Creditors’ claims against assets are called liabilities.
Using the balance sheet approach, the balance in Allowance for Doubtful Accounts is
not taken into consideration when finding the adjustment.
Bonds discount and bonds premium are expenses to the corporation.
The W-2 is the Wage and Tax Statement.
Common-size statements are used to compare companies of the same size.
The Loss on Disposal account is classified as another revenue account.
An allowance or exemption represents a certain amount of a person’s income that will
be considered nontaxable.
The normal balance of the Bad Debts Expense account is a credit.
The information contained on a voucher includes: invoice number and date; purchase
order number; the amount to be paid, who is being paid; voucher number; and the
verification steps.
Depreciation Expense is debited when recording the depreciation for the period.
If the assets owned by a business total $70,000 and liabilities total $30,000, then
owner’s equity totals $100,000.
The financial statements contain debit and credit columns.
A compound entry is when more than one transaction occurs.
If merchandise was bought for Cash, the same entry would be made on the company’s
books regardless of the type of inventory method is used.
A department should always be eliminated when it becomes unprofitable.
When you record the entry to the subsidiary ledger and place the checkmark in the PR
column, it is necessary to post to the Accounts Receivable controlling account.
Both parts of FICA, OASDI and Medicare have maximum earnings limits.
The entry to record the adjustment for depreciation on equipment would be a debit to
Depreciation Expense-Equipment and a credit to Equipment.
Changes in retained earnings result from effects of prior period adjustments, net income
or loss, or dividends paid.
Shares of outstanding stock always equal the number of shares of authorized stock.
The direct method must be used to report cash flows from operating activities in the
statement of cash flows.
A Schedule of Accounts Payable is a list of customer accounts that owe the company
money.
When the total amount of a bond issue matures at a certain date at which time the
bondholder can convert into shares of stock, the bonds are called callable bonds.
The post-closing trial balance would include Sales Returns and Allowances and
Purchases.
Correctly posting a transaction twice will cause the trial balance totals to be unequal.
Discount on Notes Payable is a contra-asset account that records interest deducted in
advance.
If the return on common stockholders’ equity is more than the industry standard, it
means the company is using debt financing successfully.
The double declining-balance method is an accelerated depreciation method.
LIFO reflects the oldest costs for inventory on the balance sheet.
Land is not depreciated.
The statement of owner’s equity is the link between the income statement and balance
sheet.
David borrows $4,000 from Matthew and gives him a promissory note. David is the:
A) payee.
B) payor.
C) maker.
D) drawee.
A characteristic of a schedule of accounts receivable is that:
A) it contains a list of customers’ names with balances.
B) the total is equal to the accounts receivable control account at the end of the month.
C) it is prepared at the end of the month.
D) All of these answers are correct.
If it is later decided to pay an approved voucher in two payments:
A) a memo in the check register must show the unpaid balance.
B) an entry in the Paid column of the voucher register must show the unpaid balance.
C) the original voucher must be canceled and two new vouchers must be issued.
D) a memo must be made on the voucher to show the unpaid balance.
Greg Corporation issued on January 1, $600,000 of 10%, 5-year bonds at contract rate.
Interest is to be paid semiannually on July 1 and January 1. Journalize the following
entries:
a. Issued the bonds.
b. Paid the first semiannual interest payment.
c. Retired the bonds at maturity.
When calculating the interest on a note receivable 365 days instead of 360 days was
used. This error would cause:
A) the period end assets to be overstated.
B) the period end liabilities to be understated.
C) the period’s net income to be overstated.
D) the period’s net income to be understated.
Gene’s Tax Service has two types of employees, management and clerical support. The
company estimates that it will pay the clerical support $500,000 next year and the
managers $255,000. For every $100, the company pays $0.14 into the workers’
compensation insurance. Calculate the amount of worker’s compensation insurance.
A) $1,057
B) $336
C) $441
D) None of the above is correct.
The revenue accounts debited and the Income Summary account credited would be the
result of:
A) closing the Income Summary accountthere is a net income.
B) closing the Income Summary accountthere is a net loss.
C) closing the revenue accounts.
D) closing the expense accounts.
The journal entry to record the direct labor summarized on the labor distribution report
would include a:
A) Credit to Payroll Expense
B) Debit to Work-in-Process Inventory
C) Credit to Payroll Payable
D) Both B and C
Use four decimal places. Chocolate Heaven had the following data for November:
The cost of the estimated inventory on November 30 under the retail method is:
A) $5,440.
B) $2,560.
C) $8,160.
D) $3,840.
The following information is given for Tripp Company, which uses the indirect method.
Net income $30,000
Depreciation expense 5,000
Increase in accounts receivable 4,000
Payment of dividends 2,000
Proceeds from sale of equipment 7,000
Increase in accounts payable 5,000
Decrease in inventory 3,000
From the information provided, answer the following questions:
a) The cash flow from operating activities is ________.
b) The cash flow from investing activities is ________.
c) The cash flow from financing activities is ________.
Entries to customers’ accounts for sales are posted in the:
A) accounts receivable subsidiary ledger.
B) accounts payable subsidiary ledger.
C) fixed asset subsidiary ledger.
D) sales subsidiary ledger.
A loss on the sale of a plant asset is listed as:
A) a liability on the balance sheet.
B) an asset on the balance sheet.
C) other expense on the income statement.
D) other income on the income statement.
The average capital balances of partners Bridget and Emily are $5,000 and $15,000,
respectively. Bridget and Emily work full time in the business. The business earned net
income of $12,000 for the period. The partners have agreed to share earnings based
upon the percentage of original investment. Bridget’s share of the net income is:
A) $4,000.
B) $6,000.
C) $3,000.
D) indeterminable.
The journal entry to record issuing raw materials from the storeroom would include a:
A) Credit Raw Materials Inventory
B) Credit Work-in-Process Inventory
C) Debit Work-in-Process Inventory
D) Both A and C
The current ratio is:
A) quick assets divided by current liabilities.
B) assets divided by liabilities.
C) current assets divided by current liabilities.
D) net sales divided by current liabilities.
The journal entry to record the issuance of a stock dividend is to:
A) debit Common Stock Dividend Distributable (number of shares par value common
stock); credit Common Stock (same).
B) debit Common Stock Dividends Distributable (number of shares market value
common stock); credit Common Stock (same).
C) debit Retained Earnings (market value number of shares); credit Common Stock
Dividends Distributable (number of shares par value); credit Paid-in Capital in Excess
of Par Value-Stock Dividend.
D) debit Common Stock Dividend Distributable (number of shares par value); credit
Cash.
At the time a bond was sold at face value, the entire amount of interest over the life of
the bond was recorded as an expense and a liability. This error would cause:
A) the period end assets to be overstated.
B) the period end liabilities to be understated.
C) the period’s net income to be understated.
D) None of the above is correct.
The entry to close the Freight-In account will include which of the following?
A) Debit to Freight-In
B) Credit to Income Summary
C) Debit to Income Summary
D) Debit to Freight-Out
After aging the Accounts Receivable, it is estimated that $2,450 will not be collected
and the allowance account has an existing debit balance of $300. If Accounts
Receivable is $107,000, the net receivables would be:
A) $107,000.
B) $106,900.
C) $104,550.
D) $104,250.
The characteristic that means if a partnership is unable to pay its obligations all general
partners are individually liable is known as:
A) limited life.
B) unlimited liability.
C) limited liability.
D) mutual agreement.
When a partnership is terminated, the assets are turned into cash and obligations are
paid. This process is called:
A) dissolution.
B) termination.
C) liquidation.
D) None of the above
A voucher register could contain which of the following columns?
A) Debit to Vouchers Payable
B) Credit to sundry account
C) Debit to sundry account
D) Both B and C.
If bonds are sold between interest payment dates, the amount of cash the issuer receives
is:
A) more than the market value of the bonds.
B) less than the market value of the bonds.
C) equal to the market value of the bonds.
D) equal to the face value of the bonds.
Direct labor for the month is $50,000, and overhead is applied based on direct labor
cost. Annual overhead is estimated to be $450,000, and annual direct labor is estimated
to be $800,000. What is the entry to apply overhead to production?
A) Debit Work-in-Process Inventory $28,125; credit Payroll Payable $28,125
B) Debit Manufacturing Overhead-Applied $28,125; credit Work-in-Process Inventory
$28,125
C) Debit Work-in-Process Inventory $28,125; credit Manufacturing Overhead-Applied
$28,125
D) Debit Work-in-Process Inventory $50,000; credit Manufacturing Overhead-Applied
$50,000
If an asset is exchanged for a similar asset, a gain results:
A) when the book value of the old asset is greater than what is received for the trade-in
allowance.
B) when the book value of the old asset is less than what is received for the trade-in
allowance.
C) when the accumulated depreciation equals the cost of the old asset.
D) None of these answers is correct.
The Accounts Receivable balance has decreased 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.
On April 1, Braintree Corporation issued 10%, 10-year, $600,000 bonds at 106. 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) $15,000.
C) $30,000.
D) $31,000.
Bob’s Auction House’s payroll for June includes the following data:
What is the gross pay?
A) $1,998.40
B) $1,942.40
C) $3,200.00
D) $2,798.40
Jeff Company issues a promissory note to David Company to get extended time on an
account payable. Jeff Company records this transaction as follows:
A) debit Accounts Receivable; credit Notes Receivable.
B) debit Notes Receivable; credit Accounts Receivable.
C) debit Notes Payable; credit Accounts Payable.
D) debit Accounts Payable; credit Notes Payable.
The law that governs overtime earnings is called:
A) State Wage Control Act.
B) Federal Wage and Hour Law.
C) Fair Labor Standards Act.
D) Both B and C are correct.
Connect Company bought $6,000 of merchandise from Woods Corporation, terms 2/10,
n/30. Connect Company uses the voucher system and the periodic inventory method.
The journal entry to record the payment under the gross method after the discount
period would be to:
A) debit Vouchers Payable $6,000; credit Cash $6,000.
B) debit Vouchers Payable $6,000; credit Purchases Discount $120; credit Cash $5,880.
C) debit Vouchers Payable $5,880; credit Cash $5,880.
D) debit Vouchers Payable $5,880; debit Purchases Discount $120; credit Cash $6,000.
On January 1 the Prepaid Insurance account had a balance of $6,000 that represented 6
months’ worth of advance payment. It is now the end of March and there have been no
adjustments to the account balance. Determine the amount of expense to record at the
end of March.
$ ________
From the following, complete the common-size income statement for Isaiah’s Sporting
Goods using net sales as the base. (Round to nearest tenth of a percent.)
Amount Percent
Net Sales $900,000 ________
Cost of Goods Sold 700,000 ________
Gross Profit on Sales 200,000 ________
Operating Expenses 110,000 ________
Net Income 90,000 ________
Amy and Beth’s partnership capital balances are $45,000 and $65,000, respectively.
They share profits and losses in a ratio of 1:3 for Amy and Beth, respectively. Rockford
is admitted to the partnership, invests $55,000 for a 40% interest, and is awarded a
bonus. Prepare the journal entry to admit Rockford to the partnership.
Determine the amount of cash collected at the time of making a sale of $7,500 worth of
merchandise subject to a 6% sales tax.
$ ________
Identify the category(s) of each of the accounts below.Current AssetPlant and
EquipmentCurrent LiabilitiesLong-Term Liabilities
Item Category0) Cash
Current Asset a) Supplies
________ b) Accts. Payable
________ c) Mortgage Payable
________ d) Building
________ e) Prepaid Insurance Exp. ________
For each of the following, identify in Column 1 the balance the account will have in the
adjusted trial balance columns (debit or credit), in Column 2 the financial statement
column(s) in which the account balance will be found (income statement or balance
sheet), and in Column 3 the effect the account will have on the determination of net
income (increase, decrease, or none).
What is the difference between a debit and credit memorandum?
For each of the following, identify in Column 1 the balance the account will have in the
adjusted trial balance columns (debit or credit), in Column 2 the financial statement
column(s) in which the account balance will be found (income statement or balance
sheet), and in Column 3 the effect the account will have on the determination of net
income (increase, decrease, or none).
Calculate the missing figures (a-k) in each of the following independent scenarios.
Journalize, in proper form, the following transactions that occurred during September.
Omit explanations.
September
5 Michele invested $23,000 cash and $10,000 of equipment into her new business
10 Paid three months’ rent in advance, $2,400
23 Withdrew $400 from the business
24 Billed client for services rendered, $18,000
Given the following accounts:
[1] Cash
[2] Accounts receivable
[3] Merchandise inventory
[4] Supplies
[5] Accounts payable
[6] Sales
[7] Sales returns and allowances
[8] Sales discounts
[9] Cost of goods sold
[10] Purchases
[11] Purchase returns and allowances
[12] Purchase discounts
[13] Freight-in
Indicate the account(s) to be debited and credited to record the following transactions.
Sold merchandise on account. – Perpetual
Debit ________ & ________ Credit ________ & ________
For each of the following items, indicate (by placing an X) whether the item would be
found on the statement of cash flows in column 1, the direct approach for determining
the cash flows from operating activities, column 2, the indirect approach for
determining the cash flows from operating activities, column 3, cash flows from
investing activities, column 4, cash flows from financing activities. If you identify that
an item affects the cash flows from operation, indirect method, also indicate whether it
will be increasing (+) or decreasing (-) the cash flows.
For each of the following, identify in Column 1 the balance the account will have in the
adjusted trial balance columns (debit or credit), in Column 2 the financial statement
column(s) in which the account balance will be found (income statement or balance
sheet), and in Column 3 the effect the account will have on the determination of net
income (increase, decrease, or none).
Kristi’s Mentoring had the following information for the pay period ending September
30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Employees contribute to their retirement fund at a rate of 5.5% of their gross earnings
Compute the total state income tax.
The Coral Co. had the following transactions involving the sale of merchandise. You
are to prepare the necessary general journal entries. All sales are subject to credit terms
of 1/10, n/30.
July 16 Sold merchandise on account with an invoice price of $4,500 to Carter and Co.
July 16 Sold merchandise on account with an invoice price of $5,000 to the Taylor Co.
July 20 Taylor Co. returned merchandise with an invoice price of $1,000.
July 25 Received full payment from Carter and Co.
July 28 Received full payment from Taylor Co.
Prepare the necessary general journal entry for July 16, Sold merchandise on account
with an invoice price of $4,500 to Carter and Co.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
The Coral Co. had the following transactions involving the sale of merchandise. You
are to prepare the necessary general journal entries. All sales are subject to credit terms
of 1/10, n/30.
July 16 Sold merchandise on account with an invoice price of $4,500 to Carter and Co.
July 16 Sold merchandise on account with an invoice price of $5,000 to the Taylor Co.
July 20 Taylor Co. returned merchandise with an invoice price of $1,000.
July 25 Received full payment from Carter and Co.
July 28 Received full payment from Taylor Co.
Prepare the necessary general journal entry for July 20.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
Given the following accounts:
[1] Cash in bank
[2] Petty cash
[3] Supplies
[4] Equipment
[5] Notes payable
[6] Vouchers payable
[7] FICA payable
[8] Wages payable
[9] Purchases
[10] Purchase discounts
[11] Discounts lost
[12] Repairs expense
[13] Interest expense
[14] Delivery expense
Indicate the account(s) to be debited and credited to record the following transactions.
The company uses the periodic inventory method.
Paid voucher #424.
Debit ________ Credit ________