The steps in the preparation of a worksheet do not include
a. analyzing documentary evidence.
b. preparing a trial balance on the worksheet.
c. entering the adjustments in the adjustment columns.
d. entering adjusted balances in the adjusted trial balance columns.
Answer:
The adjustments entered in the adjustments columns of a worksheet are
a. not journalized.
b. posted to the ledger but not journalized.
c. not journalized until after the financial statements are prepared.
d. journalized before the worksheet is completed.
Answer:
The requirement that only transaction data capable of being expressed in terms of
money be included in the accounting records relates to the
a. historical cost principle.
b. monetary unit assumption.
c. economic entity assumption.
d. both the historical cost principle and the monetary unit assumption.
Answer:
The income statement for the month of June, 2015 of Camera Obscura Enterprises
contains the following information:
After the revenue and expense accounts have been closed, the balance in Income
Summary will be
a. $0.
b. a debit balance of $1,300.
c. a credit balance of $1,300.
d. a credit balance of $7,000.
Answer:
When current liabilities are presented under IFRS, they are generally shown
a. alphabetically.
b. in order of magnitude.
c. in order of the dates they become due.
d. in order of liquidity.
Answer:
Which of the following statements is false?
a. Revenues increase stockholders’ equity.
b. Revenues have normal credit balances.
c. Revenues are a positive factor in the computation of net income.
d. Revenues are increased by debits.
Answer:
The effective federal unemployment tax rate is usually
a. 6.2%.
b. 0.8%.
c. 5.4%.
d. 8.0%.
Answer:
All revenue and expense items are considered ordinary in nature under
a. both IFRS and GAAP.
b. GAAP.
c. IFRS.
d. neither IFRS or GAAP.
Answer:
Lange Corporation issued 5,000 shares of stock.
Instructions
Prepare the entry for the issuance under the following assumptions.
(a) The stock had a par value of $10 per share and was issued for a total of $65,000.
(b) The stock had a stated value of $10 per share and was issued for a total of $65,000.
(c) The stock had a par value of $10 per share and was issued to attorneys for services
during in-corporation valued at $65,000.
(d) The stock had a par value of $10 per share and was issued for land worth $65,000.
Answer:
From an internal control standpoint, the asset most susceptible to improper diversion
and use is
a. prepaid insurance.
b. cash.
c. buildings.
d. land.
Answer:
The financial statements of Gervais Manufacturing Company report net sales of
$500,000 and accounts receivable of $80,000 and $40,000 at the beginning and end of
the year, respectively. What is the accounts receivable turnover for Gervais?
a. 6.3 times
b. 8.3 times
c. 10 times
d. 12.5 times
Answer:
Premium on Bonds Payable
a. has a debit balance.
b. is a contra account.
c. is considered to be a reduction in the cost of borrowing.
d. is deducted from bonds payable on the balance sheet.
Answer:
If a plant asset is sold before it is fully depreciated,
a. only a gain on disposal can occur.
b. only a loss on disposal can occur.
c. either a gain or a loss can occur.
d. neither a gain nor a loss can occur.
Answer:
Xeris, Inc. has 1,000 shares of 6%, $10 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2015. What
is the annual dividend on the preferred stock?
a. $6 per share
b. $600 in total
c. $6,000 in total
d. $.06 per share
Answer:
When preferred stock is cumulative, preferred dividends not declared in a period are
a. considered a liability.
b. called dividends in arrears.
c. distributions of earnings.
d. never paid.
Answer:
A common application of materiality is weighing the factual nature of cost figures
versus the relevance of fair value.
Answer:
The purchase of store equipment for cash reduces stockholders’ equity by an equal
amount.
Answer:
On January 1, 2015, Catlin Corporation had Retained Earnings of $400,000. During the
year, Catlin had the following selected transactions:
1> Declared stock dividends of $50,000.
2> Declared cash dividends of $80,000.
3> A 2 for 1 stock split involving the issuance of 200,000 shares of $5 par value
common stock for 100,000 shares of $10 par value common stock.
4> Suffered a net loss of $60,000.
5> Corrected understatement of 2014 net income because of an inventory error of
$48,000.
Instructions
Prepare a retained earnings statement for the year.
Answer:
The asset turnover is calculated as total sales divided by ending total assets.
Answer:
A company’s operating cycle and fiscal year are usually the same length of time.
Answer:
The trial balance of Red House Painters shown below does not balance.
An examination of the ledger and journal reveals the following errors:
1> Each of the above listed accounts has a normal balance per the general ledger.
2> Cash of $270 received from a customer on account was debited to Cash $720 and
credited to Accounts Receivable $720.
3> A dividend of $400 was posted as a credit to Dividends $400 and credit to Cash
$400.
4> A debit of $300 was not posted to Salaries and Wages Expense.
5> The purchase of equipment on account for $700 was recorded as a debit to
Maintenance and Repairs Expense and a credit to Accounts Payable for $700.
6> Services were performed on account for a customer, $510, for which Accounts
Receivable was debited $510 and Service Revenue was credited $51.
7> A payment on account for $235 was credited to Cash for $235 and credited to
Accounts Payable for $253.
Instructions
Prepare a correct trial balance.
Answer: