Oxhaven Company has determined that 2% of $50,000 credit sales are uncollectible.
The Allowance for Uncollectible Accounts currently has a credit balance of $250. The
adjusting entry amount for bad debts should be $1,000.
Module Accounting Services receives $8,000 cash for service revenue to be earned in
the future. The company credits Service Revenue upon receipt of the cash.
Circle Knitting, Inc. recorded $4,000 of unearned revenue being earned and the
collection of $1,500 cash for services previously accrued. The impact of these two
entries on total revenue is an increase of $5,500.
Depreciation does not generate cash, but it does have a cash benefit if it results in lower
taxes.
Because officials in federal, state, and local governments are not in the business of
making a profit, they do not need an understanding of accounting.
Revenue is generally recognized at the point of sale with a debit.
The common-size income statement percentages use Cost of Goods Sold as the base
amount at 100%.
A gain will result when the cash received from the sale of a plant asset exceeds the book
value of the asset.
Cash dividends paid to stockholders are an operating activity on the statement of cash
flows.
Which of the following is not one of the conditions for a capital lease?
A) The lease term exceeds 90% of the estimated economic life of the property.
B) The lease term equals or exceeds 75% of the estimated economic life of the property.
C) Title is transferred to the lessee by the end of the lease.
D) The present value of the lease payments is at least 90% of the leased asset’s fair
value at the start of the lease term.
E) The lease contains a bargain purchase option.
Sales returns and allowances
A) are accounted for by deducting the total amount from gross sales.
B) are accounted for by deducting the total amount from net sales.
C) are accounted for using a contra account called Trade Discounts.
D) are accounted for using a reduction account.
E) are not accounted for on the financial statements.
Emerz Corporation had sales of $850,000, of which 20% were cash sales. As of
year-end, the balance in the Allowance for Uncollectible Accounts before adjusting for
bad debts was a $400 debit. The company estimates bad debts as 10% of ending
accounts receivable or 1.5% of credit sales. What is the balance in the Allowance for
Uncollectible Accounts after Emerz Corporation estimates bad debts using a percentage
of credit sales?
A) $9,800
B) $10,200
C) $10,600
D) $12,350
E) $12,750
Assuming inflation, which of the following relationships among inventory valuation
methods is incorrectly stated?
A) FIFO has a higher ending inventory balance and a higher net income than LIFO.
B) FIFO has a higher ending inventory balance and a higher net income than
weighted-average.
C) LIFO has a higher ending inventory balance and a higher net income than
weighted-average.
D) Weighted-average has a higher ending inventory balance and a lower cost of goods
sold than LIFO.
E) LIFO has a lower ending inventory balance and a higher cost of goods sold than
FIFO.
Cider Company has the following data:
What is the total-debt-to-total-equity ratio for Cider Company in 2X13? Has the
total-debt-to-total equity ratio improved or not improved since 2X12?
A) 0.28, improved
B) 0.36, improved
C) 0.36, not improved
D) 1.00, improved
E) 1.00, not improved
Kornowski Company has the following data:
What is the inventory turnover for Kornowski Company in 2X13? Has the inventory
turnover improved or not improved since 2X12?
A) 8.10, improved
B) 8.10, not improved
C) 9.13, improved
D) 9.13, not improved
E) 91, not improved
Biscuit Bakery had the following activity in its inventory account during August 20X3.
Cost per
What is the ending inventory at August 31, 20X3, for Biscuit Bakery if the company
uses periodic weighted average as its inventory valuation method (round all calculations
to the nearest penny)?
A) $281.70
B) $285.60
C) $290.22
D) $290.70
E) $294.00
Jakey Technologies has 1,000 folders in inventory that cost $2.00 each. The company’s
supplier announced that, effective immediately, all future folders will cost $2.20 each.
Jakey Technologies should
A) increase the inventory account by $200 and increase the capital account by $200.
B) increase the inventory account by $200 and decrease the capital account by $200.
C) increase the inventory account by $200 and increase the accounts payable account
by $200.
D) increase the inventory account by $200 and decrease the accounts payable account
by $200.
E) There is no effect from the price change on the accounts of Jakey Technologies.
A policy that forces clerks to make change by pricing items at $1.99, $2.99, and $3.99
rather than at $2, $3, and $4 is an example of
A) adequate documentation.
B) general authorization.
C) specific authorization.
D) proper procedures.
E) an independent check.
For each of the following items, identify whether they are a capital expenditure or an
expense:
a. Built a new elevator in the office building.
b. Acquired a trademark.
c. Incurred research and development expense to develop a patent.
d. Modified a machine, thus extending its useful life and capabilities.
e. Paid wages for the janitorial workers.
f. Paid for a new roof on the building.
g. Paid for a month’s utilities in the office building.
h. Replaced the furnace in the office building.
i. Replaced the carpeting in the office building.
Tullot Industries began operations on January 1, 20X9. On that date, the owners
invested $140,000 in the company, and acquired a $90,000 machine. The machine has a
useful life of 5 years, and a residual value of $4,000. The company intends to depreciate
the machine on a straight-line basis for financial reporting purposes. During 20X9,
revenues, which were all in cash, totaled $630,000. All operating expenses, other than
depreciation and all paid in cash, were $510,000. Tullot Industries has a 45% income
tax rate.
Given the above information, determine the following (round all answers to the nearest
dollar):
a. 20X9 Net income using straight-line depreciation
b. 20X9 Net cash provided by operations using straight-line depreciation
When preparing the statement of cash flows under the indirect method, all of the
following would be an appropriate procedure except
A) adding depreciation expense.
B) subtracting a decrease in accounts payable.
C) subtracting a decrease in prepaid expenses.
D) adding a decrease in inventories.
E) subtracting a gain from the sale of a fixed asset.
Given the following transactions, what is the ending balance in the Cash account?
1. The owner started the company by investing $6,000 cash.
2. The company paid $1,200 for 6 months’ rent in advance.
3. The company acquired $2,400 in merchandise inventory with one-half of the
purchase on account.
4. The company sold merchandise inventory costing $1,500 for $3,100 on account.
A) $3,600 debit balance
B) $3,600 credit balance
C) $5,100 credit balance
D) $4,800 debit balance
E) $4,800 credit balance
The following data pertains to Greenwold Manufacturing. Total assets at January 1,
20X9, were $290,000; at December 31, 20X9, total assets were $334,000. During
20X9, sales were $995,000; cash dividends declared were $10,000; and operating
expenses (exclusive of cost of goods sold) were $545,000. Total liabilities at December
31, 20X9, were $128,000; at January 1, 20X9, total liabilities were $105,000. There was
no additional paid-in capital during 20X9. What was the amount of stockholders’ equity
as of January 1, 20X9?
A) $450,000
B) $440,000
C) $185,000
D) $635,000
E) $175,000
Montvale Company has the following information available:
What is the average collection period in days for Montvale in 2013? Has the average
collection period in days improved or not improved since 2012?
A) 30.0, not improved
B) 10.0, unknown
C) 10.0, improved
D) 30.0, improved
E) 30.2, not improved
Eleston Printing acquired the following short-term equity securities on January 1,
2X12:
The quarter-end prices per share were as follows:
Eleston Printing considers Color, Inc. stock to be a trading security and Black, Inc. and
White, Inc. to be available-for-sale securities.
What will be the net increase or decrease included in Accumulated Other
Comprehensive Income in the stockholders’ equity section of the balance sheet for the 3
month period ending March 31, 2X12?
A) $(200)
B) $200
C) $900
D) $1,100
E) $2,000
The following selected information is for Barble Gardening Center at, and for the year
ended, December 31, 2012, and 2011:
Using the indirect method, what is the net cash flow from operations for Barble
Gardening Center for the year ended December 31, 2012?
A) $63,000
B) $57,000
C) $83,000
D) $58,000
E) $87,000
Clokgel Inc. likes to maintain a current ratio near 1.4; however, the CFO for Clokgel,
Inc. has noticed a decline in previous months. The current ratio for April, 2012
produced a ratio of 0.6. What would be the CFO’s major concern with a declining
current ratio?
A) The company has not sold enough products on credit, thus distorting the accounts
receivable balance and the current ratio.
B) The company may have difficulty meeting its short-term obligations.
C) The company has not purchased enough inventory to meet current demand.
D) Long-term obligations such as notes payable may need to be deferred, causing
potential investor concerns.
E) The company has excessive holdings of current assets.
Which of the following statements is TRUE?
A) For most assets, MACRS approximates straight-line depreciation.
B) MACRS depreciates assets over a longer useful life than would be expected from the
asset.
C) MACRS allows for greater depreciation expense in the later years of an asset’s life,
thus reducing the taxes a company will have to pay during those years.
D) The purpose of MACRS is to increase a company’s income tax liability in the early
years of a fixed asset’s life.
E) None of the above
Grady Company’s inventory turnover was 8.2 in 2X13. After analyzing several similar,
competing companies, Grady Company found that the average inventory turnover for
those companies was 11.8. What should Grady Company consider doing?
A) Increase inventory by purchasing inventory on credit
B) Increase inventory by purchasing inventory with cash
C) Change the number of days Grady Company uses to calculate inventory turnover
D) Increase inventory by decreasing sales.
E) Decrease inventory by increasing sales
Harry Chull purchased supplies from Party Supplies Company on August 14, 2012 for
$540 cash. Party Supplies Company purchased the supplies for $75 on August 1, 2012.
What steps must Party Supplies Company follow to record the sale to Harry Chull?
After listing the step, describe in detail the specific transaction Party Supplies Company
is recording.
A classified balance sheet groups assets and liabilities into two categories. Identify and
define those two categories for both assets and liabilities. Why is this categorization
made? Finally, two measures of liquidity can be generated using these two categories.
What are the two measures of liquidity and how are they calculated?
Highland Cutlery acquired as a long-term investment some of the common stock of
LTS Company on December 31, 2X12. During 2X13, LTS Company had net income of
$300,000 and declared and paid cash dividends of $90,000. What journal entry would
Highland Cutlery make for 2X13 to recognize dividends received from LTS Company,
assuming Highland Cutlery acquired 12% of the outstanding stock of LTS Company?
With respect to whether a company should issue debt or preferred stock to finance an
investment in plant assets, provide three issues that need to be considered before such a
decision is made.
Blockade Consulting Services paid 3 months’ rent in advance on July 1, at a total cost of
$2,400. The rent covers the period from July 1 to September 30. At the time of the
payment, prepaid rent was increased by $2,400. What adjusting entry is necessary on
July 31?
E) No adjusting entry is necessary.
Corbin Catering prepares monthly bank reconciliations of its checking account balance.
The bank statement received by Corbin Catering for February 20X9 follows:
——————————————————————————-
Required:
Prepare a bank reconciliation for Corbin Catering at February 28, 20X9.
