Refer to A&B Foods. If the company uses the aging of accounts receivable method to
estimate its bad debts, what amount will be reported as bad debt expense for 2013?
A&B Foods
Data for the year ended December 31, 2013, are presented below.
a. $50,000
b. $75,000
c. $78,000
d. $53,000
Which of the following statements best describes the act of collusion?
a. Collusion is caused by an overstatement of ending inventory.
b. Collusion is an intentional act of two or more employees to accomplish theft of
company assets.
c. Collusion is one of the necessary outcomes of a system of internal control over
financial reporting.
d. Collusion is enhanced by an effective system of independent reconciliations and
other checks on recorded amounts.
A financial analyst is comparing two companies using a top-down approach. Which of
the following would cause problems in the evaluation process?
a. One company’s fiscal year-end is October 31, while the other company’s fiscal
year-end is December 31.
b. One company has been in business significantly longer than the other company.
c. Inflation has been low for several years.
d. The companies operate in different industries.
Sold merchandise on credit to customers.
Deeter Company, which sells auto parts, uses a perpetual inventory system. Identify the
effects on the accounting equation. (Choices may be used more than once.)
a. Increase in assets and liabilities
b. Decrease in assets and liabilities
c. Increase in assets and stockholders’ equity
d. Decrease in assets and stockholders’ equity
e. Increase in liabilities and decrease in stockholders’ equity
f. Decrease in liabilities and increase in stockholders’ equity
This principle is used to determine when revenue is recorded and reported.
Match the following principles with their correct definition.
Match the following principles with their correct definition.
a. Comparability g. Historical cost
b. Conservatism h. Matching
c. Double-entry accounting i. Monetary unit
d. Economic entity j. Revenue recognition
e. Going concern k. Time period
f. Full disclosure
Paid for purchased goods within the discount period.
Match the costs that might be included as part of the cost of inventory to the listed
accounting treatment. (Choices may be used more than once.)
a. Add to inventory cost c. Not an inventory cost
b. Subtract from inventory cost
GTX Corp. has $100,000 in cash, $40,000 in inventory, $25,000 in accounts payable
and $15,000 in accrued liabilities (salaries, interest, taxes, etc.). If the company has
$280,000 in cash flows from operating activities, what is its operating cash flow ratio?
a. 0.5
b. 2.0
c. 7.0
d. 3.5
Which of the following best describes one effect of recognizing expenses incurred by a
business entity?
a. Assets will increase.
b. Liabilities will decrease.
c. Contributed capital will increase.
d. Retained earnings will decrease.
Businesses engage in which of the following three main activity categories?
a. Financing, Investing, Operating
b. Cash, Credit, Noncash
c. Financing, Credit, Operating
d. Financing, Management, Operating
Refer to HVAC Service. The journal entry to record the purchase of office equipment
and supplies will include a credit to
HVAC Service
The following transactions occurred during November:
a. furniture & supplies.
b. cash.
c. accounts payable.
d. delivery expense.
An accrued liability for amounts owed to employees for work performed. Match each
of the following current liabilities with its meaning.
a. Account payable
b. Note payable
c. Wages payable
d. Interest payable
e. Sales taxes payable
f. FICA taxes payable
g. Unemployment taxes payable
h. Unearned sales revenues
i. Estimated warranty liability
Requires updating of the inventory account at the time of each purchase and each sale.
Match the terms with the descriptions related to merchandise sales and purchases.
a. Transportation-in e. Cost of goods available for sale
b. Perpetual inventory system f. Periodic inventory system
c. Net purchases g. FOB shipping point
d. FOB destination h. Delivery expense
The exact amount of profit on each product of the company.
Provided is a list of important users of accounting information. Also provided are
descriptions of a major need for accounting information that may be experienced by the
various users. Identify the one user group that is most likely to have the need described.
(Choices may be used more than once.)
a. Investors
b. Management
c. Supplier
d. Banker
e. Government
f. Employees
g. Labor Union
h. Investors and Banker
i. Supplier and Banker
Refer to A2Z Events. What are the effects on the accounting equation when the
company makes the adjustment to record bad debt expense using the allowance
method?
A2Z Events
The following data are from the company’s records for 2013:
a. Assets increase and liabilities decrease
b. Assets and stockholders’ equity decrease
c. Assets increase and stockholders’ equity decreases
d. Assets decrease and stockholders’ equity increases
Net income divided by sales revenue
Match each statement to the item listed below.
a. Current assets e. Intangible assets
b. Current liabilities f. Long-term investments
c. Gross margin g. Long-term liabilities
d. Income from operations h. Net profit margin
Dividend yield ratio For each ratio listed, select whether an increase or decrease in the
ratio is generally considered to be better. (Choices may be used more than once.)
Refer to Bay Camera. What amount will be reported as Retained Earnings on the
Balance Sheet at December 31, 2013, assuming this is the first year of operations?
Bay Camera
The company reported the following items on its financial statements for the year ended
December 31, 2013:
a. $22,500
b. $27,500
c. $42,500
d. Not enough information is provided.
$3,000 freight costs were paid to ship the equipment from the manufacturer, A
construction company purchased a piece of equipment with a price of $100,000 on
March 1, 2013. The amounts are related to the equipment purchase. Match the items
and explain how each item should be accounted for. (Choices may be used more than
once.)
A bond issue price is the present value of the cash flows that the bond will produce.
The independent auditor’s report conveys whether or not the business is a good
investment.
Consulting ServicesSelect the correct revenue recognition principle for each of the
following. (Choices may be used more than once.)
a. Recognize revenue over the passage of time.
b. Recognize revenue when the customer takes possession of the product.
c. Recognize revenue when cash is collected.
d. Recognize revenue when service is performed.
If a company records a $450 receipt as $540, this type of mistake is called a(n)
____________________.
What is the purpose of the current ratio? How does it differ from the quick ratio?
Operating cash flows generally involve income statement items (which are reflected in
Retained Earnings) and balance sheet items (such as changes in current assets and
current liabilities).