The face value of a bond payable minus the current balance of the discount account or
plus the current balance of the premium account is the bond’s carrying amount.
The direct method starts with net income and adjusts it to net cash provided by
operating activities.
Martinez Installations Company uses the direct method to prepare its statement of cash
flows. Martinez has reported sales revenues of $200,000 on its income statement for
2017. If the balance in Accounts Receivable has increased by $10,000 during the year,
then $10,000 needs to be added to $200,000 to calculate collections from customers.
The acid-test ratio is also known as the quick ratio.
Adjusting entries either credit a revenue account or debit an expense account.
When a customer returns goods to the seller, the seller debits the Purchase Returns
account.
The following is summary of information presented on the financial statements of a
company on December 31, 2017.
With respect to net income, a horizontal analysis reveals ________. (Round your
answer to two decimal places.)
A) that net income is 168.00% of net sales revenue
B) a $25,000 increase in net income
C) a 168.00% decrease in net income
D) a 168.00% increase in net income
A customer’s promise to pay in the future for services or goods sold is called a(n)
________.
A) Accounts Receivable
B) Accounts Payable
C) Unearned Revenue
D) Notes Payable
A business makes a payment in cash for advertising expense. Which of the following
accounts is debited?
A) Cash
B) Accounts Payable
C) Accounts Receivable
D) Advertising Expense
Which of the following sections from the statement of cash flows includes borrowing
cash and paying off loans?
A) the investing activities section
B) the operating activities section
C) the financing activities section
D) the non-cash investing and financing section
Morris Company established a petty cash fund with a $400 balance. Which of the
following statements is incorrect?
A) A journal entry is needed to debit the Cash account and credit the Petty Cash account
for $400.
B) There is no net effect on current assets.
C) The sum of the cash plus the total of the petty cash tickets should equal $400 at all
times.
D) The petty cash custodian cashes a check for $400 and places the currency in the
petty cash fund box.
Depreciation expense is recorded in a ________.
A) cash payments journal
B) sales journal
C) cash receipts journal
D) general journal
A business pays $500 cash for office supplies. Which of the following accounts is
debited?
A) Cash
B) Accounts Payable
C) Office Supplies
D) Utilities Expense
At Radiant, Inc., the sales department is also responsible for recording cash transactions
as it does not have a separate accounting department.In the above situation, which
internal control procedure needs strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
The formula for computing the current ratio is ________.
A) Current ratio = Current assets / Total assets
B) Current ratio = Current assets / Total liabilities
C) Current ratio = Current assets / Stockholders’ Equity
D) Current ratio = Current assets / Current liabilities
Which of the following statements is true of expenses?
A) Expenses increase equity, so an expense account’s normal balance is a credit
balance.
B) Expenses decrease equity, so an expense account’s normal balance is a credit
balance.
C) Expenses increase equity, so an expense account’s normal balance is a debit balance.
D) Expenses decrease equity, so an expense account’s normal balance is a debit balance.
On January 1, 2017, Zing Services issued $168,000 of six-year, 12% bonds when the
market interest rate was 11%. The issue price of the bonds was $177,110. Zing uses the
effective-interest method to amortize the bond premium. Semiannual interest payments
are made on June 30 and December 31 of each year. How much interest expense will be
recorded when the first interest payment is made?
A) $10,627
B) $9,741
C) $10,080
D) $9,240
The balances of select accounts of Janet, Inc. as of December 31, 2016 are given below:
The Unearned Revenue is the amount of cash received for services to be rendered in
January, 2017. The Interest Payable is due on February 15, 2017. What are the total
current liabilities shown on the balance sheet?
A) $5,400
B) $11,400
C) $13,600
D) $12,400
Viva, Inc. bought machine X for $18,000 two years ago. The machine had no residual
value and had an estimated useful life of 10 years. If the company uses the straight-line
depreciation method, calculate the current book value of the machine.
A) $14,400
B) $3,600
C) $19,800
D) $18,000
A photocopier cost $102,000 when new and has accumulated depreciation of $90,000.
If the business discards this plant asset, the result is ________.
A) a loss of $12,000
B) a loss of $11,250
C) a gain of $12,000
D) no gain or no loss
Which of the following is the correct formula to calculate inventory turnover?
A) Inventory turnover = Cost of goods sold / Average merchandise inventory
B) Inventory turnover = Cost of goods sold x Average merchandise inventory
C) Inventory turnover = Cost of goods sold + Average merchandise inventory
D) Inventory turnover = Cost of goods sold – Average merchandise inventory
Which of the following is an example of debt securities?
A) preferred stocks
B) real estate
C) common stocks
D) corporate bonds
A depreciable asset’s cost minus accumulated depreciation is called ________.
A) book value
B) residual value
C) accrued revenue
D) accrued expense
The following transactions have been journalized and posted to the proper accounts.
Prepare a trial balance at the end of the first month using the following details:
a) Received $15,000 cash and issued common stock.
b) Paid the first month’s rent with $800 cash.
c) Purchased equipment by paying $4,000 cash and executing a note payable for
$4,000.
d) Purchased office supplies for $200 cash. The supplies remain at the end of the month.
e) Billed clients for a total of $7,000 for design services rendered.
f) Received $1,000 cash from clients for services rendered above.
On December 2, 2017, St. Augustine, Inc. purchases land. In exchange for the land, St.
Augustine, Inc. issues 8,000 shares of common stock with $1.00 par value. The land has
been appraised at a market value of $400,000. Prepare the journal entry for this
transaction.
Brookside Equipment Company uses the periodic inventory system. Brookside reported
the following selected amounts at June 30, 2017:
Requirement A: Compute net sales revenue.
Requirement B: Compute cost of goods sold.
Requirement C: Compute gross profit.
Five O’Clock, Inc. purchased a van on January 1, 2017, for $800,000. Estimated life of
the van was five years, and its estimated residual value was $90,000. Five O’Clock uses
the straight-line method of depreciation. Prepare the depreciation schedule.
What is a common-size statement? Why are these statements useful?
For the following situation, state whether it represents a strength or weakness in internal
control and give the reason for your answer.The bookkeeper opens the mail, makes the
deposit, and makes the journal entries to record receipt of the cash and checks.
For the following situation, state whether it represents a strength or weakness in internal
control and give the reason for your answer.Second National Bank requires mandatory
vacations and job rotation.
On December 15, Duncan Services, Inc. collected revenue of $3,000 in advance from a
new client, and agreed to provide services to the client for the period of December 15
through January 15 of the following year. Assume that the company records deferred
revenues using the alternative treatment, and journalize the adjusting entry recorded on
December 31.
On September 1, 2017, Neighborhood, Inc. borrowed $125,000 by signing a
nine-month, 7.2% note payable. Prepare the journal entry to accrue interest expense on
December 31, 2016.
Hernandez Carpets Company buys a building for $115,000, paying $30,000 cash and
signing a 30-year mortgage note for $85,000 at 11%. Prepare the journal entry for the
purchase.
The following is the adjusted trial balance as of December 31, 2017 of Current Times
Watch Inc.:
Provide the closing entry for the Income Summary account.
