Companies are required to report plant assets as a single amount, with a note to the
financial statements that provides detailed information.
Financial leverage occurs when a company earns less income on borrowed money than
the related interest expense.
The financing section of the statement of cash flows involves transactions relating to
the equity accounts and the long-term liability accounts.
When a merchandiser records sales returns, Accounts Receivable is credited. (Assume
the seller uses the perpetual inventory system.)
Callable bonds are bonds that the issuer may call and pay off at a specified price
whenever the issuer wants.
Under a perpetual inventory system, merchandise returned by a customer to the seller is
recorded as a ________ in the books of seller.
A) sales return
B) sales allowance
C) sales discount
D) purchase return
Best Value, Inc. started its operations on January 1, 2017. It engages in buying and
selling different types of electronic gadgets. The first step in its operating cycle would
be to ________.
A) collect cash from customers
B) sell goods to customers
C) purchase inventory from vendors
D) record the sales in accounts
The accountant for Jones Auto Repair, Inc. failed to make an adjusting entry to record
$5,000 of unpaid salaries for the last two weeks of the year. Which of the following is
an effect of this omission?
A) The net income will be overstated.
B) The total assets will be understated.
C) The net income will be understated.
D) The total assets will be overstated.
Trading investments include ________.
A) debt and equity securities that the investor expects to hold longer than one year or
debt or equity securities that are not readily marketable
B) investments in debt and equity securities that are highly illiquid and that the investor
intends to hold until they mature
C) investments in debt securities that the investor intends to hold until they mature
D) 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
The net income of Avid Camera Services is $20,000. The beginning and ending
stockholders’ equity balances were $36,000 and $54,000, respectively. The company
issued no common stock. Calculate the amount of dividends.
A) $12,000
B) $2,000
C) $16,000
D) $15,000
When a business records accrued interest expense on a note payable ________.
A) Interest Expense is credited
B) Note Payable is credited
C) Cash is debited
D) Interest Payable is credited
On the ________, cash dividends become a liability of a corporation.
A) declaration date
B) date of record
C) last day of the fiscal year
D) payment date
Every transaction recorded in the cash receipts journal includes a ________.
A) credit to Cash
B) debit to Accounts Receivable
C) credit to Accounts Receivable
D) debit to Cash
Which of the following adjusted balances would appear in the balance sheet credit
column of a worksheet?
A) Rent Revenue
B) Insurance Expense
C) Salaries Payable
D) Equipment
A plant asset is fully depreciated when the book value is ________.
A) greater than the residual value
B) greater than the market value
C) equal to the residual value
D) equal to the market value