The asset turnover ratio measures the amount of net sales generated for each average
dollar of total assets invested.
The operating cycle is the process by which companies produce their financial
statements for a specific period.
The stockholders’ claim to the assets of a business is called equity or stockholders’
equity.
Vertical analysis involves comparing each figure in the financial statements with a
corresponding figure of the previous year.
The Accounts Receivable balance in the general ledger may or may not equal the sum
of the accounts in the accounts receivable subsidiary ledger.
Generally Accepted Accounting Principles (GAAP) require the use of accrual basis of
accounting.
A company received a bank statement showing a balance of $75,000. Reconciling items
included outstanding checks of $2,400 and a deposit in transit of $9,500. What is the
company’s adjusted bank balance?
A) $63,100
B) $67,900
C) $82,100
D) $65,500
On January 1, 2016, Demarest Company purchased equipment and signed a six-year
mortgage note for$80,000 at 15%. The note will be paid in equal annual installments of
$21,139, beginning January 1, 2017. Calculate the portion of principal amount paid on
the third installment. (Round your answer to the nearest whole number.)
A) $12,086
B) $12,000
C) $21,139
D) $9,053
Christopher Corp. is preparing its statement of cash flows using the indirect method. It
provides the following information about transactions for the year:Plant assets,
net-beginning balance: $111,000
Plant assets, net-ending balance: $148,000
Equipment was purchased for $65,000.
Equipment with a net asset value of $12,000 was sold for $18,000.
Depreciation Expense of $16,000 was recorded during the year.What was the amount of
net cash provided by (used for) investing activities?
A) $(47,000)
B) $47,000
C) $(63,000)
D) $(39,000)
Anthony Delivery Service has a weekly payroll of $32,000. December 31 falls on
Tuesday and Anthony will pay its employees the following Monday (January 6) for the
previous full week. Assume that Anthony has a five-day workweek and has an
unadjusted balance in Salaries Expense of $925,000. What is the December 31 balance
of Salaries Expense after adjusting entries are recorded and posted?
A) $925,000
B) $957,000
C) $944,200
D) $937,800
Which of the following is used by both internal and external users?
A) Chart of Accounts
B) Trial Balance
C) Balance Sheet
D) Costing Reports
Blue Company has four customers: A, B, C, and D. The accounts receivable balance in
the general ledger is $8,583 and the accounts receivable subsidiary ledger of customers
A, C, and D have $1,446, $3,596, and $3,340, respectively. Calculate the amount in the
accounts receivable subsidiary ledger account of customer B.
A) $8,382
B) $1,647
C) $791
D) $201
Leroy, an employee of Double Time, Inc., has gross salary for March of $4,000. 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 18%. Provide the journal entry to record
salaries expense and payroll withholdings. (Assume a FICA-OASDI Tax of 6.2% and
FICA-Medicare Tax of 1.45%.)
On March 1, 2016, Emerson Services issued a 4% long-term notes payable for $16,000.
It is payable over a 4-year term in $4,000 annual principal payments on March 1 of
each year plus interest, beginning March 1, 2017. Each yearly installment will include
both principal repayment of $4,000 and interest payment for the preceding one-year
period. On March 1, 2017, ________. The accounting period ends on December 31.
A) Emerson must accrue $4,000 of Interest Expense
B) Emerson must accrue the coming $4,000 as the current portion of principal payment
C) Emerson must pay $640 of interest to the note holder
D) Emerson will receive $4,000 as an installment payment
Which of the following entries would be recorded by a company that uses the cash basis
method of accounting?A)
B)
C)
D)
Accountants record ________.
A) economic recessions
B) estimated future transactions
C) a transaction or any event that affects the financial position of the business and can
be measured with faithful representation
D) the $20,000 increase in value of a building that actually cost $50,000 but could be
sold for $70,000
Which of the following columns is typically included in a payroll register?
A) Direct Labor Hours Worked
B) Warranties Payable
C) Current Period Earnings
D) Sales Tax
Dark Room Corp. purchased equipment for $45,000. Total depreciation of $36,000 was
recorded. On January 1, 2017, Dark Room exchanged the equipment for new
equipment, paying $65,000 cash. The market value of the new equipment is $65,000.
Prepare the journal entry to record this transaction. Assume the exchange had
commercial substance.
On October 1, 2017, Zircon Jewelry Company accepted a 4-month, 10% note for
$2,400 in settlement of an overdue account receivable. Interest revenue was accrued
through December 31, 2017. Zircon receives the maturity value of the note at maturity.
Prepare the journal entry to record the collection.
Lewis, Inc. uses the indirect method to prepare its statement of cash flows. Refer to the
following portion of the comparative balance sheet:Lewis, Inc.
Comparative Balance Sheet
December 31, 2017 and 20162017 2016 Increase (Decrease)
Cash $42,000 $36,000 $6,000
Accounts Receivable 62,000 70,000 (8,000)
Merchandise Inventory 106,000 50,000 56,000
PP&E, net 240,000 180,000 60,000
Total Assets $450,000 $336,000 $114,000Additional information provided by the
company includes the following:
Equipment costing $104,000 was purchased for cash.
Equipment with a net book value of $20,000 was sold for $28,000.
Depreciation Expense of $24,000 was recorded during the year.Use the T-account
format and evaluate the transactions affecting Property, Plant, and Equipment, net.
A business renders services to its customer for $50,000 on account. Record the
transaction in the journal.
Prairie Outfitters, Inc., a retailer, accepts payment through credit cards. During August,
credit card sales amounted to $12,000. The processor charges a 3% fee. Assuming that
the credit card processor uses the gross method, prepare the journal entries, on the
books of Prairie Outfitters, for the credit card sales and the payment of fees. (Ignore
cost of goods sold.)
Extracts from the balance sheet of Michigan, Inc. are as follows:2017
Assets
Current Assets:
Cash and Cash Equivalents $30,000
Accounts Receivable, Net 65,000
Merchandise Inventory 50,000
Total Current Assets 145,000
Long-term Investments 150,000
Property, Plant, and Equipment, Net 250,000
Total Assets $545,000
Total Current Liabilities $150,000Compute the acid-test ratio.
On April 1, 2017, Nurix Manufacturers purchases equipment for $100,000, paying
$30,000 in cash and signing a 10-year mortgage for $70,000 at 8% annual interest.
Prepare the journal entry to record the acquisition of the equipment.
Water Drops, Inc. purchased equipment for $200,000. The company recorded total
depreciation of $140,000. On January 1, 2017, the company exchanges the equipment
for new equipment, paying $150,000 cash. The fair market value of the new equipment
is $250,000. Prepare the journal entry to record this transaction. Assume the exchange
has commercial substance.
Ellis Service Company had the following unadjusted balances at December 31, 2016:
Salaries Payable, $0; Salaries Expense, $12,000. The following transactions took place
on December 31, 2016:
Accrued Salaries Expense, $5,000
Closed the Salaries Expense account.The following transaction took place on January 4,
2017:
Paid salaries of $6,000. This payment included $5,000 that was accrued on December
31, 2016 and $1,000 for the first few days in January 2017.Prepare the journal entry for
January 4, 2017, assuming that reversing entries were not made.