The rate of return on total assets measures a company’s success in using its assets to
earn a profit.
Investors who want to know the amount of cash a company has available for new
opportunities, such as expanding into a new sales region, should analyze the company’s
free cash flow.
A T-account is a summary device with credits posted on the left side of the vertical line.
For strong controls over cash receipts, the checks to be deposited should be sent to the
treasurer, and the remittance advices should be sent to the accounting department.
In a trial balance, total debits must always equal total credits.
Certified Public Accountants are licensed professional accountants who serve the
general public.
Given the same purchase and sales data, and assuming the cost of inventory is rising,the
costing methods for inventory will result in different amounts for sales revenue.
The post-closing trial balance shows the net income for the period just ended.
Depreciation is the allocation of a plant asset’s cost to expense over its useful life.
The trial balance is also known as the balance sheet.
When a business makes a cash payment, the Cash account is debited.
The trial balance reports the balances of assets, liabilities, and equity.
A worksheet is an external document that forms a part of the financial statements.
If the Fair Value Adjustment account for trading investments has a debit balance,
________.
A) it is subtracted from the Fixed Asset account to determine carrying value
B) it is subtracted from the Short-term Investment€Trading account to determine
carrying value
C) it is added to the Short-term Investment€Trading account to determine carrying
value
D) it is added to the Fixed Asset account to determine carrying value
The relationship between total liabilities and total assets is the ________.
A) debt ratio
B) debt to equity ratio
C) current ratio
D) earnings per share
Caleb Brown has been the sole owner of a bicycle sales and repair shop for several
years. Which of the following business types would limit Caleb’s personal liability
exposure to the entity’s debts?
A) partnership
B) limited-liability company
C) sole proprietorship
D) limited-liability partnership
If $30,000 is invested for one year at an annual interest rate of 13%, it will grow in
value to ________.
A) $33,900
B) $36,208
C) $3,900
D) $32,308
The ending merchandise inventory for the current year is overstated by $28,000. What
effect will this error have on the following year’s net income?
A) The net income will be overstated by $56,000.
B) The net income will be overstated by $28,000.
C) The net income will be understated by $28,000.
D) The net income will be understated by $56,000.
Marygrove Glassware Company issues $1,014,000 of 10%, 10-year bonds at 97 on
February 28, 2017. The bond pays interest on February 28 and August 31. On August
31, 2017, how much cash did Marygrove pay to the bondholders?
A) $51,968
B) $50,700
C) $101,400
D) $49,432
Financial statements are prepared from the balances in a(n) ________.
A) general journal
B) chart of accounts
C) unadjusted trial balance
D) adjusted trial balance
Which of the following is the order of steps to journalize an entry?
A) Identify the accounts and the account type Decide whether each account increases or
decreases, then apply the rules of debits and credits Record the transaction
B) Identify the accounts and the account type Record the transaction Decide whether
each account increases or decreases, then apply the rules of debits and credits
C) Record the transaction Identify the accounts and the account type Decide whether
each account increases or decreases, then apply the rules of debits and credits
D) Decide whether each account increases or decreases, then apply the rules of debits
and credits Identify the accounts and the account type Record the transaction
Harrison, an employee of Saft Associates, Inc., has gross salary for March of $4,000.
The entire amount is under the OASDI limit of $117,000 and thus subject to FICA. He
is also subject to federal income tax at a rate of 18%. Harrison has a deduction of $320
for health insurance and $80 for United Way. Which of the following is included in the
entry to record the disbursement of his net pay?
A) credit to Salaries and Wages Payable
B) debit to United Way Payable
C) debit to FICA Taxes Payable
D) credit to Cash
Crusoe Waterworks Corporation provides plumbing services. Transactions of Crusoe
Waterworks during the first year of operations are given below.
a) Received $4,000 cash and issued common stock to Robinson.
b) Paid $3,000 cash for equipment to be used for plumbing repairs.
c) Borrowed $27,000 from a local bank and deposited the money in the checking
account.
d) Paid $900 rent for the year.
e) Purchased $1,000 of office supplies on account.
f) Completed a plumbing repair project for a local lawyer and received $3,200 cash.
Calculate the amount of total stockholders’ equity after recording the transactions.
Assume office supplies of $1,000 are left at the end of the year.
A) $6,300
B) $3,200
C) $4,000
D) $27,000
The following are the current month’s balances for Toys Galore, Inc. before preparing
the trial balance.
What amount should be shown for Common Stock on the trial balance?
A) $39,000
B) $18,000
C) $13,500
D) $23,000
Which of the following is a contra account?
A) Depreciation Expense
B) Accumulated Depreciation
C) Unearned Revenue
D) Earned Revenue
Credit sales of assets other than merchandise inventory occur infrequently and are
recorded in the ________.
A) sales journal
B) cash receipts journal
C) accounts receivable journal
D) general journal
Which of the following is a plant asset?
A) Equipment
B) Patents
C) Trademark
D) Accounts Receivable
Under which of the following categories would Accounts Receivable appear?
A) Current assets
B) Current liabilities
C) Long-term assets
D) Long-term liabilities
Which of the following is a measure of how quickly an item can be converted to cash?
A) Debt ratio
B) Current ratio
C) Liquidity
D) Accounting cycle
Which of the following line items will appear on the income statement of a
merchandiser but not of a service company?
A) Salaries Expense
B) Depreciation Expense
C) Cost of Goods Sold
D) Supplies Inventory
The terms of an invoice are 3/10, n/25. This means that a ________.
A) discount of 10 percent is allowed if the invoice is paid within three days
B) discount of 3 percent is allowed if the invoice is paid within 10 days
C) discount of 25 percent is allowed if the invoice is paid within 10 days
D) discount of 3 percent is allowed if the invoice is paid after 25 days
A company has a cash ratio of 2.3. What does this imply?
A) The company has an unnecessarily large amount of cash supply.
B) The company does not have enough cash supply.
C) The company is not in a position to pay off its long-term liabilities.
D) The company is not in a position to pay off its current liabilities.
The Allowance for Bad Debts account has a credit balance of $5,000 before the
adjusting entry for bad debts expense. The company’s management estimates that 5% of
net credit sales will be uncollectible for the year 2017. Net credit sales for the year
amounted to $280,000. What is the amount of Bad Debts Expense reported on the
income statement for 2017?
A) $14,000
B) $19,000
C) $7,000
D) $9,000