The Social Security system is funded by contributions from both the employer and
employee.
Held-to-maturity investments are categorized as long-term assets on the balance sheet,
regardless of the maturity date.
The current portion of notes payable is the principal amount that will be paid within two
years of the balance sheet date, and the remaining portion is long term.
The direct write-off method is only acceptable for companies that have very few
uncollectible receivables.
Stockholders primarily use managerial accounting information for decision-making
purposes.
Purchases on account are recorded in the purchases journal.
The financial statements for Watertown Service Company include the following items:
Compute working capital for 2017.
A) $128,000
B) $78,000
C) $135,000
D) $27,000
According to the ________, acquired assets should be recorded at the amount actually
paid rather than at the estimated market value.
A) going concern assumption
B) economic entity concept
C) cost principle
D) monetary unit assumption
Which of the following is a major control risk related to payroll?
A) theft of inventory by staff
B) a dishonest employee cashing a paycheck that was written to a fictitious person
C) expenses being recorded as assets in order to manipulate earnings
D) contracts being awarded to relatives of employees
A company ships goods to a customer and pays transportation costs. To the seller, the
transportation costs are
A) freight out
B) freight in
C) sales commission
D) brokerage
Which of the following is a liability account?
A) Service Revenue
B) Building
C) Accounts Receivable
D) Unearned Revenue
Earning more income on borrowed money than the related interest expense is called
________.
A) premium
B) leverage
C) annuity
D) amortization
Accruex Corporation invests excess cash of $25,000 in corporate bonds on March 30,
2017. The bonds will mature in two years from the date of purchase. When the bonds
mature in 2019, Accruex plans to use the cash for its business expansion. Which of the
following is included in the journal entry on March 30, 2017?
A) a debit to Long-term Investments-Held-to-Maturity for $25,000
B) a debit to Short-term Investments-U.S. Treasury Notes for $25,000
C) a debit to Long-term Investments-Available-for-Sale for $25,000
D) a credit to Long-term Investments-Available-for-Sale for $25,000
Regarding the profit margin ratio, which of the following statements is incorrect?
A) The higher the profit margin ratio, the more sales dollars end up as profit.
B) The profit margin ratio is computed by dividing net sales by net income.
C) The profit margin ratio shows how much net income a business earns on every $1.00
of sales.
D) The profit margin ratio focuses on the profitability of a company and is often
reported in the business press.
Which of the following will be recorded in the general journal when using a manual
accounting information system?
A) adjusting and closing entries
B) payment of accounts payable
C) purchase of merchandise inventory on account
D) sale of merchandise inventory on account
The matching principle is also called the ________.
A) adjusting entry concept
B) revenue recognition principle
C) expense recognition principle
D) time period concept
Which of the following financial statements reports expenses in decreasing order of
their amounts, by stating the largest expense first?
A) Statement of cash flows
B) Income statement
C) Statement of retained earnings
D) Balance sheet
Alex, an employee of Super Sunday, Inc., has gross salary for March of $5,500. The
entire amount is under the OASDI limit of $117,000 and thus subject to FICA. The total
amount of employee FICA tax is $841.50. (Assume a FICA-OASDI Tax of 6.2% and
FICA-Medicare Tax of 1.45%.)
Which of the following is shown on a multi-step income statement but not on a
single-step income statement?
A) gross profit
B) net sales revenue
C) cost of goods sold
D) net income
Mason Lawn Equipment uses a perpetual inventory system. Journalize the following
sales transactions for this company. Explanations are not required.
List the four special journals that are often used in a manual accounting information
system. State what types of transactions are recorded in each of these special journals.
Prepare the journal entry to record an uncollectible account receivable of $10,000,
using the direct write-off method.
For each account listed, identify the category in which it would appear on a classified
balance sheet.
Provide an explanation for each of the follow liability accounts.
Reid Art Supply Company uses a perpetual inventory system. The company had the
following transactions during August 2017:Aug. 5: Purchased $2,900 of merchandise
on account. Freight and credit terms were FOB shipping point, 3/15, n/60.
Aug. 9: Paid transportation costs of $440 for the Aug. 5 purchase.
Aug. 10: Returned $600 of defective merchandise that had been purchased on Aug. 5.
Aug. 15: Paid for the merchandise purchased on Aug. 5.
Give journal entries for August 10 and 15.
What does inventory turnover measure? What does a high rate of inventory turnover
indicate?
Houlihan, Inc. purchased a van on January 1, 2016, for $800,000. Estimated life of the
van was five years, and its estimated residual value was $90,000. Houlihan uses the
straight-line method of depreciation. Give the journal entry to record the depreciation
expense for 2016 on the van.
In order to expand its business, the management of Vereos, Inc. issued a long-term
notes payable for $50,000. The note will be paid over a 10-year period with equal
annual principal payments, beginning in one year. The annual interest rate is 12%.
Prepare the journal entry for the issuance of the note.
Average Art is a new business. During its first year of operations, credit sales were
$40,000 and collections of credit sales were $36,000. One account, $650, was written
off. Management uses the percent-of-sales method to account for bad debts expense and
estimates 2% of credit sales to be uncollectible. Prepare the entry to record bad debts
expense.