In the case of a deferred expense, the adjusting entry required at the end of a period will
consist of a debit to the Prepaid Expense account. Assume the deferred expense was
initially recorded as an asset.
Laramie, Inc. signed a contract with a service provider for security services at a rate of
$260 per month for the period of January through June. Laramie, Inc. will pay the
service provider the entire amount at the end of June. The company makes adjusting
entries each month. During the month of June, it should record total security expense of
$520.
Burglar alarms, fire alarms, and security cameras improve internal control.
To accurately determine the financial performance of a company, it is necessary to
compare its performance from year to year, with a competing company, and with the
same industry as a whole.
Debit refers to the right side of the T-account, and credit refers to the left side.
The days’ sales in receivables for Barker Sales is 35. The days’ sales in receivables for
Xanadu Company is 25. This suggests that Xanadu is having greater difficulty than
Barker is in collecting its accounts receivable.
Residual value is also known as depreciable cost.
Plant assets are long-lived, tangible assets used in the operation of a business.
A law firm provides legal services for clients who do not pay immediately. There is no
effect on the counting equation until the client pay for the services.
Using the FIFO method of inventory valuation will always produce the same results
whether a company uses perpetual or periodic inventory costing methods.
When using a four-column account, the posting reference column allows the user of the
financial data to trace the amounts in the journal back to the ledger.
Investment income may come from interest earned from debt investments, dividends
earned from stock investments, and/or increases in the market value of the security.
Debentures are backed only by the goodwill of the bond issuer.
If a bond is issued at a discount, the issue price is greater than face value.
In the cash receipts journal, the Other Accounts CR column is used when a transaction
involves a credit entry that is not listed in the headings (columns) of the cash receipts
journal.
The accountant of Barnes Architectural Services failed to make an adjusting entry to
record $7,000 of depreciation expense. Which of the following statements is true?
A) The total revenue will be overstated.
B) The total revenue will be understated.
C) The total expenses will be overstated.
D) The total expenses will be understated.
Jackson Plumbing Services earned $500 by completing a job for Smith Company. The
$500 earned by Jackson Plumbing Services is its ________.
A) revenue
B) equity
C) gain
D) debt
The Allowance for Bad Debts account has a debit balance of $8,000 before the
adjusting entry for bad debts expense. After analyzing the accounts in the accounts
receivable subsidiary ledger using the aging-of-receivables method, the company’s
management estimates that uncollectible accounts will be $13,000. What amount of bad
debts expense will be reported on the income statement?
A) $6,000
B) $21,000
C) $5,000
D) $13,000
The following information is from the December 31, 2017 balance sheet of Tudor
Corporation.
What was the total paid-in capital as of December 31, 2017?
A) $736,000
B) $996,900
C) $913,000
D) $888,000
On June 1, 2017, Smith & Beecham Services issued $33,000 of 10% bonds that mature
in five years. They were issued at par. The bonds pay semiannual interest payments on
June 30 and December 31 of each year. On December 31, 2017, what is the total
amount paid to bondholders?
A) $1,650
B) $3,300
C) $825
D) $1,100
Pearland, Inc. has 9,000 shares of preferred stock outstanding. The preferred stock has a
$90 par value, a 14% dividend rate, and is noncumulative. If Pearland has sufficient
funds to pay dividends, what is the total amount of dividends that will be paid out to
preferred stockholders?
A) $32,143
B) $113,400
C) $57,857
D) $8,100
Available-for-sale (AFS) investments are reported as ________ if the business expects
to sell them within one year.
A) current assets
B) equity
C) long-term assets
D) either current assets or long-term assets
On January 1, Ajax Corp. accepted a one-year note for $55,000 at 7% from one of its
customers. When the note matured on December 31, the customer was unable to pay,
and the company recorded the dishonor. The amount of the debit recorded on December
31 is ________.
A) $51,150
B) $3,850
C) $55,000
D) $58,850
Which one of the following is true of the bank reconciliation?
A) It should not be prepared by an employee who handles cash transactions.
B) It is prepared in place of the cash ledger.
C) It is a financial statement.
D) It guarantees that no errors have been made.
Which of the following items should be amortized?
A) natural resources
B) goodwill
C) patents, copyrights, trademarks
D) tangible property, plant, and equipment, other than land
Which of the following describes the risk assessment component of internal control?
A) Internal auditors monitor company controls to safeguard assets, and external
auditors monitor the controls to ensure that the accounting records are accurate.
B) Risk assessment is the “tone at the top” of the business.
C) A company must identify its risks and take necessary steps to minimize them.
D) Risk assessment is designed to ensure that the business’s goals are achieved.
Under the weighted-average method for inventory costing, the cost per unit is
determined by ________.
A) dividing the cost of goods available for sale by the number of units available
B) dividing the cost of goods available for sale by the number of units in beginning
inventory
C) multiplying the number of units purchased with the weighted-average cost
D) multiplying the cost of goods available for sale by the ending weighted-average cost
of the previous accounting period
Which of the following would be included in the entry by the payee to record a
dishonored note receivable?
A) a debit to Accounts Receivable
B) a debit to Interest Revenue
C) a debit to Notes Receivable
D) a credit to Interest Expense
When a check is issued, the party who is paying the cash is referred to as the ________.
A) payee
B) maker
C) bank signatory
D) depositor
Which of the following is a true statement?
A) Stockholders are guaranteed annual dividends.
B) Stockholders receive their proportionate share of any assets remaining after the
corporation pays its debts and liquidates.
C) Stockholders may authorize a business contract on behalf of the corporation.
D) Stockholders may determine the issue price of common stock.
A business makes a payment of $1,400 on a note payable. Which of the following
journal entries would be recorded?
A) Cash is credited and Notes Payable is debited for $1,400.
B) Notes Payable is credited and Cash is debited for $1,400.
C) Cash is credited and Financing Expense is debited for $1,400.
D) Cash is debited and Financing Revenue is credited for $1,400.
The Allowance for Bad Debts account has a debit balance of $6,000 before the
adjusting entry for bad debts expense. After analyzing the accounts in the accounts
receivable subsidiary ledger, the company’s management estimates that uncollectible
accounts will be $11,000. What will be the amount of the adjustment in the Allowance
for Bad Debts account?
A) $16,250
B) $11,000
C) $15,900
D) $17,000
After initially recording a transaction, the data is then transferred to the ________.
A) chart of accounts
B) ledger
C) trial balance
D) journal
Annual reports ________.
A) are required to be prepared by every corporation
B) discuss the company’s competitors and the risks related to the company’s business
C) are also called a Form 10-Q
D) only include the company’s financial statements