A payment of an expense in advance is called a prepaid expense.
When using a periodic inventory system, the Merchandise Inventory DR column, in the
purchases journal, is replaced with a column titled Cost of Goods Sold DR.
The accounts receivable turnover ratio indicates whether a company could pay all its
current liabilities if they were to become due immediately.
On the income statement, a merchandising company reports the cost of merchandise
inventory that has been sold to customers.
After a bond is issued, investors may buy and sell it through the bond market.
Treasury stock is recorded at cost, without reference to par value.
The statement of retained earnings informs users about how much of the earnings were
kept and reinvested in the company.
A receivable is a monetary claim against a business or an individual.
Internal auditors are employees of the business who ensure that employees are
following company policies and that operations are running efficiently.
A receivable occurs when a business sells goods or services to another party on account.
On a multi-step income statement, merchandisers report operating expenses in two
categories-selling expenses and administrative expenses.
The sum of all the depreciation expense recorded to date for a depreciable asset is
called ________.
A) book value
B) residual value
C) depreciation expense
D) accumulated depreciation
Which of the following statements is true of the debt to equity ratio?
A) The higher the debt to equity ratio, the lower the company’s financial risk.
B) The higher the debt to equity ratio, the greater the company’s financial risk.
C) If the debt to equity ratio is greater than 1, the company is financing more assets
with equity than with debt.
D) If the debt to equity ratio is less than 1, the company is financing more assets with
debt than with equity.
The taxable income of a sole proprietorship is ________.
A) combined with the personal income of the proprietor
B) not combined with the proprietor’s personal income
C) not taxable
D) handled similarly to that of a corporation
The asset turnover ratio measures ________.
A) how efficiently a business uses its sales to finance the assets
B) how efficiently a business uses its average total assets to generate sales
C) how efficiently a business uses its net profit to finance the assets
D) how the ending inventory helps increase the value of assets
Which of the following inventory costing methods yields the highest cost of goods sold
during a period of rising inventory costs?
A) specific identification
B) weighted-average
C) last-in, first-out
D) first-in, first-out
The accounting principle that ensures all expenses are recorded during the period when
they are incurred and offsets those expenses against the revenues of the period is called
the ________ principle.
A) comparison
B) accrual
C) matching
D) revenue recognition
The main expense of a merchandiser is usually ________.
A) cost of goods sold
B) current assets
C) selling and administrative expenses
D) production overhead
Case Wines Company issues $805,000 of 9%, 10-year bonds on March 31, 2017. The
bonds pay interest on March 31 and September 30. Which of the following statements
is true?
A) If the market rate of interest is 10%, the bonds will issue at a premium.
B) If the market rate of interest is 10%, the bonds will issue at a discount.
C) If the market rate of interest is 10%, the bonds will issue at par.
D) If the market rate of interest is 10%, the bonds will issue above par.
Transactions are first record in a ________.
A) chart of accounts
B) trial balance
C) journal
D) ledger
Which of the following is an example of an intangible asset?
A) Equipment
B) Plant
C) Property
D) Copyright
Which of the following statements is true of a corporation?
A) Corporations pay the same variety of taxes as other forms of business.
B) Although a corporation is a separate legal entity, it cannot be sued.
C) Any stockholder of a corporation can commit the corporation to a binding contract.
D) The owners of a corporation are called stockholders.
Stancil Enterprises prepaid four months of office rent totaling $9,000 on October 1,
2017. Assuming Stancil records deferred expenses using the alternative treatment, what
would be the adjusting entry recorded on December 31, 2017?
A) Debit Rent Expense and credit Prepaid Rent for $6,750
B) No entry is needed since Rent Expense was recorded on October 1, 2017
C) Debit Prepaid Rent and credit Rent Expense for $2,250
D) Debit Prepaid Rent and credit Rent Expense for $27,000
Which of the following is the correct journal entry for a return of goods that were
purchased on account under the periodic inventory system?A)
B)
C)
D)
Healthy Living, a diet magazine, collected $240,000 in subscription revenue on May
31. Each subscriber will receive an issue of the magazine in each of the next 12 months,
beginning with the June issue. The company uses the accrual method of accounting.
What is the amount of Subscription Revenue that has been earned by the end of
December?
A) $100,000
B) $180,000
C) $240,000
D) $140,000