The system of accounting in which every transaction affects at least two accounts is
called the double-entry system.
Interest is generally stated as a monthly rate.
The net realizable value of Accounts Receivable is calculated by subtracting Bad Debts
Expense from Accounts Receivable.
A signature card is a card that shows each authorized person’s signature for a bank
account.
Accounting is the information system that measures business activities, processes the
information into reports, and communicates the results to decision makers.
An adjusted trial balance does not list the revenues and expenses of a business.
Reversing entries are special journal entries that ease the burden of accounting for
transactions in a later period.
Days’ sales in receivables is also called the collection period.
The employee federal and state income tax and Social Security tax are optional payroll
deductions.
Which of the following is not a way to accurately determine the financial performance
of a company?
A) carefully examining one year’s data
B) from year to year
C) with a competing company
D) with the same industry as a whole
Harris, Inc. had the following balances and transactions during 2017:
What would be reported for Cost of Goods Sold on the income statement for the year
ending December 31, 2017 if the perpetual inventory system and the last-in, first-out
inventory costing method are used?
A) $19,075
B) $13,475
C) $5,600
D) $17,850
An expense that has been incurred but not yet paid is called a(n) ________.
A) accrued revenue
B) deferred expense
C) deferred revenue
D) accrued expense
Which of the following transactions is recorded in the purchases journal?
A) purchase of furniture on account
B) cash purchase of merchandise inventory
C) sale of merchandise inventory on account
D) cash sales of merchandise inventory
Bubble Wraps Company receives cash from a stockholder, John Trent, and issues
common stock to him. The two accounts involved in this transaction are ________.
A) Accounts Payable and Cash
B) Cash and Common Stock
C) Common Stock and Accounts Payable
D) Common Stock and Accounts Receivable
In a perpetual inventory system, the credit columns of a typical cash payments journal
are ________.
A) Merchandise Inventory column and Cash column
B) Other Accounts column and Accounts Payable column
C) Merchandise Inventory column and Accounts Payable column
D) Other Accounts column and Cash column
Which of the following entries would be made to record the purchase of inventory on
account, if a company uses the perpetual inventory system?
A) a debit to Purchases and a credit to Accounts Payable
B) a debit to Accounts Payable and a credit to Purchases
C) a debit to Merchandise Inventory and a credit to Accounts Payable
D) a debit to Accounts Payable and a credit to Merchandise Inventory
Middlebrook Financial Services, Inc. invested $30,000 to acquire 6,250 shares of Mitt
Investments, Inc. on March 15, 2013. This investment represents less than 20% of the
investee’s voting stock. On May 7, 2017, Middlebrook Financial Services, Inc. sells
2,000 shares for $21,250. Which of the following will be the correct journal entry for
the May 1, 2017 transaction?A)
B)
C)
D)
A company sold merchandise for $1,000 on account with terms of 2/15, n/30. The
company uses a perpetual inventory system. Defective merchandise of $200 was
returned two days later. If the payment was received after 30 days, the journal entry to
record the cash receipt will include ________.
A) a debit to Cash for $980 and a credit to Accounts Receivable for $980
B) a debit to Cash for $800 and a credit to Accounts Receivable for $800
C) a credit to Sales Revenue for $800 and a debit to Cash for $800
D) a credit to Cost of Goods Sold for $1,000 and a debit to Sales Revenue for $1,000
Anderson Furniture sold 15 desks, with a cost of $5,500, for $12,250 on account.
Anderson uses the periodic inventory system. Which of the following is the correct way
to record this transaction?A)
B)
C)
D)
________ are categorized as either current assets or long-term assets on the balance
sheet, depending on the maturity date.
A) Equity investments
B) Matured investments
C) Trading investments
D) Held-to-maturity investments
Which of the following will be categorized as an operating activity on the statement of
cash flows?
A) Cash received by selling old equipment
B) Cash paid for purchase of new machinery
C) Cash paid for purchase of office supplies
D) Cash received from issuance of shares of common stock
The balance in the Bonds Payable is a credit of $74,000. The balance in the Premium on
Bonds Payable is a credit of $1,600. What is the bond carrying amount?
A) $1,600
B) $75,600
C) $74,000
D) $72,400
Unearned revenue is recorded when ________.
A) revenue will be both collected and earned in the future
B) the business has collected cash, but not yet earned the revenue
C) revenue has been collected and earned during the same accounting period
D) the business has earned, but not collected, cash for the revenue
Quality Jewelers uses the perpetual inventory system. On April 2, Quality sold
merchandise for $60,000 to a customer on account with terms of 2/15, n/30. The
allowances and returns on this sale amounted to $2,000 and $8,000, respectively. The
cost of goods sold was $23,000. On April 20, Quality received payment from the
customer. Calculate the amount of gross profit.
A) $50,000
B) $23,000
C) $27,000
D) $25,800
Johnson Repair Service had net income for the year of $125,000. In addition, the
balance sheet reports the following balances:
Calculate the return on assets (ROA) for Johnson Repair Service for the year ending
December 31, 2016.
Which of the following best describes horizontal analysis?
A) comparing financial statement amounts from year to year for the same company
B) expressing each financial statement amount as a percentage of a budgeted amount
C) comparing a company’s financial statements with other companies
D) calculating key ratios to evaluate performance
Kevin Woodworking Company is preparing its statement of cash flows using the
indirect method. During the year, Kevin sold equipment for $5,990 cash. The net book
value of the asset was $4,970. Which of the following statements is true?
A) The gain on sale of $1,020 is added back to net income in the operating activities
section.
B) The book value of the assets sold is shown as a negative cash flow in the investing
activities section.
C) The cash receipt of $5,990 is shown as a positive cash flow in the investing activities
section.
D) The gain on sale of $1,020 is shown as a positive cash flow in the financing
activities section.
When posting entries from a purchases journal to the general ledger, ________.
A) posting references are not shown in the subsidiary ledger
B) the Accounts Payable balance in the general ledger will be less than the sum of the
individual vendor balances in the subsidiary ledger
C) the amounts in the Other Accounts DR column are posted individually to the specific
accounts
D) entries are posted on a daily basis for all the accounts
A business purchases equipment for $8,000 cash. Which of the following accounts is
debited?
A) Cash
B) Accounts Payable
C) Common Stock
D) Equipment
Coney Island Corp. discards a truck that was originally purchased for $50,000 and had
accumulated depreciation of $30,000. Prepare the journal entry for the disposal.
The following is the adjusted trial balance as of December 31, 2017 of Piedmont
Exteriors, Inc.:
Provide the closing entry for the Income Summary account.
On January 1, 2017, Davie Services issued $20,000 of 8% bonds that mature in five
years. The bonds were issued at par. Prepare the journal entry to issue bonds.
Charlie Corp sold a truck for $15,000 cash. It was originally purchased for $50,000 and
had accumulated depreciation of $30,000 at the time of sale. Prepare the journal entry
for the sale of truck.
On June 30, 2017, Nightvale, Inc. purchased merchandise inventory for $500,000 by
signing a six-month, 8% note payable. Prepare the journal entry for the payment of the
note on December 30, 2016.
A truck was acquired for $100,000 and has accumulated depreciation of $70,000. The
business exchanges the truck for a new one. The new truck has a market value of
$120,000 and the business pays $100,000 cash. Assume the exchange has commercial
substance. Prepare the journal entry to record this transaction.
On October 1, 2016, Smith Service Company paid $5,000 in rent for the next five
months, beginning with October 2016. On that date, Smith debited Prepaid Rent and
credited Cash. If Smith fails to make an adjusting entry on December 31, 2016, indicate
the effect on assets, liabilities, equity, and net income.
On July 1, Omega, Inc. paid rent of $15,000 for a small equipment storage area from
July 1 until December 31. Provide the adjusting journal entry on July 31. (Ignore
explanation). Assume the deferred expense is initially recorded as an asset.
Modern D©cor Furniture began June with merchandise inventory of 45 sofas that cost a
total of $31,500. During the month, Modern D©cor purchased and sold merchandise on
account as follows:
Prepare a perpetual inventory record, using the FIFO inventory costing method, and
determine the company’s cost of goods sold, ending merchandise inventory, and gross
profit.