J. Long purchased computer equipment for $7,000 on January 1, 2015. It has a residual
value of $700 with a useful life of 5 years. After the appropriate adjusting entry is
made, the book value of the asset on December 31, 2015, under the double
declining-balance method, is:
A) $4,000.
B) $4,200.
C) $3,000.
D) $4,100.
Which of the following accounts is used with a periodic inventory system?
A) Purchases
B) Purchase Discounts
C) Purchases Returns and Allowances
D) All of these answers are correct.
Northern Union Pacific is planning to issue 10-year, 10% semiannual interest bonds
with a par value of $100,000.
Required: Prepare the necessary journal entry under each of the following assumptions.
a. The bonds are sold on issuance date at par.
b. The bonds are sold on issuance date at 96.
c. The bonds are sold on issuance date at 103.
Which amount is directly found on the worksheet?
A) Cost of Goods Sold
B) Gross Profit
C) Net Sales
D) None of the above
The term used when the seller is responsible for the cost of freight is:
A) F.O.B. shipping point.
B) F.O.B. destination.
C) Freight-In.
D) Purchases.
The Accounts Payable balance has increased during the year. How would this event
affect the statement of cash flows operations sectionindirect method?
A) It is already included in the net income.
B) It would affect the operations section positively.
C) It would affect the operations section negatively.
D) Does not affect the cash flow from operations.
Given the following list of accounts with normal balances, what are the trial balance
totals of the debits and credits?
A) $3,250 debit, $3,250 credit
B) $1,125 debit, $1,125 credit
C) $4,500 debit, $4,500 credit
D) $2,250 debit, $2,250 credit
The payment of a cash dividend was debited to Retained Earnings and credited to Cash.
This error would cause:
A) the period end liabilities to be overstated.
B) the period end stockholders’ equity to be overstated.
C) the period end stockholders’ equity to be understated.
D) Both A and C
On April 1, Braintree Corporation issued 10%, 10-year, $400,000 bonds at face value.
Interest dates are April 1 and October 1. The amount of cash paid out for interest during
the current calendar year is:
A) $0.
B) $10,000.
C) $20,000.
D) $40,000.
“PR” in the general journal and general ledger stands for:
A) per reviewer.
B) posting reference.
C) prior receipt.
D) post review.
If the employee has $800 withheld from their check for federal income tax, what is the
amount that the employer would need to pay for their portion of the federal income tax?
A) $800
B) $100
C) $0
D) $400
Extreme Home bought painting equipment on account for $3,000. The entry would
include:
A) debit to Supplies Expense, $3,000; credit to Cash, $3,000.
B) debit to Equipment, $3,000; credit to Cash, $3,000
C) debit to Equipment, $3,000; credit to Accounts Payable, $3,000.
D) debit to Supplies Expense, $3,000; credit to Accounts Payable, $3,000.
Transactions dealing with the exchange of cash between the firm and its owners
(stockholders) and creditors are called:
A) planning activities.
B) financing activities.
C) investing activities.
D) operating activities.
Hefley Corporation issued a 10%, $400,000, 8-year bond at 104. The entry to record the
issuance transaction is to:
A) debit Cash $400,000; credit Bonds Payable $400,000.
B) debit Cash $416,000; credit Bonds Payable $416,000.
C) debit Cash $416,000; credit Bonds Payable $400,000; credit Premium on Bonds
Payable $16,000.
D) debit Cash $400,000; debit Premium on Bonds Payable $16,000; credit Bonds
Payable $416,000.
To determine how much merchandise was returned from a company’s customers, the
company should review the:
A) Purchases Returns and Allowances Account.
B) Merchandise Inventory Account.
C) Sales Returns and Allowances Account.
D) Freight-In.
Purchases Returns and Allowances:
A) decrease net income.
B) increase net income.
C) increase accounts payable.
D) Not enough information provided.
Interim statements are prepared to:
A) notify management of the company’s current financial position.
B) notify investors of the company’s current financial position.
C) allow management to make changes to the business before processing year-end
financial statements.
D) All of the above are correct.
If beginning and ending inventories are $20,000 and $30,000, respectively, and cost of
goods sold is $450,000, what is the inventory turnover ratio?
A) 18
B) 16
C) 15.5
D) 15
When the balance in the Income Summary account is a debit, the company has:
A) incurred a net loss.
B) incurred a net income.
C) had more revenue than expenses.
D) made an error in their closing entries.
The entry to close the Income Summary to Capital was omitted, there was a net income.
This error would cause:
A) the Capital account to be understated.
B) net income to be overstated.
C) Revenue to be understated.
D) the Capital account to be overstated.
A major disadvantage of a corporation is the:
A) difficulty in transferring ownership.
B) limited life.
C) difficulty in raising capital.
D) double taxation of income to the corporation and of dividends paid to shareholders.
A cost account is treated the same as:
A) an asset.
B) a contra-asset.
C) a revenue.
D) an expense.
The journal entry to record a purchase of inventory for cash under the perpetual system
includes:
A) a debit to Merchandise Inventory.
B) a debit to Cash.
C) a credit to Cash.
D) Both A and C are correct.
The process that begins with recording business transactions and includes the
completion of the financial statements is the:
A) operating cycle.
B) natural business years.
C) fiscal year.
D) accounting cycle.
The entry to record returned merchandise to Vine Company is:
A) debit Purchases Returns and Allowances; credit Accounts Receivable in the general
ledger.
B) debit Accounts Payable; credit Purchases.
C) debit Accounts Payable/Vans Company in the accounts payable subsidiary ledger
and debit Accounts Payable in the general ledger; credit Purchases Returns and
Allowances.
D) debit Purchases; credit Accounts Payable.
The Harvester Corporation issued 50 shares of $20 par value stock to its accountant.
The shares are in full payment for her $900 fee for assistance in setting up the new
company. The entry to record the issuance of the stock would include a:
A) credit to Common Stock for $900.
B) debit to Common Stock for $900.
C) credit to Common Stock for $1,000.
D) debit to Common Stock for $1,000.
The PPC department of Ajax shows gross sales of $805,500 for computer supplies and
$910,500 for office supplies. The cost of the computer supplies was $525,000 and the
cost of the office supplies was $485,000. What is the gross profit for each category of
the department respectively?
A) $805,500 and $910,500
B) $525,000 and $485,000
C) $280,500 and $425,500
D) $320,500 and $385,500
The adjustment for wages earned, but not yet paid is:
A) Debit Wages Expense, credit Cash.
B) Debit Wages Payable, credit Wages Expense.
C) Debit Wages Payable, credit Cash.
D) Debit Wages Expense, credit Wages Payable.
A gain on the sale of an asset occurs when:
A) the cash received is less than the book value of the asset.
B) the book value is equal to the cost of the asset, and the cash received is less than the
cost of the asset.
C) the cash received is greater than the book value of the asset.
D) None of these answers is correct.
When the expenses are closed:
A) Owner’s Capital will be debited.
B) Income Summary will be debited.
C) Income Summary will be credited.
D) None of these is correct.
At year end there was no accrual of interest on a bond payable. This error would cause:
A) the period end assets to be overstated.
B) the period end liabilities to be overstated.
C) the period’s net income to be understated.
D) None of the above
The adjustment for depreciation expense was omitted; this would:
A) overstate the period’s expenses and overstate the period end liabilities.
B) overstate the period’s expenses and understate the period end liabilities.
C) understate the period’s expenses and overstate the period’s assets.
D) understate the period’s expenses and understate the period’s assets.