Mt. Zion Inc. pays its employees twice a month, on the 7thand the 21st. On June 21, Mt.
Zion Inc. paid employee salaries of $5,000. This transaction would
a. increase stockholders’ equity by $5,000.
b. decrease the balance in Salaries and Wages Expense by $5,000.
c. decrease net income for the month by $5,000.
d. be recorded by a $5,000 debit to Salaries and Wages Payable and a $4,000 credit to
Salaries and Wages Expense.
Answer:
Pakota Company issued $700,000 of 6%, 5-year bonds at 98, with interest paid
annually. Assuming straight-line amortization, what is the carrying value of the bonds
after one year?
a. $686,000
b. $683,200
c. $688,800
d. $697,200
Answer:
Determine the missing items.
Assets = Liabilities + Stockholders’ Equity
$85,000 $52,000
(a)
(b) $28,000
$34,000
$84,000 (c)
$50,000
Answer:
Sonic Youth Corporation purchased a one-year insurance policy in January 2015 for
$49,500. The insurance policy is in effect from March 2015 through February 2016. If
the company neglects to make the proper year-end adjustment for the expired insurance
a. net income and assets will be understated by $41,250.
b. net income and assets will be overstated by $41,250.
c. net income and assets will be understated by $8,250.
d. net income and assets will be overstated by $8,250.
Answer:
Sky Company is unable to reconcile the bank balance at January 3 Sky’s reconciliation
is as follows.
Instructions
(a) Prepare a correct bank reconciliation.
(b) Journalize the entries required by the reconciliation.
Answer:
In a recent year Cold Corporation had net income of $250,000, interest expense of
$50,000, and a times interest earned of 10. What was Cold Corporation’s income before
taxes for the year?
a. $550,000
b. $500,000
c. $450,000
d. None of the answers are correct.
Answer:
Depreciation based on revaluation of land and buildings is permitted under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.
Answer:
Lifetime sells softball equipment. On November 14, they shipped $3,000 worth of
softball uniforms to Palos Middle School, terms 2/10, n/30. On November 21, they
received an order from Tinley High School for $1,800 worth of custom printed bats to
be produced in December. On November 30, Palos Middle School returned $300 of
defective merchandise. Lifetime has received no payments from either school as of
month end. What amount will be recognized as net accounts receivable on the balance
sheet as of November 30?
a. $2,700
b. $3,000
c. $4,500
d. $4,800
Answer:
Transactions are initially recorded in the
a. general ledger.
b. trial balance.
c. general journal.
d. balance sheet.
Answer:
The statement of cash flows is a(n)
a. required supplemental financial statement.
b. required basic financial statement.
c. optional basic financial statement.
d. optional supplementary statement.
Answer:
The time period assumption is used under
a. GAAP but not IFRS.
b. IFRS but not GAAP.
c. both IFRS and GAAP.
d. neither IFRS nor GAAP.
Answer:
Bonds issued against the general credit of the borrower are called
a. callable bonds.
b. debenture bonds.
c. mortgage bonds.
d. a sinking fund bond.
Answer:
On October 1, 2015, Milago Company sells (factors) $700,000 of receivables to
Beanfield Factors, Inc. Beanfield assesses a service charge of 3% of the amount of
receivables sold. The journal entry to record the sale by Milago will include
a. a debit of $700,000 to Accounts Receivable.
b. a credit of $721,000 to Cash.
c. a debit of $721,000 to Cash.
d. a debit of $21,000 to Service Charge Expense.
Answer:
Jarmin Company received proceeds of $377,000 on 10-year, 8% bonds issued on
January 1, 2013. The bonds had a face value of $400,000, pay interest semi-annually on
June 30 and December 31, and have a call price of 101. Jarmin uses the straight-line
method of amortization.
What is the carrying value of the bonds on January 1, 2015?
a. $400,000
b. $381,600
c. $395,400
d. $379,300
Answer:
An alternative name for Bad Debt Expense is
a. Deadbeat Expense.
b. Uncollectible Accounts Expense.
c. Collection Expense.
d. Credit Loss Expense.
Answer:
Two bases for estimating uncollectible accounts are:
a. percentage of assets and percentage of sales.
b. percentage of receivables and percentage of total revenue.
c. percentage of current assets and percentage of sales.
d. percentage of receivables and percentage of sales.
Answer:
Management usually desires ________ financial statements and the IRS requires all
businesses to file _________ tax returns.
a. annual, annual
b. monthly, annual
c. quarterly, monthly
d. monthly, monthly
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:
In preparing closing entries for a merchandising company, the Income Summary
account will be credited for the balance of
a. sales revenue.
b. inventory.
c. sales discounts.
d. freight-out.
Answer:
Companies with good credit ratings use _________________ bonds extensively.
a. callable bonds.
b. convertible bonds.
c. mortgage bonds.
d. debenture bonds.
Answer:
The two criteria necessary for an item to be classified as an extraordinary item are that
the transaction or event must be (1) __________________ and (2)
___________________.
Answer:
Determine the missing amount for each of the following.
Answer:
If a parent company has two wholly owned subsidiaries, how many legal and economic
entities are there from the viewpoint of the shareholders of the parent company?
Answer:
Special journals are used to record unique transactions which do not occur very often.
Answer:
When vacation benefits are paid, Vacation Benefits Expense is debited.
Answer:
Presented below is information for Annie Company for the month of March 2015.
Instructions
[a] Prepare a multiple -step income statement.
[b] Compute the gross profit rate.
Answer:
GAAP’s provision for ownership of goods (goods-in-transit or consigned goods), as
well as which costs to include in inventory, as compared to IFRS are:
Answer:
Under the direct write-off method, no attempt is made to match bad debts expense to
sales revenues in the same accounting period.
Answer: