The information to prepare the statement of cash flows usually comes from each of the
following except
a. the comparative balance sheet.
b. the prior year’s income statement.
c. additional information.
d. the current income statement.
Answer:
Which one of the following transactions does not affect cash?
a. Acquisition and retirement of bonds payable
b. Write-off of an uncollectible accounts receivable
c. Acquisition of treasury stock
d. Payment of cash dividend
Answer:
LRRP Company had credit sales of $650,000. The beginning accounts receivable
balance was $15,000 and the ending accounts receivable balance was $140,000. What
were the cash collections from customers during the period?
a. $775,000
b. $650,000
c. $525,000
d. $665,000
Answer:
Which of the following is false with regard to a worksheet?
a. Before the adjusting entries are recorded in the general journal, they are recorded in
the adjustments columns of the worksheet.
b. A worksheet is a required step in the accounting cycle.
c. When a worksheet is used, the preparation of financial statements is still required.
d. If a credit is needed to balance the income statement columns on the worksheet, a
debit will be needed to balance the balance sheet columns
Answer:
Which of the following is not a special journal?
a. Sales journal
b. Purchases journal
c. General journal
d. Cash receipts journal
Answer:
Match the items below by entering the appropriate code letter in the space provided.
A. Wage and Tax Statement D. FICA taxes
B. Net pay E. Federal unemployment taxes
C. Federal income taxes
1> Levied against employees’ wages without limit.
2> A payroll tax expense levied only against the employer based on employees’ wages.
3> Gross earnings less payroll deductions.
4> A form showing gross earnings and income taxes withheld.
5> Levied against employees’ wages with a maximum limit.
Answer:
Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases and
sales during the month of January were as follows:
Partridge does not maintain perpetual inventory records. According to a physical count,
365 units were on hand at January 31.
The cost of the inventory at January 31, under the FIFO method is:
a. $3,285.
b. $3,650.
c. $3,900.
d. $4,015.
Answer:
The bookkeeper for Panda Bear Yard Service made a number of errors in journalizing
and posting as described below:
1> A debit posting to accounts receivable for $500 was omitted.
2> A payment of accounts payable for $600 was credited to cash and debited to
accounts receivable.
3> A credit to accounts receivable for $950 was posted as $95.
4> A cash purchase of equipment for $893 was journalized as a debit to equipment and
a credit to notes payable. The credit posting was made for $839 while the debit posting
was made for $893.
5> A debit posting of $400 for purchase of supplies was credited to supplies.
6> A debit to maintenance and repairs expense for $451 was posted as $415.
7> A debit posting for salaries and wages expense for $900 was made twice.
8> A cash purchase of supplies for $700 was journalized and posted as a debit to
supplies for $70 and a credit to cash for $70.
Instructions
For each error, indicate (a) whether the trial balance will balance; if the trial balance
will not balance, indicate (b) the amount of the difference, and (c) the trial balance
column that will have the larger total. Consider each error separately. Use the following
form, in which error (1) is given as an example.
Answer:
Using the indirect method, patent amortization expense for the period
a. is deducted from net income.
b. causes cash to increase.
c. causes cash to decrease.
d. is added to net income.
Answer:
The following information is for Bright Eyes Auto Supplies:
The total dollar amount of assets to be classified as current assets is
a. $140,000.
b. $220,000.
c. $360,000.
d. $500,000.
Answer:
The gross profit rate is computed by dividing gross profit by
a. cost of goods sold.
b. net income.
c. net sales.
d. sales revenue.
Answer:
The final step in the recording process is to transfer the journal information to the
a. trial balance.
b. financial statements.
c. ledger.
d. file cabinets.
Answer:
Beacon, Inc. disposes of an unprofitable segment of its business. The operation of the
segment suffered a $350,000 loss in the year of disposal. The loss on disposal of the
segment was $150,000. If the tax rate is 30%, and income before income taxes was
$2,300,000,
a. the income tax expense on the income before discontinued operations is $540,000.
b. the income from continuing operations is $1,610,000.
c. net income is $1,800,000.
d. the losses from discontinued operations are reported net of income taxes at $150,000.
Answer:
Kelly Rice has a large consulting practice. New clients are required to pay one-half of
the consulting fees up front. The balance is paid at the conclusion of the consultation.
How does Rice account for the cash received at the end of the engagement?
a. Cash
Unearned Service Revenue
b. Cash
Service Revenue
c. Prepaid Service Fees
Service Revenue
d. No entry is required when the engagement is concluded.
Answer:
Each of the following decreases retained earnings except a
a. cash dividend.
b. liquidating dividend.
c. stock dividend.
d. All of these decrease retained earnings.
Answer:
The present value of a bond is also known as its
a. face value.
b. market price.
c. future value.
d. deferred value.
Answer:
Which of the following statements is true?
a. The price-earnings ratio is a long-term solvency ratio.
b. High asset turnover is a sign of efficient use of assets.
c. The payout ratio measures the profitability of the owners’ investment.
d. The acid-test ratio applies to manufacturing companies but not to service or retailing
businesses.
Answer:
Horton Company uses four special journals, (cash receipts, cash payments, sales, and
purchases journal) in addition to a general journal. On November 1, 2015, the control
accounts in the general ledger had the following balances: Cash $12,000, Accounts
Receivable $200,000 and Accounts Payable $42,000. Selected information on the final
line of the special journals for the month of November is presented below:
Additional Data:
The Sales Journal total was $41,000. A customer returned merchandise for credit for
$360 and Norton Company returned store supplies to a supplier for credit for $400.
Instructions
(a) Determine the missing amounts in the special journals.
(b) Determine the balances in the general ledger accounts (Cash, Accounts Receivable,
and Accounts Payable) at the end of November.
Answer:
The following information pertains to Rural Company. Assume that all balance sheet
amounts represent both average and ending balance figures. Assume that all sales were
on credit.
What is the price-earnings ratio for Rural?
a. 8 times
b. 4.0 times
c. 7.0 times
d. 3.0 times
Answer:
On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office
furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is
recorded by the straight-line method over 10 years with a salvage value of $75,000.
What depreciation expense should be recorded on this asset in 2015?
a. $22,500.
b. $25,000.
c. $33,750.
d. $67,500.
Answer:
On October 1, 2015, Holt Company places a new asset into service. The cost of the
asset is $120,000 with an estimated 5-year life and $30,000 salvage value at the end of
its useful life. What is the book value of the plant asset on the December 31, 2015,
balance sheet assuming that Holt Company uses the double-declining-balance method
of depreciation?
a. $78,000
b. $90,000
c. $108,000
d. $114,000
Answer:
Which of the following is not an advantage of the corporate form of business
organization?
a. Limited liability of stockholders
b. Transferability of ownership
c. Unlimited personal liability for stockholders
d. Unlimited life
Answer:
Theel Company had a balance in the Inventory account of $260,000 at the beginning of
the year and a balance of $340,000 at the end of the year. Inventory turnover for 2015
was 5 times. If gross profit as a percentage of sales was 40%, the amount of sales for
2015 was
a. $2,500,000.
b. $1,500,000.
c. $3,750,000.
d. $937,500.
Answer:
A statement of cash flows summarizes the operating, ____________, and ___________
activities of an entity.
Answer:
Prepare a trial balance from the ledger accounts of Black Diamond Express as of
January 31, 2015.
Answer:
Pincher Company purchased 50 Issac Company 12%, 10-year, $1,000 bonds on January
1, 2014, for $50,000. The bonds pay interest semiannually. On January 1, 2015, after
receipt of interest, Pincher Company sold 30 of the bonds for $28,300.
Instructions
Prepare the journal entries to record the transactions described above.
Answer:
At the end of an accounting period, if the fair value of the trading portfolio is less than
its cost, then the company should recognize an ______________ which is reported on
the _________________.
Answer:
The income statement of Reagan Inc. for the year ended December 31, 2015, reported
the following condensed information:
Roman’s balance sheet contained the following comparative data at December 31:
Reagan has no depreciable assets. Accounts payable pertains to operating expenses.
Instructions
Prepare the operating activities section of the statement of cash flows using the direct
method.
Answer: