Stahl Consulting started the year with total assets of $60,000 and total liabilities of
$15,000. During the year, the business recorded $48,000 in catering revenues and
$30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during
the year. The net income reported by Stahl Consulting for the year was:
a. $3,000.
b. $12,000.
c. $18,000.
d. $27,000.
Answer:
The control principle related to not having the same person authorize and pay for goods
is known as
a. establishment of responsibility.
b. independent internal verification.
c. segregation of duties.
d. rotation of duties.
Answer:
All of the following are necessary to compute the future value of a single amount
except the
a. interest rate.
b. number of periods.
c. principal.
d. maturity value.
Answer:
The officer who is generally responsible for maintaining the cash position of the
corporation is the
a. controller.
b. treasurer.
c. cashier.
d. internal auditor.
Answer:
Which one of the following columns in a cash receipts journal is not posted in total to
an account in the general ledger?
a. Cash column
b. Sales Discounts column
c. Accounts Receivable column
d. Other Accounts column
Answer:
In a period of rising prices, FIFO will have
a. lower net income than LIFO.
b. lower cost of goods sold than LIFO.
c. lower income tax expense than LIFO.
d. lower net purchases than LIFO.
Answer:
The manager of Brick Company is given a bonus based on income before income taxes.
Net income, after taxes, is $11,200 for FIFO and $9,800 for LIFO. The tax rate is 30%.
The bonus rate is 20%. How much higher is the manager’s bonus if FIFO is adopted
instead of LIFO?
a. $84
b. $2,800
c. $400
d. $420
Answer:
Under IFRS, companies do not use a
a. discount account but do use a premium account.
b. premium account but do use a discount account.
c. bonds payable account.
d. discount or premium account.
Answer:
Tomas Pest Control Products has the following information available:
What is Tomas’ free cash flow?
a. $27,000
b. $23,000
c. $21,000
d. $10,000
Answer:
The statement of cash flows is a(n)
a. required supplemental financial statement.
b. required basic financial statement.
c. optional basic financial statement.
d. optional supplementary statement.
Answer:
The one characteristic that all entries recorded in a cash receipts journal have in
common is
a. a credit to the Cash account.
b. that they all represent collections from customers.
c. that they originate from the sales of merchandise.
d. a debit to the Cash account.
Answer:
The Northern Corporation issues 7,000 shares of $100 par value preferred stock for
cash at $120 per share. The entry to record the transaction will consist of a debit to Cash
for $840,000 and a credit or credits to
a. Preferred Stock for $840,000.
b. Paid-in Capital from Preferred Stock for $840,000.
c. Preferred Stock for $700,000 and Retained Earnings for $140,000.
d. Preferred Stock for $700,000 and Paid-in Capital in Excess of Par’”Preferred Stock
for $140,000.
Answer:
The relationship of current assets to current liabilities is used in evaluating a company’s
a. operating cycle.
b. revenue-producing ability.
c. short-term debt paying ability.
d. long-range solvency.
Answer:
Copyrights are granted by the federal government
a. for the life of the creator or 70 years, whichever is longer.
b. for the life of the creator plus 70 years.
c. for the life of the creator or 70 years, whichever is shorter.
d. and therefore cannot be amortized.
Answer:
The trial balance of Houston Inc. includes the following balances: Common Stock,
$40,000; Paid-in Capital in Excess of Par, $64,000; Treasury Stock, $6,000; Preferred
Stock, $30,000. Capital stock totals
a. $70,000.
b. $104,000.
c. $134,000.
d. $140,000.
Answer:
Company X sells $900 of merchandise on account to Company Y with credit terms of
2/10, n/30. If Company Y remits a check taking advantage of the discount offered, what
is the amount of Company Y’s check?
a. $630
b. $720
c. $810
d. $882
Answer:
In the first month of operations for Gallowsbird Industries, the total of the debit entries
to the cash account amounted to $36,000 ($16,000 investment by stockholders and
revenues of $20,000). The total of the credit entries to the cash account amounted to
$22,000 (purchase of equipment $8,000 and payment of expenses $14,000). At the end
of the month, the cash account has a(n)
a. $6,000 credit balance.
b. $6,000 debit balance.
c. $14,000 debit balance.
d. $14,000 credit balance.
Answer:
If the total debits exceed total credits in the balance sheet columns of the worksheet,
stockholders’ equity
a. will increase because net income has occurred.
b. will decrease because a net loss has occurred.
c. is in error because a mistake has occurred.
d. will not be affected.
Answer:
What is the proper adjusting entry at June 30, the end of the fiscal year, based on a
prepaid insurance account balance before adjustment, $18,500, and unexpired amounts
per analysis of policies of $6,000?
a. Debit Insurance Expense, $6,000; Credit Prepaid Insurance, $6,000.
b. Debit Insurance Expense, $18,500; Credit Prepaid Insurance, $18,500.
c. Debit Prepaid Insurance, $12,500; Credit Insurance Expense, $12,500.
d. Debit Insurance Expense, $12,500; Credit Prepaid Insurance, $12,500.
Answer:
If $40,000 is put in a savings account paying interest of 4% compounded annually, what
amount will be in the account at the end of 5 years?
a. $32,878
b. $48,000
c. $48,620
d. $48,666
Answer:
Comparative balance sheets are usually prepared for
a. one year.
b. two years.
c. three years.
d. four years.
Answer:
Prior period adjustments
a. may only increase retained earnings.
b. may only decrease retained earnings.
c. may either increase or decrease retained earnings.
d. do not affect retained earnings.
Answer:
The balance sheet is frequently referred to as
a. an operating statement.
b. the statement of financial position.
c. the statement of cash flows.
d. the statement of retained earnings.
Answer:
At the beginning of 2015, Hold Steady Company had total assets of $520,000 and total
liabilities of $250,000. Answer each of the following questions.
1> If total assets increased $60,000 and stockholders’ equity decreased $90,000 during
the year, determine the amount of total liabilities at the end of the year.
2> During the year, total liabilities decreased $75,000 and stockholders’ equity
increased $50,000. Compute the amount of total assets at the end of the year.
3> If total assets decreased $100,000 and total liabilities increased $55,000 during the
year, determine the amount of stockholders’ equity at the end of the year.
Answer:
Financial statements can be prepared from the information provided by an adjusted trial
balance.
Answer:
The following errors were made in journalizing and posting transactions in May in the
Silas Company.
1> A $600 payment for repairs incurred on account and properly recorded in April was
debited to Maintenance and Repairs Expense $600 and credited to Cash $600.
2> A collection of $6,000 on account from a customer was recorded as a debit to Cash
$600 and a credit to Accounts Receivable $600.
3> A bill for $930 for new office equipment was debited to Supplies $390 and credited
to Accounts Payable $390.
4> The receipt of $800 from a customer for future service was recorded as a debit to
Accounts Receivable $800 and a credit to Service Revenue $800.
Instructions
Prepare the correcting entries at May 31 assuming the incorrect entry is not reversed.
(Omit explanations.)
Answer:
Freight costs incurred by the seller on outgoing merchandise are an operating expense
to the seller.
Answer:
The following items were taken from the financial statements of Rug, Inc., over a
four-year period:
Instructions
Using horizontal analysis and 2014 as the base year, compute the trend percentages for
net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable
or unfavorable for each item.
Answer:
Arquette Company’s financial information is presented below.
The missing amounts above are:
Answer:
A large stock dividend and stock split can frequently have the same effect on the market
price of a corporation’s stock. Explain how stock dividends and stock splits affect the
market price of a corporation’s stock.
Answer:
A contingent liability is a liability that may occur if some future event takes place.
Answer:
The responsibility for ordering, receiving, and paying for merchandise should be
assigned to different individuals.
Answer: