The operating cycle is the time span required for a business to repay its long-term
liabilities.
The stockholders’ claim to the assets of a business is called equity or stockholders’
equity.
If a debt security is purchased at a discount, the discount must be amortized when the
interest revenue is earned.
Cost of goods available for sale represents beginning merchandise inventory plus net
purchases less freight in.
The spreadsheet starts with the beginning statement of cash flows and concludes with
the ending statement of cash flows.
A trial balance summarizes the ledger by listing all the accounts with their balances at a
point in time.
On June 1, Edison, Inc. borrowed $24,000 on a one-year Note Payable with an interest
rate of 10% per year. It will repay the principal and interest at the end of the one-year
period. The company makes accrual adjustments at the end of each month. The
company should record interest expense of $2,400 on June 30.
The days’ sales in receivables ratio indicates the number of days it takes to collect the
average level of accounts receivable.
The balance sheet shows whether or not a business is earning profits.
The beginning balance in the Common Stock account of a company was $14,000. The
revenues and expenses were $240,000 and $100,000, respectively. During the year, the
company declared and paid dividends of $7,000. The ending balance in the Retained
Earnings was $133,000. (Assume that the opening balance of Retained Earnings was
zero.)
Nobells Corp. has acquired land and paid $500 as brokerage to acquire the land.
However, the company’s accountant has recorded the $500 as a revenue expenditure.
What is the effect of this error?
A) Net income is understated by $500.
B) Liabilities are overstated by $500.
C) Revenue is overstated by $500.
D) Assets are overstated by $500.
The accountant for Belden Jewelry Repair Services, Inc. forgot to make an adjusting
entry for Depreciation Expense for the current year. Which of the following is an effect
of this error?
A) Total assets are understated.
B) Revenues are overstated.
C) Total assets are overstated.
D) Net income is understated.
Gray Financial Services, Inc. invested $33,000 to acquire 6,250 shares of Mitt
Investments, Inc. on March 15, 2013. This investment represents less than 20% of the
investee’s voting stock. On May 7, 2017, Gray Financial Services, Inc. sells 2,500
shares for $19,250. When the journal entry to record the sale is made, ________.
A) Gain on Disposal will be credited
B) Long-term Investments-Available-for-Sale will be debited
C) Cash will be credited
D) Long-term Investments-Held-to-Maturity will be debited
Elite Services, Inc. pays $1,350,000 to acquire 38% of voting stock of Grey
Investments, Inc. on March 5, 2017. Which of the following is the correct journal entry
for the transaction?A)
B)
C)
D)
Which of the following types of stock has less investment risk?
A) common stock
B) par value stock
C) no-par stock
D) preferred stock
The amount of cash interest the borrower pays each year is based on the ________.
A) market conditions on the day of payment
B) market interest rate
C) stated interest rate
D) effective interest rate
Pan Services, Inc. owns 32% of voting stock of Grey Investments, Inc. During the year
2017, Grey Investments, Inc. earned profits of $320,000. Under the equity method,
which of the following journal entries will Pan Services record?A)
B)
C)
D)
A company purchased 100 units for $30 each on January 31. It purchased 170 units for
$25 each on February 28. It sold 170 units for $70 each from March 1 through
December 31. If the company uses the first-in, first-out inventory costing method, what
is the amount of Cost of Goods Sold on the income statement for the year ending
December 31? (Assume that the company uses a perpetual inventory system.)
A) $3,000
B) $4,250
C) $4,750
D) $7,250
On August 14, Main Street Bank lent $200,000 to City Cafe on a 75 day, 6% note. What
is the maturity date of the note?
A) Oct. 27
B) Oct. 28
C) Oct. 29
D) Oct. 30
Compute the present value of $46,000, invested for six years at 8%.Present value of $1:
A) $36,647
B) $25,300
C) $32,660
D) $28,980
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
Reducing expenses to increase operating profit is representative of ________.
A) safeguarding assets
B) following company policies
C) promoting operational efficiency
D) ensuring accurate, reliable accounting records
The cost of an asset is $1,110,000, and its residual value is $300,000. Estimated useful
life of the asset is five years. Calculate depreciation for the second year using the
double-declining-balance method of depreciation.
A) $222,000
B) $162,000
C) $324,000
D) $266,400
Which of the following statements is true if the income statement credit column
exceeds the income statement debit column on a worksheet?
A) The company made a net profit.
B) The company incurred a net loss.
C) The retained earnings account decreased during the period.
D) An error was made.
On January 1, 2016, Martini, Inc. acquired a machine for $1,050,000. The estimated
useful life of the asset is five years. Residual value at the end of five years is estimated
to be $100,000. What is the book value of the machine at the end of 2017 if the
company uses the straight-line method of depreciation?
A) $630,000
B) $670,000
C) $570,000
D) $629,996
Which of the following accounts decreases with a credit?
A) Cash
B) Common Stock
C) Accounts Payable
D) Notes Payable
Which of the following is included in the cost of land?
A) cost of fencing
B) cost of paving
C) brokerage commission
D) cost of outdoor lighting
Which of the following appears on a statement of cash flows prepared using the direct
method?
A) adjustments to net income
B) cash payments for salaries
C) adjustments for gains and losses on sale of property
D) increase/decrease in current assets