The indirect and direct methods use different computations but produce the same
amount of net cash flow from operating activities.
Warranty Expense is shown on the income statement at the estimated amount.
The Other Accounts DR columns of a purchases journal are used for recording
merchandise inventory and office supplies.
A lump-sum purchase or basket purchase involves paying a single price for several
assets as a group.
A deposit ticket is a document that instructs a bank to pay the designated person a
specified amount of money.
Davis Metals Company uses the direct method to prepare its statement of cash flows.
Use the following information reported for the year 2017 to compute the cash paid to
suppliers for operating expenses.Operating expenses, $29,000
Accrued Liabilities, beginning balance, $3,400
Accrued Liabilities, ending balance, $5,400A) $32,400
B) $31,000
C) $27,000
D) $34,400
Gross profit is calculated as ________.
A) sales revenue less sales discounts and allowances
B) sales revenue less operating expenses
C) net sales revenue less sales discounts
D) net sales revenue less cost of goods sold
The ability of a company to repay its liabilities can be determined from its ________.
A) bankers
B) creditors
C) debt ratio
D) journal
Hank’s Tax Planning Service started business in January 2016. The company rented an
office for $7,000 per month starting from January 1, 2016. On that day, Hank prepaid
the rent through June 30. The company makes adjusting entries at the end of each
month. What is the balance in the Prepaid Rent account as of April 30, 2016?
A) $14,000
B) $1,167
C) $7,000
D) $3,500
In an accounting information system, source documents are the documents which
________.
A) are audited and presented to the Securities and Exchange Commission
B) detail the strategic planning of the business
C) have complete information about the financial statements
D) provide the evidence for accounting transactions
A company reports total assets of $870,000 and stockholders’ equity of $560,000.
Calculate the debt ratio. (Round your answer to two decimal places.)
A) 39.16%
B) 35.63%
C) 64.37%
D) 55.36%
Accounts Receivable has a balance of $4,000, and the Allowance for Bad Debts has a
credit balance of $400. The allowance method is used. What is the net realizable value
of Accounts Receivable after a $160 account receivable is written off?
A) $3,440
B) $3,760
C) $3,600
D) $4,000
Cash is a(n) ________ account and has a normal ________ balance.
A) asset; debit
B) liability; credit
C) liability; debit
D) asset; credit
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
A business pays $500 cash for office supplies. Which of the following accounts is
credited?
A) Cash
B) Accounts Payable
C) Office Supplies
D) Utilities Expense
The accountant for Sparks Electric, Inc. failed to make an adjusting entry to record
$3,000 of telephone expenses for the last two months of the year. Which of the
following statements is true?
A) The total liabilities will be overstated.
B) The total liabilities will be understated.
C) The total assets will be overstated.
D) The total assets will be understated.
Which of the following is an entry-level accounting software package?
A) Microsoft Word
B) QuickBooks
C) Cloud Computing
D) Oracle®
Merchandise Inventory increased $28,000 and Accounts Payable decreased $19,600
during the year. Accounts Payable relates only to the acquisition of merchandise
inventory. Sales were $796,000 and Cost of Goods Sold was $549,700. Compute the
payment made to the suppliers.
A) $577,700
B) $569,300
C) $597,300
D) $47,600
Which one of the following account groups normally has a debit balance?
A) assets and expenses
B) revenues and expenses
C) liabilities and revenues
D) assets and liabilities