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Inventory is reported on the balance sheet as a current asset.
When a company pays its rent in advance, an asset is reported on the balance sheet.
The entry recorded when the petty cash fund is replenished includes a debit to Petty
Cash and a credit to Cash.
Net income is increased when accounts receivable are collected.
Tax accounting and financial accounting use the same depreciation calculations and
there are no differences in the results between the two accounting systems.
Unpaid dividends on cumulative preferred stock are called dividends in arrears.
Which of the following is an example of an error that would cause the trial balance to
be out of balance?
A) A journal entry was posted as a debit to Cash for $525 and a credit to Accounts
Receivable for $552.
B) A journal entry was posted as a debit to Cash and a credit to Sales Revenue when the
company received a $400 payment from a customer on account.
C) A purchase of supplies on account for $100 was posted as a debit to Supplies for $10
and a credit to Accounts Payable for $10.
D) A $350 transaction was not recorded at all.
Use the information above to answer the following question. Eaton Electronics uses the
specific identification method. What is its cost of goods sold?
A) $3,000
B) $2,950
C) $3,200
D) $3,033
If a company is paid in full for services provided this month, how will the basic
accounting equation be affected?
A) Liabilities will decrease.
B) Stockholders' equity will increase as revenue is recorded.
C) Liabilities will increase.
D) Assets will decrease.
A company issued 600 shares of $50 par value stock for $45,000. What is the total
amount of contributed capital?
A) $30,000
B) $15,000
C) $45,000
D) $50
A company's comparative balance sheet show total assets of $990,000 and $900,000,
for the current and prior years, respectively. The percentage change to be reported in the
horizontal analysis is an increase of:
A) 10%.
B) 9%.
C) 5%.
D) 4%.
A corporate charter specifies that the company may sell up to 20 million shares of
stock. The company sells 12 million shares to investors and later buys back 3 million
shares. The number of authorized shares after these transactions are accounted for is:
A) 12 million shares.
B) 20 million shares.
C) 9 million shares.
D) 17 million shares.
Use the information above to answer the following question. Eaton Electronics uses the
LIFO method. What is the cost of its ending inventory?
A) $13,850
B) $13,800
C) $13,760
D) $13,600
A contra-account:
A) increases the original value of the account to which it relates.
B) always appears in the same column of the trial balance as the account to which it
relates.
C) offsets, or reduces, another account.
D) reduce the asset to its fair value.
For billing and collection purposes, a company will internally keep a separate accounts
receivable account for each customer called a:
A) customer record.
B) subsidiary account.
C) subsidiary ledger.
D) debit memorandum.
The difference between net income and cash flow may be due to all of the following
except:
A) use of the direct method of presenting cash flows from operating activities.
B) the company being brand new.
C) fraudulent financial reporting.
D) seasonal variations in a company's operating activities.
Which of the following statements about capitalizing costs is correct?
A) Capitalizing costs refers to the process of converting assets to expenses.
B) All costs incurred to acquire an asset may be capitalized.
C) Capitalizing a cost means to record it as an asset.
D) Capitalizing costs results in an immediate decrease in net income.
Husain, Inc.'s income statement and other financial information for the current year is
presented below.
Required:
Part a. Perform vertical analysis of the income statement. (Round to the nearest whole
percentage.)
Part b. Calculate the debt-to-assets ratio. (Round to two decimal places.)
Part c. Calculate the times interest earned ratio. (Round to two decimal places.)
Part d. Evaluate the company's solvency.
Which of the following statements is correct regarding a voucher system?
A) The journal entry to record the asset purchased and liability owed should be
recorded when the bill for goods or services is received.
B)A voucher system is most commonly used in very small companies to make up for
the lack of other internal controls.
C)A well-designed voucher system will allow employees requiring office supplies to
place orders directly with suppliers for control purposes.
D)A well designed voucher system will eliminate fraud and errors.
A company uses a weighted-average perpetual inventory system. The following
transactions took place during the month of November:
What is the per-unit value of ending inventory on November 30 if this company uses a
weighted-average perpetual inventory system? (Round each per unit cost to two
decimal points.)
A) $6.00
B) $7.00
C) $8.80
D) $13.00
Countryside Corporation provides $6,000 worth of lawn care on account during the
month. Experience suggests that about 2% of net credit sales will not be collected. To
record the potential bad debts, Countryside Corporation would debit:
A) Accounts Receivable and credit Allowance for Doubtful Accounts for $120.
B) Allowance for Doubtful Accounts and credit Bad Debt Expense for $120.
C) Bad Debt Expense and credit Allowance for Doubtful Accounts for $120.
D) Bad Debt Expense and credit Accounts Receivable for $120.
