1) the cash balance in a company’s general ledger and the bank’s balance on the bank
statement will always be the same.
2) in the case of unearned revenue, the cash is received first, and the revenue is earned
later.
3) the dividends account is increased by a debit.
4) the trial balance summarizes the balances of assets, liabilities, and equity.
5) a high rate of inventory turnover indicates ease in selling inventory.
6) compound interest means that interest is calculated only on the principal amount.
7) allen moving pictures company uses the indirect method to prepare its statement of
cash flows. refer to the following portion of the comparative balance sheet:
allen company
comparative balance sheet
december 31, 2015 and 2014
if the net income for the year was $58,000, the company must have declared $32,000 as
dividends during the year.
8) declaring and paying dividends causes an increase in both assets and stockholders’
equity for the corporation.
9) michelin jewelers uses the perpetual inventory system. on april 2, michelin sold
goods with a cost of $5,500 for $9,000 with terms of 3/15, n/30. on april 4, the
customer reported damaged goods and michelin granted a $1,000 sales allowance. on
april 10, michelin received the payment for the sale. give the journal entry that will be
recorded on april 10 by michelin.
a)
b)
c)
d)
10) the accountant of delta inc. failed to make an adjusting entry to record $6,000 of
unearned service revenue that has now been earned. assume the unearned revenue was
initially recorded as a liability. which of the following statements is true?
a) the total revenue will be overstated
b) the total revenue will be understated
c) the total expenses will be overstated
d) the total expenses will be understated
11) which of the following is shown on the balance sheet as well as the statement of
cash flows?
a) stockholders’ equity (ending balance)
b) net income
c) total assets
d) cash (ending balance)
12) following is a list of account balances of wilson mowing services as of december 31
of the first year of operation:
what is the amount of total liabilities at the end of the year?
a) $12,400
b) $24,100
c) $21,200
d) $12,200
13) which of the following actions could increase the balance in the paid-in capital in
excess of parcommon account?
a) cash dividend declared
b) stock split
c) 10% stock dividend declared
d) purchase of treasury stock
14) a certain contingent liability was evaluated at year-end; the company felt it was
probable that it would become an actual liability, and the amount could be reasonably
estimated. if the accountant decided not to report it on the balance sheet or in the notes
to the financial statement, what effect would it have on the financial reporting of the
company?
a) there would be no effect
b) the liabilities on the balance sheet would be understated
c) the information about the transaction would be inadequately disclosed in the notes
d) the net income of the company would be understated
15) a business has the following transactions:
the business received $20,000 cash and issued common stock to stockholders.
the business purchases $500 of office supplies on account.
the business purchases $2,000 of furniture on account.
the business renders services to various clients totaling $10,000 on account.
the business pays out $2,000 for salaries expense and $3,000 for rent expense.
the business pays $500 to supplier for the office supplies purchased earlier.
the business collects $3,000 from one of its clients for services rendered earlier in the
month.
at the end of the month, all journal entries are posted to the ledger. the accounts
receivable account will appear as:
a)
b)
c)
d)
16) which of the following requires that financial statements should report the least
favorable figures?
a) conservatism principle
b) materiality concept
c) disclosure principle
d) consistency principle
17) which of the following is the base amount when performing vertical analysis of an
income statement?
a) total expenses
b) net sales
c) sales revenue
d) gross profit
18) which of the following states that a company must perform strictly proper
accounting only for items that are significant to the business’s financial statements?
a) accounting conservatism
b) materiality concept
c) disclosure principle
d) consistency principle
19) which of the following accounting principles requires that warranty expenses must
be estimated and recognized in the same period when the related sales revenue is
recognized?
a) the matching principle
b) the disclosure principle
c) the revenue principle
d) the consistency principle
20) a(n) ________ is represented by a certificate and is commonly traded on an
exchange.
a) inventory
b) intangible asset
c) interest
d) security
21) on january 1, 2015, wax-d purchased equipment for $60,000 cash, expecting it to
remain in service for six years. the corporation depreciates the equipment on a
straight-line basis, with $2,000 residual value. on april 30, 2017, the corporation sold
the equipment for $48,000 cash. record both depreciation expense for 2017 and sale of
the equipment on april 30, 2017. (do not round your intermediate calculations.)
22) give the journal entry to record an uncollectible account receivable using the direct
write-off method.
23) octave inc. had the following cost and retail pricing on its merchandise inventory:
costretail
beginning merchandise inventory$150,000$187,500
net purchases712,500890,625
the net sales revenue for the time period was $65,000. compute the estimated cost of
ending merchandise inventory by the retail method.
24) black n white corp. purchased equipment for $45,000. the corporation recorded total
depreciation of $36,000 on the equipment. on january 1, 2015, black n white traded in
the equipment for new equipment, paying $54,000 cash. the fair market value of the
new equipment is $65,000. journalize the corporation’s exchange of equipment. assume
the exchange had commercial substance.
25) reid art supply company uses a perpetual inventory system. the company had the
following transactions during august, 2015:
august 5: purchased $2,900 of merchandise on account. freight and credit terms were
fob shipping point, 3/15, n/60.
august 9: paid transportation costs of $440 for the aug. 5 purchase.
august 10: returned $600 of defective merchandise that had been purchased on aug. 5.
august 15: paid for the merchandise purchased on aug. 5.
give journal entries for august 10 and 15.
26) on january 1, 2015, a corporation acquired a truck for $600,000. residual value was
estimated to be $20,000. the truck can be driven for 50,000 miles over the next 3 years.
actual usage of the truck was recorded as 8,640 miles for the first year. give journal
entry to record depreciation for the first year calculated as per the units-of-production
method. (do not round your intermediate calculations.)
27) a petty cash fund was established with a $299 balance. it currently has cash of $76
and petty cash tickets totaling $222 for travel expense. provide the journal entry to
record the replenishment of the fund.
28) on january 1, 2015, anderson tools company purchases property of $300,000 by
paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance.
anderson will make yearly payments of $46,072. prepare the amortization schedule for
the first five payments. (round your answers to the nearest dollar.)
29) partridge inc. provides the following information for the year 2014:
net income$180,000
market price per share of common stock$20.00/share
common stockholders’ equity at jan. 1, 2014$1,100,000
common stockholders’ equity at dec. 31, 2014$1,500,000
12% preferred stock outstanding$100,000
calculate return on common stockholders’ equity. (round the percentage answer to two
decimals.)