Which of the following ratios does not use net income in its calculation?
A) Net profit margin
B) Earnings per share
C) Return on equity
D) Fixed asset turnover
Flynn Company ‘s monthly bank statement showed the ending balance of cash of
$18,500. The bank reconciliation for the period showed an adjustment for a deposit in
transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service
charges of $30 and the EFT from a customer in payment of the customer ‘s account of
$1,500.
Use the information above to answer the following question. What journal entry should
be recorded by Flynn Company for the EFT?
A) Debit Cash and credit Accounts Receivable for $1,500
B) Debit Accounts Receivable and credit Cash for $1,500
C) Debit Cash and credit Sales Revenue for $1,500
D) No journal entry is necessary for this item.
Cash sales rung up by cashiers totaled $117,000. Cash in the drawer was counted and
found to be $119,000. The journal entry to record the day ‘s sales would include a:
A) debit to Cash for $117,000.
B) credit to Cash Overage for $2,000.
C) credit to Sales Revenue for $119,000.
D) debit to Sales Revenue for $117,000.
The following account balances are taken from the December 31, 2015, financial
statements of ABZ Advertising Company. The company uses accrual basis accounting.
The following activities occurred in 2016:
1> Performed advertising services on account, $55,000.
2> Received cash payments on account, $10,400.
3> Received deposits from customers for advertising services to be performed in 2017,
$2,500.
4> Made payments to suppliers on account, $5,000.
5> Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was
on account and unpaid as of the end of the year.
Use the information above to answer the following question. Which of the following is
the journal entry that will be used to record activity #3?
A) Debit Cash and credit Unearned Revenue for $2,500
B) Debit Unearned Revenue and credit Advertising Revenue for $2,500
C) Debit Cash and credit Accounts Receivable for $2,500
D) Debit Unearned Revenue and credit Receivable for $2,500
On January 1, 2016, a company purchased a machine for $138,000 with an expected
life of 5 years and a residual value of $12,000. In addition, the company paid delivery
costs of $1,200 and $4,800 to have the machine installed. The company uses the
double-declining-balance method of depreciation.
Use the information above to answer the following question. What is the depreciation
expense for the first year using the double-declining-balance method?
A) $52,800
B) $57,600
C) $53,000
D) $55,200
Use the information above to answer the following question. What amount is
represented by letter J in the statement of cash flows?
A) ($42,000)
B) $42,000
C) ($22,000)
D) $22,000
Which of the following would be reported as a cash outflow from investing activities?
A) Donating an old piece of equipment to charity
B) Repaying the principal of a bond
C) Buying another company’s bonds with cash
D) Acquiring an investment security by issuing company stock
Groucho, Harpo, and Chico go into partnership on January 1, 2015. Groucho
contributes $90,000, Harpo $70,000, and Chico $40,000 to a business called Marx
Brothers’ Partnership. On a monthly basis, each partner is allocated income and is
allowed to receive cash from the business in proportion to the capital they provided.
Assume that Groucho receives $2,700 cash per month.
Required:
Part a. Prepare the journal entry for the initial investment.
Part b. Determine the monthly distribution amounts for each of the three partners.
Part c. Prepare the journal entry that would be made in one month for the monthly
distribution.
Part d. Prepare the journal entry for the allocation of an annual net income of $84,000.
For purposes of this journal entry, assume Sales Revenue totaled $116,000 and that all
expenses, totaling $32,000, were recorded in a single account called Operating
Expenses.
Part e. Prepare the journal entry to close the Drawings accounts at the end of the year.
Part f. Prepare a Statement of Partners’ Equity (assume no additional investments
made).
The following accounts are taken from the December 31, Year 4 financial statements of
a company.
Use the information above to answer the following question. What is the amount of
retained earnings on the Balance Sheet at the end of Year 4?
A) $7,725.
B) $6,725.
C) $4,800.
D) $4,725.
Which of the following statements about nonrecurring and other special items is
correct?
A) Some special items, such as changes in the value of certain balance sheet accounts,
are excluded from the calculation of net income.
B) Nonrecurring items such as discontinued operations are presented above the income
tax expense line on the income statement.
C) Discontinued operations are reported net of tax as part of the income from
continuing operations.
D) The cumulative effect of change in accounting principles is reported on the income
statement as part of income from continuing operations.
Segregation of duties means that a company assigns responsibilities so that:
A) sufficient workers are available to cover all necessary jobs.
B) responsibilities for related activities are assigned to two or more people.
C) employees are restricted to jobs for which they have adequate training.
D) workers are divided into those who do the same tasks but on different days.
This month, Grass is Greener Lawn Service pays cash for $4,000 of grass fertilizer to
be used two months from now. What journal entry will Grass is Greener record this
month?
A) Debit Cash and credit Supplies Expense for $4,000.
B) Debit Supplies Expense and credit Accounts Payable for $4,000.
C) Debit Supplies and credit Cash for $4,000.
D) Debit Retained Earnings and credit Accounts Payable for $4,000.
Hardware Inc. has a periodic inventory system and uses the weighted average method.
The company began the year with 150 large brass switch plates on hand at a cost of
$4.00 each. Purchases of switch plates during the year were as follows:
The switch plates sell for $7.00 each. If Hardware sells 570 switch plates during the
year, what is the company ‘s cost of goods sold?
A) $3,990
B) $2,508
C) $2,480
D) $2,560
The asset account Office Supplies has a balance of $800 at the beginning of the year.
The amount on hand at the end of the year is $500. The company has calculated the
Supplies Expense for the year to be $3,500. Based on this information, what amount of
office supplies was purchased during the year?
A) $0
B) $4,000
C) $3,200
D) $3,000
Which of the following would be in the work in process inventory of a company
making cheese?
A) Milk and cream used to make the cheese
B) Cheese that has been made but is curing before being ready to sell
C) Cured cheese that is waiting to be shipped to retailers
D) Cured cheese that has been sold to retailers
Soar Inc. enters into the following transactions:
Stockholders contribute $10,000 cash to a company in exchange for common stock.
The company purchases $5,000 to buy new equipment by paying cash.
The company pays $3,000 to suppliers on account.
Required:
Part a. Show the effect of these transactions on the basic accounting equation.
Part b. Prepare the journal entries that would be used to record the transactions.
Internal users of financial data include:
A) investors.
B) creditors.
C) management.
D) regulatory authorities.
The balance sheet category “Intangible Assets” includes:
A) patents, trademarks, and franchises.
B) equipment, land, and buildings.
C) investments, receivables, and cash.
D) goodwill, inventory, and vehicles.
Some bonds mature in installments. If a bond issue contains this feature, the bonds are
known as:
A) secured bonds.
B) convertible bonds.
C) callable bonds.
D) serial bonds.
In the interest formula, the interest rate is on a(n) _____ basis; therefore, the time
variable must reflect how many _____ out of _____ in the interest period.
A) monthly, months, 6
B) annual, years, 1
C) monthly, months, 12
D) annual, months, 12