A high rate of inventory turnover indicates difficulty in selling inventory.
The issue price of a bond-whether it is issued at par, premium, or discount-has an effect
on the principal repayment at maturity.
Unearned revenue is a liability account.
An accounts receivable requires the business to pay cash in the future.
The most that the owner of a sole proprietorship can lose, as a result of business debts
or lawsuits, is the amount he/she has invested in the business.
Establishing controls for efficiency of the payroll process is one of the two key controls
for payroll.
The difference that arises between the balance on the bank statement and the balance on
the company’s books because of a time lag in recording transactions is known as a
permanent difference.
Why would a corporation issue bonds payable instead of issuing stock?
A) Debt is a less expensive source of capital than stock.
B) Borrowing by issuing bonds payable carries no risk to the company.
C) Debt affects the percentage of ownership of the corporation by the stockholders.
D) Debt does not have to be shown on the balance sheet.
When bonds are issued at face value, ________.
A) the amount of cash received depends on the amount of bond discount or premium
B) for each interest payment, the amount of Interest Expense equals the amount of cash
paid
C) for each interest payment, the amount of Interest Expense depends on the
amortization of the bond discount or premium
D) the journal entry to record the issuance of the bonds includes a debit to the Bonds
Payable account
Which of the following is true of comprehensive income?
A) All items included in comprehensive income enter into the determination of net
income.
B) Dividend payments are not included in the determination of comprehensive income,
even though it results in a decrease in total stockholders’ equity.
C) Comprehensive income includes company changes in total stockholders’ equity from
all sources, including owners’ investments.
D) Comprehensive income cannot be combined with a traditional income statement into
a combined statement of comprehensive income.
McDaniel, Inc. uses the direct method to prepare its statement of cash flows. Refer to
the following financial statement information for the year ended December 31,
2017:McDaniel, Inc.
Comparative Balance Sheet
December 31, 2017 and 2016
McDaniel, Inc.
Income Statement
December 31, 2017 and 2016
Use the direct method to compute the payments made to employees. (Accrued
Liabilities relate to other operating expense.)
A) $72,200
B) $43,500
C) $24,700
D) $47,500
Rosewood, Inc. earned revenues of $19,000 and incurred expenses of $4,000. The
company declared and paid cash dividends of $1,500. What is the balance in the Income
Summary account after closing net income or loss to the Retained Earnings account?
A) debit balance of $19,000
B) credit balance of $4,000
C) credit balance of $15,000
D) balance of $0
An internal document that helps summarize data for the preparation of financial
statements is called a ________.
A) journal
B) ledger
C) worksheet
D) chart of accounts
Which of the following is a characteristic of a current liability?
A) It creates a present obligation for future payment of cash or services.
B) It cannot be settled with services.
C) It is an avoidable obligation.
D) It occurs because of a future transaction or event.
A business makes a cash payment to a supplier for office supplies that were purchased
earlier on account. Which of the following accounts is debited?
A) Cash
B) Accounts Payable
C) Office Supplies
D) Utilities Expense
Rodriguez Tint, Inc. uses the indirect method to prepare the statement of cash flows.
Refer to the following income statement:Rodriguez, Inc.
Income Statement
Year Ended December 31, 2017
Additional information provided by the company includes the following:
Current assets, other than cash, decreased by $5,100.
Current liabilities increased by $2,300.Compute the net cash provided by (used for)
operating activities.
A) $(18,000)
B) $(45,600)
C) $10,500
D) $23,400
Which of the following is subtracted from net sales revenue to arrive at gross profit on a
multi-step income statement?
A) cost of goods available for sale
B) cost of goods sold
C) sales discounts and sales returns and allowances
D) operating expenses
When a stockholder contributes cash to a corporation in exchange for stock, ________.
A) liabilities and stockholders’ equity are increased
B) assets and stockholders’ equity are increased
C) one asset is increased and another asset is decreased
D) assets and liabilities are increased
Debra Technologies invests $68,000 to acquire $68,000 face value, 10%, five-year
corporate bonds on December 31, 2010. The bonds will mature on December 31, 2015.
The bonds pay interest semiannually on December 31 and June 30 every year until
maturity. Assume Debra Technologies uses a calendar year. Based on the information
provided, which of the following will be included in the journal entry for the transaction
on December 31, 2014?
A) a credit to Interest Revenue for $6,800
B) a debit to Interest Revenue for $6,800
C) a credit to Interest Revenue for $3,400
D) a debit to Interest Revenue for $3,400
On January 1, 2016, Bratios Company purchased equipment and signed a six-year
mortgage note for $97,000 at 15%. The note will be paid in equal annual installments of
$25,631, beginning January 1, 2017. On January 1, 2017, the journal entry to record the
first installment payment will include a ________. (Round your answer to the nearest
whole number.)
A) debit to Mortgage Payable for $25,631
B) debit to Interest Expense for $14,550
C) credit to Cash for $11,081
D) credit to Mortgage Payable for $97,000
In a typical computerized accounting information system, ________.
A) transactions must be recorded in debit and credit format
B) the software automatically knows to record a debit or a credit
C) transactions are posted manually
D) spreadsheets must be used to produce financial statements
A corporation has 4,000 shares, 10% preferred stock of $55.00 par preferred stock, and
8,000 shares of common stock outstanding. The net income for the year is $260,000.
Calculate earnings per share. (Round your answer to the nearest cent.)
A) $55.00
B) $29.75
C) $32.50
D) $65.00
If an adjusting entry includes a debit to Rent Expense, it indicates that the payment of
rent had been previously recorded as a(n) ________.
A) deferred expense
B) depreciation expense
C) accrued expense
D) accrued revenue
Wellington, Inc. uses the direct method to prepare its statement of cash flows. Refer to
the following financial statement information for the year ended December 31,
2017:Wellington, Inc.
Comparative Balance Sheet
December 31, 2017 and 2016
Wellington, Inc.
Income Statement
December 31, 2017
A) $287,400
B) $294,500
C) $260,300
D) $296,100
At Cadmia Services, the cashier collects checks and cash from customers, and the
junior accountant records the transactions in the journal. The controller approves the
journal entries and bank reconciliations. The treasurer signs checks and approves
contracts.Which internal control procedure is exemplified in the above situation?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
Cash disbursement journals also are known as ________.
A) sales journals
B) purchases journals
C) cash receipts journals
D) cash payments journals
Beetles, Inc. recorded the following journal entry on March 2, 2016.
From the journal entry above, identify the transaction on March 2, 2016.
A) Beetles purchased goods worth $4,500 and signed a one-year note for the same.
B) Beetles sold goods for $4,500 cash.
C) Beetles received $4,500 for services to be performed in a later period.
D) Beetles paid $4,500 for services to be received at a later date.