Moroni Industries has the following inventory information.
Assuming that a periodic inventory system is used, what is the amount allocated to
ending inventory on a FIFO basis?
a. $11,500
b. $11,520
c. $33,960
d. $33,980
Answer:
Under the retail inventory method, the estimated cost of ending inventory is computed
by multiplying the cost-to-retail ratio by
a. net sales.
b. goods available for sale at retail.
c. goods purchased at retail.
d. ending inventory at retail.
Answer:
Priscilla has the following inventory information.
A physical count of merchandise inventory on July 31 reveals that there are 35 units on
hand. Using the average-cost method, the value of ending inventory is
a. $680.
b. $704.
c. $723.
d. $730.
Answer:
On June 30, 2015, Fox Enterprises sold equipment with an original cost of $990,000 for
$400,000. The equipment was purchased January 1, 2014, and was depreciated using
the straight-line method assuming a five-year useful life and $90,000 salvage value. The
necessary entries for 2015 include a
a. debit to Accumulated Depreciation’”Equipment for $180,000.
b. credit to Gain on Disposal of Equipment for $320,000.
c. credit to Cash for $400,000.
d. debit to Depreciation Expense for $90,000.
Answer:
The balance in the Prepaid Rent account before adjustment at the end of the year is
$21,000, which represents three months’ rent paid on December 1. The adjusting entry
required on December 31 is to
a. debit Rent Expense, $7,000; credit Prepaid Rent, $7,000.
b. debit Rent Expense, $14,000; credit Prepaid Rent $14,000.
c. debit Prepaid Rent, $7,000; credit Rent Expense, $7,000.
d. debit Prepaid Rent, $14,000; credit Rent Expense, $14,000.
Answer:
Vega Corporation’s December 31, 2015 balance sheet showed the following:
Vega declared and paid a $58,000 cash dividend on December 15, 2015. If the
company’s dividends in arrears prior to that date were $10,000, Vega’s common
stockholders received
a. $48,000.
b. $22,000.
c. $36,000.
d. no dividend.
Answer:
Xeris, Inc. has 1,000 shares of 6%, $10 par value, cumulative preferred stock and
50,000 shares of $1 par value common stock outstanding at December 31, 2015. What
is the annual dividend on the preferred stock?
a. $6 per share
b. $600 in total
c. $6,000 in total
d. $.06 per share
Answer:
Consolidated financial statements present all of the following except the
a. individual assets and liabilities of the parent company
b. individual assets and liabilities of the subsidiary.
c. total revenues and expenses of the subsidiary.
d. All of these are presented in consolidated financial statements.
Answer:
Companies that are subject to, but fail to comply with, the Foreign Corrupt Practices
Act of 1977
a. may do so legally by obtaining an exemption.
b. will be automatically dissolved.
c. may be subject to fines and officer imprisonment.
d. may be forced to sell their foreign subsidiaries.
Answer:
The following data is available for Blaine Corporation at December 31, 2015:
Common stock, par $10 (authorized 30,000 shares) $250,000
Treasury Stock (at cost $15 per share) 900
Based on the data, how many shares of common stock are outstanding?
a. 30,000
b. 25,000
c. 29,940
d. 24,940
Answer:
The LIFO inventory method assumes that the cost of the latest units purchased are
a. the last to be allocated to cost of goods sold.
b. the first to be allocated to ending inventory.
c. the first to be allocated to cost of goods sold.
d. not allocated to cost of goods sold or ending inventory.
Answer:
The Accumulated Depreciation account is a(n)
a. contra asset account.
b. liability account.
c. asset account.
d. operating expense account.
Answer:
If an investment firm underwrites a stock issue, the
a. risk of being unable to sell the shares stays with the issuing corporation.
b. corporation obtains cash immediately from the investment firm.
c. investment firm has guaranteed profits on the sale of the stock.
d. issuance of stock is likely to be directly to creditors.
Answer:
The time period assumption states that
a. a transaction can only affect one period of time.
b. estimates should not be made if a transaction affects more than one time period.
c. adjustments to the company’s accounts can only be made in the time period when the
business terminates its operations.
d. the economic life of a business can be divided into artificial time periods.
Answer:
At December 31, 2014, the available-for-sale securities for Allison, Inc. are as follows.
Instructions
(a) Prepare the adjusting entry at December 31, 2014, to report the securities at fair
value.
(b) Show the balance sheet and income statement presentation at December 31, 2014,
after adjustment to fair value. The securities are considered to be a long-term
investment.
Answer:
A new accountant working for Spirit Walker Company records $900 Depreciation
Expense on store equipment as follows:
The effect of this entry is to
a. adjust the accounts to their proper amounts on December 31.
b. understate total assets on the balance sheet as of December 31.
c. overstate the book value of the depreciable assets at December 31.
d. understate the book value of the depreciable assets as of December 31.
Answer:
On January 1, 2015, $2,000,000, 10-year, 10% bonds, were issued for $1,946,000.
Interest is paid annually on January 1. If the issuing corporation uses the straight-line
method to amortize discount on bonds payable, the monthly amortization amount is
a. $19,460.
b. $5,400.
c. $1,454.
d. $450.
Answer:
The first required step in the accounting cycle is
a. reversing entries.
b. journalizing transactions in the book of original entry.
c. analyzing transactions.
d. posting transactions.
Answer:
Which one of the following is shown on a multiple-step but not on a single-step income
statement?
a. Net sales
b. Net income
c. Gross profit
d. Cost of goods sold
Answer:
When the allowance method is used for bad debts, the entry to write off an individual
account known to be uncollectible involves a
a. debit to an expense account.
b. credit to an expense account.
c. credit to the allowance account.
d. debit to the allowance account.
Answer:
The Fair Value Adjustment account
a. is set up for each security in the company’s portfolio.
b. relates to the entire portfolio of securities held by the company.
c. is closed at the end of each accounting period.
d. appears on the income statement as Other Expenses and Losses.
Answer:
An intangible asset
a. does not have physical substance, yet often is very valuable.
b. is worthless because it has no physical substance.
c. is converted into a tangible asset during the operating cycle.
d. cannot be classified on the balance sheet because it lacks physical substance.
Answer:
Seaver Books, a small book publishing company, wrote off the debt of The Learning
Center, and the Academy of Basic Education, both small private schools, after it
determined that the schools were facing serious financial difficulty. No notice of the
action was sent to the schools; Seaver Books simply stopped sending bills. Nearly a
year later, The Learning Center was given a large endowment and a government grant.
The resulting publicity brought the school to the attention of Seaver Books, which
immediately reinstated the account, and sent a new bill to the school, including interest
for the entire time the debt was outstanding. No further action was taken regarding the
Academy of Basic Education, which was still operational.
Answer:
Domaine Corporation is authorized to issue 1,000,000 shares of $1 par value common
stock. During 2015, the company has the following stock transactions.
Jan. 15 Issued 500,000 shares of stock at $7 per share.
Sept. 5 Purchased 30,000 shares of common stock for the treasury at $9 per share.
Instructions
Journalize the transactions for Domaine Corporation.
Answer:
To determine a new depreciation amount after a change in estimate of a plant asset’s
useful life, the asset’s remaining depreciable cost is divided by its remaining useful life.
Answer:
An employee earnings record is a cumulative record of each employee’s gross earnings,
deductions, and net pay during the year.
Answer:
Handel Company uses the allowance method for estimating uncollectible accounts.
Prepare journal entries to record the following transactions:
Answer:
Management is responsible for establishing a system of internal control.
Answer:
An inexperienced accountant for Douglas Corporation made the following entries.
Instructions
On the basis of the explanation for each entry, prepare the entry that should have been
made for the transactions.
Answer:
If the proceeds from the sale of a plant asset exceed its book value, a gain on disposal
occurs.
Answer:
A dividend based on paid-in capital is termed a liquidating dividend.
Answer:
Transactions are entered in the ledger first and then they are analyzed in terms of their
effect on the accounts.
Answer: