The Cost of Goods Sold account is classified as:
A.a liability.
B.an asset.
C.a contra asset.
D.an expense.
Jing Company was started on January 1, 2016 when it issued common stock for
$50,000 cash. Also, on January 1, 2016 the company purchased office equipment that
cost $34,000 cash. The equipment was delivered under terms FOB shipping point, and
transportation cost was $2,000. The equipment had a five-year useful life and a $12,000
expected salvage value.
Using double-declining balance depreciation, determine the amount of depreciation
expense and the amount of accumulated depreciation that would appear on the
December 31, 2018 financial statements.
A.$0/$24,000.
B.$960/$24,000.
C.$8,640/$23,040.
D.$5,184/$28,224.
Which one of the following is not an accurate description of the Allowance for
Doubtful Accounts?
A.The account is a contra account.
B.The account is a temporary account.
C.The amount of the Allowance for Doubtful Accounts decreases the net realizable
value of a company’s receivables.
D.The account is increased by an estimate of uncollectible accounts expense.
Madison Company issued an interest-bearing note payable with a face amount of
$24,000 and a stated interest rate of 8% to the Metropolitan Bank on August 1, 2016.
The note carried a one-year term.
Based on this information alone, the amount of total liabilities appearing on Madison’s
2016 balance sheet would be:
A.$24,720
B.$24,800
C.$25,920
D.$24,000
Indicate whether each of the following statements is true or false.
_____ a) Plant assets are classified as long-term assets, while intangible assets are
treated as current assets.
_____ b) Intangible assets include patents, copyrights, and natural resources.
_____ c) Intangible assets with indefinite useful lives will be not be amortized.
_____ d) The cost of land should be depleted over its useful life.
_____ e) The cost of a natural resource should be expensed (depleted) over its useful
life.
At the end of 2016 the following information is available for Grumpy, Happy, and Doc
Companies.
Which company is the most profitable from the owners’ perspective?
A.Grumpy
B.Happy
C.Doc
D.Cannot be determined
The following beginning and ending balances were drawn from the records of Allen Co.
If Allen Co. sold equipment that had an original cost of $175,000 and accumulated
depreciation of $75,000 for $62,500, how much did Allen pay for new equipment?
A.$12,500.
B.$25,000.
C.$100,000.
D.$250,000.
Sanchez Company engaged in the following transactions during 2015:
1) Started the business by issuing $42,000 of common stock for cash.
2) The company paid cash to purchase $26,400 of inventory.
3) The company sold inventory that cost $16,000 for $30,600 cash.
4) Operating expenses incurred and paid during the year, $14,000.
Sanchez Company engaged in the following transactions during 2016:
1) The company paid cash to purchase $35,200 of inventory.
2) The company sold inventory that cost $32,800 for $57,000 cash.
3) Operating expenses incurred and paid during the year, $18,000.
Note: Sanchez uses the perpetual inventory system.
The balance in the inventory account shown at December 31, 2016 is:
A.$2,400.
B.$12,800.
C.$61,600.
D.$28,800.
Jalisco, Inc., had issued and outstanding 250,000 shares of $8 par value common stock
at January 1, 2016 with a retained earnings balance of $750,000. Jalisco issued a 12%
stock dividend to its common shareholders. At the time of the dividend the market value
of the stock was $17 per share.
Required: a) What is the total dollar amount of the stock dividend?
b) Prepare the entry to record the stock dividend.
c) How many shares are outstanding after the stock dividend?
Which of the following would not be presented in the financing section of the statement
of cash flows?
A.Purchased a new office building by issuing a note payable.
B.Purchased treasury stock.
C.Repayment of long-term bonds payable.
D.Issuing of preferred stock.
Indicate whether each of the following statements is true or false. (Assume a perpetual
inventory system.)
_____ a) In a perpetual inventory system, an employee theft is discovered immediately.
_____ b) No adjusting entry is required for inventory losses under a perpetual inventory
system.
_____ c) Inventory shrinkage is calculated as the difference between the beginning and
ending balances in the merchandise inventory account.
_____ d) In a perpetual inventory system, adjustments for lost, damaged or stolen
merchandise are recorded as expenses.
_____ e) The entry to record inventory losses due to employee theft or shoplifting has a
negative effect on the statement of cash flows.
Which of the following is not a typical form associated with a bank checking account?
A.Signature card
B.Bank statement
C.Debit memo
D.Deposit ticket
The Garrett Company uses the perpetual inventory system. Although its inventory
records indicated $18,000 in the inventory, a physical count showed only $16,250.
Which of the following answers indicates the effect of the necessary write-down entry?
A.
B.
C.
D.
Indicate whether each of the following statements is true or false. (Assume a perpetual
inventory system)
_____ a) The purchase of merchandise inventory is recorded as an expense.
_____ b) Merchandise inventory is expensed in the period it is sold.
_____ c) Merchandise Inventory is an account appearing on the balance sheet.
_____ d) Cost of goods available for sale is allotted between cost of goods sold and
selling expenses.
_____ e) Cost of goods sold is a part of administrative and selling expenses.
The Curtis Company’s inventory records reflects the following for the month of October
2016:
Assuming that Curtis Company uses the FIFO cost flow method in a perpetual
inventory system:
(a) Calculate the cost of goods sold and the ending inventory for the month ending
October 31, 2016.
(b) Prepare the journal entry for the sale of inventory on October 31, 2016.
Which answer would represent the financial statement presentation of stockholders’
equity after the following transactions?
1) Issued 200 shares of $20 par value common stock for $50 a share. Five hundred
shares are authorized.
2) Purchased 75 shares of treasury stock at $44 a share.
A.
B.
C.
D.
The Oglethorpe Corporation reported a beginning balance of $12,400 in its Prepaid
Insurance account for 2016. During the year, Oglethorpe paid a total of $42,000 to
purchase insurance, and the Prepaid Insurance account had an ending balance of
$13,100. What was the amount of insurance expense that Oglethorpe reported for 2016?
A.$42,000
B.$42,300
C.$42,700
D.$41,300
Chandler Company declared and paid a cash dividend. Which of the following choices
accurately reflects how this event would affect the company’s financial statements?
A.
B.
C.
D.
What business event is represented by this journal entry?
A.Incurred supplies expense.
B.Purchased supplies on account.
C.Used supplies.
D.Purchased supplies with cash.
Jack’s Snow Removal Company received a cash advance of $6,000 on December 1,
2016 to provide services during the months of December, January, and February. The
2016 year-end adjustment to recognize the partial expiration of the contract will
A.increase assets by $2,000
B.increase equity by $2,000
C.increase liabilities by $2,000
D.increase assets by $2,000 and increase equity by $2,000
The following T-accounts are from the ledger of Hill Company. Hill uses the periodic
inventory system.
Which of the following is true about Hill Company?
A.When merchandise is sold, the Purchases account will be credited for cost of goods
sold.
B.The accounts indicate that Hill returned $6,000 of merchandise to a supplier.
C.The balance in the purchases account will appear on the balance sheet at year end.
D.The T-accounts indicate that Hill purchased inventory on account.
The Miller Company earned $190,000 of revenue on account during 2016. There was
no beginning balance in the accounts receivable and allowance accounts. During 2016
Miller collected $136,000 of cash from its receivables accounts. The company estimates
that it will be unable to collect 3% of its sales on account.
The amount of uncollectible accounts expense recognized on the 2016 income
statement was
A.$5,700.
B.$1,320.
C.$4,080.
D.$54,000.
Currie Company borrowed $20,000 from the Sierra Bank by issuing a 10% three-year
note. Currie agreed to repay the principal and interest by making annual payments in
the amount of $8,042. Based on this information, the amount of the interest expense
associated with the second payment would be: (round your answer to the nearest dollar)
A.$730.
B.$1,396.
C.$2,000.
D.$8,042.
Chase Co. uses the perpetual inventory method. The inventory records for Chase
reflected the following
Assuming Chase uses a FIFO cost flow method, the cost of goods sold for the sales
transaction on January 31 is:
A.$1,020.
B.$1,005.
C.$1,045.
D.$340.
Select the incorrect statement regarding the information disclosed in financial
statements.
A.The costs of providing all possible information about a firm would be prohibitively
high for the business.
B.Some information disclosed in financial statements may be irrelevant to some users.
C.Financial statements should be detailed enough to answer any financial-related
question an investor might have.
D.When too much information is presented users may suffer from information
overload.
A five-year, $500,000 bond was issued on January 1, 2016. The stated rate of interest
was 8%, and the effective rate of interest was 10%. The interest is paid semiannually.
Which of the following statements is correct?
A.This bond was issued at a premium, and each semiannual cash payment is $25,000.
B.This bond was issued at a discount, and each semiannual cash payment is $20,000.
C.This bond was issued at a discount, and the annual interest expense is $40,000.
D.This bond was issued at a premium, and the annual interest expense is $40,000.
Grace Company sold equipment for $40,000 cash. The equipment has cost $70,000 and
had accumulated depreciation of $44,000 at the time of the sale. Based on this
information alone, select the true statement.
A.Cash flow from investing activities would be less if the sale of equipment is reported
on the statement of cash flows under the direct method than if it is reported under the
indirect method.
B.Cash flow from investing activities would be greater if the sale of equipment is
reported on the statement of cash flows under the direct method than if it is reported
under the indirect method.
C.Cash flow from investing activities would be the same regardless of whether the sale
of equipment is reported on the statement of cash flows under the direct method or the
indirect method.
D.The answer cannot be determined because the amount of the salvage value is
unknown.
Which of the following items would be used to compute “Net Cash Flow from
Investing Activities” on a Statement of Cash Flows?
1) issue common stock
2) payment on principal of note payable
3) depreciation expense
4) sale of equipment for cash
A.1 and 4
B. 4 only
C.3 only
D.1, 2, 3, and 4
Nelson Company experienced the following transactions during 2016, its first year in
operation.
1) Issued $12,000 of common stock to stockholders.
2) Provided $4,600 of services on account.
3) Paid $3,200 cash for operating expenses.
4) Collected $3,800 of cash from accounts receivable.
5) Paid a $200 cash dividend to stockholders.
The amount of retained earnings appearing on Nelson Company’s December 31, 2016
balance sheet is:
A.$1,200.
B.$1,000.
C.$1,400.
D.$13,200.
The following information is available for Phoenix Corporation, which uses the
allowance method of accounting for uncollectible accounts. Phoenix expects 3% of
sales on account to be uncollectible.
Required: a) Calculate the amount of uncollectible accounts expense for 2016.
b) Prepare the journal entry to record uncollectible accounts expense for 2016.
c) In 2017, after several attempts of collection, Phoenix wrote off accounts that could
not be collected of $700. Prepare the journal entry to record the write-off of the $700.
d) Later in 2017, Phoenix received a check for $140 from one of the customers whose
account had been written off in c), above. Prepare the required journal entries to record
the collection of the $140.
How would accountants estimate the amount of a company’s uncollectible accounts
expense?
A.Consider new circumstances that are anticipated to be experienced in the future.
B.Compute as a percentage of credit sales.
C.Consult with trade association and business associates.
D.All of these answer choices are correct.
Gilligan Corporation was established on February 15, 2014. Gilligan is authorized to
issue 500,000 shares of $6.00 par value common stock. As of December 2016,
Gilligan’s stockholders’ equity accounts report the following balances:
At the end of 2016, Gilligan decides to issue a 5% stock dividend.
At the time of issue, the market price of the stock was $22 per share.
Calculate the number of shares outstanding after the stock dividend is issued.
A.57,750 shares
B.55,000 shares
C.52,250 shares
D.525,000 shares