The check register replaces the voucher journal.
Gross pay is the amount that the employee takes home.
The financial loss that each stockholder in a corporation can incur is unlimited.
The Uniform Partnership Act defines a partnership as “an association of two or more
persons to carry on as co-owners of a business for profit.”
Usually, there is a gain or loss associated with early retirement of bonds.
Withdrawals and expenses are reported on the income statement.
In a voucher system, the source documents include the invoice, receiving report, sales
order, and purchase requisition.
The availability of suppliers and a firm’s potential capacity is a consideration before a
department is added.
Real accounts are those accounts with balances that are brought forward to the next
accounting period.
The buyer issues a debit memorandum to indicate that a previous purchase amount is
being reduced because goods were returned or an allowance was requested.
A prior period adjustment is corrected to the ending balance of Retained Earnings.
The proceeds received from discounting a note could be less than the face value.
Businesses will make their payroll tax deposits based on payroll taxes collected.
The aging of Accounts Receivable is a balance sheet approach.
Net income is not affected by the depreciation method used.
Overhead may be applied based on direct labor hours or machine hours.
Wages Expense appears on the balance sheet.
If the trial balance is in balance, it proves that all transactions were properly
journalized.
Accounts Payable is an asset account that is increased on the credit side.
A loss occurs when net income is not large enough to cover salary and interest
allowances for the partners.
A balance sheet where assets and liabilities are broken down into more detail is called a
comprehensive balance sheet.
Operating expenses are found in the Cost of Goods Sold section of the income
statement.
The adjusted trial balance represents the combination of the unadjusted trial balance
and the adjustments columns.
Revenue is the same thing as Capital.
The worksheet is the last financial statement prepared.
Double taxation is said to be an advantage of a corporation.
Financing activities include transactions with vendors or suppliers.
A company issues no-par value with no stated value stock. Therefore, the company does
not have a minimum legal capital amount.
The Schedule of Accounts Payable is listed alphabetically.
If $200,000 of a company’s own stock is sold, it is shown in the investing activities
section.
The income statement and balance sheet sections of the worksheet provide the
information needed to prepare the closing entries.
When calculating Cost of Goods Sold on the Income Statement, the beginning
inventory and not the ending inventory value is required.
The Bean Counter Corporation received subscriptions for 100 shares of its $12 par
value common stock at $15 per share. The entry to record receipt of the subscriptions
would include a:
A) debit to Cash $1,500 and a credit to Common Stock $1,500.
B) debit to Cash $1,500; a credit to Common Stock $1,200; and a credit to Paid-in
Capital in Excess of Par ValueCommon $300.
C) debit to Common Stock Subscribed $1,500 and a credit to Subscriptions
Receivable-Common Stock $1,500.
D) debit to Subscriptions ReceivableCommon Stock $1,500; a credit to Common Stock
Subscribed $1,200; and a credit to Paid-in Capital in Excess of Par ValueCommon for
$300.
The net realizable value of a company’s Accounts Receivables is:
A) increased at the time of a specific write-off.
B) decreased at the time of a specific write-off.
C) unchanged at the time of a specific write-off.
D) the guaranteed amount the company will collect from its customers.
The following amounts are on the Riley’s Clothing worksheet for the month ended
March 31
Required: Calculate the following:
a) Net sales
b) Net purchases
c) Net cost of purchases
d) Cost of goods available for sale
e) Cost of goods sold
f) Gross profit
Account Income Statement
Debit Credit
Income Summary 11 13
Sales 40
Sales Returns and Allowances 4
Sales Discounts 2
Purchases 15
Purchases Discount 2
Purchases Returns and Allowances 4
Freight-In 2
When the contract rate of interest on bonds is equal to the market rate of interest, bonds
sell at:
A) a premium.
B) their face value.
C) their maturity value.
D) a discount.
Lacy purchased equipment for $76,000 on January 1. Its residual value is $4,000 with a
useful life of 8 years. The amount of depreciation expense in the first year under the
straight-line method is:
A) $9,000.
B) $9,500.
C) $19,000.
D) $10,000.
Intellectual property assets are:
A) depreciated.
B) depleted.
C) amortized.
D) expensed.
The principle of consistency states that:
A) changes in accounting methods should occur from one fiscal period to the next.
B) a company cannot change from one inventory valuation method to another.
C) a company should switch from LIFO to FIFO every other period.
D) by using the same method, the financial statements are more meaningful.
If an expense is traceable to a department, it would be considered a(n):
A) direct expense.
B) indirect expense.
C) profit center issue.
D) cost center issue.
On the worksheet the ending Merchandise Inventory account appears in the:
A) adjusted trial balance and trial balance columns.
B) adjustment column.
C) adjustment, trial balance, and income statement columns.
D) adjustment, adjusted trial balance, and balance sheet columns.
The following amounts are an expense to the company except:
A) FICA-OASDI Payable.
B) FUTA Payable.
C) SUTA Payable.
D) All of the above are correct.
The order of the steps to prepare the worksheet are:
A) prepare the trial balance, complete adjustments, prepare the adjusted trial balance,
extend the respective totals to the Income Statement and Balance Sheet columns.
B) complete the adjustments, prepare the adjusted trial balance, prepare the trial
balance, extend the respective totals to the Income Statement and Balance Sheet
columns.
C) extend the totals to the Income Statement and Balance Sheet columns, prepare the
trial balance, complete the adjustments, prepare the adjusted trial balance.
D) prepare the adjusted trial balance, complete the adjustments, prepare the trial
balance, extend the respective totals to the Income Statement and Balance Sheet
columns.
To find an explanation for a transaction, look in the:
A) income statement.
B) balance sheet.
C) journal.
D) trial balance.
When making the adjustment for accrued interest the Bond Discount account was not
taken into consideration. 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) Both B and C are correct.
The catering department of a construction firm is a(n):
A) profit center.
B) cost center.
C) investment center.
D) allocation center.
Which of the following entries records the owner taking cash for personal use?
A) Wage Expense, debit; Cash, credit
B) Capital, debit; Cash, credit
C) Withdrawals, debit; Cash, credit
D) No entry is necessary since the owner owns the cash and the entire business.
With a beginning Accounts Receivable balance of $30,000, an ending balance of
$46,000, and net credit sales of $480,000, compute accounts receivable turnover ratio.
A) 0.08
B) 12.63
C) 16.0
D) 10.43
Closing entries will:
A) increase the Owner’s Capital.
B) decrease the Cash balance.
C) either increase or decrease Owner’s Capital.
D) not affect the Owner’s Capital balance.
Gail’s Bakery had the following information before the pay period ending June 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%.
Given the above information, what would be the amount applied to Office employee
wage Expense?
A) Debit $550
B) Credit $550
C) Debit $500
D) Credit $500
Which of the following groups of accounts have a normal credit balance?
A) Revenue, liabilities, and capital
B) Assets, capital, and withdrawals
C) Liabilities, expenses, and assets
D) Assets, expenses, and withdrawals
The entry to record the payroll tax expense would include:
A) a credit to Federal Income Taxes Payable.
B) a credit to Cash.
C) a credit to FICA (OASDI and Medicare) Taxes Payable.
D) a credit to Wages Payable.
A bond is issued for an amount equal to its face value. Which of the following
statements most likely would explain why?
A) The bond’s contract rate is lower than the market rate at the time of the issue.
B) The bond’s contract rate is the same as the market rate at the time of the issue.
C) The bond’s contract rate is higher than the market rate at the time of the issue.
D) The bond is secured by specific assets of the corporation.
The left side of any account is the:
A) debit side.
B) credit side.
C) ending balance.
D) beginning balance.
Which of the following situations would likely result in too many uncollectible
accounts?
A) The company extends credit easily.
B) The company has a strict credit policy.
C) The company has a cash only policy.
D) None of these answers is correct.
Purchased merchandise (periodic) issuing a note would have which effect on the
categories?
A) Total assets would be increased.
B) Total liabilities would be increased.
C) Owner’s equity would be decreased.
D) Both B and C would be correct.
Which of the following would result if the owner withdrew cash from the business?
A) Cash would increase and Capital would decrease.
B) Cash would increase and Withdrawals would increase.
C) Cash would decrease and Withdrawals would increase.
D) An investment by the owner is not a business transaction.
The Income Summary account shows debits of $29,000 and credits of $20,000. This
results in a:
A) net income of $49,000.
B) net loss of $49,000.
C) net income of $9,000.
D) net loss of $9,000.
A transaction completed by Norton Company caused a $4,000 increase in both the total
assets and the total liabilities. This transaction could have been:
A) purchase of office equipment for $12,000, paying $8,000 cash, with the rest on
account.
B) investment by the owner of an additional $4,000.
C) purchase of office equipment, paying $4,000 cash, and $8,000 on account.
D) a loan of $5,000, on a $9,000 purchase of equipment with $4,000 down payment.
Jane borrowed $1,000 from West Bank and signed a promissory note. West Bank is:
A) the payee.
B) the drawee.
C) the drawer.
D) the maker.
The normal balance of the Sales Returns and Allowances account is:
A) a credit.
B) a debit.
C) zero.
D) It does not have a normal balance.
Calculate a department’s gross profit given the following:
A) $350
B) $700
C) $1,050
D) $1,250
Operating activities deal with which types of accounts?
A) Current liabilities and owner’s equity
B) Current and intangible assets
C) Current assets and current liabilities
D) Current assets and owner’s equity
James borrowed $950 from Tracy. James promised in writing that he would repay the
money to Tracy on May 13, 201X. At the time of the loan, Tracy records the transaction
as a(n):
A) Accounts Receivable.
B) Accounts Payable.
C) Promissory Note Receivable.
D) Promissory Note Payable.
Which of the following would not be considered a direct expense for a shoe department
in a department store?
A) Building expenses
B) Advertising expense
C) Administrative expense
D) All of the above
An employee earns $33 per hour. She worked 53 hours the third week of January.
Calculate the gross pay.
The business is involved in interstate commerce.
Federal Income Tax rate = 20%
State Income Tax rate = 5%
FICA rate OASDI = 6.2% and Medicare = 1.45%
FUTA rate = .8%
SUTA rate = 5.6%
$ ________
The CFC College Credit Card Services has a significant increase in business each
spring due to a large increase in new applicants from graduating college students.
Subsequently, each spring 40 temporary workers are hired for a 12-week period,
working 40 hours per week at $10 per hour and then they are laid off. College’s
permanent employment total is 350 workers. Because of these yearly layoffs, College’s
state unemployment merit tax rate is 9%. If the number of layoffs could be reduced, the
merit tax rate could be reduced to 4.1%.
As the payroll specialist for College, you have been asked to evaluate the following and
determine the pros/cons of each decision:
1. Should College stop hiring temporary employees and ask its full-time workers to
work overtime to handle the extra load?
2. Should College get its temporary employees from a temporary employment agency
and therefore not be subject to the extra taxes?
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).
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.
Determine the amount of cash collected on a credit sale with a price of $80,000 and
credit terms of 1/10, n/30, assuming the payment was after the discount period had
expired.
$ ________
Explain what is meant by the cumulative gross earnings.
Use the following information to prepare 1) an income statement, 2) a statement of
owner’s equity, and 3) a balance sheet for the month ended March 31, 200x for
Bolthouse Company.
Prepare the general journal entries to record the following transaction. All purchases are
on account and subject to terms of 2/10, n/30. The perpetual inventory method is in use.
May 5 Purchased merchandise from the Anderson Inc. with a price of $15,000.
May 9 Returned $1,500 worth of merchandise to Anderson Inc.
May 14 Paid the amount due to Anderson Inc.
Prepare the general journal entry for the May 14 transaction.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
Post the following to the ledger of Wiley Services. The partial chart of accounts is:
111 Cash
121 Accounts Receivable
211 Accounts Payable
411 Service Fees Earned
GENERAL JOURNAL Page 1
Cash Account 111
Accounts Receivable Account 121
Accounts Payable Account 211
Service Fees Account 411
Determine the ending inventory of a business having:
Beginning Capital $6,000
Net sales of $50,000
Net purchases of $30,500
Freight-in of $2,000
Beginning inventory of $4,000
Ending Capital of $15,000
Operating expenses of $10,000
No additional investments or withdrawals.
$ ________
Discuss the advantages and disadvantages of sole proprietorships, partnerships and
corporations.
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.
Returned merchandise inventory for cash – Periodic
Debit ________ Credit ________
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 on which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
Below is a list of expenses; you are to identify each as either [1] a direct expense or [2]
an indirect expense.
Electricity for the general lighting in a department store. ________
If merchandise is purchased ________, the buyer becomes the owner when the
merchandise is placed on the carrier.