Generally, all transactions are recorded in a special journal as well as the general
journal.
A creditor is a person who owes money to the business.
As a part of the closing process, revenues and expenses may be closed to a temporary
account called the Net Income (Loss) account.
The worksheet is NOT a journal, a ledger, or a financial statement.
In a vertical analysis of the balance sheet, each line item is shown as a percentage of
stockholders’ equity.
Equity increases when revenues are earned.
When preparing financial statements under the periodic inventory system, a calculation
of cost of goods sold must be made.
The Merchandise Inventory account is an expense account that is used only for goods
purchased that the business owns and intends to resell to customers.
Although the direct method is easier to use, the Financial Accounting Standards Board
(FASB) prefers the indirect method of reporting cash flows from operating activities.
Mutual agency of the owners is not present in a corporation as it is in a partnership.
A business must only invest in an accounting information system in which the benefits
received outweigh the cost of the system.
Only temporary accounts appear on the post-closing trial balance.
Companies sometimes obtain financing and do not receive cash. Although such
transactions do not directly involve cash, they still must be reported in the financing
section of the statement of cash flows.
The current ratio measures a company’s ________.
A) overall ability to pay liabilities
B) ability to pay current liabilities with current assets
C) proportion of assets that are financed by debt
D) rate of cash flow
Adjusting entries are recorded in the ________.
A) cash payments journal
B) purchases journal
C) cash receipts journal
D) general journal
The income statement presents a summary of an entity’s revenues and expenses for a
period of time. Which of the following statements is true of an income statement?
A) There is net income when total expenses are greater than total revenues.
B) There is a net loss when total expenses are less than total revenue.
C) There is a net loss when total expenses are greater than total liabilities.
D) There is net income when total revenues are greater than total expenses.
Which of the following journal entries would be recorded if Christy Jones, Inc. issued
stock and received $3,000?A)
B)
C)
D)
Which of the following accounts increases with a credit?
A) Cash
B) Common Stock
C) Accounts Receivable
D) Prepaid Expense
A company sold merchandise for $23,000 on account with terms of 3/15, n/30. The
company uses a perpetual inventory system. After two days, it received defective
merchandise worth $2,000. The journal entry to record the cash receipt for the sale if
the payment is received within 10 days of the invoice date would include ________.
A) a debit to Cash for $20,370, a credit to Merchandise Inventory for $630, and a credit
to Sales Revenue for $21,000
B) a debit to Cash for $20,370, a debit to Sales Discount for $630, and a credit to
Accounts Receivable for $21,000
C) a debit to Cash for $21,000, a debit to Merchandise Inventory for $2,000, and a
credit to Accounts Receivable for $23,000
D) a debit to Sales Revenue for $23,000, a credit to Accounts Receivable for $21,000,
and a credit to Sales Discounts for $2,000
The petty cash fund has a current balance of $100. Based on activity in the fund, it is
determined that the balance needs to be changed to $700. Which journal entry is needed
to make this change?
A) Debit the Petty Cash account and credit the Cash account for $700.
B) No journal entry is needed because this change only involves cash.
C) Debit the Petty Cash account and credit the Cash account for $600.
D) Debit the Cash account and credit the Petty Cash account for $600.
Radar, Inc. purchased a van on January 1, 2016, for $830,000. Estimated life of the van
was five years, and its estimated residual value was $104,000. Radar uses the
straight-line method of depreciation. At the beginning of 2018, the corporation revised
the total estimated life of the asset from five years to six years. The estimated residual
value remained the same as estimated earlier. Calculate the depreciation expense for
2018.
A) $145,200
B) $134,900
C) $108,900
D) $72,600
Which of the following is true of the internal control component-information system?
A) Internal auditors monitor company controls to safeguard assets, and external
auditors monitor the controls to ensure that the accounting records are accurate.
B) Control procedures are designed to ensure that the business’s goals are achieved.
C) Only authorized users have access to various parts of the information system.
D) The information system is the “tone at the top” or the culture of the business.
Under the direct write-off method, the entry to write off an uncollectible account will
include ________.
A) a debit to Bad Debts Expense account
B) a debit to the customer’s Account Receivable
C) a credit to the Allowance for Bad Debts
D) No entry is made to write off uncollectible accounts.
Revenue is earned when the business has ________.
A) entered into an agreement with the customer about the goods or services to be
delivered
B) prepared a journal entry to record revenue
C) received cash from the customer before goods or services are delivered
D) delivered a good or service to the customer
A business borrows cash by signing a note payable. Which of the following accounts is
credited?
A) Notes Payable
B) Accounts Payable
C) Notes Receivable
D) Cash
Gem Corp. had cash sales of $10,000. The state sales tax rate is 10.8%. What amount is
debited to the Cash account?
A) $10,000
B) $11,080
C) $1,080
D) $1,000