Compton Inc. made a $500 ordinary repair to a piece of equipment. Compton’s
accountant debited this amount to the asset account, Equipment and credited Cash. Was
this the correct entry and if not, why not?
a.Yes, this was the correct entry.
b.No, the correct entry would be a debit to Maintenance and Repairs Expense and a
credit to Cash.
c.No, the correct entry would be a debit to Cash and a credit to Maintenance and
Repairs Expense.
d.No, the correct entry would be a debit to Service Revenue and a credit to Cash.
Haverty Industries increased its gross profit rate from 18.4% in 2013 to 23.7% in 2014.
Which of the following would be a possible explanation for this change?
a.Haverty’s global sourcing efforts at the beginning of 2014 resulted in a lower cost of
merchandise sold.
b.Haverty’s new profit lines with lower margins in 2014 became a larger component of
their sales.
c.Haverty increased its product markdowns in 2014.
d.Haverty’s average margin between the selling price and the inventory cost decreased
over this two-year period.
Noise Makers Inc has the following inventory data:
A physical count of merchandise inventory on July 30 reveals that there are 32 units on
hand. Using the average cost method, the value of ending inventory is
a.$620
b.$640
c.$651
d.$660
If a gain of $45,000 is incurred in selling (for cash) office equipment having a book
value of $180,000, the total amount reported in the cash flows from investing activities
section of the statement of cash flows is
a.$135,000.
b.$180,000.
c.$225,000.
d.$45,000.
On July 1 the Fisher Shoe Store paid $18,000 to Acme Realty for 6 months rent
beginning July 1. Prepaid Rent was debited for the full amount. If financial statements
are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is:
a.debit Rent Expense, $18,000; credit Prepaid Rent, $3,000.
b.debit Prepaid Rent, $3,000; credit Rent Expense, $3,000.
c.debit Rent Expense, $3,000; credit Prepaid Rent, $3,000.
d.debit Rent Expense, $18,000; credit Prepaid Rent, $15,000.
Return on common stockholders’ equity is most closely related to
a.gross profit rate and operating expenses to sales ratio.
b.profit margin and free cash flow.
c.times interest earned and debt to stockholders’ equity ratio.
d.return on asset and leverage (debt to assets ratio).
Burke Company purchases land for $90,000 cash. Burke assumes $2,500 in property
taxes due on the land. The title and attorney fees totaled $1,000. Burke has the land
graded for $2,200. They paid $10,000 for paving of a parking lot. What amount does
Burke record as the cost for the land?
a.$93,200.
b.$105,700.
c.$95,700.
d.$90,000.
Whitmore Corporation Issues a 1,800,000, 10%, 10-year mortgage on December 31,
2014. The terms call for semi-annual installment payments of 144,435.The entry to
record the first installment payment will include
a.a debit to Interest Payment of 144,435.
b.a debit to Mortgage Notes Payable of 54,435.
c.a debit to Interest Expense of 180,000.
d.a credit to cash of 144,435.
Dobler Company uses a periodic inventory system. Details for the inventory account for
the month of January 2014 are as follows:
An end of the month (1/31/2014) inventory showed that 160 units were on hand. If the
company uses FIFO and sells the units for $10 each, what is the gross profit for the
month?
a.$1,188
b.$1,212
c.$2,400
d.$1,600
On January 1, 2014, Holt Corporation had $1,000,000 of common stock outstanding
that was issued at par and retained earnings of $750,000. The company issued 60,000
shares of common stock at par on July 1 and earned net income of $400,000 for the
year.
Instructions
Journalize the declaration of a 15% stock dividend on December 10, 2014, for the
following two independent assumptions.
(a)Par value is $10 and market value is $16.
(b)Par value is $5 and market value is $8.
Savory Thymes, Inc.had net credit sales of $9,000,000 and cost of goods sold of
$5,250,000 for the year. The average inventory for the year amounted to $2,500,000.
The average days in inventory during the year was approximately
a.115 days.
b.130 days.
c.139 days.
d.174 days.
At December 31, 2014, before any year-end adjustments, Janus Company’s Prepaid
Insurance account had a balance of $2,800. It was determined that $1,200 of the Prepaid
Insurance had expired. The adjusted balance for Prepaid Insurance for the year would
be:
a.$1,200.
b.$1,600.
c.$3,800.
d.$2,800.
The cash records of Grayson Company show the following:
There were no bank debit or credit memoranda and no errors were made by either the
bank or Grayson Company.
Answer the following questions:
(a)What were the deposits in transit at January 31?
(b)What were the outstanding checks at January 31?
Ramirez Company acquires land for $210,000 cash. Additional costs are as follow.
Ramirez will record the acquisition cost of the land as
a.$224,640.
b.$227,200.
c.$225,920.
d.$210,000.
Marvin Services Corporation had the following accounts and balances:
If the balance of the Buildings account was $51,000, what would be the total of
liabilities and stockholders’ equity?
a.$102,000
b.$105,000
c.$81,000
d.$75,000
If $2,500,000 of bonds are issued during the year but $4,000,000 of old bonds are
retired during the year, the statement of cash flows will show a(n)
a.net increase in cash of $1,500,000.
b.net decrease in cash of $1,500,000.
c.increase in cash of $2,500,000 and a decrease in cash of $4,000,000.
d.net loss on retirement of bonds of $1,500,000.
Givens Retail purchased land for a new parking lot for $75,000. The paving cost
$105,000 and the lights to illuminate the new parking area cost $36,000. Which of the
following statements is true with respect to these additions?
a.$180,000 should be debited to the Land account.
b.$141,000 should be debited to Land Improvements.
c.$216,000 should be debited to the Land account.
d.$216,000 should be debited to Land Improvements.
Which of the following is not a true statement about a multiple-step income statement?
a.Operating expenses do not include income tax expense.
b.There may be a section for non-operating activities.
c.There may be a section for operating assets.
d.There is a section for cost of goods sold.
Jack’s by the Tracks. has the following partial balance sheet:
JACK’S BY THE TRACKS.
Balance Sheet (partial)
What effect will the unrealized gain on available for sales securities have on
comprehensive income?
a.No effect on comprehensive income.
b.Increase of $800,000 in comprehensive income.
c.Increase of $8,800,000 in comprehensive income.
d.Decrease of $800,000 in comprehensive income.
Operating data for Panola Land Corporation are presented below
Instructions
Prepare a schedule showing a vertical analysis for 2014 and 2013.
John Tate is the bookkeeper for Gabelli Company. John has been trying to get the
balance sheet of Gabelli Company to balance. It finally balanced, but now he’s not sure
it is correct.
Instructions
Prepare a correct balance sheet.
Prepare the journal entries to record the following transactions on Markowitz
Company’s books using a perpetual inventory system. On February 6, Markowitz
Company sold $105,000 of merchandise to the Lyman Company, terms 2/10, net /30.
The cost of the merchandise sold was $70,000. On February 8, the Lyman Company
returned $14,000 of the merchandise purchased on February 6. The cost of the
merchandise returned was $7,000. On February 16 Markowitz Company received the
balance due from the Lyman Company.
Listed below are items typically found in the stockholders’ equity section of the balance
sheet.
Common stock, $10 stated value
Retained earnings
8% Preferred stock, $100 par value
Paid-in capital in excess of par value – Preferred Stock
Paid-in capital in excess of stated value – Common Stock
Treasury stock
Instructions
Place each of the items listed below in the appropriate subdivision of the stockholders’
equity section of a balance sheet.
The following information is available for Chenard Corporation for the year ended
December 31, 2014.
Instructions
Prepare a statement of cash flows using the indirect method.
Hanlin Company uses the periodic inventory system to account for inventories.
Information related to Hanlin Company’s inventory at January 31 is given below:
Instructions
1>Show computations to value the ending inventory using the FIFO cost assumption if
600 units remain on hand at January 31.
2>Show computations to value the ending inventory using the weighted-average cost
method if 600 units remain on hand at January 31.
3>Show computations to value the ending inventory using the LIFO cost assumption if
600 units remain on hand at January 31.
Retro Company is authorized to issue 10,000 shares of 8%, $100 par value preferred
stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If
Retro issues 5,000 shares of preferred stock for land with an asking price of $625,000
and a market value of $550,000, which of the following would be the best journal entry
for Retro to record?
West County Bank agrees to lend Drake Builders Company $200,000 on January 1.
Drake Builders Company signs a $200,000, 6%, 6-month note. The entry made by
Drake Builders Company on January 1 to record the proceeds and issuance of the note
is
