Use the information above to answer the following question. Assuming that the
company uses cash basis accounting, what is net income for May?
Melody’s Piano School operations for the month of May were limited to the following
transactions:
– Provided $400 of piano lessons to students who paid in cash.
– Provided $100 of piano lessons on account.
– Collected $300 from students who took piano lessons during April.
– Paid April’s piano rental bill of $100.
– Received May’s piano rental bill of $150 and set it aside for payment in June.
A) $800.
B) $300.
C) $350.
D) $600.
Net income was $418,600 in the current year and $364,000 in the prior year. The
year-to-year percentage change in net income is closest to:
A) 15%.
B) 55%.
C) 87%.
D) 13%.
Which of the following would be included in cash flows from investing activities?
A) Cash collected from customers
B) Cash received from an issuance of bonds
C) Cash dividends paid
D) Cash used to purchase equipment
On December 31, 2015, interest of $500 is owed on a bank loan that will not be paid
until June 30, 2016. What is the necessary adjusting journal entry on December 31,
2015?
A) Debit Interest Expense and credit Cash for $500
B) Debit Interest Expense and credit Interest Payable for $500
C) Debit Interest Payable and credit Interest Expense for $500
D) Debit Interest Receivable and credit Interest Revenue for $500
A company issues $20 million in new stock. It later uses the cash received to pay off
promissory notes. What accounts are affected by these two transactions?
A) Common Stock, Cash, and Notes Payable.
B) Common Stock, Cash, Investments, and Notes Payable.
C) Cash, Common Stock, and Accounts Payable.
D) Common Stock, Investments, and Notes Payable.
Brighton, Inc. uses the indirect method to determine its net cash flows from operating
activities. During the course of the year, the company’s Accounts Receivable increased
by $10,000 and its Accounts Payable decreased by $5,000. If these are the only two
adjustments required to convert net income to net cash provided by operating activities,
the combined effect will be a(n):
A) subtraction of $5,000.
B) addition of $5,000.
C) addition of $15,000.
D) subtraction of $15,000.
An example of an account that could be included in an accrual adjustment for revenue
is:
A) Interest Receivable.
B) Interest Payable.
C) Unearned Revenue.
D) Cash.
The book value of equipment is equal to which of the following?
A) Cost of equipment plus the related accumulated depreciation
B) Accumulated depreciation less the related depreciation expense
C) Cost of equipment less the related accumulated depreciation
D) Its accumulated depreciation plus the related depreciation expense
Your business purchased an investment security on April 1 that will pay $90 interest on
June 30. Which of the following adjusting entries would be made on April 30?
A) Debit Interest Receivable and credit Interest Revenue for $90
B) Debit Interest Revenue and credit Interest Receivable for $30
C) Debit Interest Receivable and credit Interest Revenue for $30
D) Debit Interest Revenue and credit Interest Receivable for $90
In the interest formula, the interest rate is on a(n) _____ basis; therefore, the time
variable must reflect how many _____ out of _____ in the interest period.
A) monthly, months, 6
B) annual, years, 1
C) monthly, months, 12
D) annual, months, 12
A retail store that drops all of its product prices by 25% will experience a(n) ________
in its overall gross profit percentage but may experience a(n) ________ in sales
volume.
A) increase, increase
B) decrease, decrease
C) increase, decrease
D) decrease, increase
When faced with an ethical dilemma, an accountant should:
A) Identify who will be affected by the situation, identify and evaluate the alternative
courses of action, and choose the alternative that is the most ethical.
B) report the matter to the SEC.
C) report the matter to the IRS.
D) resign.
Use the information above to answer the following question. If the company pays a
$15,000 dividend and the preferred stock is noncumulative, what is the amount the
common stockholders will receive?
A) $15,000
B) $9,000
C) $9,900
D) $0