In 2015, Warehouse 13 had net credit sales of $750,000. On January 1, 2015, Allowance
for Doubtful Accounts had a credit balance of $16,000. During 2015, $29,000 of
uncollectible accounts receivable were written off. Past experience indicates that the
allowance should be 10% of the balance in receivables (percentage of receivable basis).
If the accounts receivable balance at December 31 was $150,000, what is the required
adjustment to the Allowance for Doubtful Accounts at December 31, 2015?
a. $150,000
b. $29,000
c. $28,000
d. $31,000
Answer:
Bonds that are secured by real estate are termed
a. mortgage bonds.
b. convertible bonds.
c. debentures.
d. bearer bonds.
Answer:
Under IFRS, bank overdrafts are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. cash and cash equivalents.
Answer:
The adjusted trial balance for Perry Corporation at the end of 2015 contained the
following accounts:
Instructions
(a) Prepare the long-term liabilities section of the balance sheet.
(b) Indicate the proper balance sheet classification for the accounts listed above that do
not belong in the long-term liabilities section.
Answer:
Which of the following would require a compound journal entry?
a. To record merchandise returned that was previously purchased on account.
b. To record sales on account.
c. To record purchases of inventory when a discount is offered for prompt payment.
d. To record collection of accounts receivable when a cash discount is taken.
Answer:
Profit margin is calculated by dividing
a. sales by cost of goods sold.
b. gross profit by net sales.
c. net income by stockholders’ equity.
d. net income by net sales.
Answer:
If a company incurs legal costs in successfully defending its patent, these costs are
recorded by debiting
a. Legal Expense.
b. an Intangible Loss account.
c. the Patent account.
d. a revenue expenditure account.
Answer:
Stockholders’ equity can be described as
a. creditorship claim on total assets.
b. ownership claim on total assets.
c. benefactor’s claim on total assets.
d. debtor claim on total assets.
Answer:
MECHE Company reports income before income taxes of $2,500,000 and had an
extra-ordinary loss of $800,000. If the tax rate is 35%,
a. the income before the extraordinary item is $1,190,000.
b. the extraordinary loss would be reported on the income statement at $800,000.
c. the income before the extraordinary item is $1,625,000.
d. the extraordinary loss will be reported at $280,000.
Answer:
Meat Puppets Company purchased equipment for $7,200 on December 1. It is estimated
that annual depreciation on the equipment will be $1,800. If financial statements are to
be prepared on December 31, the company should make the following adjusting entry:
a. Debit Depreciation Expense, $1,800; Credit Accumulated Depreciation, $1,800.
b. Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150.
c. Debit Depreciation Expense, $5,400; Credit Accumulated Depreciation, $5,400.
d. Debit Equipment, $7,200; Credit Accumulated Depreciation, $7,200.
Answer:
Which of the following statements concerning the statement of cash flows is true?
a. The statement of cash flows is usually more accurate when using the indirect method.
b. If the direct method is used, a supplementary schedule reconciling the net income to
net cash from operating activities must still be provided.
c. The statement of cash flows reflects both earnings per share and cash per share.
d. The statement of cash flows is an optional financial statement for external reporting
purposes.
Answer:
Centro-matic Company began the year with stockholders’ equity of $30,000. During the
year, Centro-matic issued additional shares of stock in exchange for cash of $42,000,
recorded expenses of $120,000, and paid dividends of $8,000. If Centro-matic’s ending
stockholders’ equity was $112,000, what was the company’s revenue for the year?
a. $160,000.
b. $168,000.
c. $202,000.
d. $210,000.
Answer:
Candy Claws Company gathered the following reconciling information in preparing its
August bank reconciliation:
The adjusted cash balance per books on August 31 is
a. $11,160.
b. $12,060.
c. $23,160.
d. $24,060.
Answer:
Each of the following is included in computing the acid-test ratio except
a. cash.
b. inventory.
c. receivables.
d. short-term investments.
Answer:
If errors occur in the recording process, they
a. should be corrected as adjustments at the end of the period.
b. should be corrected as soon as they are discovered.
c. should be corrected when preparing closing entries.
d. cannot be corrected until the next accounting period.
Answer:
Financial statements for Kinder Corporation are presented below.
Additional Information: All sales were on account. The market price of Kinder’s
common stock was $42 on December 31, 2015.
Instructions: Compute the indicated ratios at December 31, 2015, or for the year ended
December 31, 2015, as appropriate. Report answers to two decimal places.
1> Return on assets is __.
2> Acid-test ratio is .
3> Profit margin ___.
4> Payout ratio is __.
5> Debt to assets ratio is .
6> Asset turnover is .
7> Accounts receivable turnover is .
8> Price-earnings ratio is .
9> Current ratio is __.
Answer:
Penny Company made an inventory count on December 31, 2015. During the count,
one of the clerks made the error of counting an inventory item twice. For the balance
sheet at December 31, 2015, the effects of this error are
Answer:
Net sales appears on both the multiple-step and single-step forms of an income
statement.
Answer:
Prepare the necessary adjusting entry for each of the following:
1> Services provided but unrecorded totaled $700.
2> Accrued salaries at year-end are $1,000.
3> Depreciation on equipment for the year is $600.
Answer:
The Fair Value Adjustment account is a balance sheet account. Identify the asset
account it is related to. Explain how this account is increased and describe the
procedure followed when its related asset account is disposed of.
Answer:
Which is part of IFRS accounting for financial instruments?
Answer:
The dividends account is a permanent account whose balance is carried forward to the
next accounting period.
Answer:
Closing entries are unnecessary if the business plans to continue operating in the future
and issue financial statements each year.
Answer:
Equipment was acquired on January 1, 2012, at a cost of $90,000. The equipment was
originally estimated to have a salvage value of $5,000 and an estimated life of 10 years.
Depreciation has been recorded through December 31, 2015, using the straight-line
method. On January 1, 2016, the estimated salvage value was revised to $6,000 and the
useful life was revised to a total of 8 years.
Instructions
Determine the depreciation expense for 2016.
Answer: