On October 1, Angelica Inc. signs a note for $200,000 to provide the funds needed to
build a new facility. The note is due in 10 years, includes an annual interest rate at 7%,
and requires semiannual interest payments each April and October. The journal entry to
record the issuance of the promissory note should debit:
A) Notes Payable for $200,000, debit Interest Expense for $14,000, credit Cash for
$200,000, and credit Interest Payable for $14,000.
B) Accrued Interest and credit Cash for $14,000.
C) Cash and credit Notes Payable for $200,000.
D) Cash for $200,000, debit Interest Expense for $14,000, credit Notes Payable for
$200,000, and credit Interest Payable $14,000.
When the direct write-off method is used, the entry to write-off a specific account
would:
A) increase net income.
B) have no effect on net income.
C) increase Accounts Receivable and increase net income.
D) decrease Accounts Receivable and decrease net income.
Which of the following statements about this statement of retained earnings is not
correct?
A) Retained earnings of $350,500 will appear on the balance sheet as of December 31,
Year 3.
B) The net income in the above statement came from the income statement for the year
ending December 31, Year 3.
C) Dividends are shown in parentheses because they are distributions of earnings to the
stockholders.
D) The ending retained earnings amount represents the amount of cash at the end of
Year 3.
For each of the following cash activities, choose the appropriate letter to match the
activity with the internal control principle to which it relates. Each internal control
principle may be used more than once.
Activity
1) ____ A password is required to open up the cash register
2) ____ The treasurer is the person who is approved to sign checks
3) ____ A list of checks received in the mail is prepared
4) ____ A bank reconciliation is prepared each month
5) ____ The treasurer is not permitted to make bank deposits
6) ____ Checks are pre-numbered.
7) ____ Cashiers cannot approve price changes.
8) ____ Unused checks are kept in the vault.
Internal Control Principle
A. Establish responsibility
B. Segregate duties
C. Restrict access
D. Document procedures
E. Independently verify
A typical classified balance sheet provides no information about which of the following
items?
A) To whom the company owes money
B) For what the company owes money
C) How much the company owes
D) The proportion of the company’s debts that will be paid in the short-term
Which of the following is not an operating activity?
A) Paying off a loan to the bank
B) Receiving cash from customers for services rendered
C) Paying employees for work completed
D) Billing customers for services rendered but not yet paid for
Which of these accounts would normally not be affected by an adjustment?
A) The Supplies account.
B) Revenue accounts.
C) Expense accounts.
D) The Cash Account.
According to Generally Accepted Accounting Principles, which of the following is not a
characteristic of useful financial information?
A) comparable
B) verifiable
C) timely
D) ethical
The cashier uses the cash register and its accompanying point-of-sale accounting
system to perform three important functions. Which of the following is not one of those
functions?
A) Document total cash sales
B) Document amount charged for each item sold
C) Segregate duties
D) Restrict access
Which amount should be reported as cash on the balance sheet?
A) The ending cash balance per the bank statement
B) The beginning cash balance per the bank statement
C) The up-to-date ending cash balance per the bank reconciliation
D) The ending cash balance per the books
When the allowance method is used, the entry to record the write-off of specific
uncollectible accounts would decrease:
A) the Allowance for Doubtful Accounts account.
B) Net Income.
C) Accounts Receivable, Net.
D) Bad Debt Expense.