Departmental income statements would be a useful to tool for management to
determine the viability of a department.
The left and right columns on the financial statements are used for debits and credits.
The Petty Cash account should never be debited when the fund is replenished.
Transferring money without paper checks is called electronic funds transfer.
The employer’s payroll taxes do not affect the employee’s paycheck.
Merchandise Inventory (ending) appears on both the Income Statement and the Balance
Sheet.
The debit is indented in a journal entry.
The date of record determines who receives the declared dividends.
A capital expenditure is recorded in an equity account.
The accounting equation states that total assets must always equal total liabilities plus
owner’s equity.
The Accounts Receivable account is increased by a debit.
On a bank reconciliation, outstanding checks are deducted from the balance per the
bank.
The individual employee earnings for all employees in a company are summarized on
the W-3 form.
Direct expenses and indirect expenses are not separated in determining contribution
margin.
Partnerships are not subject to federal income tax.
Bond interest expense is tax deductible.
Accounts Receivable indicates amounts owed to us by our clients or creditors.
FUTA and SUTA are paid for exclusively by the employer.
According to GAAP, the statement of cash flows is one of four major financial
statements.
The toy department of a department store would be a profit center.
In accrual basis accounting, revenues are only recorded when cash is received.
FIT Payable has a credit normal balance.
Journalizing a transaction with both the debit and the credit for $75 instead of the
correct amount of $57 will cause the trial balance to be out of balance.
The balance sheet shows the company’s financial position as of a particular date.
The amount for beginning inventory is not needed when calculating Cost of Goods
Sold.
Direct expenses, such as salaries, can be traced to a particular department.
To compute net income or net loss, the debit and credit columns of the income
statement section of the worksheet are totaled, and the difference is placed on the
smaller side.
Using the income statement approach, the balance in Allowance for Doubtful Accounts
is taken into consideration when finding the adjustment.
Common Stock is an asset.
The beginning inventory is assumed to be sold; therefore, it is added to cost of goods
sold.
Work-in-Process is debited and Payroll is credited when direct labor is charged to
production.
On the worksheet, the difference between the debits and credits in the income statement
columns would be the net income or net loss for the period.
An interest allowance is based on the beginning capital balance of each partner.
Under the periodic inventory system, an adjustment is not made on the worksheet for
inventory.
The income statement shows the financial condition of the company.
A partnership is defined by the Generally Accepted Accounting Principles.
An example of a subsidiary ledger is the revenue ledger.
The ratio that indicates how much profit is generated from each sales dollar to cover
general and selling expenses is:
A) gross profit rate.
B) return on sales.
C) rate of return on total assets.
D) rate of return on common stockholders’ equity.
A partnership admits a new partner. The new partner invests $70,000 in the business
and receives a credit of $90,000 to his capital account. The difference of $20,000 is
called a(n):
A) admission fee.
B) partnership expense.
C) bonus.
D) illegal activity.
A compound entry is:
A) a transaction involving more than one debit and/or credit.
B) used to prepare the trial balance.
C) included on the balance sheet.
D) found on the income statement.
If the allowance method of accounting for uncollectible receivables is used, what
general ledger account is credited to write off a customer’s account as uncollectible?
A) Bad Debts Expense
B) Accounts Receivable
C) Accounts Payable
D) Bad Debts Recovered
Advertising expense totaled $20,000. If indirect advertising costs are allocated based on
gross sales per department, what amount would be allocated to the Watches department
if $5,000 of advertising is indirect?
Gross Sales: Jewelry, $80,000; Glassware, $30,000; Watches, $40,000.
A) $1,000
B) $1,333
C) $2,500
D) $2,667
On November 30, Janoch’s Dog Kennel purchased $600 of merchandise on account
from the Ganster Company. The goods were shipped F.O.B. shipping point. The freight
charge of $40 was paid by Ganster Company and added to the invoice. The amount to
record in the Purchases account is:
A) $600.
B) $640.
C) $560.
D) $550.
After the accounts are adjusted and closed at the end of the year, Accounts Receivable
has a normal balance of $560,000 and Allowance for Doubtful Accounts has a normal
balance of $35,000. What is the net realizable value of the Accounts Receivable?
A) $525,000
B) $595,000
C) $560,000
D) The amount cannot be determined from the given information.
The journal entry to record a customer’s return of an item for a cash refund would:
A) be the same under both the periodic and perpetual system.
B) only include one entry under the perpetual system.
C) include two entries under the perpetual system.
D) include none of the above.
Declaration of a cash dividend was recorded by debiting Operations Expense and
crediting Cash. This error would cause:
A) the period end assets to be overstated.
B) the period end net income to be understated.
C) the period end stockholders’ equity to be understated.
D) None of the above is correct.
The length of time the customer is allowed to repay the bill is the:
A) discount period.
B) short period.
C) credit period.
D) due date.
Prepare a general journal payroll entry for Advanced Computer Programming using the
following information:
Assume the following:
a) FICA: OASDI, 6.2% on a limit of $117,000; Medicare, 1.45%.
b) Federal income tax is 15% of gross pay.
c) Each employee pays $20 per week for medical insurance.
Vanessa’s Gymnastics’ cash register tapes do not agree with cash receipts. The facts are:
total cash register tapes $400; total coins and currency $404. The summary journal
entry to record the day’s transactions would include a:
A) $400 debit to Cash; $4 debit to Cash Short and Over; and $404 credit to Service
Revenue.
B) $404 debit to Cash; $4 credit to Cash Short and Over; and $400 credit to Service
Revenue.
C) $404 debit to Cash and $404 credit to Service Revenue.
D) $400 debit to Cash and $400 credit to Service Revenue.
On a departmental income statement, contribution margin minus total indirect expenses
equals:
A) departmental contribution margin.
B) net income.
C) income before taxes.
D) income taxes.
Revenue is traditionally recognized in the accounting records when:
A) cash is received.
B) services are rendered.
C) it is incurred.
D) None of the answers are correct.
Logan’s Snowboards estimated depreciation for office equipment at $250. The adjusting
entry to record the depreciation would include:
A) a debit to Accumulated Depreciation for $250.
B) a credit to Depreciation Expense for $250.
C) a credit to Accumulated Depreciation for $250.
D) a credit to Office Equipment for $250.
The entry to adjust salaries was done twice. This error would cause:
A) assets to be understated.
B) liabilities to be overstated.
C) expenses to be understated.
D) assets to be overstated.
A classified balance sheet provides more information about the company to:
A) owners.
B) creditors.
C) suppliers.
D) All of the above answers are correct.
Net income was $60,000 in Year 1 and $45,000 in Year 2. The percentage increase or
decrease in net income was:
A) 33.33%.
B) 133.33%.
C) (25%).
D) (33.33%).
Which of the following sequence of actions describes the proper order in the accounting
cycle?
A) Journalize, post, close, prepare financial statements, adjust, and analyze transactions
B) Prepare financial statements, journalize, post, adjust, analyze transactions, close
C) Analyze transactions, journalize, post, adjust, prepare financial statements, close
D) Post, close, prepare financial statements, adjust, analyze transactions, and journalize
Cost of Goods Sold includes:
A) Freight-in.
B) Freight-out.
C) Supplies Expense.
D) Net Sales.
Which allocation base is best used to allocate advertising expense by selling
department?
A) Square feet of spaced used
B) Gross sales of each department as a percent of total gross sales
C) An even split among all selling departments
D) Some other method not listed.
Preferred stock that is given a right to share with the common stock in dividends in
excess of a stated preferred dividend rate is called:
A) nonparticipating.
B) participating.
C) cumulative.
D) noncumulative.
When making a collection, no entry was recorded to reinstate an account previously
written off. The allowance method is being used. This error would cause:
A) total assets to be overstated.
B) total liabilities to be understated.
C) net income to be understated.
D) None of these is correct.
Allan and Rick are partners who share profits and losses in the ratio of 3:2 for Allan and
Rick, respectively. They have capital balances of $35,000 and $40,000, respectively. If
Tammy invests $30,000 for one-third interest, Tammy’s capital balance will be:
A) $35,000.
B) $23,750.
C) $31,667.
D) $21,667.
What type of account is Payroll Tax Expense?
A) Asset
B) Liability
C) Contra-revenue
D) Expense
Supporters of the contribution margin approach believe that:
A) indirect expenses should be departmentalized.
B) indirect expenses should not be used for evaluating departmental performance.
C) indirect expenses are proportionally charged to each department.
D) direct expenses should not be used in evaluating departmental performance.
Net Purchases are:
A) Total Purchases + Purchases Discounts + Purchases Returns and Allowances.
B) Total Purchases + Purchases Discounts – Purchases Returns and Allowances.
C) Total Purchases – Purchases Discounts – Purchases Returns and Allowances.
D) None of these is correct.
A form used with a business by the requesting department asking the purchasing
department to buy specific goods is called a:
A) purchase order.
B) purchase requisition.
C) credit memorandum.
D) debit memorandum.
Which of the following transactions will cause a liability to be credited and a cost
account to be debited when the periodic inventory system is in use?
A) Recorded the adjustment for depreciation
B) Recorded the adjustment for the consumption of supplies
C) Purchased merchandise inventory on account
D) Purchased office supplies on account
The TM Stockholders’ Equity section includes the following:
What was the total amount common stock was sold for?
A) $7,700
B) $13,700
C) $11,500
D) $9,950
Given the following list of accounts with normal balances, what are the trial balance
totals of the debits and credits?
A) $3400 debit, $3400 credit
B) $3,900 debit, $3,900 credit
C) $2,000 debit, $2,000 credit
D) $1,200 debit, $1,200 credit
Partners Roger and Martin each have $3,000 capital balances and share income and
losses in a 2:1 ratio for Roger and Martin, respectively. Cash equals $1,000, noncash
assets total $10,000, and liabilities are $5,000. If all the noncash assets are sold for
$4,000, Martin’s capital account will:
A) increase by $4,667.
B) decrease by $2,000.
C) decrease by $1,000.
D) increase by $2,333.
If the average collection period is 35 days, this means:
A) from the date of purchase to the date of payment is 35 days.
B) from the date of sale to the date of receipt of payment is 35 days.
C) from the date of discount to the date of receipt of payment is 35 days.
D) None of these answers is correct.
The amount of federal income tax withheld from an employee during the year is
determined by the employee’s:
A) W-4 form.
B) W-2 form.
C) 1040 form.
D) all of these answers are correct.
Tracey’s Photography completes the following transactions:
a. Tracey invests $20,000 cash in her company.
b. The company purchases equipment on account, $600.
c. The company purchases additional equipment for cash, $300.
d. The company makes a payment on account for the equipment, $500.
Required: Record the above transactions in the basic accounting equation.
Tracey’s Photography
In the voucher register “miscellaneous accounts” are classified as ________ accounts.
Given the following accounts:
[1] Expense accounts.
[2] Accounts receivable
[3] Finished goods inventory.
[4] Work in process inventory.
[5] Raw materials inventory.
[6] Factory supplies inventory.
[7] Manufacturing overhead applied
[8] Depreciation expense
[9] Accounts payable.
[10] Payroll
[11] Utilities expense
[12] Sales.
[13] Raw materials purchases.
[14] Manufacturing overhead-control.
[15] Cost of goods sold.
Indicate the account(s) to be debited and credited to record the following transactions.
Transferred completed products to finished goods.
Debit ________ Credit ________
Complete the horizontal analysis of Soopy’s Used Cars. (Round all percentages to the
nearest tenth of a percent.)
2013 2012 Amount
Percent
of
Change of Change
Current Assets $75,000 $60,000
Plant and Equipment 225,000 200,000
Total Assets $300,000 $260,000
Current Liabilities $ 30,000 $ 35,000
Long-term Liabilities 80,000 70,000
Common Stock 100,000 100,000
Retained Earnings 90,000 55,000
Total Liabilities and
Stockholders’ Equity $300,000 $260,000
Given the following accounts:
[1] Cash
[2] Notes receivable
[3] Accounts receivable
[4] Interest receivable
[5] Notes payable
[6] Accounts payable
[7] Interest payable
[8] Discount on notes payable
[9] Interest expense
[10] Interest income
[11] Sales
Indicate the account(s) to be debited and credited to record the following transactions.
Paying the principal plus accrued interest.
Debit ________ & ________ Credit ________
Journalize the transactions for the stock subscription plan for Rico Company. On
February 1, Rico received subscriptions for 90 shares of $10 par value common stock at
$15 per share. The buyer will pay two equal installments on March 1 and June 1.
Assume all payments are made as scheduled and the company issues the stock after the
June 1 collection.
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 gross earnings for the tutors.
Journalize the following transactions. All purchases are on account and subject to terms
of 2/10, n/30. The periodic inventory method is used.
Nov. 3 Purchased merchandise with a price of $2,000 from the Bartkowski Inc.
Nov. 5 Purchased merchandise from the Thiesman and Co. with a price of $4,000.
Nov. 7 Purchased merchandise with a price of $2,000 from the Montana Supply Co.
Nov. 10 Paid the amount due to Bartkowski Inc.
Nov. 12 Paid the amount due to Thiesman and Co.
Nov. 23 Paid the amount due to Montana Supply Co.
Journalize the Nov. 5 transaction.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
Given the following accounts:
[1] Expense accounts.
[2] Accounts receivable
[3] Finished goods inventory.
[4] Work in process inventory.
[5] Raw materials inventory.
[6] Factory supplies inventory.
[7] Manufacturing overhead applied
[8] Depreciation expense
[9] Accounts payable.
[10] Payroll
[11] Utilities expense
[12] Sales.
[13] Raw materials purchases.
[14] Manufacturing overhead-control.
[15] Cost of goods sold.
Indicate the account(s) to be debited and credited to record the following transactions.
Sold products on account.
Debit ________ & ________ Credit ________ & ________
Assume an asset costing $90,000 is expected to produce 400,000 units and have a
salvage value of $2,000. During year 1, 75,000 units were produced; during year 2,
68,000 units were produced; and during year 3, 70,000 units were produced. Using
units-of-production, compute the depreciation expense for each of the three years.
Explain what happens to assets and to liabilities when a borrower issues a note payable
for the purchase of equipment?
From the following partial data, prepare a departmental income statement showing
income before tax along with net income for Mason Corporation for the month ended
December 31.
Net Sales-Sporting Goods $3,000
Net Sales-Shoes 1,500
Cost of Goods Sold-Sporting Goods 1,950
Cost of Goods Sold-Shoes 900
Income Tax Rate is 30%
Sporting Goods Dept.-5,000 square feet
Shoe Dept.-3,000 square feet
The following items are indirect expenses and should be allocated:
Basis of Appropriation
Building Expense $240 Square Footage
Delivery Expense $135 Net Sales
Depreciation Expense $40 Square Footage
Complete the following horizontal analysis comparative income statements of Websters
Corporation.
Websters Corporation
Comparative Income Statements
For the Years Ended December 31, Years 1 and 2
Amt. of
Percent of
Year 2 Year 1 Change
Change
Net Sales $75,000 $50,000 ________
________
Expenses:
Cost of Goods Sold $36,000 $30,000 ________
________
Operating Expense 17,000 9,000 ________
________
Interest Expense 2,500 1,800 ________
________
Income Tax Expense 1,900 1,400 ________
________
Total Expenses $57,400 $42,200 ________
________
Net Income $17,600 $7,800 ________
________
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, and in Column 3 the financial
statement that the account in which the account balance is reported.
The carrying value of a bond sold at a ________ falls over time until it reaches the face
value.
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 net pay.
From the following, determine the book value per share for preferred and common
stocks, assuming $2,000 of dividends are in arrears on the preferred stock.
Stockholders’ Equity
Preferred Stock, 10% cumulative and
$20 par value, $21 redemption value
1,000 shares issued and outstanding $20,000
Common Stock, $10 par value, 4,000 shares
issued and outstanding 40,000
Retained Earnings 8,000
______
Total Stockholders’ Equity $68,000
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement that the account in which the account balance is reported, and in Column 4
the account’s nature (temporary/permanent).
Beginning inventory $8,000Ending inventory 7,000