Individual amounts are recorded during the month to the accounts payable ledger.
When an employee’s earnings are greater than FICA base limit during the calendar year,
no more FICA-OASDI tax is deducted from earnings.
Purchase discounts are given to the buyer from the supplier for early payment on
account.
FICA taxes are levied only on employees and employers.
Both Accounts Payable and Notes Payable are both formal promises to pay.
The lower the times interest earned ratio, the more likely it is that interest payments will
be made.
The debit part of the transaction is recorded second in a journal entry.
The credit side is always the left side of the account.
Common-size statements deal with the percentage of change in a certain item over
several years.
The normal balance of Sales Tax Payable is a credit.
All bonds have accrued interest adjustments on December 31.
Changes in current assets and current liabilities accounts deal with financing activities.
Most companies report restrictions of Retained Earnings by using a footnote to the
Retained Earnings account.
A direct expense should be traceable to a respective department.
Unearned Revenue is a liability account used to record rent fees received in advance.
Under the periodic inventory method, the ending inventory is adjusted by debiting
Income Summary and crediting Merchandise Inventory.
The left side of the accounting equation must always equal the right side of the
equation.
The effective interest rate on a discounted note payable is less than the rate on the note.
The W-3 is also known as the Transmittal of Wage and Tax Statements.
Cost of goods manufactured is determined before the income statement can be
completed.
Ending inventory is adjusted by debiting Merchandise Inventory and crediting Capital.
An inventory ledger is used to track details of quantities and costs.
If liabilities are $20,000 and assets are $30,000, owner’s equity will be $10,000.
Market value per share is the price per share a corporation pays to holders of stock
when it is redeemed.
The Sales Returns and Allowances account is contra-revenue.
Revenues are closed to the Expense accounts.
If a company had a beginning balance of $5,000 in Raw Materials, an ending balance of
$3,000 and purchased $27,000 of materials during the month, then the raw material
used for the month was $25,000.
The acid test ratio is usually lower than the current ratio.
The retail method is used by many manufacturing businesses to estimate the amount of
inventory.
Depreciation Expense is closed to Income Summary, but Accumulated Depreciation is
not closed.
A real account is the same as a permanent account.
The income statement is a financial statement.
When a perpetual inventory system is used, a physical inventory should be taken at
least monthly.
Accounts Payable indicates monies owed to us by our clients or customers.
Retained earnings represent past investments into the company.
The income statement approach estimates a percentage of Accounts Receivable that is
uncollectible.
Cash is credited when the business makes a payment for supplies.
A profit center and a cost center both generate revenue.
Equipment is an example of a capital account.
The full disclosure principle says that if a change is made:
A) the company should disclose the change.
B) the effects of the change on profit and inventory valuation should be disclosed.
C) the company should show justification for the change in a footnote on the financial
reports.
D) All of these answers are correct.
The method of reporting cash flows from operating activities under which revenues and
expenses on the income statement are adjusted to reflect the amount of cash received or
expended for each item is the:
A) direct method.
B) indirect method.
C) combination method.
D) adjustment method.
To examine in detail the weekly payroll of all employees, one would look at the:
A) W-2.
B) W-4.
C) payroll register.
D) employee earnings record.
The trial balance lists the accounts:
A) alphabetically.
B) in the same order as in the ledger.
C) all debits first and then credits.
D) all credits first and then debits.
A bank service charge would be included on the bank reconciliation as a(n):
A) addition to the balance per books.
B) subtraction from the balance per books.
C) addition to the balance per bank.
D) subtraction from the balance per bank.
Which of the following goods should Nassen Company include in its December 31,
201X, count?
A) Goods held on consignment for Acorn Supply
B) Goods sold to Crishom, F.O.B. destination, and arrival date scheduled for January 5
C) Goods that are not salable
D) Goods in transit purchased F.O.B. destination
The term F.O.B. means:
A) free on board.
B) freight or bill.
C) freight order billing.
D) fee on bill.
Saxon Corporation’s beginning inventory was $15,000. The cost of goods sold was
$350,000 for the year, with an ending inventory of $20,000. Inventory turnover for the
year is:
A) 20 times.
B) 10 times.
C) 11.67 times.
D) 8.75 times.
Which type of account would NOT be reported on the balance sheet?
A) Expense
B) Cash
C) Accounts Payable
D) Equipment
The accounting procedures are the same for sole proprietorships as for partnerships
with the exception of:
A) the asset section includes more than one cash account.
B) the liability section.
C) the revenue section.
D) the capital section is now divided per the number of partners.
The right side of any account is the:
A) debit side.
B) credit side.
C) ending balance.
D) beginning balance.
During the month of October, Ford advertised on the Internet. Ford received the bill for
$600 in October, but waited until November to pay the advertising expense. The journal
entry to record the payment in November is:
A) Accounts Payable, debit; Cash, credit
B) Advertising Expense, debit; Accounts Payable, credit
C) Advertising Expense, debit; Cash, credit
D) The journal entry is not made in November.
The voucher system strengthens internal control because:
A) all the duties of preparing a voucher and the receiving reports are assigned to a
single person.
B) certain payments, which are made on a regular basis, such as monthly rent payments,
do not need to be vouchered.
C) the employee who approves all vouchers then sends the approved vouchers to others
who prepare the voucher register and the check register.
D) All of these answers are correct.
Finished goods ending inventory was understated. This error will cause:
A) the cost of goods manufactured to be overstated.
B) the cost of goods sold to be overstated.
C) the net income to be overstated.
D) All of these are correct.
Assets are equal to:
A) liabilities + owner’s equity.
B) liabilities – owner’s equity.
C) liabilities – revenues.
D) revenues + liabilities.
If Wages and Salaries Payable is debited, what account would most likely be credited?
A) Cash
B) Wages and Salaries Expense
C) Payroll Expense
D) SUTA Payable
Accounting provides information to:
A) managers.
B) government.
C) investors.
D) All of these answers are correct.
The general journal entry to record a payment to a creditor would most commonly
include:
A) a debit to Accounts Payable and a credit to Cash.
B) a debit to Capital and a credit to Cash.
C) a debit to Supplies and a credit to Cash.
D) a debit to Cash and a credit to Accounts Payable.
What is George’s gross profit rate if net sales are $100,000, operating expenses are
$25,000, and cost of goods sold is $60,000?
A) 40.0%
B) 25.0%
C) 35.0%
D) 60.0%
When recording transactions in two or more accounts and the totals of the debits and
credits are equal, it is called:
A) debiting.
B) crediting.
C) balancing.
D) double-entry bookkeeping.
A cash inflow from a financing activity would be:
A) paying cash dividends.
B) issuing stock or bonds.
C) paying interest on notes payable.
D) making payments for additional inventory.
A voucher register is:
A) a replacement for the purchases journal.
B) a special journal which records prenumbered vouchers.
C) Both A and B
D) Neither A nor B
Describe how the transactions listed would be handled applying the gross method and
the net method. For example: A $750 invoice with 3/10 net 30 terms.
Transaction Gross Method Net
Method
(a) Record original transaction
(b) Returned purchases
(c) Discounts taken
(d) Discounts not taken
Indicate which adjustments would require a journal entry during the completion of the
bank reconciliation. Place an “X” on the respective line(s).
________ a. Deposit in transit
________ b. Bank service charge
________ c. NSF check
________ d. Check written for $58 recorded on the company’s ledger as $85
________ e. Outstanding checks
________ f. Check written for $42 recorded as $4
________ g. Check printing charge
________ h. Note collected by bank.
To calculate dividends on par-value preferred stock:
A) multiply the number of shares issued times rate.
B) multiply rate times par-value per share.
C) multiply number of shares outstanding times rate times par-value.
D) None of these answers is correct.
A ledger:
A) includes all company accounts and their balances.
B) can replace the financial statements.
C) is the same as a chart of accounts.
D) is known as a worksheet.
Bonds payable issued with collateral are called:
A) debenture bonds.
B) serial bonds.
C) callable bonds.
D) secured bonds.
Which of the following is an operating expense?
A) Salaries Expense
B) Payroll Tax Expense
C) Purchases
D) Both A and B are correct.
Compute net earnings on March 3, when gross (taxable) pay equals $750.
FICA-OASDI tax rates are 6.2%, FICA-Medicare rate is 1.45%, federal income tax
$71.00, and state income tax $5.00.
A) $615.00
B) $610.00
C) $616.62
D) $672.12
Asset management ratios measure:
A) a company’s ability to earn a profit.
B) a company’s ability to meet short-term obligations.
C) how well a company is using debt versus equity.
D) how effectively a company is using its assets.
Many associations such as medical centers and law firms could organize as a:
A) sole proprietorship.
B) corporation.
C) partnership.
D) Both B and C are correct.
The beginning balance in Cash was $4,000. Additional cash of $2,000 was received.
Checks were written totaling $2,500. The ending balance in cash is:
A) $2,000.
B) $6,000.
C) $4,500.
D) $3,500.
Merchants who buy goods from wholesalers for resale to customers are:
A) merchandisers.
B) retailers.
C) service companies.
D) None of the above is correct.
If the direct write-off method of accounting for uncollectible receivables is used, what
general ledger account is debited to write off a customer’s account as uncollectible?
A) Bad Debts Recovered
B) Bad Debts Expense
C) Accounts Receivable
D) Interest Expense
The ________ is the one who consigns the merchandise.
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 total gross earnings.
Indicate which effect(s) each situation will have:
1. New check written
2. Recorded in the general journal
3. Recorded in auxiliary petty cash record
4. Petty cash voucher prepared
________ Bought Supplies on account
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 nature of the
account (permanent/temporary).
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).
Baxter Corporation has 1,000 shares of $5 par value common stock issued and
outstanding.
Journalize the following Baxter transactions for 20XX:
Feb. 1 Purchased 200 shares of treasury stock at $6.00.
20 Declared a $2.00 per share cash dividend payable on March 15
to stockholders of record March 1.
Mar. 15 Paid the cash dividend.
May 10 Declared a 10% stock dividend. The market value of the stock is $15.00 per
share.
May 30 Distributed the stock dividend.
Jun 10 Reissued the treasury stock for $9.00.
Separation of duties in a voucher system leads to a more effective ________ for the
management of cash payments.
On the worksheet, the Balance Sheet debit column totaled $2,000 and the credit column
totaled $1,400. What is the amount of Net Loss?
$ ________
Accumulated depreciation is a contra ________ and is reported on the ________
________.
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.
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.
Calculate the cost of goods manufactured from the following information.
Beginning Raw Materials Inventory: $63,000
Ending Raw Materials Inventory: 58,000
Overhead: 36,000
Beginning Finished Goods Inventory: 27,000
Ending Finished Goods Inventory: 32,000
Direct Labor: 42,000
Raw Materials Purchased: 73,000
Beginning Work-in-Process Inventory: 12,000
Ending Work-in-Process Inventory: 15,000
Using the following accounts:
[1] Cash
[2] Dividends payable
[3] Preferred stock
[4] Common stock
[5] Common Stock dividend distributable
[6] Paid-in capital in excess of par value-common
[7] Paid-in capital in excess of par value – preferred
[8] Paid-in capital from treasury stock
[9] Retained earnings
[10] Appropriation for plant expansion
[11] Treasury stock
[12] Income summary
[13] Paid-in capital in excess of par value-Stock dividend
Indicate the account(s) to be debited and credited to record the following transactions.
Sold treasury stock at a price below cost when there was sufficient paid-in capital from
treasury stock to absorb the difference between cost and selling price.
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 that the account in which the account balance is reported, and in column 4 the
account’s nature (permanent/temporary).
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 in which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
Fox Company uses a voucher system and the periodic inventory method. The following
transactions were completed:
May 3 Purchased $5,000 of merchandise; terms 3/10, n/30.
Prepared voucher #205.
May 13 Paid voucher #205.
Required: Prepare journal entries to record the above transactions. Assume Fox
Company uses the gross method for recording purchases. Omit explanations.
The Bixby Co. had the following transactions involving the purchase of merchandise.
Prepare the necessary general journal entries. Any applicable freight costs are prepaid
by the seller. The perpetual inventory method is in use.
June 16 Purchased merchandise having a price of $6,000 from the Shelby
Manufacturing Co.
on account with credit terms 2/10, n/30. Transportation terms F.O.B destination.
June 16 Purchased merchandise having a price of $9,000 from the Ajax Supply House
on account with credit terms 2/10, n/30. Transportation terms F.O.B shipping point.
The freight costs of $175 were added to the invoice. Merchandise was shipped June 16.
June 17 Received the goods from Shelby.
June 17 Received the goods from Ajax.
June 20 Returned for credit merchandise with an invoice price of $800 to Ajax.
June 25 Paid Shelby the amount owed.
June 28 Paid Ajax the amount owed.
June 30 Returned for cash, merchandise with an invoice price of $400 to Shelby.
Prepare the necessary general journal entry for June 16. Purchased merchandise having
a price of $9,000 from the Ajax Supply House on account with credit terms 2/10, n/30.
Transportation terms F.O.B shipping point. The freight costs were $175.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________