The T-account is a summary device that is shaped like a capital T with debits posted on
the right side of the vertical line and credits posted on the left side of the vertical line.
Accountants assume that the dollar’s purchasing power is stable.
When preparing the statement of cash flows using the indirect method, depreciation
expense is subtracted from net income under operating activities.
The environment is the culture of a business, and it starts with the CEO or CFO and the
top managers.
If the total debits equal the total credits on the trial balance, the individual account
balances will be error free.
The debt to equity ratio measures the proportion of total liabilities relative to the total
equity.
The purchases journal is a special journal used to record all purchases of merchandise
inventory, office supplies, and other assets on account.
The depreciation method that allocates an equal amount of depreciation each year is
called the straight-line method.
The higher the acid-test ratio, the less able the business is to pay its current liabilities.
The Public Company Accounting Oversight Board oversees the work of auditors of
public companies.
Goodwill is the excess cost of an acquired company over the market value of its net
assets.
A common-size statement reports the same percentages that appear in a ________.
A) horizontal analysis
B) financial statement
C) vertical analysis
D) cost statement
The Allowance for Bad Debts has a credit balance of $8,000 before the adjusting entry
for bad debts expense. After analyzing the accounts in the accounts receivable
subsidiary ledger using the aging-of- receivables method, the company’s management
estimates that uncollectible accounts will be $17,000. What will be the amount of Bad
Debts Expense reported on the income statement?
A) $25,000
B) $9,000
C) $17,000
D) $8,000
To match expenses against revenues means to ________.
A) add expenses incurred during one period from revenues earned during that same
period
B) subtract expenses incurred during one period from revenues earned during the
previous period
C) add expenses incurred during one period from revenues earned during the previous
period
D) subtract expenses incurred during one period from revenues earned during that same
period
Which of the following is included in the entry to record the employer’s payroll taxes?
A) a debit to State Unemployment Tax Payable
B) a credit to Payroll Tax Expense
C) a credit to FICA-OASDI Tax Payable
D) a credit to Salaries Payable
On November 1, 2017, Oster, Inc. declared a dividend of $4.50 per share. Oster, Inc.
has 23,000 shares of common stock outstanding and no preferred stock. Which of the
following is the journal entry needed to record the declaration of the dividend?
A) Debit Dividends Payable-Common $103,500, and credit Retained Earnings
$103,500.
B) Debit Cash Dividends $103,500, and credit Cash $103,500.
C) Debit Cash Dividends $103,500, and credit Dividends Payable-Common $103,500.
D) Debit Cash $103,500, and credit Dividends Payable-Common $103,500.
Stewart Candle Company received cash of $40,000 and issued common stock. Which of
the following accounts will be debited?
A) Accounts Receivable
B) Cash
C) Common Stock
D) Accounts Payable
Treasury stock ________.
A) decreases the number of shares issued
B) increases the number of shares issued
C) increases the number of shares outstanding
D) decreases the number of shares outstanding
Which of the following is true of a corporation?
A) A corporation cannot be privately held.
B) The earnings of a corporation may be subject to double taxation.
C) A corporation has a limited life.
D) The stockholders of a corporation have unlimited liability for the corporation’s debt.
Available-for-sale (AFS) investments that are expected to be held longer than a year are
reported as ________.
A) equity
B) current assets
C) long-term assets
D) either current assets or long-term assets
The following transactions for the month of March have been journalized and posted to
the proper accounts.
What is the balance in Cash?
A) $13,170
B) $12,270
C) $15,270
D) $13,900
International Financial Reporting Standards ________ U.S. Generally Accepted
Accounting Principles.
A) are the same as
B) are generally less specific than
C) are based less on principle than
D) leave less room for professional judgment than
Fitch Supply Services received $1,000 cash from a customer; the amount was owed to
the business from the previous month. What is the effect of this transaction on the
accounting equation?
A) Accounts Receivable increases and Service Revenue increases
B) Cash increases and Accounts Receivable decreases
C) Cash increases and Service Revenue increases
D) Cash increases and Accounts Payable decreases
Which of the following is included in comprehensive income?
A) Owners’ investments
B) Purchase of capital assets
C) Preferred dividends
D) Deferred gains or losses from derivatives
Unearned Revenue is classified as a(n) ________ account.
A) liability
B) asset
C) revenue
D) equity
The employees of Leicester Services, Inc. worked the last two weeks of December,
2016. They received their paychecks on January 2, 2017. Which of the following
accounts should appear on the income statement for the year ended December 31,
2016?
A) Salaries Expense
B) Prepaid Expense
C) Salaries Payable
D) Unearned Revenue
The debt to equity ratio of four companies is given below.
Which of the following companies has the greatest financial risk?
A) Lewis, Inc.
B) Jackson, Inc.
C) Jones Corp.
D) Roberts Corp.