Sales taxes collected by a retailer are expenses
a. of the retailer.
b. of the customers.
c. of the government.
d. that are not recognized by the retailer until they are submitted to the government.
Answer:
On January 1, 2014, Gene Corp. paid $800,000 for 100,000 shares of Onofine
Company’s common stock, which represents 30% of Onofine ‚s outstanding common
stock. Onofine reported net income of $200,000 and paid cash dividends of $60,000
during 2014. Gene should report the investment in Onofine Company on its December
31, 2014, balance sheet at:
a. $800,000
b. $758,000
c. $818,000
d. $842,000
Answer:
Which of the following steps in the accounting cycle may be performed most
frequently?
a. Prepare a post-closing trial balance
b. Journalize closing entries
c. Post closing entries
d. Prepare a trial balance
Answer:
In preparing its August 31, 2015 bank reconciliation, Annie Corp. has available the
following information:
At August 31, 2015, Annie’s adjusted cash balance is
a. $56,700.
b. $56,400.
c. $68,400.
d. $61,500.
Answer:
Stockholders of a corporation directly elect
a. the president of the corporation.
b. the board of directors.
c. the treasurer of the corporation.
d. all of the employees of the corporation.
Answer:
If a plant asset is retired before it is fully depreciated, and no salvage or scrap value is
received,
a. a gain on disposal will be recorded.
b. phantom depreciation must be taken as though the asset were still on the books.
c. a loss on disposal will be recorded.
d. no gain or loss on disposal will be recorded.
Answer:
A deposit made by a company will appear on the bank statement as a
a. debit.
b. credit.
c. debit memorandum.
d. credit memorandum.
Answer:
The form showing gross earnings, FICA taxes withheld, and income taxes withheld for
the year is
a. Form W-4.
b. Form W-2.
c. Form 1040.
d. Schedule A.
Answer:
Megan’s Products is undecided about which base to use in estimating uncollectible
accounts. On December 31, 2015, the balance in Accounts Receivable was $680,000
and net credit sales amounted to $3,800,000 during 2015. An aging analysis of the
accounts receivable indicated that $40,000 in accounts are expected to be uncollectible.
Past experience has shown that about 1% of net credit sales eventually are
uncollectible.
Instructions
Prepare the adjusting entries to record estimated bad debt expense using the (1)
percentage-of-sales basis and (2) the percentage-of-receivables basis under each of the
following independent assumptions:
(a) Allowance for Doubtful Accounts has a credit balance of $3,200 before adjustment.
(b) Allowance for Doubtful Accounts has a debit balance of $730 before adjustment.
Answer:
Regular dividends are declared out of
a. Paid-in Capital in Excess of Par.
b. Treasury Stock.
c. Common Stock.
d. Retained Earnings.
Answer:
Proponents of LIFO, as opposed to FIFO, point out that LIFO results in
a. lower income taxes in a period of deflation.
b. a more current cost of goods sold.
c. lower net income in a period of deflation.
d. higher net income in periods of inflation.
Answer:
Adams Corporation began business by issuing 400,000 shares of $5 par value common
stock for $24 per share. During its first year, the corporation sustained a net loss of
$40,000. The year-end balance sheet would show
a. Common stock of $2,000,000.
b. Common stock of $9,600,000.
c. Total paid-in capital of $9,560,000.
d. Total paid-in capital of $7,600,000.
Answer:
An accounting record of the balances of all assets, liabilities, and stockholders’ equity
accounts is called a
a. compound entry.
b. general journal.
c. general ledger.
d. chart of accounts.
Answer:
An aircraft company would most likely have
a. a high inventory turnover.
b. low profit margin.
c. high volume.
d. a low inventory turnover.
Answer:
A general rule to use in assessing the average collection period is that
a. it should not exceed 30 days.
b. it can be any length as long as the customer continues to buy merchandise.
c. it should not greatly exceed the discount period.
d. it should not greatly exceed the credit term period.
Answer:
Dense Company’s income statement showed revenues of $275,000 and operating
expenses of $135,000. Accounts receivable decreased by $40,000 and accounts payable
increased by $35,000 during the year.
Instructions
Compute (a) cash receipts from customers and (b) cash payments for operating
expenses using the direct method.
Answer:
If preferred stock is cumulative, the
a. preferred dividends not declared in a given year are called dividends in arrears.
b. preferred stockholders and the common stockholders receive equal dividends.
c. preferred stockholders and the common stockholders receive the same total dollar
amount of dividends.
d. common stockholders will share in the preferred dividends.
Answer:
If accounts payable have increased during a period,
a. revenues on an accrual basis are less than revenues on a cash basis.
b. expenses on an accrual basis are less than expenses on a cash basis.
c. expenses on an accrual basis are greater than expenses on a cash basis.
d. expenses on an accrual basis are the same as expenses on a cash basis.
Answer:
The comparative condensed balance sheets of Able Corporation are presented below.
Instructions
(a) Prepare a horizontal analysis of the balance sheet data for Able Corporation using
2015 as a base.
(b) Prepare a vertical analysis of the balance sheet data for Able Corporation in
columnar form for 2016.
Answer:
In published annual reports
a. subdivisions within the stockholders’ equity section are routinely reported in detail.
b. capital surplus is used in place of retained earnings.
c. the individual sources of additional paid-in capital are often combined.
d. retained earnings is often not shown separately.
Answer:
Each of the following is used in computing revised annual depreciation for a change in
estimate except
a. book value.
b. cost.
c. depreciable cost.
d. remaining useful life.
Answer:
On the dividend record date,
a. a dividend becomes a current obligation.
b. no entry is required.
c. an entry may be required if it is a stock dividend.
d. Dividends Payable is debited.
Answer:
A common set of standards that provides guidelines to accountants and indicates how to
report economic events is called _________________.
Answer:
A consolidated balance sheet reports the financial position of two or more legal entities
just as if they were one reporting unit. Explain why all the individual items appearing
on the separate balance sheets of each of the affiliated companies cannot be added
together to arrive at a consolidated total for each item.
Answer:
A debenture bond is an unsecured bond which is issued against the general credit of the
borrower.
Answer:
On March 9, Phillips gave Jackson Company a 60-day, 12% promissory note for
$5,200. Phillips honors the note on May 8. Record the collection of the note and interest
by Jackson assuming that no interest has been accrued.
Answer:
The study of accounting will be useful only if a student is interested in working for a
profit-oriented business firm.
Answer:
Under the direct method, the two largest classes of items in the operating activities
section for a merchandising company are cash ________________________ and cash
_________________________.
Answer: