On a classified balance sheet, inventory is classified as
a. an intangible asset.
b. property, plant, and equipment.
c. a current asset.
d. a long-term investment.
Answer:
The usual sequence of steps in the transaction recording process is:
a. journal –> analyze –> ledger.
b. analyze –> journal –> ledger.
c. journal –> ledger –> analyze.
d. ledger –> journal –> analyze.
Answer:
Which of the following would not be considered a motive for making a stock
investment in another corporation?
a. Appreciation in the market value of the stock investment
b. Use of the investment for expanding its own operations
c. Use of the investment to diversify its own operations
d. An increase in the amount of interest revenue from the stock investment
Answer:
The paneling of the body of an open pickup truck would be classified as a(n)
a. revenue expenditure.
b. addition.
c. improvement.
d. ordinary repair.
Answer:
A loss on the write down of obsolete inventory should be reported as
a. “other expenses and losses.”
b. part of discontinued operations.
c. an operating expense.
d. an extraordinary item.
Answer:
At December 31, the stockholders’ equity of Smith Company was as follow:
The book value per share of common stock is
a. $7.00
b. $7.20
c. $8.40
d. $7.70
Answer:
The following information is available for Heller Company:
Instructions
Compute each of the following:
(a) Inventory turnover.
(b) Days in inventory.
Answer:
Ale Company reports a $16,000 increase in inventory and a $8,000 increase in accounts
payable during the year. Cost of Goods Sold for the year was $150,000. The cash
payments made to suppliers were
a. $150,000.
b. $158,000.
c. $126,000.
d. $174,000.
Answer:
Prepare the necessary journal entry for each of the following transactions for Zenia
Corporation.
(a) Issued 2,000 shares of its $5 par value common stock for $20 per share.
(b) Issued 5,000 shares of its stock for land advertised for sale at $90,000. Zenia’s stock
is actively traded at a market price of $16 per share.
Answer:
A plant asset was purchased on January 1 for $60,000 with an estimated salvage value
of $12,000 at the end of its useful life. The current year’s Depreciation Expense is
$6,000 calculated on the straight-line basis and the balance of the Accumulated
Depreciation account at the end of the year is $30,000. The remaining useful life of the
plant asset is
a. 10 years.
b. 8 years.
c. 5 years.
d. 3 years.
Answer:
Selected transactions for Good Home, a property management company, in its first
month of business, are as follows:
Jan. 2 Issued stock to investors for $15,000 cash.
3 Purchased used car for $5,200 cash for use in business.
9 Purchased supplies on account for $500.
11 Billed customers $2,100 for services performed.
16 Paid $450 cash for advertising.
20 Received $1,300 cash from customers billed on January 11.
23 Paid creditor $300 cash on balance owed.
28 Paid dividends of $2,000.
Instructions
For each transaction indicate the following.
(a) The basic type of account debited and credited (asset (A), liability (L), stockholders’
equity (SE)).
(b) The specific account debited and credited (cash, rent expense, service revenue, etc.).
(c) Whether the specific account is increased (incr.) or decreased (decr).
(d) The normal balance of the specific account.
Use the following format, in which the January 2 transaction is given as an example.
Answer:
A company decides to exchange its old machine and $231,000 cash for a new machine.
The old machine has a book value of $189,000 and a fair value of $210,000 on the date
of the exchange. The cost of the new machine would be recorded at
a. $420,000.
b. $441,000.
c. $399,000.
d. cannot be determined.
Answer:
Internal auditors
a. are hired by CPA firms to audit business firms.
b. are employees of the IRS who evaluate the internal controls of companies filing tax
returns.
c. evaluate the system of internal controls for the companies that employ them.
d. cannot evaluate the system of internal controls of the company that employs them
because they are not independent.
Answer:
The statement of cash flows reports each of the following except
a. cash receipts from operating activities.
b. cash payments from investing activities.
c. the net change in cash.
d. cash sales.
Answer:
Evergreen Manufacturing Corporation purchased 5,000 shares of its own previously
issued $10 par common stock for $115,000. As a result of this event,
a. Evergreen’s Common Stock account decreased $50,000.
b. Evergreen’s total stockholders’ equity decreased $115,000.
c. Evergreen’s Paid-in Capital in Excess of Par account decreased $65,000.
d. All of these answers are correct.
Answer:
Sargent Corporation bought equipment on January 1, 2015. The equipment cost
$360,000 and had an expected salvage value of $60,000. The life of the equipment was
estimated to be 6 years. Assuming straight-line deprecation, the book value of the
equipment at the beginning of the third year would be
a. $360,000.
b. $150,000.
c. $260,000.
d. $100,000.
Answer:
Which one of the following amounts increases each period when accounting for
long-term notes payable?
a. Cash payment
b. Interest expense
c. Principal balance
d. Reduction of principal
Answer:
Which account listed below would be double ruled in the ledger as part of the closing
process?
a. Cash
b. Retained Earnings
c. Dividends
d. Accumulated Depreciation’”Equipment
Answer:
Starting with net income and adjusting it for items that affected reported net income but
which did not affect cash is called the
a. direct method.
b. indirect method.
c. working capital method.
d. cost-benefit method.
Answer:
Expenses incurred but not yet paid or recorded are called
a. prepaid expenses.
b. accrued expenses.
c. interim expenses.
d. unearned expenses.
Answer:
On November 1, Gentle Company received a $3,000, 6%, three-month note receivable.
The cash to be received by Gentle Company when the note becomes due is:
a. $3,000.
b. $3,030.
c. $3,045.
d. $3,180.
Answer:
Compute the missing amount for each of the following notes:
Answer:
Three important dates associated with dividends are the: (1)__________________,
(2)__________________, and (3)__________________.
Answer:
If a revenue account is credited, the revenue account is increased.
Answer:
T’Pol Furniture factors $900,000 of receivables to Trip Factors, Inc. Trip Factors
assesses a 2% service charge on the amount of receivables sold. T’Pol Furniture factors
its receivables regularly with Trip Factors. What journal entry does T’Pol make when
factoring these receivables?
Answer:
The IRS does not require the taxpayer to use the same depreciation method on the tax
return that is used in preparing financial statements.
Answer:
On January 2, 2015, Superchunk purchased a general liability insurance policy for
$2,700 for coverage for the calendar year. The entire $2,700 was charged to Insurance
Expense on January 2, 2015. If the firm prepares monthly financial statements, the
proper adjusting entry on January 31, 2015, will be:
Answer:
Reck Company receives a $15,000, 3-month, 8% promissory note from Fey Company
in settlement of an open accounts receivable. What entry will Reck Company make
upon receiving the note?
Answer:
Match the items below by entering the appropriate code letter in the space provided.
1> An entry that involves three or more accounts.
2> Transferring journal entries to ledger accounts.
3> The side which increases an account.
4> A list of all the accounts used by an enterprise.
5> A record of increases and decreases in specific assets, liabilities, and stockholdersl
items.
6> Left side of an account.
7> An entry that involves only two accounts.
8> A book of original entry.
9> A list of accounts and their balances at a given time.
10> Has a credit normal balance
Answer:
The income statement is an important financial statement used by individuals who are
interested in the operations of a business enterprise. Explain how the time period
assumption and the revenue recognition and expense recognition principles provide
guidance to accountants in preparing an income statement.
Answer: