It is possible to invest no tangible assets into a partnership, yet be given a positive
opening capital balance.
The post-closing trial balance will typically have more accounts than the adjusted trial
balance.
A building not currently used because economic conditions have limited a company’s
expansion is classified as an investment.
A stock dividend increases the total amount of stockholders’ equity.
Bondholders share voting rights with stockholders.
Licenses are properly classified as intangible assets.
The matching of revenue with inventory costs is best achieved with the FIFO method.
When the terms are FOB shipping point, the title passes at the point of origin and the
buyer pays the transportation costs.
FOB shipping point means that the seller incurs the shipping costs.
The determination of the balance sheet cost of merchandise inventory is not important
to the determination of net income.
A debt to equity ratio of 1.0 means that half of the company’s assets are financed by
creditors.
A partnership is relatively easy to form, but is very complex to dissolve.
To be useful for decision making, financial reporting must enable the user to assess cash
flow prospects and assess management’s stewardship.
As long as the action is within the scope of the partnership, any partner can bind the
partnership.
Payment to a creditor is an example of a nonexchange business transaction.
The direct charge-off method of recognizing uncollectible accounts is not in accordance
with generally accepted accounting principles.
The holder, or payee, of a dishonored note should transfer the total amount due,
including interest income, from Notes Receivable to an individual account receivable
for the debtor.
To form a corporation, most states require persons called underwriters to sign and file it
with proper state official. This application contains the articles of incorporation.
After selling all the assets and paying the liabilities in a liquidation of a partnership, the
partners share any remaining cash according to the stated ratios.
The Internal Revenue Service is responsible for issuing accounting standards for state
and local governments.
The Sarbanes-Oxley Act has not stopped the occurrence of fraud, and additional
guidance with regard to internal controls is expected to be issued.
Invoices are documents prepared by a vendor and sent to the accounting department of
its customers.
In a common-size income statement, each item is expressed as a percentage of net
income.
In applying the matching rule, revenue recognition should come before the matching
(assignment) of expense.
Trading securities appear as current assets on the balance sheet at their historical cost
regardless of subsequent increases or decreases in market value.
When bonds are converted to stock, any excess carrying value of the bonds over the par
value of the stock is to be recorded as Additional Paid-in Capital.
When the terms are FOB destination, the title passes at the destinationand the seller
pays the transportation costs.
When the balance of a petty cash fund is increased, the entry would contain a credit to
Petty Cash.
Freight-in is considered a cost of merchandise purchased.
Customer lists are classified as intangible assets.
The debt to equity ratio is expressed in terms of dollars.
Oswald purchased land for $48,000 and paid an additional $2,000 to install parking
space. The entry to record the payment for the parking space is:
A. Land 50,000
Cash 50,000
B. Land Improvements 50,000
Cash 50,000
C. Land Improvements 2,000
Cash 2,000
D. Land Improvements 46,000
Most business enterprises in the United States are
A. government units.
B. partnerships.
C. sole proprietorships.
D. corporations.
Which of the following methods ignores residual value initially but eventually
considers it in the calculation of depreciation?
A. Straight-line
B. Double-declining-balance
C. Group
D. Production
Intangible assets could include all except
A. Trademark
B. Land held for future use
C. Patent
D. Goodwill
The processing stage of accounting is accomplished by the recording of data.
Which of the following accounts would not be closed?
A. Design Revenue
B. Interest Income
C. Accumulated Depreciation – Equipment
D. Interest Expense
Each of the following is a characteristic of a promissory note except a(n)
A. maturity date that can be determined on the date the note is signed.
B. payee who has an unconditional right to receive a definite amount on a definite date.
C. maker who agrees to pay a definite sum subject to certain conditions.
D. amount to be paid that can be determined on the date the note is signed.
Copper Company began operations in April and then engaged in the following
transactions during April
If the balance in cash after these transactions is $165,000, how much cash was paid on
account?
A. $43,000
B. $57,000
C. $1,000
D. $21,000
A company sells merchandise on a deferred payment plan, ultimately receiving $6,000
on the account receivable. On the payment date, the company would
A. credit Accounts Receivable for less than $6,000.
B. debit Interest Income for the imputed amount.
C. credit Sales for less than $6,000.
D. debit the asset account for $6,000.
Ivy Company entered into a long-term lease for a piece of equipment. The lease term
calls for an annual payment of $4,000 for six years, which approximates the useful life
of the equipment. Assume a discount factor of 16 percent. (Note: Present value of a
single sum factor at six years and 16% is 0.410; present value of an annuity factor at six
years and 16% is 3.685.) Round answers to the nearest dollar.
a. Prepare the entry without explanation to record the leased equipment.
b. Prepare the entry without explanation to record annual depreciation, assuming the
straight-line method and no residual value.
c. Prepare the entry without explanation to record the first annual payment of $4,000,
after the company has had the equipment for one year.
An $800 debit item is accidentally posted as a credit. The trial balance column totals
will therefore differ by
A. $0
B. $400
C. $800
D. $1,600
A customer’s promise to pay for goods or services
A. increases the company’s liabilities.
B. decreases the company’s Cash account.
C. creates a liability for the company.
D. increases the assets of the company.
The exclusive right to publish and sell a literary, artistic, or musical work is called a
A. patent.
B. trademark.
C. copyright.
D. franchise.
Which of the following transactions does not result in an increase in expenses?
A. Payment of accounts payable.
B. Usage of utlities.
C. Allocation of the cost of a building.
D. Expiration of prepaid insurance.
The general ledger account for Accounts Receivable shows a debit balance of $40,000.
The Allowance for Uncollectible Accounts has a credit balance of $2,000. Net sales for
the year were $250,000. In the past, 3 percent of net sales have proved uncollectible. An
aging of accounts receivable accounts results in an estimate of $9,000 of uncollectible
accounts receivable. Calculate (1) Uncollectible Accounts Expense and (2) the ending
balance of the Allowance for Uncollectible Accounts using (a) the percentage of net
sales method and (b) the accounts receivable aging method for both (1) and (2).
The maturity value of a 60-day, 9 percent, $4,000 note receivable is
A. $3,940.66.
B. $3,641.78.
C. $4,059.18
D. $4,360.24.
Mesquite, Inc. engaged in the following transactions during October:
What is the balance in cash after these transactions?
A. $940
B. $1,140
C. $740
D. $2,440
If net cash flows from operating activities total $115,000, net cash flows from financing
activities total $50,000, net cash flows from investing activities total $60,000, purchases
of plant assets total $30,000, dividends total $12,000, and sales of plant assets total
$17,000, the free cash flow equals
A. $90,000.
B. $174,000.
C. $116,000.
D. $56,000.
Lexi invests $80,000 for a one-fourth interest in a partnership in which the other
partners have capital totaling $160,000 before admitting Lexi. After distribution of the
bonus, what is Lexi’s capital balance?
A. $20,000
B. $40,000
C. $60,000
D. $80,000
Use this information pertaining to Tucson Company to answer the following question.
1) The corporation’s Supplies account showed a beginning debit balance of $400 and
supplies purchased of $1,600. There were $600 of supplies on hand at year end.
2)Depreciation on a building is estimated to be $10,000.
3)A one-year insurance policy was purchased for $4,800. Five months have passed
since the purchase.
4)Accrued interest on a note receivable amounted to $200.
5)The company received a $3,600 advance payment during the year on services to be
performed. By the end of the year, one-third of the services had been performed.
The adjusting entry for the insurance policy is
A. Prepaid Insurance 2,800
Insurance Expense 2,800
B. Insurance Expense 2,800
Prepaid Insurance 2,800
C. Prepaid Insurance 2,000
Insurance Expense 2,000
D. Insurance Expense 2,000
A reversing entry is acceptable for which of the following?
A. Depreciation of building
B. Allocation of prepaid rent to the current period
C. Correction of an error
D. Accrual of interest expense
Use this information to answer the following question.
In addition, beginning merchandise inventory was $11,000 and ending merchandise
inventory was $7,000.
Net cost of purchases for the period were
A. $37,000.
B. $21,000.
C. $27,000.
D. $33,000.
Which of the following would not appear in the owner’s equity section of a
corporation?
A. I. Muller, Capital
B. Retained earnings
C. Additional paid-in capital
D. Common stock
Which of the following attributes of internal control would be violated if the purchasing
department wrote checks to pay accounts payable?
A. Adequate design of documents
B. Sound personnel procedures
C. Periodic independent verification
D. Separation of duties
The owner’s Capital, Withdrawals, and Income Summary accounts for Laurel Repair
Company for the accounting period are presented below in T account form after the
recording and posting of closing entries:
The total amount of revenue earned for the period is
A. $900.
B. $500.
C. $400.
D. $200.
Feathertouch Company sold merchandise worth $1,600 on credit, terms n/15. The
merchandise sold had cost $1,100. What is the required journal entry to record the
transaction and to transfer the cost of merchandise inventory to cost of goods sold under
the periodic inventory system?
A. Accounts Receivables 1,600
Sales 1,600
No entry for transfer to cost of goods sold.
B. Sales 1,600
Accounts Receivables 1,600
Merchandise Inventory 1,100
Cost of Goods Sold 1,100
C. Accounts Receivables 1,600
Merchandise Inventory 1,600
Cost of Goods Sold 1,100
Merchandise Inventory 1,100
D. Merchandise Inventory 1,600
Which of the following costs would not be included in the inventory cost?
A. Invoice price
B. Cost of goods held on consignment
C. Freight-in
D. Sales tax
When payment is received by mail, a detailed list of such receipts would not be retained
by the
A. receiving department.
B. accounting department.
C. person who opens the mail.
D. cashier.
The process of crossfooting on the work sheet results in the
A. Income Statement columns.
B. Trial Balance columns.
C. Adjusted Trial Balance columns.
D. Adjustments columns.
Which of the following statements is true about factoring without recourse?
A. The seller of the receivables is liable upon default of the debtor.
B. The factor’s risk is lower than if the factoring were with recourse.
C. An example is the use of major credit cards.
D. The fee will be lower than if the factoring were with recourse.
Use the following information to answer the question below.
The following accounts appear in the ledger of Pepper Corporation on December 31,
20×5
A balance sheet prepared on December 31, 20×5 , would report total stockholders’ equity
of
A. $164,000.
B. $178,000.
C. $214,000.
D. $294,000.
A truck that cost $12,000 and on which $9,000 of accumulated depreciation has been
recorded was disposed of on January 1. If the truck was discarded as having no value,
the entry to record this event includes
A. a gain of $3,000.
B. a loss of $3,000.
C. a loss of $6,000.
D. no recognition of a gain or loss.
Use the numbers corresponding to the accounts below to indicate the entries for the
transactions below. You may debit or credit more than one account. Dollar amounts
have been omitted. The first one (x-y) has been done for you.
1. Accounts Receivable
2. Owner’s Capital
3. Withdrawals
4. Cash
5. Income Summary
6. Legal Fees Earned
7. Rent Expense
8. Salaries Expense
9. Salaries Payable
10. Unearned Legal Fees
x-y. To record cash invested by the owner
a-b. To record the reversal of the entry that adjusted for accrued legal fees
c-d. To close the Income Summary account when net income has been realized
e-f. To record the closing of expense account(s)
g-h. To record payment of salaries for which an adjusting entry was made a few days
before. The appropriate reversing entry also was made.
Elliot and Jessica are about to liquidate their partnership.
Briefly describe each of the following type of bonds:
1. Convertible bonds.
2. Callable bonds.
3. Debenture bonds.
4. Serial bonds.
5. Term bonds.
Sonora Corporation had 45,000 shares of $5 par value common stock issued and
outstanding on December 31, 20×4. Each share was issued during 20×2 at $14 per
share. Prepare the entries in journal form without explanations for the following
transactions occurring in 20×5:
Explain management’s responsibility as it pertains to internal control of a company.
The following transactions and information pertain to Myers Corporation for 2013 and
2014.
For each listed document, indicate the letter of the department/person that would
prepare it.
X, Y, and Z are partners who share profits and losses in a ratio of 1:2:3, respectively.
Anne, Barb, and Cathy are partners who share profits and losses in a ratio of 3:1:2,
respectively.
Joan and Pat Clair are sisters who each own and operate shops selling the latest
electronics in neighboring towns. They decide to have a contest to see whose shop can
be more profitable for the year. At year-end, Joan’s records show sales of $210,000, cost
of goods sold of $110,000, and operating expenses of $42,000. The records of Pat’s
shop reveal sales of $216,000, cost of goods sold of $124,000, and operating expenses
of $38,000. Pat’s shop also had other revenue of $6,000 received for allowing the shop
to be used in taping a television show. Each sister claims to have won the contest.
Provide explanations as to why each would think so, and then name the winner
Comment on the change in both the carrying value and the balance of the Unamortized
Bond Discount account over the life of a bond issue.
Indicate on the blanks below the effect (I = increase, D = decrease, NE = no effect) of a
stock split on each of the items listed.
_____ 1) Assets
_____ 2) Balance of Common Stock account
_____ 3) Total contributed capital
_____ 4) Total retained earnings
_____ 5) Total stockholders’ equity
_____ 6) Par value per share
_____ 7) Total number of shares outstanding
Use the following information to calculate the ratios requested below. Round answers to
two decimal places. Show your work.
The following transactions and information pertain to Graczyk Corporation for 2014.
Prepare the entries in journal form necessary to record the following stock transactions
of Horsetail Corporation. These transactions represent all treasury stock transactions
entered into by the company. (Omit explanations.)
Given the following information, prepare in good form the cost of goods sold section of
an income statement for 20×5.
What is a capital lease, in substance? How is a capital lease recorded? At what amount
is a capital lease recorded?