Critical thinking and judgment skills are not necessary for accountants because
technology has made the activities routine.
Securities are represented by a certificate and are commonly traded on an exchange.
When a company invests in equity securities with 20% to 50% ownership in the
investee’s voting stock, the investor can significantly influence the investee’s decisions.
Freight in is recorded in the Merchandise Inventory account if the purchaser uses the
perpetual inventory system.
In the worksheet, the adjusted balance of the Service Revenue account appears in the
credit column of the income statement.
When using the weighted-average inventory costing method in a perpetual inventory
system, a new weighted average cost per unit is computed at the end of each quarter.
Companies use a ledger to show all of the increases and decreases in each account
along with their balances.
In a vertical analysis of the income statement, each line item is shown as a percentage
of net sales.
If an asset is disposed of during the year, there is no need to calculate depreciation from
the beginning of the year of disposal to the date of disposal.
When a business accepts payment by credit cards or debit cards, a fee is paid to the card
processor.
There are three parties to a check: the depositor, the maker, and the bank.
Long-term investments are investments in bonds or stocks in which the company
intends to hold the investment for longer than one year.
A balance sheet prepared in the report form lists the assets on the left and the liabilities
and stockholders’ equity on the right.
Dividends are the expenses of a business.
If preferred stock is issued for an amount above the par value, the amount of the par
value times the number of shares issued is credited to Paid-In Capital in Excess of
Par-Preferred.
Which of the following is true of the gross profit percentage?
A) Gross profit percentage is the same for companies in all industries.
B) Gross profit percentage is used to measure the solvency of a company.
C) The gross profit percentage is one of the most carefully watched measures of
profitability.
D) A service company must show its gross profit percentage in its Income Statement.
Harvard Financial Services, Inc. purchased computers that are to be used in its
consultancy services. Based on the matching principle, what account, other than
Computers, should appear on the balance sheet as of December 31, 2016?
A) Depreciation Expense
B) Service Revenue
C) Accumulated Depreciation
D) Equipment Expense
Which of the following statements is an accurate interpretation of the current ratio?
A) A current ratio of 1.5 or higher is considered a high-risk ratio.
B) A current ratio below 1.00 is considered a good and safe ratio.
C) A current ratio of 2.0 indicates strong ability to pay current liabilities.
D) A current ratio of 0.60 or lower is a good and safe ratio.
Best Deals, Inc. has 13 units in ending merchandise inventory on December 31. The
units were purchased in November for $155 each. The price lists from suppliers indicate
the current replacement cost of the item to be $161 each. What would be the amount
reported as Merchandise Inventory on the balance sheet?
A) $2,015
B) $4,108
C) $316
D) $2,093
Mitchell Florists & Co. reported assets of $1,000 and equity of $450. What is its debt
ratio? (Round your percentage answer to two decimal places.)
A) 55.00%
B) 45.00%
C) 100.00%
D) 60.00%
Under which of the following categories would Accounts Payable appear?
A) Long-term assets
B) Current assets
C) Long-term liabilities
D) Current liabilities
The asset account, Office Supplies had a beginning balance of $5,300. During the
accounting period, office supplies were purchased, on account, for $4,900. A physical
count, on the last day of the accounting period, shows $2,300 of office supplies on
hand. What is the amount of Supplies Expense for the accounting period?
A) $4,900
B) $2,700
C) $7,900
D) $3,000
On January 1, 2017, Streuly Sales issued $29,000 in bonds for $20,700. These are
six-year bonds with a stated rate of 12% and pay semiannual interest. Streuly Sales uses
the straight-line method to amortize the Bond Discount. Immediately after the issue of
the bonds, the ledger balances appeared as follows:Bonds Payable
Discount on Bonds Payable
After the second interest payment on December 31, 2017, what is the balance of
Discount on Bonds Payable?
A) debit of $7,608
B) debit of $8,992
C) debit of $6,917
D) credit of $8,300
In reconciling a bank statement, the bank balance is $2,100, and the checkbook balance
is $2,001. Which of the following is the most probable reason for the bank balance
being larger than the book balance?
A) There are outstanding checks.
B) The bank has deducted certain amounts for bank service charges.
C) A deposit in transit was made at the end of the month.
D) The company erroneously recorded a check for an amount less than the actual
amount.
Cadmia Services hired a new clerk to keep custody of and maintain all the equipment in
the equipment yard. The clerk has not yet been adequately trained on the maintenance
needs of the equipment.In the above situation, which internal control procedure needs
strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
Which of the following is not typically shown as a separate column in a cash receipts
journal that uses the perpetual inventory system?
A) Interest Revenue CR column
B) Cost of Goods Sold DR, Merchandise Inventory CR column
C) Sales Revenue CR column
D) Other Accounts CR column
Under the perpetual inventory system, the journal entry to record cost of goods sold:A)
B)
C)
D)
Which is a true statement regarding the accounting equation?
A) The equation can be stated as assets minus liabilities equals equity.
B) The equation consists of three parts: assets, liabilities, and net income.
C) The equation is an optional tool for accountants to use.
D) The equation does not need to balance during a specific period.
Grant, an employee of Fitzgerald, Inc., has gross salary for March of $4,000. The entire
amount is under the OASDI limit of $117,000, and thus subject to FICA. His
year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. Which of
the following is a part of the journal entry to record the employer’s payroll taxes?
A) credit to Payroll Tax Expense
B) debit to FICA Taxes Payable
C) credit to FICA-Medicare Taxes Payable
D) debit to Cash