Good Time Carts offers a one-year warranty on all its golf carts. Estimates suggest that
two percent of carts sold will require warranty service and that the average warranty
claim will cost $215. During 2013, the company sold 450 golf carts.
Checks on recorded amounts
Choose the proper category of internal control activities that best matches the
following actions. Each action should be matched with a different numbered item
within the internal controls list.
a. One employee or department should verify the work of another.
b. Specific approval is given by management for the performance of activities.
c. Accounting and cash collections should be properly separated.
d. Blank checks should be stored in a locked location.
e. Initial entry into the accounting system should be from a consistent source with
complete information.
Form that includes unaudited financial statements and provides a continuing view of the
corporation’s financial position during the year since it must be filed for each of the first
three fiscal quarters of the corporation’s fiscal year.
Match the term with its correct definition.
Which of the following transactions does not affect total assets?
a. A bill is received for last month’s utilities.
b. Dividends are paid to stockholders.
c. Customers are billed for services provided on credit.
d. New equipment is purchased on credit.
Refer to Gainesville Truck Center. Which of the following statements is true regarding
the unemployment taxes to be recorded?
Gainesville Truck Center This company has a weekly payroll of $10,000 for its
employees who work Monday through Friday. Federal and state income taxes are
withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld
at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In
addition, the federal and state unemployment taxes are applied at rates of 2% and 5%,
respectively. The company’s year-end is December 31. a. $700 of unemployment taxes
will be withheld from employee paychecks.
b. $700 of unemployment tax expenses will be included on the income statement.
c. $1,400 of unemployment taxes payable will be included on the balance sheet.
d. $1,400 of unemployment tax expenses will be included on the income statement.
Effective cash management and control for a company’s operating cycle includes all of
the following except
a. the use of a petty cash fund.
b. the preparation of monthly bank reconciliations.
c. the practice of using surplus cash for the purchase of bonds or other long-term
investments.
d. the practice of keeping inventory levels low.
Indicates that non-cash resources have been exchanged for cash.
Match each statement to the item listed below
a. Accounts receivable e. Notes receivable
b. Aging method f. Realized
c. Allowance for Doubtful Accounts g. Securitization
d. Earned
Which one of the following financial statements show the end of the year cash balance
for a business entity?
a. Income Statement and Statement of Retained Earnings
b. Balance Sheet and Statement of Cash Flows
c. Statement of Retained Earnings and Statement of Cash Flows
d. Balance Sheet and Statement of Retained Earnings
Refer to Accelerated Solutions. If the aging approach is used to estimate bad debts, find
the balance in the Allowance for Doubtful Accounts after the bad debt expense
adjustment.
Accelerated Solutions
The following data are from the company’s records for 2013:
a. $ 5,000
b. $15,000
c. $25,000
d. $50,000
The stockholders’ equity section of the balance sheet at January 1, 2015, appeared as
follows:
On March 1, 2015, the company sold 800 shares of treasury stock at $25 per share.
Ending inventory is equal to the cost of items on hand plus
a. merchandise in transit sold to customers with terms FOB shipping point.
b. merchandise in transit sold to customers with terms FOB destination.
c. merchandise returned to sellers in transit with terms FOB shipping point.
d. merchandise purchased from buyers in transit with terms FOB destination.
Future Foundations purchased equipment on January 1, 2013, for $50,000, with an
estimated useful life of 5 years and an estimated residual value of $5,000. The company
uses the straight-line method of depreciation. On July 1, 2015, the equipment was sold
for $17,500 cash. Prepare journal entries for the following:
A) Depreciation expense for 2013;
B) Depreciation expense for 2014; and
C) Sale of the equipment in 2014.
The accounting records of Cary’s Magic Shows reflect the following account balances
at January 1, 2013:
During 2013, the following transactions occurred:
Required:
A) Determine the effect on financial statement accounts of the preceding
transactions.Hint: It may be helpful to create a table to reflect the increases and
decreases in account.
B) Prepare an income statement for 2013 ignoring income taxes.
C) Prepare a classified balance sheet at December 31, 2013.
Which of the following ratios is most useful in indicating a company’s profitability?
a. operating cash flow ratio
b. operating margin percentage
c. dividend payout ratio
d. dividend yield ratio
Mark is planning on making an investment in a new computer system. He wants to
know how much he must invest to have $9,000 in 4 years if the interest rate is 5% per
year?
a. $10,939.59
b. $2,479.41
c. $7,826.83
d. $7,404.30
On a bank reconciliation, interest earned for the month is added to the cash balance per
the company records.
The ____________________ rate of interest is a function of economic factors and the
creditworthiness of the borrower.
If a company estimates its bad debt expense on the basis of a receivables aging, the
balance in the Allowance for Doubtful Accounts account will not affect the amount of
the end-of-period adjusting entry for bad debts.
In order for an internal or external event to be recognized in an accounting system, the
items making up the event must impact the financial statements and they must be
sufficiently reliable and ____________________.
A stock split has the effect of reducing the par value per share and the number of shares
outstanding.
Explain the differences between the cash and accrual basis of accounting and how the
adjusting process fits in.
Research and Development costs should be added to the cost of patents.
Individuals who hold this stock receive priority over common shareholders in the
payment of dividends and the distribution of assets in the event of liquidation.
The number of shares issued minus the number of shares of treasury stock is
____________________ shares.
What do profitability ratios measure?