In a bank reconciliation, outstanding checks will be shown on the bank side of the
reconciliation.
In reviewing the T-account for Accounts Receivable, you find that the beginning
balance is zero, the total increases are $5,400 and the total decreases are $2,100. This
means that the ending balance of the account is a credit balance of $3,300.
A company is uncertain whether a complex transaction should be recorded as an asset
or an expense. Under the conservatism principle, it should choose to treat it as an asset.
Significant interest investments must be accounted for using the equity method.
Franchises are privileges granted by a business to sell goods and services under
specified conditions.
The balance sheet shows the balance in Bonds Payable plus any discount or minus any
premium.
The T-account is a summary device that is shaped like a capital T with debits posted on
the left side of the vertical line and credits posted on the right side of the vertical line.
Credit terms of 2/10, n/30 indicate that a discount of 2% will be given if payment is
made within 10 days of the invoice date. Otherwise, the total invoice amount is due
within 30 days of the invoice date.
When stock is issued for assets other than cash, the transaction is recorded at the market
value of the stock issued or the market value of the assets received, whichever is more
clearly determinable.
The Merchandise Inventory account is debited to write down the inventory as per the
lower-of-cost-or-market rule.
Hector Production Company uses the indirect method to prepare its statement of cash
flows. The Treasury Stock account had a debit balance of $8,000 at the beginning of the
year and a debit balance of $16,000 at the end of the year. No Treasury Stock was sold
during the year. The financing section of the statement of cash flows will show a
positive cash flow of $8,000 for the buy back of Treasury Stock.
Inventory turnover measures ________.
A) the days’ sales in inventory ratio
B) how rapidly merchandise inventory is purchased
C) how rapidly merchandise inventory is sold
D) the time period for inventory to become obsolete
At the end of the current year, the accountant for Colorful Graphics, Inc. forgot to make
an adjusting entry to accrue Wages Payable to the company’s employees for the last
week in December. The wages will be paid to the employees in January. Which of the
following is an effect of this error?
A) Net income is overstated.
B) Liabilities are overstated.
C) Net income is understated.
D) Expenses are overstated.
Ten years ago a corporation purchased a building for $160,000. At that time, the
corporation felt that the business was worth $185,000. The current market value of the
business is $460,000. The building has been assessed at $435,000 for property tax
purposes. At which amount should the corporation record the building in its accounting
records?
A) $160,000
B) $185,000
C) $435,000
D) $460,000
The Accounts Receivable account of Rosewood, Inc. has the following postings:
Calculate the ending balance of the account.
A) $25,000 debit
B) $23,000 debit
C) $2,000 credit
D) $21,000 debit
The two methods of accounting for uncollectible receivables are ________.
A) the direct write-off method and the liability method
B) the asset method and the sales method
C) the allowance method and the liability method
D) the allowance method and the direct write-off method
Which of the following values is considered the market valuewhen valuing inventory at
lower-of-cost-or-market?
A) sales price less the company’s normal mark-up percentage
B) current replacement cost
C) cost plus the company’s normal mark-up percentage
D) historic cost
The date on which the principal amount is repaid to the bondholder is known as the
________.
A) issuing date
B) interest date
C) maturity date
D) installment date
Which of the following is true of available-for-sale (AFS) investments?
A) They are always reported as current assets in the balance sheet.
B) They are always reported as long-term assets in the balance sheet.
C) They are reported as current assets on the balance sheet only if the business expects
to sell them within the first two years.
D) They are reported as long-term assets on the balance sheet only if they are planned
to be held for longer than a year.
The expense for warranty costs is recorded in the period ________.
A) when the product is sold
B) when the product is repaired or replaced
C) when cash is paid to repair or replace the product
D) when cash is collected from the sale of the product
The sale of merchandise inventory for cash is recorded in the ________.
A) general journal
B) cash receipts journal
C) sales journal
D) accounts receivable journal
Which of the following factors is assessed using the debt ratio?
A) expenses
B) revenues
C) risk
D) income
A list of the accounts and their balances at the end of the period, after journalizing and
posting the closing entries, is called ________.
A) chart of accounts
B) adjusted trial balance
C) post-closing trial balance
D) pre-closing balance sheet
Which of the following is the correct formula for calculating gross profit percentage?
A) Net profit / Net sales revenue
B) Gross profit / Net sales revenue
C) Net sales revenue / Net profit
D) Net sales revenue / Gross profit
Clark Coatings Company uses the indirect method to prepare its statement of cash
flows. Refer to the following information for the year 2017:Net cash provided by
operating activities: $44,000
Net cash used for investing activities: $(27,000)
Net cash provided by financing activities: $2,000What is the net change in cash during
the year?
A) $(19,000)
B) $42,000
C) $19,000
D) $(17,000)
Which of the following items would require an adjusting entry after preparation of the
bank reconciliation?
A) errors made by the bank revealed by the bank reconciliation
B) all items on the bank’s side
C) errors made on the books revealed by the bank reconciliation
D) outstanding checks
________ represent the right to receive cash in the future from customers for goods
sold or for services performed.
A) Accounts Receivable
B) Accounts Payable
C) Equity
D) Expenses
Federal income taxes are ________.
A) deducted to arrive at an employee’s gross pay
B) added to arrive at an employee’s net pay
C) deducted to arrive at an employee’s net pay
D) not borne by the employee
The ________ is a measure of a company’s ability to pay its current liabilities from cash
and cash equivalents.
A) cash conversion cycle
B) cash ratio
C) gross profit
D) debt equity ratio
Isabelle’s gross pay for the week is $920.00. Her deduction for federal income tax is
based on a rate of 22%. She has voluntary deductions of $190.00. Her yearly pay is
under the limit for OASDI. What is her net pay? (Assume a FICA-OASDI Tax of 6.2%
and FICA-Medicare Tax of 1.45%.)
A) $527.60
B) $717.60
C) $647.22
D) $457.22
A(n) ________ represents stock ownership in another company and sometimes pays
dividends.
A) debt security
B) forward contracts
C) futures contract
D) equity security