Under the perpetual inventory system, when a purchaser makes payment within the
discount period, the amount of discount will be credited to the Merchandise Inventory
account.
The Salaries Payable account is a permanent account.
The system of accounting in which every transaction affects at least two accounts is
called the double-entry system.
Regardless of the type of plant asset disposal, the first step is to bring the depreciation
up to date.
The Sarbanes-Oxley Act was passed by the Public Company Accounting Oversight
Board.
The Office Supplies account is a temporary account.
The direct method of reporting cash flows from operating activities provides clearer
information about the sources and uses of cash than does the indirect method.
Weller, Inc. provided the following particulars for 2017:
Calculate the average number of days that inventory was held by Weller, Inc. during
2017. (Assume 365 days in a year. Round your intermediate calculations and final
answer to two decimal places.)
A) 341.12 days
B) 218.56 days
C) 122.07 days
D) 170.56 days
A corporation declares a dividend of $0.50 per share on 18,000 shares of common
stock. Which of the following is included in the entry to record the declaration?
A) Cash Dividends is debited for $9,000.
B) Paid-In Capital in Excess of Par-Common is credited for $9,000.
C) Cash Dividends is credited for $9,000.
D) Dividends Payable-Common is debited for $9,000.
Downs Tax Planning Service bought communications equipment for $9,600 on January
1, 2017. It has an estimated useful life of five years and zero residual value. Downs uses
the straight-line method to calculate depreciation and records depreciation expense in
the books at the end of every month. As of June 30, 2017, the balance in the
Accumulated Depreciation account for this equipment is ________.
A) $160
B) $1,920
C) $800
D) $960
To safeguard a business’s assets and reduce the likelihood of fraud and errors, its
accounting information system ________.
A) should be manual
B) must be flexible to accommodate changes in a business over time
C) should work smoothly with the business’s employees
D) must provide adequate controls of a business’s assets and data
The financial statements of Harbor Furniture Company include the following items:
What is 2017 acid-test ratio? (Round your answer to two decimal places.)
A) 0.23
B) 1.07
C) 1.86
D) 0.54
Rockville Corporation makes a $1,200 purchase of merchandise inventory on account.
This transaction will be recorded in the ________.
A) cash payments journal
B) sales journal
C) cash receipts journal
D) purchases journal
The revenue recognition principle guides accountants in ________.
A) ensuring only revenues received in cash are recorded
B) determining when to record expenses
C) determining when to record revenues
D) ensuring expenses are deducted from revenues
Refer to the following list of liability balances at December 31, 2017.
What is the total amount of long-term liabilities?
A) $55,000
B) $109,000
C) $94,000
D) $40,000
Genity Corporation records business transactions in dollars and disregards changes in
the value of a dollar over time. Which of the following accounting assumptions does
this represent?
A) economic entity assumption
B) going concern assumption
C) accounting period assumption
D) monetary unit assumption
Metro Computer, Inc. had the following balances and transactions during 2017:
What would the company’s ending merchandise inventory amount be on December 31,
2017 if the perpetual inventory system and the last-in, first-out inventory costing
method are used?
A) $15,180
B) $71,760
C) $56,580
D) $54,720
Which of the following is the correct formula to calculate days’ sales in inventory?
A) Days’ sales in inventory = 365 days x Inventory turnover
B) Days’ sales in inventory = 365 days + Inventory turnover
C) Days’ sales in inventory = 365 days / Inventory turnover
D) Days’ sales in inventory = 365 days – Inventory turnover
The amount of income taxes ________.
A) required by the federal government for a corporation is calculated on a Form 1120
B) paid by the corporation, when it files the Form 1120, is recorded as a debit to the
Income Tax Expense account and a credit to the Cash account
C) the corporation owes, but has not yet paid, is recorded as a debit to the Income Tax
Payable account
D) the corporation owes, but has not yet paid, is reported as a long-term liability on the
balance sheet
Which of the following is a financial statement that presents a business’s accounting
equation?
A) Chart of Accounts
B) Trial Balance
C) Income Statement
D) Balance Sheet
A company has purchased inventory and received an invoice that requires the buyer to
pay the transportation costs for delivering the merchandise. The terms are ________.
A) FOB destination
B) FOB shipping point
C) FOB, 2/10, n/30
D) FOB in transit
To accurately determine the financial performance of a company, it is necessary to
compare performance ________.
A) with a competing company
B) to the budget
C) with companies in different industries
D) only with profitable companies
The following information is from the records of Pangolin Camera Shop:
Bad expense is estimated by the aging-of-receivables method. Management estimates
that $3,050 of accounts receivable will be uncollectible. Calculate the amount of net
accounts receivable after the adjustment for bad debts.
A) $21,450
B) $20,950
C) $20,450
D) $20,100
Which of the following accounting principles requires that warranty expense must be
estimated and recognized in the same period when the related sales revenue is
recognized?
A) the matching principle
B) the disclosure principle
C) the revenue principle
D) the consistency principle
The following information is from the December 31, 2017 balance sheet of Lawson
Corporation.
What was the average issue price of the common stock shares? (Round your answer to
the nearest cent.)
A) $1.88
B) $1.00
C) $2.68
D) $3.68
A business renders services to a customer for $26,000 on account. Which of the
following accounts is debited?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
A merchandiser, following the perpetual inventory system, has the following
transactions during August, 2017:Date Transaction Amount
Aug. 5 Purchased inventory on account $ 300,000
Aug. 9 Paid for transportation of goods purchased 25,000
Aug. 10 Returned defective merchandise to the seller 20,000
Aug. 15 Paid for goods purchased on August 5 ?Credit terms of invoice are 2/15, n/45.
Give journal entries for the above transactions.
Database Services sells service plans for commercial computer maintenance. The price
for each plan is $1,350 per year, paid in advance. On October 1, 2017, a service plan
was sold to a new customer for cash, and the plan covers the period October 1, 2017 to
September 30, 2018. Prepare the December 31, 2017 adjusting entry.
Use the following cash payments journal to record the preceding transactions.Cash
Payments Journal Page 8
On January 2, 2017, Mahoney Sales issues $10,000 in bonds for $9,400. The bonds are
five-year bonds with a stated rate of 4% and pay semiannual interest on June 30 and
December 31. Mahoney Sales uses the straight-line method to amortize bond discount.
Prepare the journal entry for the first interest payment on June 30, 2017.
State the effects of inventory errors on cost of goods sold and net income for periods 1
and 2. The response should be overstated or understated.Period 1 Ending Merchandise
Inventory is overstated