales in the income statement.
Answer: