Steve is an employee of Panache, Inc. Panache pays a portion of his health insurance
premium and also contributes to a retirement plan in his name. The company’s share of
the health insurance premium is $600, and the company’s contribution to the retirement
plan is $860. The journal entry to record the employee benefits to be paid by the
company should include a debit to Employee Health Insurance Payable for $1,460.
The adjusting process zeroes out all revenue accounts and all expense accounts.
Recipes, Inc. purchased $2,000 of supplies on account. Under the accrual basis of
accounting, no entry is made until the amount is paid.
Repair work that generates a capital expenditure because it extends a plant asset’s useful
life past the normal expected life is known as an extraordinary repair.
International Financial Reporting Standards are comparatively more specific and more
rule-based than U.S. GAAP.
In a vertical analysis of the balance sheet, the base amount is (100%) is total liabilities.
In a period of rising costs, the first-in, first-out (FIFO) method results in lower cost of
goods sold and higher gross profit than the last-in, first-out (LIFO) method.
The net cash flow from operating activities is calculated in the same way, whether the
company uses the direct or the indirect method of preparing the statement of cash flow.
Journal entries are required if the bank reconciliation includes outstanding checks.
Deferred expenses are also called prepaid expenses.
If purchase allowances are granted, the buyer need not return the goods to the seller.
The current portion of notes payable is reported on the balance sheet under current
liabilities.
Since cost is a reliable measure, the cost principle holds that the accounting records
should continue reporting an asset at its historical cost over its useful life.
Violators of the Sarbanes-Oxley Act may be sentenced to prison for making false sworn
statements.
The journal entry to replenish a petty cash fund includes a debit to the Petty Cash
account and a credit to the Expense account.
Which of the following accounts decreases with a debit?
A) Accounts Receivable
B) Notes Payable
C) Cash
D) Rent Expense
Which of the following statements describes a receiving report?
A) It is an order to purchase goods from a supplier.
B) It is a statement from the supplier showing the goods purchased and the amount due.
C) It is a report showing that the goods have been received in good condition, as
ordered.
D) It is a document authorizing a payment to a supplier.
Which of the following financial statements shows the dividends distributed to
stockholders?
A) Income statement
B) Statement of retained earnings
C) Budgeted balance sheet
D) Balance sheet
An accounting entry that is characterized by having multiple debits and/or multiple
credits is called a ________ entry.
A) balanced
B) posted
C) chart of accounts
D) compound journal
Which of the following sections of the statement of cash flows includes purchases and
sales of long-term assets?
A) the financing activities section
B) the operating activities section
C) the investing activities section
D) the non-cash investing and financing section
Ursula Tax Planning Service has the following plant assets: Communications
equipment: Cost, $7,120 with useful life of eight years; Furniture: Cost, $22,800 with
useful life of 12 years; and Computer: Cost, $12,000 with useful life of four years.
(Assume residual value of all the assets is zero.) Ursula’s monthly depreciation expense
calculated using the straight-line method is ________. (Round any intermediate
calculations to two decimal places, and your final answer to the nearest dollar.)
A) $250
B) $158
C) $74
D) $482
VB Specialty Foods, a grocery merchandiser, purchased goods and paid transportation
to bring them to the company warehouse. The transportation cost is known as
________.
A) freight out
B) selling expense
C) freight in
D) cost of goods sold
An accounting information system is said to have good control characteristics, if it
________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
Which of the following is a characteristic of a plant asset, such as a building?
A) It is used in the operations of a business.
B) It is available for sale to customers in the ordinary course of business.
C) It has a short useful life.
D) It will have a negligible value at the end of its useful life.
Harris Landscaping Services incurred $500 as a labor expense and promised to pay the
labor agency within 30 days. Which of the following accounts will increase as a result
of this transaction?
A) Accounts Receivable
B) Cash
C) Accounts Payable
D) Retained Earnings
If the maker of a note does not pay at maturity, ________.
A) the debtor no longer owes the payee
B) interest revenue cannot be accrued on the note
C) the note is no longer in force because it has expired
D) the principal is recorded as a debit to the Accounts Receivable account
A company has $120,000 in current assets; $600,000 in total assets; $90,000 in current
liabilities, and $140,000 in total liabilities. Calculate the current ratio of the company.
(Round your answer to two decimals.)
A) 1.33
B) 1.71
C) 1.75
D) 0.86
The accountant of Zeus Legal Services failed to make an adjusting entry for supplies
that had been used for the year. Assume the supplies were initially recorded as an asset.
Which of the following statements is true?
A) The total liabilities will be overstated.
B) The equity will be understated.
C) The total assets will be overstated.
D) The total assets will be understated.
Tryst, Inc. has a policy of accruing $2,300 for every employee as a vacation benefit.
Sarah, an employee, took a vacation. Which of the following is the correct journal entry
for the vacation benefit paid?A)
B)
C)
D)
Long-term investments ________.
A) include all debt securities that are trading investments or held-to-maturity
investments
B) are investments in debt and equity securities that are highly liquid and that the
investor intends to sell in one year or less
C) include debt and equity securities that the investor expects to hold longer than one
year or debt or equity securities that are not readily marketable
D) are investments in debt securities or equity securities in which the investor holds less
than 20 percent of the voting stock and that the investor plans to sell in the very near
future
Which of the following sequences is the normal sequence of flow of accounting data?
A) Ledger Journal Source document
B) Journal Source document Ledger
C) Source document Journal Ledger
D) Source document Ledger Journal
The first step in the journalizing and posting process is to ________.
A) post the journal entry to the ledger
B) identify the accounts involved and the account type
C) decide whether each account increases or decreases
D) record the transaction in the journal
Jade Investments, Inc. purchased 45% of the common stock of Ivory Corporation on
March 1, 2017. Ivory Corporation reports a net income of $720,000 for the 2017 year.
Which of the following is the correct journal entry?A)
B)
C)
D)
U.S. government securities are ________.
A) real estate investments
B) equity securities
C) debt securities
D) forward contracts
Joshua Thomas Corporation manufactures and retails computer hardware. The president
of the corporation bought a new car as a gift for his daughter and paid for it using cash
from the business. Since the corporation paid for the car, it was recorded in its books as
an asset. Which of the following concepts or principles of accounting did the
corporation violate?
A) monetary unit assumption
B) economic entity assumption
C) cost principle
D) going concern assumption