For good controls over cash payments, the company officer approving a payment
voucher should be the same as the person who ordered the goods, to ensure that the
correct amount of cash is paid.
Tuesday Electric Company uses the direct method to prepare its statement of cash
flows. Tuesday has reported operating expenses of $63,000 on its income statement for
the year 2017. If the balance in accrued liabilities has increased by $6,000 during the
year, then $6,000 needs to be added to $63,000 to calculate payments to suppliers for
operating expenses.
In a periodic inventory system, there is no need to record an entry to Merchandise
Inventory and Cost of Goods Sold.
In an accounting cycle, an analysis of transactions is performed at the end of each
accounting period.
The statement of cash flows explains why net income as reported on the income
statement does not equal the change in the cash balance.
When a company uses the last-in, first-out (LIFO) method, the cost of goods sold
correlates to the most recently purchased goods, and the ending inventory correlates to
the oldest goods in stock.
The cash paid for the purchase of equipment will typically be shown in the investing
activities section of the statement of cash flows.
Revenue and expense accounts are closed to the Income Summary account.
Given the same purchase and sales data, and assuming the cost of inventory is rising,
the costing methods for inventory will result in different amounts for cost of goods sold.
Bank errors are posting errors made by the bank that either incorrectly increase or
decrease the bank balance.
The operating activities section of the statement of cash flows reflects the cash flows
that affect current assets and current liabilities.
Ratio analysis is used most effectively to measure a company against other companies
in different industries.
All transactions are recorded in either one of the special journals or in the general
journal, but not both.
Allen Moving Company uses the indirect method to prepare its statement of cash flows.
Refer to the following portion of the comparative balance sheet:Allen Company
Comparative Balance Sheet
December 31, 2017 and 2016
If the net income for the year was $67,000, the company must have declared $42,000 as
dividends during the year.
Which of the following is a liability account?
A) Accounts Receivable
B) Cash
C) Building
D) Notes Payable
On January 1, 2017, Citywide Sales issued $25,000 in bonds for $29,800. These are
eight-year bonds with a stated rate of 15% and pay semiannual interest. Citywide Sales
uses the straight-line method to amortize the bond premium. On June 30, 2017, when
Citywide makes the first payment to bondholders, what is the amount that will be
reported as Interest Expense?
A) $1,575
B) $1,875
C) $3,225
D) $1,225
A ________ is a document explaining the reasons for the difference between a
depositor’s Cash account in the ledger and the depositor’s cash balance in its bank
account.
A) bank statement
B) deposit receipt
C) bank reconciliation
D) remittance advice
On December 31, 2016, the balance in Pinnacle Exploration Company’s Unearned
Revenue account was a credit of $6,000. In January, 2017, the company received an
advance payment of $12,000 from a new customer for services to be performed. By
January 31, adjustments were made to recognize $7,000 of the revenue that had been
earned during January. What was the balance in Unearned Revenue on January 31,
2017?
A) $7,000 credit
B) $12,000 debit
C) $6,000 credit
D) $11,000 credit
Get in Shape, a healthy living magazine, collected $528,000 in subscription revenue on
May 31. Each subscriber will receive an issue of the magazine in each of the next 12
months, beginning with the June issue. The company uses the accrual method of
accounting. What is the balance in the Unearned Revenue account as of December 31?
A) $220,000
B) $308,000
C) $528,000
D) $396,000
Adjusting entries are needed to correctly measure the ________.
A) ending balance in the Cash account
B) net income (loss) on the balance sheet
C) net income (loss) on the income statement
D) beginning balance in the Cash account
The sales revenue of a merchandiser amounted to $25,000, sales returns and allowances
amounted to $2,400, and sales discounts amounted to $600. The merchandiser uses a
perpetual inventory system. The first entry in the closing process would include
________.
A) a credit to Income Summary for $25,000
B) a credit to Income Summary for $22,600
C) a debit to Income Summary for $2,400
D) a debit to Income Summary for $24,400
Roggers Corp.’s beginning and ending total assets in the year 2017 were $18,000,000
and $22,000,000, respectively. Its asset turnover ratio for the year was calculated to be
1.75 times. Calculate the amount of net sales for the year 2017.
A) $27,000,000
B) $42,000,000
C) $35,000,000
D) $48,000,000
e-Shop, Inc. has net sales on account of $1,500,000. The average net accounts
receivable are $610,000. Calculate the days’ sales in receivables. (Round your answer to
two decimal places.)
A) 897.90 days
B) 365.00 days
C) 148.37 days
D) 2.46 days
GAAP requires companies to use the ________ method to record bad debts expense.
A) direct write-off
B) allowance
C) amortization
D) 360-day
The following information relates to Newman and Foster, Inc.
Calculate the net income of Newman and Foster.
A) $22,500
B) $34,500
C) $77,500
D) $240,000
On September 1, Capitol Maintenance Company contracted to provide monthly
maintenance services for the next nine months at a rate of $2,400 per month. The client
paid Capitol $21,600 on September 1. The maintenance services began on that date.
Assuming Capitol records deferred revenues using the alternative treatment, what
would be the adjusting entry recorded on December 31?
A) No entry is needed since revenue was recorded on September 1.
B) Debit Service Revenue and credit Unearned Revenue for $12,000
C) Debit Service Revenue and credit Unearned Revenue for $9,600
D) Debit Unearned Revenue and credit Service Revenue for $9,600
On December 1, 2017, Going Places, Inc. sold machinery to a customer for $22,000.
The customer could not pay at the time of sale but agreed to pay 10 months later and
signed an 10-month note at 9% interest. What was the total amount of cash collected by
Going Places on the maturity of the note? (Round your answer to the nearest dollar.)
A) $23,980
B) $23,650
C) $20,350
D) $1,650
The net income of a company for the year was $570,000. The company has no preferred
stock. Common stockholders’ equity was $1,800,000 at the beginning of the year and
$2,300,000 at the end of the year. Calculate the rate of return on common stockholders’
equity. (Round your answer to two decimal places.)
A) 24.78%
B) 19.86%
C) 31.67%
D) 27.80%
The following is the adjusted trial balance for Becker Photography.
After the closing entries, what will the final balance in Retained Earnings be?
A) $25,000
B) $216,800
C) $27,500
D) $175,800
The three major categories included on the statement of cash flows are ________.
A) investing, operating, and financing activities
B) investing, capital, and financing activities
C) investing, operating, and contracting activities
D) financial, operating, and internal control activities
The Salaries Payable account is a(n) ________.
A) liability account with a normal debit balance
B) asset account with a normal debit balance
C) liability account with a normal credit balance
D) asset account with a normal credit balance
Saturn Corporation has 13,000 shares of 14%, $84 par noncumulative preferred stock
outstanding and 20,000 shares of no-par common stock outstanding. At the end of the
current year, the corporation declares a dividend of $180,000. How is the dividend
allocated between preferred and common stockholders?
A) The dividend is allocated $8,107 to preferred stockholders and $109,091 to common
stockholders.
B) The dividend is allocated $152,880 to preferred stockholders and $27,120 to
common stockholders.
C) The dividend is allocated $70,909 to preferred stockholders and $109,091 to
common stockholders.
D) The dividend is allocated $235,200 to preferred stockholders and $55,200 to
common stockholders.
On January 1, 2016, Brubeck Company purchased equipment and signed a six-year
mortgage note for $160,000 at 15%. The note will be paid in equal annual installments
of $42,278, beginning January 1, 2017. Calculate the balance of Mortgage Payable after
the payment of the first installment. (Round your answer to the nearest whole number.)
A) $24,000
B) $117,722
C) $141,722
D) $120,702
William Baker works for Jones Restaurant Supply all year and earns a monthly salary
of $8,000. There is no overtime pay and Jones withholds income taxes at 12% of gross
pay. Jones deducts $200 monthly fo the co-payment of the health insurance premium.
Employees are paid on the fifth day of each month. As of October, 31, William had
$80,000 of cumulative earnings. Journalize the accrual of salaries expense on October
31. Omit explanations.
Data for Martin Corp. and Tante, Inc. follow:Martin Tante
Net Sales $25,000 $32,500
Cost of Goods Sold 18,500 22,360
Other Expenses 2,150 5,000
Net Income $4,350 $5,140Prepare a comparative common-size income statement for
each company for the year ending December 31, 2017. Round to two decimal places.
Use a multi-step format for the income statement.
On January 1, 2017, Shea Landscaping borrowed $100,000 on a 15%, 10-year note with
annual installment payments of $10,000 plus interest due on December 31 of each year.
Prepare the journal entry for the first installment payment made on December 31, 2017.
The periodic inventory records of Lucas Dental Supply indicate the following for the
month of April:
As of April 30, Lucas counts 8 units of merchandise inventory on hand.
Compute ending merchandise inventory and cost of goods sold for Lucas using the
FIFO inventory method.
Complete the following table, which compares the effects of LIFO, FIFO and
weighted-average inventory costing methods on the financial statements in periods of
declining inventory costs. The answer should be lowest, highest, or middle.
Fashion Fiesta Company uses the indirect method to prepare its statement of cash
flows. Refer to the following portion of the comparative balance sheet:Fashion Fiesta
Company
Comparative Balance Sheet
December 31, 2016 and 20152016 2015 Increase (Decrease)
Accounts Payable $6,000 $9,000 $(3,000)
Accrued Liabilities 3,000 1,500 1,500
Long-term Notes Payable 126,000 135,000 (9,000)
Total liabilities $135,000 $145,500 $(10,500)Additional information provided by the
company includes the following:
During 2015, the company repaid $60,000 of long-term notes payable.
During 2015, the company borrowed $51,000 on a new long-term note payable.Use the
T-account format to evaluate the transactions affecting the long-term notes payable
account.
A petty cash fund was established with a $250 balance. It currently has cash of $38 and
petty cash tickets totaling $212 for travel expense. Provide the journal entry to record
the replenishment of the fund.
At the end of a month, a business shows the following balances in its ledger.
Use this data to prepare a trial balance.
Budget Auto Parts Company uses the indirect method to prepare the statement of cash
flows. Refer to the following income statement:Budget Company
Income Statement
Year Ended December 31, 2017Sales Revenue $360,000
Interest Revenue 1,500
Gain on Sale of Plant Assets 6,000
Total Revenues and Gains $367,500
Cost of Goods Sold 165,000
Salary Expense 67,500
Depreciation Expense 18,000
Other Operating Expenses 34,500
Interest Expense 1,500
Income Tax Expense 7,500
Total Expenses 294,000
Net Income (Loss) $73,500Additional information provided by the company includes
the following:
Current assets other than cash increase by $36,000.
Current liabilities decrease by $1,500.Prepare the operating activities section of the
statement of cash flows.