The aging-of-receivables method is a balance sheet approach of estimating
uncollectible accounts.
Credit terms of a merchandising company are 1/15, net 40. This means that the buyer
can receive a discount of 1% if the invoice is paid within 40 days of the invoice date.
Generally accepted accounting principles require that interest expense be measured
using the straight-line amortization method.
The Common Stock account is a temporary account.
A company is uncertain whether a complex transaction should be recorded as gain or
loss. Under the conservatism principle, it should choose to treat it a loss.
Management’s discussion and analysis of financial condition and results of operations
section of the annual report is the company’s attempt to explain its financial statements
and discuss its performance.
Ace, Inc. had the following transactions during June:
Performed services for $5,000 on account; received cash on account, $7,000; paid $600
for repair expense; paid $2,000 to a supplier that it owed from the previous month.
What is the combined effect on Cash of the June transactions?
A) $4,400 increase
B) $4,400 decrease
C) $7,000 increase
D) $2,600 decrease
The maturity value of a note is the ________.
A) principal amount minus interest due at maturity
B) principal amount plus interest due at maturity
C) face amount of the note
D) principal amount times the interest rate
Arthur, Inc. plans to develop a shopping center. In the first quarter, the following
amounts were spent:
What amount should be recorded as the land improvement cost?
A) $9,100
B) $10,500
C) $19,060
D) $2,500
Outstanding stock represents shares of stock that ________.
A) are held by the stockholders
B) are sold for the highest price
C) have been authorized by state law
D) have been issued but may or may not be held by stockholders
Which of the following accounting terms assumes that a business’s activities can be
divided into small segments and that financial statements can be prepared for specific
periods, such as a month, quarter, or year?
A) adjusting entry concept
B) economic entity concept
C) matching principle
D) time period concept
A parent company is a company that ________.
A) is controlled by another corporation
B) owns a controlling interest in another company
C) is the first to begin operations in an industry
D) has a trading investment in another company
Dogwood, Inc. earned revenues of $11,000 and incurred expenses of $7,500. The
company declared and paid cash dividends of $2,000. What is the balance in the Income
Summary account prior to closing net income or loss to the Retained Earnings account?
A) debit balance of $3,500
B) debit balance of $1,500
C) credit balance of $3,500
D) credit balance of $11,000
Which of the following is true of assets?
A) Assets include cash, merchandise inventory, and accounts payable.
B) Assets are something of value the business owns or controls.
C) Assets do not need to provide future benefit to the business.
D) Assets can be recorded at the expected cost if acquired at a bargain.
A shortened form of the ledger is called a ________.
A) trial balance
B) balance sheet
C) chart of accounts
D) T-account
A business purchases equipment by paying $9,087 in cash and issuing a note payable of
$13,264. Which of the following occurs?
A) Cash is credited for $9,087, Equipment is credited for $22,351, and Notes Payable is
debited for $13,264.
B) Cash is credited for $9,087, Equipment is debited for $22,351, and Notes Payable is
credited for $13,264.
C) Cash is debited for $9,087, Equipment is debited for $13,264,and Notes Payable is
credited for $22,351.
D) Cash is debited for $9,087, Equipment is credited for $13,264, and Notes Payable is
debited for $4,177.
Which of the following is an example of a security?
A) dividends
B) municipal bond
C) interest expense
D) depreciation
Which of the following is pay over and above base salary, usually paid for exceptional
performance?
A) FICA
B) benefits
C) wages
D) bonuses
The expected value of a depreciable asset at the end of its useful life is called
________.
A) book value
B) residual value
C) accrued revenue
D) accrued expense
Deal Corporation sells a product for $500 on account to Liza Masters. This transaction
will be recorded in the ________.
A) cash payments journal
B) sales journal
C) cash receipts journal
D) purchase journal
Which of the following is the correct accounting equation?
A) Assets + Liabilities = Equity
B) Assets = Liabilities + Equity
C) Assets + Revenues = Equity
D) Assets + Revenues = Liabilities + Expenses