Match the basic step in the recording process described by each of the following
statements.
A. Analyze each transaction
B. Enter each transaction in a journal
C. Transfer journal information to ledger accounts
____ 1> This step is called posting.
____ 2> Business documents are examined to determine the effects of transactions on
the accounts.
____ 3> This step is called journalizing.
Answer:
Effie Company uses a periodic inventory system. Details for the inventory account for
the month of January, 2015 are as follows:
An end of the month (1/31/15) inventory showed that 160 units were on hand. If the
company uses LIFO, what is the value of the ending inventory?
a. $800
b. $832
c. $848
d. $868
Answer:
The adjusted trial balance for Lamar Corp. at the end of the current year, 2015,
contained the following accounts.
The total long-term liabilities reported on the balance sheet are
a. $1,945,000.
b. $1,935,000.
c. $2,095,000.
d. $2,085,000.
Answer:
Accrued revenues are
a. cash received and a liability recorded before services are performed.
b. revenue for services performed and recorded as liabilities before they are received.
c. revenue for services performed but not yet received in cash or recorded.
d. revenue for services performed and already received in cash and recorded.
Answer:
If a transaction cannot be recorded in a special journal, it is
a. not recorded.
b. a correcting entry.
c. recorded in the general journal.
d. an error.
Answer:
Which one of the following inventory methods is often impractical to use?
a. Specific identification
b. LIFO
c. FIFO
d. Average cost
Answer:
Under GAAP, income statement items are generally described as
a. administration, distribution, manufacturing, etc.
b. salaries, depreciation, utilities, etc.
c. administration, depreciation, manufacturing, etc.
d. salaries, distribution, utilities, etc.
Answer:
The accounting for warranty costs is based on the
a. going concern principle.
b. expense recognition principle.
c. conservatism principle.
d. full disclosure principle.
Answer:
Which of the following would not be considered an internal user of accounting data for
the GHI Company?
a. President of the company.
b. Production manager.
c. Merchandise inventory clerk.
d. President of the employees’ labor union.
Answer:
Inventories are defined by IFRS as
a. held-for-sale in the ordinary course of business.
b. in the process of production for sale in the ordinary course of business.
c. in the form of materials or supplies to be consumed in the production process or in
the providing of services.
d. All of these answer choices are correct.
Answer:
A company shows the following balances:
What is the gross profit percentage?
a. 30%
b. 44%
c. 56%
d. 70%
Answer:
Selected transactions of Alton Company are listed below.
1> Common stock is sold for cash above par value.
2> Bonds payable are issued for cash at a discount.
3> Interest receivable on a short-term note receivable is collected.
4> Land is sold for cash at book value.
5> Accounts payable are paid in cash.
6> Equipment is purchased by signing a 3-year, 10% note payable.
7> Cash dividends on common stock are declared and paid.
8> 100 shares of XYZ common stock are purchased for cash.
9> Merchandise is sold to customers for cash.
10> Bonds payable are converted into common stock.
Instructions
Classify each transaction as either (a) an operating activity, (b) an investing activity, (c)
a financing activity, or (d) a noncash investing and financing activity.
Answer:
Miroz Corporation’s comparative balance sheets are presented below.
Additional information:
1> Net income was $17,700. Dividends declared and paid were $9,300.
2> Equipment which cost $11,000 and had accumulated depreciation of $2,000 was
sold for $4,000.
3> All other changes in noncurrent account balances had a direct effect on cash flows,
except the change in accumulated depreciation.
Instruction
(a) Prepare a statement of cash flows for 2015 using the indirect method.
(b) Compute free cash flow.
Answer:
If bonds have been issued at a discount, over the life of the bonds, the
a. carrying value of the bonds will decrease.
b. carrying value of the bonds will increase.
c. interest expense will increase, if the discount is being amortized on a straight-line
basis.
d. unamortized discount will increase.
Answer:
Auditing is
a. the examination of financial statements by a CPA in order to express an opinion on
their fairness.
b. a part of accounting that involves only recording of economic events.
c. an area of accounting that involves such activities as cost accounting, budgeting, and
accounting information systems.
d. conducted by the Securities and Exchange Commission to ensure that registered
financial statements are presented fairly.
Answer:
Rouse Corporation’s December 31, 2015 balance sheet showed the following:
Rouse’s total stockholders’ equity was
a. $51,990,000.
b. $43,710,000.
c. $51,360,000.
d. $50,730,000.
Answer:
On January 1, 2015, Carter Corporation issued $5,000,000, 10-year, 8% bonds at 102.
Interest is payable semiannually on January 1 and July 1. The journal entry to record
this transaction on January 1, 2015 is
Answer:
For each of the following items, indicate by using the appropriate code letter, how the
item should be reported in the statement of cash flows, using the direct method.
A> Added in determining cash receipts from customers
B> Deducted in determining cash receipts from customers
C> Added in determining cash payments to suppliers
D> Deducted in determining cash payments to suppliers
E> Cash outflow’”investing activity
F> Cash inflow’”investing activity
G> Cash outflow’”financing activity
H> Cash inflow’”financing activity
I> Significant noncash investing and financing activity
J> Is not shown
____ 1> Decrease in accounts payable during a period.
____ 2> Declaration and payment of a cash dividend.
____ 3> Decrease in accounts receivable during a period.
____ 4> Depreciation expense.
____ 5> Conversion of bonds payable into common stock.
____ 6> Decrease in merchandise inventory during a period.
____ 7> Sale of equipment for cash at book value.
____ 8> Issuance of preferred stock for cash.
____ 9> Purchase of land for cash.
____ 10> Loss on sale of a plant asset.
Answer:
Glover Co. returned defective goods costing $5,000 to Mal Company on April 19, for
credit. The goods were purchased April 10, on credit, terms 3/10, n/30. The entry by
Glover Co. on April 19, in receiving full credit is:
Answer:
For each of the ratios listed below, indicate by the appropriate code letter, whether it is a
liquidity ratio, a profitability ratio, or a solvency ratio.
Code:
____ 1> Price-earnings ratio
____ 2> Asset turnover
____ 3> Accounts receivable turnover
____ 4> Earnings per share
____ 5> Payout ratio
____ 6> Current ratio
____ 7> Acid-test ratio
____ 8> Debt to assets ratio
____ 9> Times interest earned
____ 10> Inventory turnover
Answer:
Karley Company sold equipment on July 1, 2015 for $75,000. The equipment had cost
$210,000 and had $120,000 of accumulated depreciation as of January 1, 2015.
Depreciation for the first 6 months of 2015 was $12,000.
Instructions
Prepare the journal entry to record the sale of the equipment.
Answer:
A statement of cash flows should help investors and creditors assess the entity’s ability
to generate future income.
Answer:
When a year-end adjustment is made to reduce the trading securities portfolio to
market, what effect, if any, will the adjustment have on the balance sheet and the
income statement?
Answer: