Fitzgerald Company wrote checks totaling $34,160 during October and $37,300 during
November. $32,480 of these checks cleared the bank in October, and $36,440 cleared
the bank in November. What was the amount of outstanding checks on November 30?
a. $2,860
b. $1,680
c. $2,540
d. $3,140
Answer:
The cost of debt investments includes each of the following except
a. brokerage fees.
b. commissions.
c. accrued interest.
d. the price paid.
Answer:
Lynn Company owns equipment that cost $120,000 when purchased on January 1,
2012. It has been depreciated using the straight-line method based on estimated salvage
value of $15,000 and an estimated useful life of 5 years.
Instructions
Prepare Lynn Company’s journal entries to record the sale of the equipment in these
four independent situations.
(a) Sold for $58,000 on January 1, 2015.
(b) Sold for $58,000 on May 1, 2015.
(c) Sold for $32,000 on January 1, 2015.
(d) Sold for $32,000 on October 1, 2015.
Answer:
Which of the following is in accordance with generally accepted accounting principles?
a. Accrual-basis accounting
b. Cash-basis accounting
c. Both accrual-basis and cash-basis accounting
d. Neither accrual-basis nor cash-basis accounting
Answer:
An accounting convention is best described as
a. an absolute truth.
b. an accounting custom.
c. an optional rule.
d. something that cannot be changed.
Answer:
Stockholders’ equity is decreased by all of the following except
a. sales of stock.
b. net losses.
c. expenses.
d. dividends.
Answer:
If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11
years, what annual rate of interest will she be earning on her investment?
a. 8%
b. 8.5%
c. 9%
d. 10%
Answer:
If services are rendered for credit, then
a. assets will decrease.
b. liabilities will increase.
c. stockholders’ equity will increase.
d. liabilities will decrease.
Answer:
Trendy Company issued $600,000 of 8%, 5-year bonds at 105. Assuming straight-line
amortization and annual interest payments, how much bond interest expense is recorded
on the next interest date?
a. $48,000
b. $54,000
c. $42,000
d. $6,000
Answer:
Posting is the process of
a. preparing a chart of accounts.
b. adding a column of figures.
c. transferring journal entries to ledger accounts.
d. recording entries in a journal.
Answer:
The Northern Corporation issues 7,000 shares of $100 par value preferred stock for
cash at $120 per share. The entry to record the transaction will consist of a debit to Cash
for $840,000 and a credit or credits to
a. Preferred Stock for $840,000.
b. Paid-in Capital from Preferred Stock for $840,000.
c. Preferred Stock for $700,000 and Retained Earnings for $140,000.
d. Preferred Stock for $700,000 and Paid-in Capital in Excess of Par’”Preferred Stock
for $140,000.
Answer:
After the adjusting entries are journalized and posted to the accounts in the general
ledger, the balance of each account should agree with the balance shown on the
a. adjusted trial balance.
b. post-closing trial balance.
c. the general journal.
d. adjustments columns of the worksheet.
Answer:
Which of the following would not result in unearned revenue?
a. Rent collected in advance from tenants
b. Services performed on account
c. Sale of season tickets to football games
d. Sale of two-year magazine subscriptions
Answer:
An extraordinary item is one that
a. occurs infrequently and is uncontrollable in nature.
b. occurs infrequently and is unusual in nature.
c. is material and is unusual in nature.
d. is material and is uncontrollable in nature.
Answer:
On January 15, 2015, Craig Company received a two-month, 9%, $9,000 note from
William Pentel for the settlement of his open account. The entry by Craig Company on
January 15, 2015 would include a:
a. debit of $9,135 to Notes Receivable.
b. debit of $9,000 to Notes Receivable.
c. credit of $9,135 to Accounts Receivable.
d. credit of $9,000 to Notes Receivable.
Answer:
The income statement of Annette Co, for the month of July shows net income of $2,400
based on Service Revenue $7,200, Salaries and Wages Expense $2,900 Supplies
Expense $1,400, and Utilities Expense $500.In reviewing the statement, you discover
the following.
1> Insurance expired during July of $600 was omitted.
2> Supplies expense includes $300 of supplies that are still on hand at July 31.
3> Depreciation on equipment of $250 was omitted.
4> Accrued but unpaid salaries and wages at July 31 of $400 were not included.
5> Services performed but unrecorded totaled $700.
Instructions
A. Prepare a correct income statement for July 2015.
B. What effect do the corrections have on the amount reported as total assets on the
balance sheet?
C. What effect do the corrections have on the amount reported as total liabilities on the
balance sheet?
Answer:
Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of
$15,000,000 for the year. The average inventory for the year amounted to $2,500,000.
The average number of days in inventory during the year was
a. 365 days.
b. 60.8 days.
c. 50.7 days.
d. 30 days.
Answer:
If a stockholder cannot attend a stockholder’s meeting, he may delegate his voting rights
by means of
a. an absentee ballot.
b. a proxy.
c. a certified letter.
d. a telegram.
Answer:
Income from operations will always result if
a. the cost of goods sold exceeds operating expenses.
b. revenues exceed cost of goods sold.
c. revenues exceed operating expenses.
d. gross profit exceeds operating expenses.
Answer:
Kennedy Company had the following account balances at year-end: cost of goods sold
$85,000; inventory $15,000; operating expenses $39,000; sales revenue $144,000; sales
discounts $1,600; and sales returns and allowances $2,300. A physical count of
inventory determines that inventory on hand is $14,400.
Instructions
(a) Prepare the adjusting entry necessary as a result of the physical count.
(b) Prepare closing entries.
Answer:
Companies that are subject to, but fail to comply with, the Foreign Corrupt Practices
Act of 1977
a. may do so legally by obtaining an exemption.
b. will be automatically dissolved.
c. may be subject to fines and officer imprisonment.
d. may be forced to sell their foreign subsidiaries.
Answer:
The existing balance in Allowance for Doubtful Accounts is considered in computing
bad debt expense in the
a. direct write-off method.
b. percentage of receivables basis.
c. percentage of sales basis.
d. percentage of receivables and percentage of sales basis.
Answer:
Saira, Inc. has the following income statement (in millions):
Using vertical analysis, what percentage is assigned to Net Income?
a. 625%
b. 40%
c. 25%
d. None of these answer choices are correct.
Answer:
An unrealized loss on available-for-sale securities is
a. reported under Other Expenses and Losses in the income statement.
b. closed-out at the end of the accounting period.
c. reported as a separate component of stockholders’ equity.
d. deducted from the cost of the investment.
Answer:
Which of the following correctly identifies normal balances of accounts?
a. Assets Debit
Answer:
Neither corporate bond interest nor dividends are deductible for tax purposes.
Answer:
Presented below is the Trial Balance and Adjusted Trial Balance for Morning Jacket
Company on December 31.
Instructions
Prepare in journal form, with explanations, the adjusting entries that explain the
changes in the balances from the trial balance to the adjusted trial balance.
Answer:
Under IFRS, companies can choose which inventory system?
Answer:
Notes receivable represent claims for which formal instruments of credit are issued as
evidence of debt.
Answer:
Employees of a company who evaluate the effectiveness of the company’s system of
internal controls on a year-round basis are called ______________.
Answer:
When recording bond interest, Interest Receivable is reported as a fixed asset in the
balance sheet.
Answer:
Natural resources have two distinguishing characteristics (1) they are physically
_______________ in operations, and (2) they are _________________ only by an act
of nature.
Answer: