A company changes its inventory costing method each period in order to maximize net
income. This is a violation of the consistency principle.
Ordinary repairs to plant assets are referred to as revenue expenditures.
The trial balance verifies the equality of debits and credits at a point in time.
The post-closing trial balance shows the updated Retained Earnings balance.
Accounting for stated value common stock is identical to accounting for par value
stock.
Under accrual basis accounting, revenue is recorded only when cash is received.
Debits in the journal are always posted as debits in the ledger.
The T-account is a summary device that is shaped like a capital T with debits posted on
the left side of the vertical line and credits posted on the right side of the vertical line.
Business owners use accounting information to set goals, evaluate progress toward
those goals, and make adjustments when needed.
The smaller the current ratio, the higher the firm’s ability to repay its current debts.
Employer FICA tax is paid by the employer and is added to the employee’s earnings.
Properly recording inventory when sold and removing the units sold from the inventory
count will prevent a company from running out of inventory.
Entries from the purchases journal are posted monthly to the accounts payable
subsidiary ledger and daily to the general ledger.
The declaration date is the date the corporation records that stockholders will receive
dividend checks.
A horizontal analysis would be used if an analyst wants to see how the assets of a
company have changed from one year to the next.
At the beginning of 2017, Yummy Cupcakes, Inc. has the following ledger
balances:Accounts Receivable $40,000 (Debit)
Allowance for Bad Debts $7,000 (Credit)During the year, credit sales amounted to
$810,000. Cash collected on credit sales amounted to $760,000, and $16,000 has been
written off. Yummy Cupcakes uses the aging-of-receivables method to record bad debts
expense. The estimate of uncollectible accounts was $26,000. The ending balance in the
Allowance for Bad Debts is ________.
A) $35,000
B) $16,000
C) $26,000
D) $19,000
Indicate the effects on the accounting equation of the following business transactions of
Smith Service Corporation for b) to d) below. Use proper account titles. Transaction a)
is answered as a guide.
a) Received cash from Don Jones; issued common stock to him.
Prepaid Rent in the worksheet’s unadjusted trial balance column is $5,000. Prepaid Rent
in the balance sheet column is $2,000. Which of the following entries would have
caused this difference?
A) a $3,000 debit entry to Prepaid Rent in the worksheet’s adjustments column
B) a $3,000 credit entry to Rent Expense in the worksheet’s adjustments column
C) a $3,000 credit entry to Prepaid Rent in the worksheet’s adjustments column
D) a $3,000 credit entry to Rental Revenue in the worksheet’s adjustments column
Journalizing a transaction involves ________.
A) calculating the balance in an account using journal entries
B) posting the account balances in the chart of accounts
C) preparing a summary of account balances
D) recording the data only in the journal
Dalton Delivery Service is hired on October 31, 2016 to perform services, beginning on
November 1, 2016. The delivery services will be performed for six months at a rate of
$3,000 per month. Dalton’s fiscal year ends on December 31. What amount of service
revenue should be recorded as an adjusting entry on December 31, 2016?
A) $3,000
B) 0
C) $6,000
D) $9,000
Which of the following is true of the general journal?
A) All transactions recorded in one of the special journals also are recorded in the
general journal.
B) Manual accounting information systems do not need the general journal.
C) The adjusting entries and the closing entries are recorded in the general journal.
D) Non-routine transactions are generally not recorded in the general journal.
Cat Nap Corp. uses the indirect method to prepare the statement of cash flows. Refer to
the following section of the comparative balance sheet:Cat Nap Corp.
Comparative Balance Sheet
December 31, 2017 and 2016
How will the change in Accounts Receivable be shown on the statement of cash flows?
A) addition to net income under the operating activities section
B) subtraction from net income under the operating activities section
C) positive cash flow under the financing activities section
D) negative cash flow under the investing activities section
Which of the following transactions is recorded by selecting the “Receive payment”
action of QuickBooks?
A) making electricity bill payments
B) selling merchandise inventory on account
C) selling products for cash
D) paying interest to bondholders
When a loss is recorded on the sale of a significant interest investment, ________.
A) total assets will increase
B) equity will increase
C) total assets will decrease
D) equity will remain unchanged
First Street, Inc. has 6 units in ending merchandise inventory on December 31. The
units were purchased in November for $190 each. The price lists from suppliers indicate
the current replacement cost of the item to be $182 each. Which of the following
statements is true of the effects of the adjustments to ending merchandise inventory on
the cost of goods sold?
A) The cost of goods sold would increase by $8.
B) The cost of goods sold would not be affected.
C) The cost of goods sold would decrease by $48.
D) The cost of goods sold would increase by $48.
Martin Sales provides the following information:Net credit sales: $800,000
Beginning net accounts receivable: $40,000
Ending net accounts receivable: $22,000
Calculate the accounts receivable turnover ratio. (Round your answer to the nearest
whole number.)A) 20 times
B) 26 times
C) 36 times
D) 35 times
A business collects cash from a customer for services that were performed one month
earlier. Which of the following accounts is debited?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
The following transactions for March have been journalized and posted to the proper
accounts.
What is the ending balance in the Service Revenue account?
A) $15,000
B) $8,000
C) $13,000
D) $7,000
When is a trial balance usually prepared?
A) after each entry is journalized
B) before the financial statements are prepared
C) after the financial statements are prepared
D) at the beginning of an accounting period
Lafayette, Inc. was incorporated on January 1, 2014. Lafayette issued 15,000 shares of
common stock and 800 shares of preferred stock on that date. The preferred stock is
cumulative, $100 par, with an 12% dividend rate. Lafayette has not paid any dividends
yet. In 2017, Lafayette had its first profitable year, and on November 1, 2017, Lafayette
declared a total dividend of $44,000. What is the total amount that will be paid to
common stockholders?
A) $9,600
B) $38,400
C) $5,600
D) $44,000
A business makes a cash payment to a supplier on account for office supplies that were
purchased earlier. Which of the following accounts is credited?
A) Cash
B) Accounts Payable
C) Office Supplies
D) Utilities Expense