Overhead includes labor costs of assembly line supervisors but not the assembly
workers.
The income statement is completed after the statement of owners equity.
When merchandise is sold, the periodic inventory system requires a debit to Cost of
Goods Sold and a credit to Merchandise Inventory.
After the closing process, the permanent accounts are set back to zero.
To maintain good internal control procedures, the person filing a purchase requisition
should approve the payment.
The drawee of a check is normally the bank.
The debit side of all accounts decreases the balance and the credit side increases all
accounts.
In the closing process for corporations, net income is closed to the capital account.
Unpaid vouchers are arranged by the invoice date in a tickler file.
The trial balance proves the equality of debits and credits.
Retained Earnings is reported as part of shareholders’ equity on the balance sheet.
Insurance paid in advance is an expense.
Mortgage Payable is found on the income statement.
Debits must always equal credits in a transaction or journal entry.
The three manufacturing inventories are raw materials, work-in-process, and
merchandise inventory.
In entries to record the movement of material, labor, and overhead through the
operation of a company, the credit is the destination and the debit is the source.
Revenue is recorded when earned, and expenses are recorded only when incurred.
A running balance is maintained in the ledger after each transaction is posted.
Under a perpetual inventory system, inventory purchases are entered in the
Merchandise Inventory account at cost.
The Petty Cash account is used to pay for small items such as postage stamps and
supplies.
The discount period is the amount of time the bank holds a note that was discounted
until the maturity date.
A cost center is evaluated on the amount of costs it incurs.
If the liabilities owed by a business total $150,000, then the assets must also total
$150,000.
When net income before taxes and interest is $52,000 and total assets equal $205,000,
the rate of return on total assets is 25.4%.
A trial balance is a list of the accounts and their ledger balances.
Stockholder claims for interest and repayment rank ahead of the claims of bondholders.
A list showing the ending balances owed to individual creditors is called a Schedule of
Accounts Payable.
The balance in Income Summary after posting all revenues and expenses for the period
is equal to net income/loss.
Mortgage Payable is a contra-liability account.
After paying a voucher, the voucher document is marked paid.
The form used for the annual federal unemployment taxes is Form 941.
Most companies that prepare departmental income statements also prepare departmental
balance sheets.
The inventory method that assumes the cost of the ending inventory consists of old
inventory is:
A) LIFO.
B) FIFO.
C) weighted-average.
D) specific invoice.
Prepare a bank reconciliation from the following information:
a. Balance per bank statement of March $4,825
b. Checkbook balance 5,250
c. Collection of note by bank 500
d. Service charges 110
e. Deposit in transit 2,140
f. Outstanding checks 1,325
Work in Process Inventory appears on which of the following statements on the
worksheet?
A) Statement of cost of goods manufactured and income statement
B) Statement of cost of goods manufactured and balance sheet
C) Income statement and balance sheet
D) Income statement and cost of goods sold statement
Tory Company received the first installment of $2,000 on a common stock subscription.
The entry to record the collection would include a:
A) debit to Subscriptions ReceivableCommon Stock for $2,000.
B) credit to Common Stock Subscribed for $2,000.
C) credit to Common Stock for $2,000.
D) credit to Subscriptions ReceivableCommon Stock for $2,000.
If management wishes to know how well the inventory is moving for a business, they
could use the:
A) accounts receivable turnover.
B) inventory turnover.
C) acid test ratio.
D) current ratio.
The company uses the periodic inventory system and the voucher system. If the net
method is applied, the purchase of $7,000 of merchandise with terms 4/15, n/60 is
recorded by:
A) debit Cash $7,000; credit Accounts Payable $7,000.
B) debit Accounts Payable $7,000; credit Purchases $7,000.
C) debit Purchases $6,720; credit Accounts Payable $6,720.
D) debit Purchases $6,720; credit Vouchers Payable $6,720.
Which of the following groups of accounts have a normal debit balance?
A) Revenue, liabilities, and capital
B) Assets, capital, and withdrawals
C) Liabilities, expenses, and assets
D) Assets, expenses, and withdrawals
A business uses the retail inventory method to estimate the value of the ending
inventory. For the month of May, the cost of goods available for sale is $15,625 at cost
and $21,550 at retail. The cost ratio is:
A) 72.5%.
B) 27.5%.
C) 37.9%.
D) None of these is correct.
Revenue expenditures do NOT include:
A) additions to existing plant assets.
B) changing tires on a car.
C) changing oil in a car.
D) All of the above are revenue expenditures.
Which of the following would cause a contra-asset to be credited and an expense
debited?
A) Recording an accrued expense
B) Recording the consumption of supplies
C) Recording the building depreciation
D) All of the above would have that effect.
When the adjustment for Unearned Rent Revenue is made:
A) liabilities decrease.
B) revenue increases.
C) assets decrease.
D) Both A and B are correct.
When preparing an income statement showing departmental contribution margin:
A) indirect expenses are combined with direct expenses.
B) indirect departmental expenses are added to contribution margin.
C) direct expenses are subtracted from gross profit of a department.
D) None of these answers is correct.
Using the information below, determine the amount of the payroll tax expense for B.
Hope Company’s first payroll of the year. In your answer list the amounts for FICA
(OASDI and Medicare), SUTA, and FUTA.
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $117,000 and Medicare 1.45%.
State Unemployment tax rate is 5.0% on the first $7,000.
Federal Unemployment tax rate is 0.8% on the first $7,000.
Gross profit less operating expenses equals:
A) Cost of Goods Sold.
B) net sales.
C) net purchases.
D) net income.
Which of the following accounts would be increased by a debit?
A) Cash
B) Accounts Payable
C) Capital
D) Service Revenue
Freight-in is:
A) a Cost of Selling Goods.
B) a Cost of Purchasing Goods.
C) recorded as an Operating Expense.
D) recorded as an asset.
Which depreciation method deducts residual value when computing depreciation
expense?
A) Units-of-production
B) Straight-line
C) Double declining-balance
D) Both A and B are correct.
The journal entry to record a withdrawal by the owner would most commonly include:
A) a debit to Wage Expense and a credit to Cash.
B) a debit to Capital and a credit to Cash.
C) a debit to Withdrawals and a credit to Cash.
D) a debit to Cash and a credit to Wage Expense.
The account used in perpetual inventory to record the cost of inventory used to make
the sale is:
A) Purchases.
B) Purchases Returns and Allowances.
C) Purchases Discounts.
D) Cost of Goods Sold.
Freight-in:
A) adds to the Cost of Goods Sold.
B) reduces the Cost of Goods Sold.
C) does not affect Cost of Goods Sold.
D) increases operating expenses.
A business received $3,000 from a customer in payment of an amount owed. The effect
of the transaction on the accounting equation was to:
A) increase one asset, decrease another asset.
B) increase an asset, increase a liability.
C) decrease an asset, decrease a liability.
D) increase an asset, increase owner’s equity.
Which of the following would normally appear in the Stockholders’ Equity section of
the balance sheet?
A) Cash
B) Unearned Revenue
C) Common Stock
D) Prepaid Expenses
The adjusting entry for accrued interest on a notes receivable would include:
A) a debit to Interest Expense.
B) a credit to Accrued Interest Receivable.
C) a credit to Interest Income.
D) a credit to Interest Payable.
Which of the following transactions could cause the Income Summary to be debited and
Capital to be credited?
A) The business earned a net loss for the period.
B) The business earned a net income for the period.
C) Closed the Owner’s Capital account
D) A credit balance in the Owner’s Withdrawals account.
When a bond is bought between interest dates:
A) the buyer pays the interest since the last interest payment.
B) the buyer pays the purchase price of the bonds only.
C) the buyer pays the purchase price plus accrued interest since the last interest
payment.
D) A buyer can’t buy a bond between interest dates.
Indicate whether the following accounts are used in the periodic inventory method,
perpetual inventory method, or both by placing an X on the respective line(s).
Periodic Perpetual
a) Purchases ________ _________
b) Purchase Discount ________ _________
c) Sales ________ _________
d) Sales Discounts ________ _________
e) Cost of Goods Sold ________ _________
f) Merchandise Inventory ________ _________
g) Accounts Receivable ________ _________
h) Purchase Returns and Allowances ________ _________
Calculate the simple interest and maturity value for the following:
a) $10,000, 10%, 2 1/2 years
b) $3,500, 5%, 9 months
c) $8,000, 14%, 90 days
Purchases:
A) decrease net income.
B) increase net income.
C) have no effect on net income.
D) increase capital.
An adjustment that must be made for the interest on a note payable that is incurred
during the period but not paid or recorded because payment is not due is called:
A) Notes Payable.
B) Accrued Interest Income.
C) Accrued Interest Expense.
D) Discount Payable Liability.
When a voucher transaction does not fit in the special columns of the voucher register,
it will be recorded in the:
A) general journal.
B) sundry column.
C) purchases debit column.
D) Both B and C
The document granted by the state authorizing the creation of a corporation is known
as:
A) the articles of incorporation.
B) the certificate of achievement.
C) the certificate of incorporation.
D) the minute book.
Indirect expenses are normally:
A) subjective and approximate.
B) assigned by arbitrary methods.
C) assigned precisely by accepted methods.
D) overlooked.
Which of the following accounts will appear on the post-closing trial balance?
A) Capital
B) Purchases
C) Rent Expense
D) Withdrawals
The Coral Co. had the following transactions involving the sale of merchandise. You
are to prepare the necessary general journal entries. All sales are subject to credit terms
of 1/10, n/30.
July 16 Sold merchandise on account with an invoice price of $4,500 to Carter and Co.
July 16 Sold merchandise on account with an invoice price of $5,000 to the Taylor Co.
July 20 Taylor Co. returned merchandise with an invoice price of $1,000.
July 25 Received full payment from Carter and Co.
July 28 Received full payment from Taylor Co.
Prepare the necessary general journal entry for July 25.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
Use the account code numbers to identify how the following transactions would be
journalized.
[1] Cash
[2] Accounts Receivable
[3] Allowance for Doubtful Accounts
[4] Bad Debts Expense,
[5] Bad Debts Recovered
Decrease the allowance for the estimated bad debts using the percentage of receivables.
Debit account ________ Credit account ________
Rockwell Industries purchased a plant asset to be used in its business. The expenditures
included:
Cost of machine $10,000
Special concrete base to support machine 400
Freight charges 1,500
Repair cost of damage incurred during installation 600
The Machine account will be debited for ________.
What is required of an employer by the Federal Insurance Contributions Act?
Below is a list of departments; you are to identify each as either [1] a profit center or [2]
a cost center.
The warehouse area for a wholesale club. ________
Below is a list of departments; you are to identify each as either [1] a profit center or [2]
a cost center.
The housekeeping department for a hotel chain. ________
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, and in Column 3 the financial
statement that the account in which the account balance is reported.
From the following data, calculate the estimate annual advance premium for workers’
compensation insurance and record it in general journal form.
Determine the ending capital balance of a business which had a beginning capital
balance of $1,950, additional investments of $500, withdrawals of $750, revenue of
$3,800, and expenses of $2,600.
$ ________
The following data applies to the July 15 payroll for the Woodard Research Firm
(overtime is paid at 1 1/2)
Assume:
FICA-OASDI is 6.2% based on a limit of $117,000.
FICA-Medicare is 1.45%.
FUTA is .8% based on a limit of $7,000.
SUTA is 5.6% based on a limit of $7,000.
State income tax is 2.8%.
Compute the total deductions for the employees’ paychecks.
Journalize the following transactions for Pets R Us:
Mar. 5 Sold a truck for $10,000 that cost $15,000 and had an accumulated depreciation
of $12,000.
Mar. 10 A machine costing $13,000 with accumulated depreciation of $10,500 was
destroyed in a fire. No claim was filed.
May 15 Traded in a machine costing $25,000, with $19,000 of accumulated
depreciation, for a new machine costing $32,000 with a trade-in allowance of$ 9,000.
Kitchen Supply purchased $2,000 of merchandise, terms 2/10, n/60 on July 2, and
prepared voucher #1001. Kitchen Supply paid the invoice on August 31.
Prepare journal entries to record the above transactions. Assume Kitchen Supply uses
the gross method and the periodic inventory system for recording purchases. Omit
explanations.
For each of the following, identify in column 1 the category to which the account
belongs, in column 2 the normal balance for the account, in column 3 the financial
statement that the account in which the account balance is reported, and in column 4 the
account’s nature (permanent/temporary).
For each of the following, identify in column 1 the category to which the account
belongs, in column 2 the normal balance for the account, in column 3 the financial
statement that the account in which the account balance is reported, and in column 4 the
account’s nature (permanent/temporary).