T. Powers Company’s financial statements on December 31, 2015, showed the
following:
Net Sales $275,000
Fixed Assets, January 1 $ 73,000
Fixed Assets, December 31 $ 67,000
Total Assets, January 1 $ 97,000
Total Assets, December 31 $100,000
What is the fixed asset turnover for 2015 (rounded to two decimal places)?
A) 3.93
B) 2.60
C) 4.10
D) 2.79
Bonds that are backed with a pledge of the company’s assets are called:
A) debenture bonds.
B) convertible bonds.
C) secured bonds.
D) registered bonds.
On October 31, your company prepays rent of $7,000 for November and December.
Which of the following describes the effects of this transaction on your company’s
accounting equation?
A) Assets decrease $7,000 and liabilities decrease $7,000.
B) Assets increase $7,000 and stockholders’ equity increases $7,000.
C) There is no change to total assets, liabilities or stockholders’ equity.
D) Liabilities decrease $7,000 and stockholders’ equity increases $7,000.
When it paid its rent in advance, a company recorded Prepaid Rent. As of the end of the
accounting year, the prepayment had expired. If no adjustment is made to record this
expiration, which of the following will occur?
A) Assets will be understated and expenses will be overstated.
B) Assets will be overstated and expenses will be understated.
C) Assets and expenses will be overstated.
D) Assets and expenses will be understated.
Which of the following is not a commonly used internal control?
A) Mandatory vacations
B) Anonymous hotlines
C) Bonding employees
D) Consolidating duties
When interest expense is calculated using the effective-interest amortization method,
interest expense on a bond that pays interest annually is equal to the:
A) actual amount of interest paid.
B) carrying value of the bonds payable multiplied by the effective interest rate.
C) maturity value of the bonds payable multiplied by the effective interest rate.
D) carrying value of the bonds payable multiplied by the stated interest rate.
The internal control principle related to assigning responsibilities so that one employee
cannot make a mistake or commit a dishonest act without someone else discovering it is
referred to as:
A) duplication of responsibility.
B) mandatory vacations.
C) segregation of duties.
D) rotation of duties.
A list of Year 3 revenues and expenses for Green Thumb, Inc. is provided below.
Required:
Part a. Calculate the net income for the Green Thumb, Inc. for Year 3.
Part b. Prepare a statement of retained earnings for Green Thumb, Inc. for Year 3.
Assume the company had retained earnings of $162,000 as of January 1, Year 3, and
paid out $46,000 in dividends during Year 3.
Which of the following statements about nonrecurring and other special items is
correct?
A) Some special items, such as changes in the value of certain balance sheet accounts,
are excluded from the calculation of net income.
B) Nonrecurring items such as discontinued operations are presented above the income
tax expense line on the income statement.
C) Discontinued operations are reported net of tax as part of the income from
continuing operations.
D) The cumulative effect of change in accounting principles is reported on the income
statement as part of income from continuing operations.
A company bought a piece of equipment for $40,000 and expects to use it for eight
years. The company then plans to sell it for $3,500. The company has already recorded
depreciation of $35,995. Using the double-declining-balance method, what is the
company’s annual depreciation expense for the upcoming year?
A) $1,001
B) $9,125
C) $505
D) $10,000
Use the information above to answer the following question. What journal entry
(entries) will Darin Company make on October 4 to record the sales return?
A) Debit Sales Returns & Allowances and credit Accounts Receivable for $500; debit
Inventory and credit Cost of Goods Sold for $200
B) Debit Sales Returns & Allowances for $200 and credit Accounts Receivable for
$200
C) Debit Sales for $500 and credit Inventory for $500
D) Debit Accounts Receivable and credit Sales Returns & Allowances for $500; debit
Cost of Goods Sold and credit Inventory for $200