Internal control is defined, in part, as a plan that safeguards
a. all balance sheet accounts.
b. assets.
c. liabilities.
d. capital stock.
Answer:
The entry to record an installment payment on a long-term note payable is
a. Mortgage Payable
Cash
b. Interest Expense
Cash
c. Mortgage Payable
Interest Expense
Cash
d. Bonds Payable
Cash
Answer:
Mather Company purchased equipment on January 1, 2015 at a total invoice cost of
$336,000; additional costs of $6,000 for freight and $30,000 for installation were
incurred. The equipment has an estimated salvage value of $12,000 and an estimated
useful life of five years. The amount of accumulated depreciation at December 31, 2016
if the straight-line method of depreciation is used is:
a. $129,600.
b. $132,000.
c. $144,000.
d. $148,800.
Answer:
The following information pertains to Ortiz Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
What is the return on assets for Ortiz?
a. 6.0%
b. 5.0%
c. 10.0%
d. 12.0%
Answer:
Which of the following errors will cause a trial balance to be out of balance? The entry
to record a payment on account was
a. not posted at all.
b. posted as a debit to Cash and a credit to Accounts Payable.
c. posted as a debit to Cash and a debit to Accounts Payable.
d. posted as a debit to Accounts Receivable and a credit to Cash.
Answer:
Ted Leo is the proprietor (owner) of Ted’s, a retailer of golf apparel. When recording the
financial transactions of Ted’s, Ted does not record an entry for a car he purchased for
personal use. Ted took out a personal loan to pay for the car. What accounting concept
guides Ted’s behavior in this situation?
a. Pay back concept
b. Economic entity assumption
c. Cash basis concept
d. Monetary unit assumption
Answer:
Avett Furniture Store has credit sales of $400,000 in 2015 and a debit balance of $600
in the Allowance for Doubtful Accounts at year end. As of December 31, 2015,
$130,000 of accounts receivable remain uncollected. The credit manager prepared an
aging schedule of accounts receivable and estimates that $7,000 will prove to be
uncollectible.
On March 4, 2016, the credit manager authorizes a write-off of the $1,200 balance
owed by B. Fernitti.
Instructions
(a) Prepare the adjusting entry to record the estimated uncollectible accounts expense in
2015.
(b) Show the balance sheet presentation of accounts receivable on December 31, 2015.
(c) On March 4, before the write-off, assume the balance of Accounts Receivable
account is $160,000 and the balance of Allowance for Doubtful Accounts is a credit of
$3,000. Make the appropriate entry to record the write-off of the Fernetti account. Also
show the balance sheet presentation of accounts receivable before and after the
write-off.
Answer:
Which one of the following is not a part of an account?
a. Credit side
b. Trial balance
c. Debit side
d. Title
Answer:
The per share amount normally assigned by the board of directors to a small stock
dividend is
a. the market value of the stock on the date of declaration.
b. the average price paid by stockholders on outstanding shares.
c. the par or stated value of the stock.
d. zero.
Answer:
Teamboo Company’s stockholders’ equity at the beginning of August 2015 was
$750,000. During the month, the company earned net income of $175,000 and paid
dividends of $75,000. At the end of August 2015, what is the amount of stockholders’
equity?
a. $675,000
b. $750,000
c. $825,000
d. $850,000
Answer:
The following information is available for Everett Company at December 31, 2015:
beginning inventory $80,000; ending inventory $120,000; cost of goods sold
$1,050,000; and sales $1,800,000. Everett’s inventory turnover in 2015 is
a. 8.7 times.
b. 10.5 times.
c. 13.2 times.
d. 18 times.
Answer:
The following items were taken from the financial statements of Henager, Inc., over a
three-year period:
Instructions
Compute the following for each of the above time periods.
a. The amount and percentage change from 2014 to 2015.
b. The amount and percentage change from 2015 to 2016.
Answer:
Which one of the following is not an application of revenue recognition?
a. Recording revenue as an adjusting entry on the last day of the accounting period.
b. Accepting cash from an established customer for services to be performed over the
next three months.
c. Billing customers on June 30 for services completed during June.
d. Receiving cash for services performed.
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:
A periodic inventory system
a. allows for the determination of cost of goods sold after each sale.
b. traditionally has been used with low unit-value items.
c. requires that detailed inventory records be kept.
d. none of these answer choices are correct.
Answer:
On January 1, Focus Corporation issued $600,000, 6%, 5-year bonds at face value. Interest is
payable semiannually on July 1 and January
Instructions
Prepare journal entries to record the
(a) Issuance of the bonds.
(b) Payment of interest on July 1, assuming no previous accrual of interest.
(c) Accrual of interest on December 31.
Answer:
In the month of May, Kijak Company Inc. wrote checks in the amount of $84,000. In
June, checks in the amount of $114,000 were written. In May, $75,000 of these checks
were presented to the bank for payment, and $99,000 in June. What is the amount of
outstanding checks at the end of May?
a. $9,000
b. $15,000
c. $24,000
d. $30,000
Answer:
IFRS treats the purchase of treasury stock as any of the following except
a. an increase to a contra equity account.
b. a decrease to retained earnings.
c. a decrease to share capital.
d. a decrease to share premium.
Answer:
North Company reports the following amounts for 2015:
The 2015 rate of return on common stockholders’ equity is:
a. 5.8%.
b. 6.6%.
c. 8.0%.
d. 9.1%.
Answer:
The interest rate specified on any note is for a
a. day.
b. month.
c. week.
d. year.
Answer:
Even though a partnership is not a separate legal entity, for accounting purposes the
partnership affairs should be kept separate from the personal activities of the owners.
Answer:
Lucky Lou has just won the lottery and will receive an annual payment of $100,000
every year for the next 20 years. If the annual interest rate is 8%, what is the present
value of the winnings?
Answer:
Shellhammer Company’s inventory records show the following data for the month of
September:
A physical inventory on September 30 shows 200 units on hand. Calculate the value of
ending inventory and cost of goods sold if the company uses FIFO inventory costing
and a periodic inventory system.
Answer:
Vertical analysis is useful in making comparisons of companies of different sizes.
Answer:
Assume that Swann Company uses a periodic inventory system and has these account
balances: Purchases $525,000; Purchase Returns and Allowances $14,000; Purchase
Discounts $9,000; and Freight-In $15,000. Determine net purchases and cost of goods
purchased.
Answer:
The ______________ assumption divides the economic life of a business into artificial
time periods.
Answer:
Liabilities are generally classified as either ______________ or ______________ on a
classified balance sheet.
Answer:
In a service company, revenue is recognized when the service is ______________.
Answer: