Under the direct method of the statement of cash flows, a sale of merchandise inventory
for cash is a(n):
A) managing activity.
B) investing activity.
C) financing activity.
D) operating activity.
The ratios that measure a company’s ability to pay off short-term debt are known as:
A) Liquidity Ratios.
B) Debt Management Ratios.
C) Profitability Ratios.
D) None of the above
Which of the following types of accounts has a normal credit balance?
A) Withdrawals
B) Assets
C) Expenses
D) Revenues
Rick’s Cars had a beginning account receivables balance of $320,000. The ending
account receivables balance was $280,000. Net credit sales for the company were
$4,200,000. The accounts receivable turnover for Rick’s Cars is:
A) 12.92.
B) 14.
C) 13.44.
D) None of the above is correct.
Which of the following is most likely to result in an adjusting entry at the end of the
period?
A) Payment of two months’ insurance in advance
B) Payment of one month’s rent
C) Owner’s withdrawals
D) Owner’s investment
Providing services to a credit customer was recorded with a debit to Cash and a credit
to Retained Earnings. This error would cause:
A) the period’s net income to be understated.
B) the period end liabilities to be understated.
C) the total period end stockholders’ equity to be understated.
D) the period’s net income to be overstated.
The basic formula for calculating the interest on a note is:
A) Interest = Principal Rate Time.
B) Interest = (Principal Rate) – Time.
C) Interest = (Principal Time) + Rate.
D) Interest = Principal Rate/ Time.
The Face Value of a bond:
A) is a special type of long-term interest-bearing note payable issued by a corporation
to raise capital.
B) is the annual interest rate based on face value.
C) is the amount to be paid on the maturity date of a bond.
D) is the information on the bond certificate written by the corporation in a formal
agreement.
Bill James earned $800 for the week. If his cumulative earnings are $30,000 prior to
this pay period, how much FICA-OASDI must his employer withhold from his
earnings? FICA tax rates are OASDI 6.2% on a limit of $117,000.
A) $496.00
B) $4.96
C) $49.60
D) None of the above is correct.
Activities that increase and decrease as a result of selling a company’s stock are:
A) marketing activities.
B) operating activities.
C) investing activities.
D) financing activities.
Accounts of a single type are kept in the:
A) supplemental ledger.
B) junior ledger.
C) subsidiary ledger.
D) None of these answers is correct.
Total stockholders’ equity consists of retained earnings of $100,000 and paid-in capital
of $500,000. There are 30,000 common shares outstanding, and no preferred shares
outstanding. What is the book value per share of common stock?
A) $20.00 per share
B) $25.00 per share
C) $15.00 per share
D) $ 5.00 per share
The financial statement on which Unearned Rent Revenue would appear is:
A) the income statement.
B) the balance sheet.
C) the owner’s equity statement.
D) the worksheet.
Jane Kathryn has 30,000 shares outstanding of $10 par value, 10% preferred stock and
100,000 shares outstanding $5 par value common stock. In the first 3 years of
operations, the company paid dividends in Year 1, $0; Year 2, $40,000; Year 3,
$100,000. Calculate the dividend paid to preferred and common stockholders under the
following independent situations:
a) Preferred is non-cumulative and nonparticipating.
Year Preferred Common
1 ________ ________
2 ________ ________
3 ________ ________
b) Preferred is cumulative and nonparticipating.
Year Preferred Common
1 ________ ________
2 ________ ________
3 ________ ________
c) Preferred is cumulative and participating.
Year Preferred Common
1 ________ ________
2 ________ ________
3 ________ ________
Five hundred shares of $26 par common stock was exchanged for a piece of equipment
with a fair market value of $13,500. The journal entry to record the transaction would
include a:
A) credit to Equipment for $13,000.
B) debit to Common Stock for $13,500.
C) credit to Paid-In Capital in Excess of Par Value-Common for $500.
D) credit to Common Stock for $13,500.
The voucher register would contain a column for:
A) Date of Payment.
B) Vouchers Payable credit.
C) Voucher Number.
D) Purchases credit.
Tricia’s Decor purchased merchandise from House Beautiful and issued a promissory
note. Tricia should record the transaction as:
A) debit Purchases and credit Notes Payable for the principal amount of the note.
B) debit Purchases and credit Notes Payable for the maturity value of the note.
C) debit Purchases and credit Accounts Payable for the face amount of the note.
D) debit Purchases and credit Accounts Payable for the maturity value of the note.
Interest expense was $10,000, income tax expense $20,000, and net income after taxes
is $40,000. The number of times interest was earned is:
A) 9 times.
B) 8 times.
C) 7 times.
D) 6 times.
Tender Years purchased a new van on January 1, 201X, for $60,000. The life of the van
is 5 years or 100,000 miles, with an estimated residual value of $5,000. During the first
year, the van was driven 22,000 miles. Compute the depreciation expense for the first
year applying each of the methods below.
a) ________ Straight-line
b) ________ Units-of-production
c) ________ Double declining-balance
Beginning Merchandise Inventory would be found on the worksheet in the:
A) income statement debit column.
B) income statement credit column.
C) balance sheet debit column.
D) balance sheet credit column.
The inventory method where the flow of goods and flow of costs are the same is:
A) LIFO.
B) specific invoice.
C) weighted-average.
D) FIFO.
To prove the subsidiary ledger agrees with the Accounts Payable controlling account
balance, complete a:
A) debit memorandum.
B) schedule of accounts payable.
C) purchase order.
D) schedule of accounts receivable.
An example of an internal control is:
A) the use of bank account.
B) all checks are prenumbered.
C) all checks written must have reference source documents.
D) All of these answers are correct.
Carrie flew to San Francisco on a business trip that will be reimbursed by her employer.
The purchase price of the ticket was $500 and it was bought on account. The entry to
record the transaction is:
A) debit Accounts Payable, $500; credit Travel Expense, $500.
B) debit Capital, $500; credit Accounts Payable, $500.
C) debit Travel Expense, $500; credit Accounts Payable, $500.
D) debit Travel Expense, $500; credit Cash, $500.
Hard Candy has a beginning inventory of $1,000 with a retail value of $1,800. June
purchases were $3,000, with a retail value of $4,700 and retail sales were $4,200. Use
four decimal places. What is the June 30 estimated ending inventory at cost under the
retail method?
A) $351
B) $949
C) $4,161
D) $1,416.42
Possible reasons for a business estimating the value of the ending inventory should
include:
A) the inventory is destroyed by fire.
B) the business uses periodic system and needs to prepare interim financial statements.
C) the business uses perpetual system so a physical inventory is never needed.
D) Both A and B are correct.
The entry to establish the petty cash fund was not completed. This would cause:
A) cash to be understated.
B) cash to be overstated.
C) assets to be understated.
D) assets to be overstated.
Calculate the (a) cost of raw materials used and (b) total manufacturing costs from the
following information.
Beginning Raw Materials Inventory: $65,000
Ending Raw Materials Inventory: 59,000
Overhead: 38,000
Beginning Finished Goods Inventory: 28,000
Ending Finished Goods Inventory: 23,000
Direct Labor: 40,000
Raw Materials Purchased: 83,000
Beginning Work-in-Process Inventory: 16,000
Ending Work-in-Process Inventory: 19,000
a. ________
b. ________
To determine how much merchandise a company has returned to its vendors, it should
review the:
A) Purchases Returns & Allowances account.
B) Change in the Inventory balance.
C) Sales Returns & Allowances account.
D) Sales Discounts account.
The ratio that indicates how many days it takes to turn accounts receivable into cash is
the:
A) accounts receivable turnover ratio.
B) average turnover ratio.
C) average collection period.
D) quick assets turnover ratio.
A beginning inventory and purchases of computer parts follow:
Beginning inventory 10 @ $10
First purchase 14 @ $12
Second purchase 8 @ $16
Required: Determine the cost of an ending inventory of 6 computer parts remaining in
the periodic inventory under each of the assumptions listed. Round to three decimal
places.
a) ________ FIFO
b) ________ LIFO
c) ________ Weighted-average
Molly Manufacturing is using a manufacturing overhead application rate of 125% of
machine cost. A job uses 35 machine hours at $9/hour. How much overhead should be
applied to the job?
A) $315.00
B) $393.75
C) ($393.75)
D) ($315.00)
The increase or decrease in the owner’s equity is reported on the:
A) income statement.
B) statement of owner’s equity.
C) balance sheet.
D) All of these are correct.
Number the following types of accounts (1-6) as they would appear on the Trial
Balance.
________ Assets
________ Capital
________ Revenue
________ Liabilities
________ Withdrawals
________ Expenses
Below is a list of expenses; you are to identify each as either [1] a direct expense or [2]
an indirect expense.
Rent paid for the building of department store. ________
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 on which the account balance is reported.
Prepare the adjusting journal entry for Bad Debts Expense from the following
information using the balance sheet approach.
Net Sales for the year $575,000
Balance in the allowance account 450 credit
Estimated percentage of sales uncollectible 1.5%
Estimated uncollectible accounts-aging 3,500
Mike’s Door Service’s payroll data for the second week of June included the following:
Taxable earnings for state unemployment taxes: $2,000
Assume the following tax rates:
Required: Prepare the payroll tax expense entry.
For each of the following items, indicate by placing an X in the appropriate column
whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column
3) debt, or (column 4) profitability.
Using the following accounts:
[1] Cash
[2] Subscription receivable-common stock
[3] Machinery
[4] Building
[5] Land
[6] Organization costs
[7] Preferred stock
[8] Common stock
[9] Paid in capital in excess of par value – preferred
[10] Paid in capital in excess of par value – common
[11] Common stock subscribed
[12] Discount on common stock
[13] Organization Expense
Indicate the account(s) to be debited and credited to record the following transaction.
Sold common stock at a price above par accepting a subscription.
Debit ________ Credit ________ & ________
For each of the following items, indicate by placing an X in the appropriate column
whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column
3) debt, or (column 4) profitability.
For each of the following items, indicate (by placing an X) whether the item would be
found on the statement of cash flows in column 1, the direct approach for determining
the cash flows from operating activities, column 2, the indirect approach for
determining the cash flows from operating activities, column 3, cash flows from
investing activities, column 4, cash flows from financing activities. If you identify that
an item affects the cash flows from operation, indirect method, also indicate whether it
will be increasing (+) or decreasing (-) the cash flows.
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 (temporary/permanent).
Determine the amount of net sales given:
gross sales = $200,000
sales discounts = $25,000
sales returns and allowances = $35,000
$ ________
Below is a list of expenses; you are to identify each as either [1] a direct expense or [2]
an indirect expense.
Wages paid to the restaurant wait staff. ________
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 on which the account balance is reported.
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 on which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
From the following, determine the book value per share for preferred and common
stocks; no dividends are in arrears on the preferred stock.
Stockholders’ Equity
Preferred Stock, 8% cumulative and
$8 par value, $12 redemption value
4,000 shares issued and outstanding $32,000
Common Stock, $1 par value, 30,000 shares
issued and outstanding 30,000
Retained Earnings 24,000
________
Total Stockholders’ Equity
Given the following accounts:
[1] Cash
[2] Accounts receivable
[3] Allowance for doubtful accounts
[4] Merchandise inventory
[5] Store supplies
[6] Store equipment
[7] Accumulated depreciation
[8] Notes payable
[9] Accounts payable
[10] Able Partner’s, Capital
[11] Baker Partner’s, Capital
[12] Able Partner’s, withdrawals
[13] Baker Partner’s, withdrawals
[14] Income summary
[15] Service revenue
[16] Gain on realization
[17] Loss on realization
Indicate the account(s) to be debited and credited to record the following transaction.
The business provided services on credit.
Debit ________ Credit ________
Birch Company issued 200 shares of common stock with a par value of $10 per share in
exchange for equipment with a fair market value of $4,000. Record the journal entry for
the stock issuance.
Calculate gross sales:
net sales = $100,000
sales returns and allowances = $25,000
sales discounts = $30,000
accounts receivable = $12,000