In a periodic inventory system, a sale of inventory involves two entries, one to record
Sales Revenue and one to record Cost of Goods Sold.
If the maker of the note fails to pay on the maturity date, the note is said to be
dishonored.
Nelson Corp. uses the indirect method to prepare the statement of cash flows. Refer to
the following section of the comparative balance sheet:Nelson Corp.
Comparative Balance Sheet
December 31, 2017 and 2016
The change in Accounts Payable is as a negative cash flow in the adjustments to net
income.
Source documents provide the evidence and data for accounting transactions.
The units-of-production method allocates a varying amount of depreciation each year
based on an asset’s usage.
An acid-test ratio of 1.0 is considered safer than a ratio of 0.50.
If a physical count of inventory indicates that the Merchandise Inventory account is
overstated, an adjusting entry is required to record the difference.
A system cannot be overcome or broken into if its internal controls are properly
designed and structured.
Days’ sales in receivables measures the return on average receivables.
If the debt ratio is too high, the company may be unable to pay its debts.
Plant assets are reported at book value on the balance sheet.
The Employee Bonus Payable would normally be shown on the balance sheet under
long-term liabilities.
Short-term investments are investments in debt and equity securities that are highly
illiquid.
Which of the following financial statements is used to analyze the economic resources,
debt, and overall financial position of a company?
A) income statement
B) balance sheet
C) statement of cash flows
D) statement of retained earnings
Which of the following is true of retained earnings?
A) Retained earnings decrease with payment of dividends.
B) Retained earnings increase with purchase of assets.
C) Retained earnings decrease with collection of revenue.
D) Retained earnings increase with payment on account.
The worksheet helps accountants to ________.
A) make the trial balance
B) prepare the financial statements
C) prepare the unadjusted trial balance
D) maintain books of accounts without a journal
For each user of accounting information, identify if the user would use financial
accounting (FA) or managerial accounting (MA).
Kevin, an employee of Sunbeam, Inc., has gross salary for May of $7,000. 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 20%. Which of the following is a part of the
journal entry to record the disbursement of his net pay? (Assume a FICA-OASDI Tax
of 6.2% and FICA-Medicare Tax of 1.45%.)
A) debit to Cash for $5,064.50
B) credit to Cash for $5,064.50
C) debit to Employee Income Tax Payable of $5,064.50
D) debit to FICA Tax Payable of $5,064.50
Accounts Receivable is a(n) ________ account and has a normal ________ balance.
A) liability; debit
B) asset; debit
C) liability; credit
D) asset; credit
A company that uses the perpetual inventory system sold goods to a customer for cash
for $3,500. The cost of the goods sold was $600. Which of the following journal entries
correctly records this transaction?A)
B)
C)
D)
Intangible assets ________.
A) always have a definite life
B) that are purchased are recorded at cost
C) are always expensed through amortization
D) with definite lives are tested annually for impairment
Which of the following assets must be reported at the lower-of-cost-or-market value?
A) Accounts Receivable
B) Merchandise Inventory
C) Prepaid Insurance
D) Notes Receivable
Which of the following is a cash outflow for a financing activity on the statement of
cash flows?
A) payment of interest on a loan
B) payment for purchasing Merchandise Inventory
C) payment of dividends
D) payments to the government for taxes
At the maturity of a note payable, a borrower will pay ________.
A) the principal plus interest
B) the principal amount only
C) the interest amount only
D) the principal minus interest
The cost of an asset is $1,000,000, and its residual value is $290,000. Estimated useful
life of the asset is five years. Calculate depreciation for the first year using the
double-declining-balance method of depreciation.
A) $284,000
B) $400,000
C) $200,000
D) $142,000
Bryant, Inc. provides the following data:
Additional information:
Calculate the rate of return on total assets for 2017. (Round your answer to two decimal
places.)
A) 45.79%
B) 62.03%
C) 71.98%
D) 50.74%
Which of the following categories of accounts are temporary accounts that are closed at
the end of the year?
A) assets, liabilities, and dividends
B) revenues, expenses, and dividends
C) assets, liabilities, and stockholders’ equity
D) revenues, expenses, and stockholders’ equity
Regarding the separation of corporate ownership and management, which of the
following is a true statement?
A) The corporate officers elect the board of directors.
B) The corporation runs better with day-to-day input from stockholders.
C) None of the stockholders have the ability to manage the business of the corporation.
D) Stockholders own the business, but a board of directors appoints corporate officers
to manage the business.
In a statement of retained earnings, decreases in retained earnings result from
________.
A) issuance of stock
B) net losses
C) net income
D) revenues earned
Brink Moving Company reported the following amounts on its balance sheet as of
December 31, 2016 and December 31, 2017:
For the vertical analysis, what is the percentage of current assets as of December 31,
2017? (Round your answer to two decimal places.)
A) 27.88%
B) 28.25%
C) 39.38%
D) 38.67%
A company purchased 300 units for $30 each on January 31. It purchased 360 units for
$36 each on February 28. It sold a total of 460 units for $40 each from March 1 through
December 31. What is the amount of ending inventory on December 31 if the company
uses the first-in, first-out (FIFO) inventory costing method? (Assume that the company
uses a perpetual inventory system.)
A) $7,200
B) $5,360
C) $6,000
D) $640