Current liabilities must be paid either in cash or with goods and services within one
year or within the entity’s operating cycle, if the cycle is longer than a year.
The accounts payable subsidiary ledger lists each vendor along with amounts paid to
the vendors and the remaining amounts owed to them.
After posting the journal entries from the journal to the ledger, the accounting equation
should be in balance.
When a company issues stock at an amount greater than the par value, a gain is
recorded for the difference between the issue price and the par value.
On March 1, 2016, Vantage Services issued a 8% long-term notes payable for $22,000.
It is payable over a 16-year term in $1,375 principal installments on March 1 of each
year, beginning March 1, 2017. Each yearly installment will include both principal
repayment of $1,375 and interest payment for the preceding one-year period. The
journal entry to pay the first installment will include a debit to Interest Expense for
$1,760.
The accounting period used for the annual financial statements is called the fiscal year.
The declaration of a cash dividend does not create an obligation for the corporation.
The higher the debt ratio, the lower the risk.
Financing activities on the statement of cash flows affect the long-term liability and
equity accounts.
Debit card transactions are considered electronic funds transfer.
When a company uses the perpetual inventory system, there is no need to conduct a
physical count of inventory.
Interest expense paid on a note payable is included in the operating activities section of
the statement of cash flows.
A company that uses a perpetual inventory system purchased inventory on account and
later returned goods worth $500 to the vendor. Which of the following would be the
correct journal entry to record these returns?A)
B)
C)
D)
Hamilton Lawn Services incurred $800 as a repair expense and paid for it in cash. This
transaction will ________.
A) decrease the stockholders’ equity
B) increase the assets of the business
C) increase the liabilities of the business
D) decrease the liabilities of the business
Salaries are $6,500 per week for five working days and are paid weekly at the end of
the day Fridays. The end of the month falls on a Thursday. The accountant for Dayton,
Inc. made the appropriate accrual adjustment and posted it to the ledger. The balance of
Salaries Payable, as shown on the adjusted trial balance, will be a ________. (Assume
that there was no beginning balance in the Salaries Payable account.)
A) credit balance of $5,200
B) debit balance of $1,300
C) debit balance of $5,200
D) credit balance of $1,300
Which one of the following is true of a signature card?
A) It shows each authorized person’s signature for a bank account.
B) It is the same as a deposit receipt and acts as a proof of the deposit transaction.
C) It can be used as a debit card.
D) It can only be used for bank accounts of individuals, not for the bank accounts of
businesses.
Which of the following statements is true of a bond that is issued at a discount?
A) The bond will be issued at par.
B) The stated interest rate is higher than the prevailing market interest rate.
C) At maturity, the bond will repay an amount that is less than the face value.
D) The bond will be issued for an amount less than the face value.
A business’s cash receipts and cash payments for a specific period are reported on a(n)
________.
A) income statement
B) balance sheet
C) statement of cash flows
D) cash reconciliation statement
Which of the following is true of a completed worksheet?
A) The total debits in the unadjusted trial balance column equal the total debits in the
adjusted trial balance column.
B) The total debits in the income statement column equal the total credits in the balance
sheet column.
C) The total debits in the income statement column equal the total debits in the balance
sheet column.
D) The total of all the debit columns is equal to the total of all the credit columns.
A corporation originally issued $13 par value common stock for $15 per share. Which
of the following is included in the entry to record the purchase of 300 shares of treasury
stock for $11 per share?
A) Treasury Stock-Common is debited for $3,300.
B) Treasury Stock-Common is credited for $45.
C) Retained Earnings is debited for $1,650.
D) Treasury Stock-Common is debited for $1,650.
Before any internal control procedure is initiated, which of the following questions
must be primarily addressed by a company?
A) Will this put an end to theft?
B) Is this the best security money can buy?
C) How much benefit will be derived from the cost of the procedure?
D) Will this prevent accounting errors?
Calculate the current ratio using the following information: (Round your answer to two
decimals.)Cash $6,000
Accounts Receivable 1,300
Prepaid Rent 1,100
Land 20,000
Equipment 6,000
Accumulated Depreciation 1,000
Accounts Payable 5,000
Salaries Payable 1,000
Notes Payable-long term 8,000A) 1.40
B) 1.68
C) 1.44
D) 1.22
Which of the following statements describes a purchase order?
A) It is an order to purchase goods from a supplier.
B) It is a statement from the supplier showing the goods purchased and the amount due.
C) It is a report showing that the goods have been received in good condition, as
ordered.
D) It is a document authorizing a payment to a supplier.
A petty cash fund was established with a $390 balance. It currently has cash of $43 and
petty cash tickets totaling $347. Which of the following would be included in the entry
to replenish the fund?
A) a credit to Petty Cash for $347
B) a debit to Petty Cash for $43
C) a credit to Cash for $43
D) a credit to Cash for $347
Prepare a comparative common-size income statement for Marion, Inc. for 2017 and
2016 data. (Round percentages to one decimal place.)Marion, Inc.
Comparative Income Statement
Years Ended December 31, 2017 and 20162017 2016
Net Sales $ 6,355 $ 4,920
Cost of Goods Sold 3,370 2,200
Gross Profit 2,985 2,720
Operating Expenses:
Selling Expenses 675 580
Administrative Expenses 410 425
Total Operating Expenses 1,085 1,005
Operating Income 1,900 1,715
Other Revenues and (Expenses):
Interest Revenue 0 0
Interest Expense (400) (695)
Total Other Revenues and (Expenses) (400) (695)
Income Before Income Taxes 1,500 1,020
Income Tax Expense 230 210
Net Income $ 1,270 $ 810
Techno Technical Services is working on a six-month job for a client, starting on
February 1. It will collect $24,000 from its customer when the job is finished but the
revenue is earned evenly over the six months. On March 31, before adjusting entries are
made, Techno’s Accounts Receivable account had a debit balance of $3,000. After the
March 31 monthly adjusting entry has been made, what will be the balance in Accounts
Receivable?
A) Debit balance of $4,000
B) Credit balance of $20,000
C) Debit balance of $7,000
D) Debit balance of $24,000
Joe, an employee of Time Travel, Inc., has gross salary for March of $5,200. The entire
amount is under the OASDI limit of $117,000, and thus subject to FICA. He is also
subject to federal income tax at a rate of 29%. His year-to-date pay has already
exceeded the $7,000 cap for FUTA and SUTA. The journal entry to record employer’s
payroll tax expense includes a credit to FICA-Medicare Taxes Payable for $150.80.
(Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)
At the time the transaction occurred, which of the following would result in an increase
in net income under the accrual basis of accounting, but would not result in an increase
in net income under cash basis accounting?
A) purchase of supplies for cash
B) performance of services on account
C) use of supplies purchased earlier
D) receipt of cash for services that were performed earlier on account
A-Z Auto Parts Company uses the indirect method to prepare the statement of cash
flows. Refer to the following section of the comparative balance sheet:A-Z Company
Comparative Balance Sheet
December 31, 2017 and 2016
How will the change in Accrued Liabilities be shown on the statement of cash flows?
A) as an addition to Net Income
B) as a deduction from Net Income
C) as a deduction from operating cash flows
D) as an addition to operating cash flows
Which of the following is true when the estimate of an asset’s useful life is changed?
A) The new estimate is ignored until the last year of the asset’s life.
B) The depreciation expense in the prior year is restated.
C) Prior years’ financial statements must be restated.
D) The asset’s remaining depreciable book value will be spread over the asset’s
remaining life.