A customer returned damaged goods for credit. Under a perpetual system, which of the
seller’s accounts decreases?
a. purchase returns
b. accounts receivable
c. sales returns
d. sales revenue
Flossil Fossils Company purchased a tract of land containing coal in 2013 for
$20,000,000 and then spent $30,000,000 to get a mine ready for operation. The
company estimates that there will be 10,000,000 tons of coal available over the next 10
years. The land has a residual value of $500,000. During 2013, 1,000,000 tons of coal
were mined.
A retail company issues numerous discount coupons throughout the year. A balance in
the estimated liability account indicates
a. that an error has been made in posting.
b. the amount of coupons that are expected to be redeemed in the future.
c. the amount of coupons already redeemed.
d. that more coupons were redeemed than estimated.
A trial balance is a(n)
a. optional financial statement used only by creditors.
b. tool used to prove the equality of debits and credits in the general ledger.
c. list of accounts and their balances taken from the chart of accounts.
d. financial statement which can be used in place of a balance sheet.
The inventory account a manufacturer uses to record the cost of products completed and
available for sale is called
a. raw materials inventory
b. work in process inventory
c. finished goods inventory
d. merchandise inventory
Relationship between total liabilities and stockholders’ equity.
For each of the following sentences, select the phrase or group of words that best
completes the statement.
a. Debt-to-equity ratio
b. Dividend payout ratio
c. Dividend yield ratio
d. Earnings per share
e. Leverage
f. Return on assets ratio
g. Return on common equity ratio
h. Stock repurchase payout
A photo processing store purchased office supplies on January 15 by paying cash of
$5,000. On January 1, the Supplies account had a beginning balance of $500. On
December 31, an inventory revealed that supplies on hand amounted to $500. A) What
adjusting journal entry is necessary at December 31st?
B) How much will be reported on the balance sheet at December 31 for Supplies?
C) How much supplies expense will be reported on the income statement?
D) If the adjustment in part A is not recorded, what will be the impact on the income
statement, retained earnings statement, and balance sheet?
Which of the following will not cause a trial balance to be out of balance?
a. The balance for the account is incorrectly computed.
b. A debit entry is posted as a credit.
c. A credit entry is posted to the wrong account, but still as a credit.
d. An account is accidentally omitted from the trial balance.
Which of the following statements best describes the term “outstanding check” from a
company’s point of view?
a. A check written by the company and presented to the bank for payment.
b. A check written by the company but not yet presented to the bank for payment.
c. A check written by a customer to the company, and the check has been presented to
the bank for payment.
d. A check written by a customer to the company, but it has not yet been presented to
the bank for payment.
How are cash equivalents reported or disclosed in the financial statements?
a. They are included with cash as a current asset on the balance sheet.
b. They are only reported on the statement of cash flows.
c. They are only disclosed in the notes to the financial statements.
d. They are included with short-term investments as a current asset on the balance sheet.
Which of the following statements is false with respect to the qualitative characteristics
of useful accounting information?
a. Comparability is concerned with different companies using the same accounting
methods; whereas, consistency is concerned with a single company using the same
accounting methods over time.
b. Trade-offs are often necessary in evaluating relevant versus reliable information.
c. All external and internal events must be fully disclosed in the accounting system.
d. The full disclosure policy should be followed in all situations that would made a
difference to financial statement users.
The accounting records for Delta Driving School shows a cash balance of $14,134 on
February 28, 2013. On the evening of February 28, company receipts of $1,250 were
placed in the bank’s night deposit drop box; this deposit was processed by the bank on
March 1. The February 28 bank statement shows balance of $18,877, including
collection of a $6,000 note receivable plus $55 of interest earned, a service charge of
$40, and a $1,550 debit memo for the payment of the company’s utility bill. All of the
checks that the company had written during January were listed on the bank statement
except for check #1908 in the amount of $1,528. A) Prepare a bank reconciliation to
calculate the company’s adjusted cash balance at February 28, 2013.
B) Prepare the journal entries needed to adjust the cash records as a result of the bank
reconciliation procedures.
Which method of accounting for investments results in unrealized gains and losses
because the investments must be marked to market?
a. equity method
b. amortized cost method
c. fair value method
d. trading method
Assume that a company has a current ratio of 3. Failure to record estimated warranty
costs will cause the current ratio to be
a. overstated.
b. understated.
c. unchanged since the effects offset one another.
d. unchanged since it has no impact on any current asset or liability accounts.
Which one of the following is an accurate description of the Allowance for Doubtful
Accounts?
a. Contra Account
b. Liability Account
c. Revenue Account
d. Expense Account
When using the direct method to determine operating cash flows, how is the purchase
of equipment for cash shown on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
Which of the following combinations of ratios will best analyze a company’s income
statement performance?
a. gross profit percentage, return on common equity, and debt-to-equity
b. gross profit percentage, earnings per share, and net profit margin percentage
c. gross profit percentage, current ratio, and return on common equity
d. gross profit percentage, net profit margin percentage, and debt-to-equity
Refer to Kaleidoscope Paint. What is the carrying value of the bonds on the maturity
date?
Kaleidoscope Paint
On January 1, 2013, this company issued $500,000, 10-year, 9% bonds for $480,745.
The bonds pay interest on June 30 and December 31. The market rate is 10%. The
company plans to use the effective interest method of amortizing bond discounts and
premiums. a. $0
b. $19,255
c. $480,745
d. $500,000
The payment of salaries to employees will result in a debit to an expense account and a
credit to the ___________ account.
In an operating lease, the lessor retains the risks and obligations of ownership.
What are some weaknesses of performing time series analysis alone?
In the worksheet, the first set of columns immediately following the account titles is for
the Adjusted Trial Balance
Mortgage bonds are secure bonds.
The ________________ method of depreciation method is referred to as an
“accelerated” method.
A debit entry increases assets and revenue accounts.
Why is liquidity important for businesses?
A corporation has 10,000 shares of $5 par common stock authorized but only 8,000
shares issued and outstanding. In the space provided, indicate the effect of the following
dividend transactions (shown in chronological order) on each account listed by writing
the amount and whether the account would be debited or credited. For any instances
where there is no effect on the account, place N/A in the space.
