A debit to a liability account was posted as a debit to the Capital account. This error
would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) capital to be overstated.
D) None of the above is correct.
A stock split:
A) causes decrease in the number of shares outstanding.
B) increases the par or stated value in proportion.
C) reduces retained earnings.
D) has no effect on total shareholders’ equity.
A debit to a liability account was posted to an expense account. This would cause:
A) assets to be overstated.
B) liabilities to be overstated.
C) owner’s equity to be overstated.
D) expenses to be understated.
If direct labor for the month is $100,000, and overhead is applied based on 75% of
direct labor dollars, what is the entry to apply overhead?
A) Debit Work-in-Process Inventory $75,000; credit Payroll Payable $75,000
B) Debit Overhead-Applied $75,000; credit Work-in-Process Inventory $75,000
C) Debit Work-in-Process Inventory $75,000; credit Manufacturing Overhead-Applied
$75,000
D) Debit Work-in-Process Inventory $100,000; credit Manufacturing Overhead-Applied
$100,000
A retained earnings appropriation is a restriction of retained earnings by:
A) accountants.
B) senior management.
C) stockholders.
D) the board of directors.
The interest rate stated on a note for 90 days is:
A) stated on a daily basis.
B) stated on a monthly basis.
C) stated on an annual basis.
D) indeterminable.
An overstated cost of goods sold of $100 will cause:
A) net income to be understated.
B) net income to be overstated.
C) merchandise inventory to be understated.
D) None of these answers is correct.
Special journals are used to:
A) minimize the amount of entries posted monthly to the general ledger.
B) easily summarize like-kind transactions.
C) reduce the number of entries recorded in the general journal.
D) All of the above are correct.
A notice was received from Mary, who is a customer, that she was bankrupt. If using an
allowance method, the entry to write-off her balance of $1,250 would be:
A)
B)
C)
D) None of the above
When calculating the employee’s payroll, the clerk forgot about the wage base limits.
What impact could this error cause on the employee’s check?
A) FICA-OASDI could be overstated.
B) FUTA could be overstated.
C) SUTA could be overstated.
D) All of these could be correct.
Which of the following accounts would be debited in a proper journal entry?
A) Notes payable when it is increased
B) Accounts Receivable when it is increased
C) Cash when it is decreased
D) Capital when it is increased
Treasury stock was purchased and recorded as an asset. This error would cause:
A) the period end assets to be understated.
B) the period end liabilities to be overstated.
C) the period end stockholders’ equity to be overstated.
D) None of the above is correct.
When Major endorsed customer Minor’s note to Story County Bank, Major agreed to
pay the note at maturity if Minor failed to pay. Major’s liability is a(n):
A) contra-liability.
B) absolute liability.
C) contingent liability.
D) regular liability.
Depreciation Expense on factory equipment would be reported in the statement of cash
flows prepared by the indirect method in:
A) the operating activities section.
B) the financing activities section.
C) the investing activities section.
D) None of the above
Brooke Company purchased $8,000 of merchandise with terms of 2/10, n/60 and paid
the invoice within the discount period. The company uses the periodic inventory
method and the voucher system. If Brooke’s uses the net method of recording
merchandise purchases, the $160 purchases discount is:
A) recorded in the voucher register.
B) recorded in the check register.
C) recorded in the general journal.
D) not recorded unless the discount is lost after the discount date.
Collected a payment from a credit customer. This will be recorded with:
A) a credit to an asset account.
B) a credit to a liability account.
C) a credit to Revenue.
D) None of these is correct.
Net income or net loss for a period is calculated by the following formula:
A) total revenues – total liabilities.
B) total revenues – total expenses – total withdrawals + assets.
C) total revenues – total expenses.
D) total revenues – total expenses + capital.
Book Value per Share is defined as:
A) the price a corporation pays when it reserves the right to retire or redeem stock at a
specific price.
B) the price at which shares are bought and sold on the open market.
C) the total stockholders’ equity minus total amount assigned to preferred stock.
D) the total of stockholders’ equity (when only common stock exists) divided by the
number of shares issued.
Beginning and ending inventories for John’s Books are $12,000 and $9,000,
respectively. The debit amounts (not including Income Summary) in the income
statement columns of the worksheet total $13,000, and the credit amounts (not
including Income Summary) total $14,500. The firm has a:
A) net income of $1,500.
B) net loss of $1,500.
C) net loss of $3,000.
D) net income of $3,000.
Closing entries are prepared:
A) to clear all temporary accounts to zero.
B) to update the Capital balance.
C) at the end of the accounting period.
D) All of the above are correct.
As the Prepaid Workers’ Compensation is recognized, the amount will transfer to:
A) Workers’ Compensation Insurance Payable.
B) Workers’ Compensation Insurance Expense.
C) Wages and Salaries Expense.
D) Payroll Tax Expense.
A detailed analysis of Accounts Receivable to determine how long each account has
been outstanding is called:
A) aging the Accounts Receivable.
B) aging the uncollectible accounts.
C) analyzing the Accounts Receivable.
D) taking a percentage of sales on account.
Activities that pay and collect interest on loans are:
A) financing and investing activities.
B) operating and financing activities.
C) operating and investing activities.
D) operating activities.
Harvest Moon Company has total assets of $20,000. If $2,000 cash is used to purchase
a new computer, the total assets would be:
A) $20,000.
B) $18,000.
C) $22,000.
D) $2,000.
Discuss (a) the purpose of the articles of partnership, and (b) indicate the items that
should be included.
The espresso department experienced the following revenue and expenses during
October:
The espresso departmental gross profit is:
A) $1,000.
B) $4,000.
C) $8,000.
D) $2,000.
Which inventory appears in the balance sheet column of the worksheet?
A) Ending inventory
B) Beginning inventory
C) Combination of beginning and ending inventories
D) Purchases
Scott Company had a current ratio of 2.57:1 in Year 1 and 2.76:1 in Year 2. This change
in current ratio indicates:
A) the company’s debt paying ability has improved.
B) the company’s debt paying ability has weakened.
C) the company’s customers are paying their accounts sooner.
D) the company is able to sell its inventory faster.
If $15,000 was generated from operations, $7,000 was used for investing activities, and
$6,000 was provided by financing activities, the cash balance would:
A) increase by $14,000.
B) decrease by $20,000.
C) increase by $10,000.
D) increase by $2,000.
Purchased merchandise (perpetual), by issuing a note, would have which effect on the
categories?
A) Total assets would be decreased.
B) Total liabilities would be increased.
C) Owner’s equity would be decreased.
D) None of these answers is correct.
The beginning capital balance is $5,500, there are no additional investments but the
owner did withdraw $500 during the accounting period. The period’s revenue is $4,000
and expenses total $6,000. What is the ending capital balance (after closing entries)?
A) $5,500
B) $6,000
C) $3,500
D) $3,000
What would be the depreciation expense in year 1, using units-of-production, for a
molding machine that cost $15,000, had a useful life of 5 years, no residual value, and
an estimated total machine hours of 50,000? Production in year 1 was 10,000 hours.
A) $3,000
B) $4,000
C) $6,000
D) $5,000