The Manufacturing Overhead-Control account is used to apply overhead costs to
production.
The Income Summary account can be found on the worksheet.
Stockholders do not have to pay federal income tax on their stock dividends.
The time period for which an income statement is prepared is called the accounting
period.
The payroll tax expense is recorded at the same time the payroll is recorded.
The original cost of equipment is not reduced by the amount of Depreciation Expense.
Sales Returns and Allowances is a contra-sales account.
Income Summary has a credit normal balance.
Patents, copyrights, and franchises are intangible assets with the same number of years
of useful life.
Adjustments are journalized before recording them in the worksheet.
To calculate gross profit, subtract cost of goods sold from net sales.
If a change is made in the inventory valuation method, no disclosure is necessary.
If a customer returns merchandise, the income for that period will be increased.
Deposits in transit result because of a timing difference between the bank records and
checkbook records.
Transactions are listed in chronological order in the journal.
A receiving report is used to notify the company of the quantity and condition of the
goods received.
Book value per share is the same as par value per share.
When actual overhead costs are not known until the end of the month, an estimated
overhead application rate should be determined so that the total weekly costs can be
applied.
When using a periodic inventory system, a physical inventory is required.
The adjusting entry for uncollectibles is based on an estimate.
If the return on sales is 11% and the total assets turnover is 1.8, the rate of return on
total assets would be 19.8%.
The post-closing trial balance is used to determine if the ledger is in balance after
closing.
For a statement of cash flows to be prepared, an accountant needs to compare changes
in two balance sheets.
Expenses are recorded when incurred.
A real account is the same as a nominal account.
To record the depletion of natural resources, the most common method is to use the
double declining-balance method.
Accounts in the accounts receivable subsidiary ledger are listed alphabetically.
A Loss or Gain from Realization account is credited when the assets are sold at a loss
during the liquidation process.
Raw Material Inventory is credited and Work-in-Process Inventory is debited when raw
material is transferred to production.
To have less money withheld from your paycheck, an employee can claim more
allowances than they actually have.
Different deposit rules apply to employers based on the amount collected and owed by
that employer for payroll taxes.
If a purchase return or allowance occurs after the posting of the original voucher, the
original voucher is adjusted.
After deciding which accounts are affected, the next step in analyzing a transaction is to
determine to which categories the accounts belong.
Estimating Bad Debts Expense is an example of:
A) recording accrued expense.
B) the balance sheet approach.
C) the matching principle.
D) recording accrued sales.
Bailey’s received its electric bill for December on December 31 but did not pay nor
record it in the general journal. This resulted in:
A) understated assets.
B) overstated net income.
C) overstated liabilities.
D) understated revenue.
A bond is issued for more than 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 not secured by specific assets of the corporation.
Calculate the total wages earned for each employee (assume an overtime rate of time
and a half over 40 hours):
a) Sam earns $25 per hour and worked 45 hours in one week.
b) Jim earns $20 per hour and worked 42 hours in one week.
The last step taken in liquidating a partnership is to:
A) sell the assets.
B) divide profits on assets with partners.
C) pay creditors.
D) distribute the remaining cash according to partners’ capital balances.
Budgeting for items such as equipment and furniture would be considered:
A) capital expenses.
B) capital expenditures.
C) general expenses.
D) general expenditures.
Describe and contrast the procedures for estimating uncollectible accounts under the (a)
income statement approach, (b) the balance sheet approach, and (c) the direct write-off
approach.
If management wishes to know the ability to pay off the current debts of a business,
they could use the:
A) debt to total assets.
B) current ratio.
C) inventory turnover ratio.
D) times interest earned.
A statement of cash flows would NOT disclose the effect of which of the following
transactions?
A) Dividends received on stock investments
B) Receiving cash from customers on product sales
C) Discarding an asset that had been fully depreciated
D) None of these answers is correct.
According to the MACRS tax rate table, the following classes do NOT use straight-line
depreciation:
A) residential rental property.
B) automobiles.
C) nonresidential real property.
D) All of the above use straight line depreciation.
Dividends in arrears occur when the company does NOT pay dividends to:
A) cumulative preferred stockholders.
B) non-cumulative preferred stockholders.
C) participating preferred stockholders.
D) non-participating common stockholders.
This amount does NOT change during the period and is added to purchases when
computing the cost of goods available for sale.
A) Beginning inventory
B) Ending inventory
C) Supplies
D) Freight-in
Custer.com Company’s outstanding stock is 100 shares of $100, 5% cumulative
nonparticipating preferred stock and 1,000 shares of $10 par value common stock.
Custer paid $2,300 cash dividends including one-year dividends in arrears to preferred
stockholders. Common stockholders received:
A) $0.
B) $800.
C) $1,300.
D) $500.
The entry to record payment of a voucher, for an invoice within the discount period,
under the net method will include:
A) a debit to Purchase Discounts Lost.
B) a credit to Purchase Discounts.
C) a credit to Discounts Lost.
D) None of these is correct.
When preparing the statement of cash flows by the indirect method, if current assets
have decreased, the difference is:
A) added to net income.
B) added to investments.
C) deducted from net income.
D) subtracted from investments.
Carmen’s Candies’ Net Income was $40,000. Other accounts that changed included:
Accounts Receivable decreased by $30,000; Merchandise Inventory increased by
$20,000; Accounts Payable increased by $4,000; and Salaries Payable increased by
$1,000. The amount of Net Cash Flow from Operating Activities using the indirect
method is:
A) $33,000.
B) $47,000.
C) $55,000.
D) $61,000.
Which of the following is prepared last?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Trial Balance
Diamonds Forever Corporation received subscriptions for 100 shares of its $100 par
value common stock for $120 per share. The entry to record the receipt of the
subscriptions would include a:
A) debit to Common Stock Subscribed for $10,000.
B) debit to Subscriptions Receivable-Common Stock for $10,000.
C) credit to Paid-in Capital in Excess of Par ValueCommon for $2,000.
D) credit to Common Stock to be Outstanding $12,000.
Which of the following statements about subsidiary ledgers is most accurate?
A) The subsidiary ledger accounts will never equal the control account in the general
ledger.
B) The accounts receivable subsidiary ledger is a book of accounts that provides
supporting detail for Accounts Receivable.
C) The subsidiary ledger accounts will equal the amount of cash sales.
D) All of these answers are correct.
St. Paul Corporation has a normal gross profit of 35%. The current year’s beginning
inventory was $3,500, purchases were $10,000, and retail sales were $16,000. The
estimated ending inventory under the gross profit method is:
A) $3,150.
B) $3,250.
C) $3,100.
D) $3,500.
Another name for the Fair Labor Standards Act is:
A) Federal Insurance Contribution Act.
B) Federal Wage and Hour Law.
C) Federal Income Tax Act.
D) Federal Wage and Work Law.
Net Realizable Value can be defined as:
A) the Gross Accounts Receivable.
B) the Current Bad Debts Expense.
C) the amount of Accounts Receivable you do not expect to collect.
D) the Gross Accounts Receivable minus the Allowance for Doubtful Accounts.
Compute the gross profit rate when sales are $500,000; net sales are $450,000 and gross
profits are $100,000.
A) 22.22%
B) 20.00%
C) 0.2222 to 1
D) 0.2000 to 1
Janie and Larry are partners, with beginning capital balances of $67,000 and $55,000
respectively. During the year, Janie withdrew $12,000 and Larry withdrew $18,000. The
year’s net income of $42,000 was distributed $15,000 to Janie and $27,000 to Larry.
Calculate the ending balances in the capital accounts.
A) Janie, $45,000; Larry, $28,000
B) Janie, $70,000; Larry, $64,000
C) Janie, $82,000; Larry, $82,000
D) Janie, $67,000; Larry, $55,000
Which of the following items is NOT listed on the balance sheet?
A) Accounts Payable
B) Accounts Receivable
C) Expense
D) Equipment
Allison and Josh are partners in a business. Allison’s capital is $60,000 and Josh’s
capital is $100,000. Profits for the year are $80,000. They agree to share profits and
losses as follows:
Josh’s share of the profit is:
A) $32,000.
B) $44,000.
C) ($8,000).
D) None of the above
Jane works 43 hours at a rate of pay of $20 per hour. She receives double pay over 40
hours. What is her gross pay?
A) $860
B) $720
C) $780
D) $920
For trend analysis to work correctly, the accountant should divide the item in one year
by the:
A) beginning percentage.
B) base year total.
C) current year total.
D) horizontal analysis.
Compute net income for the housewares department, when gross profit is $650,000,
direct expenses $235,000, indirect expenses are $90,000 and sales are $875,000.
A) ($20,000)
B) $530,000
C) $205,000
D) $325,000
Trundle Corporation reported net income of $40,000; depreciation expense of $11,000;
sales of additional common shares of $20,000; and an increase in Accounts Payable of
$7,000. Net cash flow from operating activities using the indirect method is:
A) $41,000.
B) $32,000.
C) $33,000.
D) $58,000.
On Flex Company’s worksheet, the revenue account had a normal balance of $3,200.
The entry to close the account would include a:
A) debit to Cash for $3,200.
B) credit to Income Summary for $3,200.
C) debit to Capital for $3,200.
D) credit to Revenue for $3,200.
The entry for indirect materials (such as glue, etc.) requisitioned for use in production
is:
A)
B)
C)
D) None of these answers is correct.
Net Sales are:
A) Gross Sales + Sales Discounts + Sales Returns and Allowances.
B) Gross Sales – Sales Discounts – Sales Returns and Allowances.
C) Revenue – Sales Discounts + Sales Returns and Allowances.
D) Gross Sales + Sales Discounts – Sales Returns and Allowances.
Invoice, subject to 4% discount $22,000Installation
cost 1,500Insurance for equipment after
installation 300Sales
tax 1,200Discount takenThe amount
the Equipment account will be debited for is ________.
Plymouth Sharks Hockey Accessories had the following transactions involving the sale
of merchandise. You are to prepare the necessary general journal entries. All sales are
subject to a 6% sales tax and have a 2/10, n/30 discount terms.
December 2 Sold merchandise priced at $100 to Cathy Norton on account.
December 4 Sold merchandise priced at $125 to a cash customer.
December 10 Payment from Cathy Norton received.
December 16 Cash customer returned $40 worth of merchandise.
Prepare the necessary general journal entry for December 16.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
Identify whether the entries below are an adjusting entry (AE) or a closing entry (CE).
________
For each of the following items, indicate by placing an X in the appropriate column
whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column
3) debt, or (column 4) profitability.
Determine the ending owner’s equity of a business having a beginning owner’s equity of
$10,500, withdrawals of $1,300, and net income of $9,000.
$ ________
On March 1, 20XX, Jones Company issued $100,000, 10-year, 6% bonds at face value.
The bonds have semiannual interest payments on June 30 and December 31. Record the
20XX journal entries.
Kristi’s Mentoring had the following information for the pay period ending September
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%.
Employees contribute to their retirement fund at a rate of 5.5% of their gross earnings
Compute the total overtime earnings.
What are the differences between depreciation expense and accumulated depreciation?
The following data applies to the July 15 payroll for the Woodard Research Firm
(overtime is paid at 1 1/2)
Assume:
FICA-OASDI is 6.2% based on a limit of $117,000.
FICA-Medicare is 1.45%.
FUTA is .8% based on a limit of $7,000.
SUTA is 5.6% based on a limit of $7,000.
State income tax is 2.8%.
Compute the net pay for the employees’ paychecks.
Below is a list of departments; you are to identify each as either [1] a profit center or [2]
a cost center.
The human resource office for a department store. ________
For each of the following items, indicate (by placing an X) whether the item would be
found on the statement of cash flows in column 1, the direct approach for determining
the cash flows from operating activities, column 2, the indirect approach for
determining the cash flows from operating activities, column 3, cash flows from
investing activities, column 4, cash flows from financing activities. If you identify that
an item affects the cash flows from operation, indirect method, also indicate whether it
will be increasing (+) or decreasing (-) the cash flows.
Below is a chart of accounts. Following is a series of transactions. Indicate for each
transaction the accounts that should be debited and credited by inserting the proper
account number in the space provided.
111 Cash
112 Accounts Receivable
121 Office Equipment
211 Accounts Payable
311 R. Andrews, Capital
312 R. Andrews, Withdrawals
411 Service Fees Earned
511 Salaries Expense
512 Rent Expense
513 Advertising Expense
Debit Credit Transaction
________ ________ 1. Purchased office equipment with cash.
________ ________ 2. Paid salaries for the week.
________ ________ 3. Invested additional cash in the business.
________ ________ 4. Received cash on account.
________ ________ 5. Billed a client on account for services performed.
________ ________ 6. Paid accounts payable.
________ ________ 7. Collected accounts receivable.
________ ________ 8. Withdrew cash for personal use.
________ ________ 9. Paid advertising expense.
________ ________ 10. Paid rent expense for the month.
Prepare the adjusting journal entry of Bad Debts Expense from the following
information using the income statement approach.
Net Credit Sales for the year $575,000
Balance in the allowance account 700 debit
Estimated percentage of credit sales uncollectible 1.5%
Estimated uncollectible accounts-aging $3,500
Use the account code numbers to identify how the following transactions would be
journalized.
[1] Cash
[2] Accounts Receivable
[3] Allowance for Doubtful Accounts
[4] Bad Debts Expense,
[5] Bad Debts Recovered
Record bad debt expense using an allowance method.
Debit account ________ Credit account ________
Items that are very similar, such as canned goods in a grocery store would be costed
using the ________ system of inventory valuation.