An equity security represents a credit relationship with another company or
governmental entity.
When a business makes a cash payment, the Cash account is debited.
In a vertical analysis of the income statement, each line item is shown as a percentage
of net income.
Paid-in capital is externally generated capital and results from transactions with
outsiders.
The Merchandise Inventory account is an expense account that is used for goods
purchased that the business owns and intends to resell to customers, as well as for
purchase of office supplies and equipment.
A corporation is a separate legal entity that is organized independently of its owners.
Debt is a less expensive source of capital than stock.
On January 1, Ogden, Inc. had $1,500 of supplies on hand. During January, Ogden
purchased $5,500 worth of new supplies. At the end of the month, a count revealed
$700 worth of supplies remaining on the shelves. The adjusting entry needed will
include a debit to Supplies Expense of $6,300. The supplies were initially recorded as
an asset.
Using the effective-interest amortization method, the amount of premium amortization
remains the same over the life of the bond.
Tritan Company is preparing its statement of cash flows using the indirect method.
Refer to the following portion of the comparative balance sheet:Tritan Company
Comparative Balance Sheet
December 31, 2017 and 2016
Additional information provided by the company includes the following:
1. During 2016, the company repaid $35,000 of long-term notes payable.
2. During 2016, the company borrowed $24,000 on a new note payable.Based on the
above information only, what amount of net cash flow would be shown in the financing
section of the statement of cash flows?
A) $(11,000)
B) $11,000
C) $59,000
D) $(59,000)
Which of the following is a disadvantage of enterprise resource planning (ERP)
systems?
A) It is not beneficial to large corporations.
B) It is not supported by cloud computing.
C) Its implementation requires a large commitment of time and people.
D) It uses separate software systems, such as sales and payroll.
The following transactions have been journalized and posted to the proper accounts.
Prepare a trial balance at the end of the first month using the following details:a)
Received $15,000 cash and issued common stock.
b) Paid the first month’s rent with $800 cash.
c) Purchased equipment by paying $4,000 cash and executing a note payable for
$4,000.
d) Purchased office supplies for $200 cash. The supplies remain at the end of the month.
e) Billed clients for a total of $7,000 for design services rendered.
f) Received $1,000 cash from clients for services rendered above.
Myers Landscaping Corporation performs lawn mowing services for its customers.
Payments for the current month’s services are expected to be received next month. How
does this transaction affect the accounting equation of Myers Landscaping?
A) liabilities increase and equity decreases
B) assets and equity increase
C) assets and equity decrease
D) liabilities and equity increase
A $43,000, two-month, 10% note payable was issued on December 1, 2016. What is the
amount of interest expense recorded in the year 2017?
A) $494
B) $358
C) $717
D) $42,994
Edelman, Inc. provides the following information for 2017:
The company has no preferred stock outstanding. Calculate the dividend payout ratio.
(Round any intermediate calculations and your final answer to two decimal places.)
A) 147.06%
B) 0.63%
C) 20.00%
D) 168.07%
The asset account, Office Supplies, had a beginning balance of $3,800. During the
accounting period, office supplies were purchased, on account, for $2,500. Supplies
Expense for the accounting period is $4,000. What is the ending balance of Office
Supplies?
A) $6,300
B) $2,300
C) $4,000
D) $5,300
A way to account for petty cash by maintaining a constant balance in the petty cash
account and which at any time requires that cash plus petty cash tickets must total the
amount allocated to the petty cash fund, is known as the ________.
A) control system
B) voucher system
C) balanced system
D) imprest system
Regarding accounting entries for debt securities, which of the following is true?
A) The receipt of interest revenue is recorded with a debit to Interest Revenue and a
credit to Cash.
B) Investments in debt securities are recorded at cost, including any brokerage fees
paid.
C) The receipt of interest revenue is recorded with a debit to Cash and a credit to
Long-term Securities-Held-to-Maturity.
D) Debt securities disposed of at maturity are recorded with a debit to the Short-term or
Long-term Investments account and a credit to Cash.
The cash ratios of four companies are listed below.
Which company has the maximum ability to repay its current liabilities?
A) Juan Corp.
B) Rose, Inc.
C) Freelance, Inc.
D) Pioneer Corp.
When a company receives interest revenue on a long-term investment in bonds,
________.
A) long-term assets decrease
B) long-term assets increase
C) equity increases
D) current assets decrease
The following are the current month’s balances for Jackson, Inc.
Calculate the total amount of credits for the trial balance.
A) $24,500
B) $22,750
C) $25,750
D) $33,750
Tanner’s gross pay for the week is $1,500. His yearly pay is under the limit for OASDI.
Assume that the rate for state and federal unemployment compensation taxes is 6% and
that Tanner’s year-to-date pay has previously exceeded the $7,000 cap. What is the
amount of state and federal unemployment tax that his employer must record as payroll
tax expense and pay to the federal and state governments?
A) $0
B) $21.75
C) $111.75
D) $90
Which of the following is true of the Premium on Bonds Payable account?
A) It is added to the Bonds Payable balance and shown with long-term liabilities on the
balance sheet.
B) It is added to the Bonds Payable balance and shown with stockholders’ equity on the
balance sheet.
C) It is subtracted from the Bonds Payable balance and shown with long-term liabilities
on the balance sheet.
D) It is subtracted from the Bonds Payable balance and shown with the current
liabilities on the balance sheet.
Which of the following accounts will be closed by debiting the Income Summary
account?
A) Depreciation Expense
B) Accounts Payable
C) Service Revenue
D) Accumulated Depreciation
Which is the most liquid form of asset?
A) cash
B) accounts receivable
C) inventory
D) supplies
Under the equity method, dividend revenue is treated as ________.
A) a debit to revenue from investments
B) dividend revenue
C) a return of capital
D) a credit to current assets
Madison, Inc. had the following balances and transactions during 2017.
The company maintains its records of inventory on a perpetual basis using the last-in,
first-out inventory costing method. Calculate the amount of ending Merchandise
Inventory at December 31, 2017 using the lower-of-cost-or-market rule. (Round any
intermediate calculations two decimal places, and your final answer to the nearest
dollar.)
A) $2,880
B) $3,412
C) $3,713
D) $3,572
A company using the perpetual inventory system purchased inventory worth $20,000 on
account with terms of 2/10, n/30. Defective inventory of $3,000 was returned two days
later, and the accounts were appropriately adjusted. If the invoice is paid within 10
days, the amount of the purchase discount that would be available to the company is
________.
A) $340
B) $460
C) $400
D) $390
Beetles, Inc. recorded the following journal entry on March 2, 2016.
From the journal entry above, identify the transaction on March 2, 2016.
A) Beetles purchased goods worth $4,500 and signed a one-year note for the same.
B) Beetles sold goods for $4,500 cash.
C) Beetles received $4,500 for services to be performed in a later period.
D) Beetles paid $4,500 for services to be received at a later date.