On June 12, because management knew with near certainty that it had no chance of
collection, Sheave Company wrote off a customer’s account balance in the amount of
$350. On November 3, the customer mailed a payment for $350 to Sheave. To record
the receipt of this payment from the customer, the company would debit:
A) Bad Debt Expense and credit Cash.
B) Accounts Receivable and credit Bad Debt Expense, and then debit Cash and credit
Allowance for Doubtful Accounts.
C) Cash and credit Accounts Receivable.
D) Accounts Receivable and credit Allowance for Doubtful Accounts, and then debit
Cash and credit Accounts Receivable.
Use the information above to answer the following question. Xu sells 150 units during
the quarter. If Xu uses the weighted average method, what is its cost of goods sold?
A) $600
B) $705
C) $750
D) $900
IBM signs an agreement to lend one of its customers $200,000 to be repaid in one year
at 5% interest. IBM would record this loan as:
A) Notes Payable.
B) Accounts Receivable.
C) Notes Receivable.
D) Unearned Revenue.
Some bonds mature in installments. If a bond issue contains this feature, the bonds are
known as:
A) secured bonds.
B) convertible bonds.
C) callable bonds.
D) serial bonds.
In a period of falling prices, the inventory costing method that will cause the company
to have the lowest cost of goods sold is:
A) LIFO.
B) FIFO.
C) Weighted average.
D) Specific identification.
Use the information above to answer the following question. The company would
report net cash provided by (used in) investing activities of:
A) $(1,000).
B) $(2,000).
C) $5,000.
D) $7,000.
Three months of rent were prepaid on May 1 for $7,200, but two months have now
expired, leaving only one month prepaid at June 30. What is the amount of rent expense
that will be recorded in the related adjusting entry dated June 30?
A) $0
B) $2,400
C) $4,800
D) $7,200
An increasing balance in the Inventory account accompanied by an increase in the
inventory turnover ratio would imply that the inventory build-up is occurring because:
A) inventory is not selling as fast as anticipated.
B) the company is expecting to sell more inventory in the future.
C) inventory is selling, but it is taking longer to collect payment from customers.
D) the economy is slowing down.
A truck costing $12,000, which has Accumulated Depreciation of $9,000, was sold for
$2,000 cash. The entry to record this event would include a:
A) gain of $1,000.
B) loss of $1,000.
C) credit to the Vehicles account for $3,000.
D) credit to Accumulated Depreciation for $9,000.
The specific identification method would probably be most appropriate for which of the
following goods?
A) Boxes of brass 4-inch drywall screws at Home Depot
B) Bottles of suntan lotion in Wal-Mart’s central warehouse
C) Sets of tires at the Goodyear plant
D) Diamond necklaces at a Tiffany & Co. jewelry store
The Rainbow House Painting Company has been contracted to paint a house for $3,600.
One-half of that amount will be paid up front; the rest will be paid upon satisfactory
completion. Rainbow should recognize the revenue when:
A) the work begins.
B) the first payment is received.
C) half of the work is complete and half of the payments have been received.
D) the work is complete.
The Fastbank Motorcycle Service Company wins a $10 million bid to provide the repair
services for a recall on a popular brand of motorcycles. No money is exchanged. The
repair services are expected to be performed early next year. How will these events
affect the balance sheet prepared at the end of this year?
A) Accounts Receivable will increase by $10 million.
B) Both Accounts Receivable and Accounts Payable will each increase by $10 million.
C) Both Accounts Receivable and Stockholders’ Equity will each increase by $10
million.
D) These events will not impact the balance sheet.
A company billed a client for services performed on January 10. The customer paid
one-half of the amount owed on January 20 and the other one-half on February 24.
When should the company record the related Service Revenue?
A) On January 10
B) On January 20
C) One-half on January 20 and the other half on February 24
D) At year-end in an adjusting entry
Pearly Gates Inc. has a debt-to-assets ratio of 0.55. This means that:
A) stockholders’ equity is 55% of total assets.
B) stockholders’ equity is 45% of total assets.
C) investors provide 55% of the company’s financing.
D) liabilities are 55% of equity.
Use the information above to answer the following question. What is the amount of the
current ratio (round to two decimal places)?
A company’s trial balance included the following account balances:
A) 8.05
B) 6.44
C) 5.22
D) 1.00
Use the information above to answer the following question. Which of the following
statements is not correct?
A) Total Assets are $1,929,800.
B) Total Stockholders’ equity is $1,130,260.
C) Noncurrent liabilities are $130,260.
D) The amount of current assets is 2.5 times the amount of current liabilities.
When the direct method is used to determine the cash flows from operating activities,
which of the following adjustments must be made to interest expense to determine total
interest payments?
A) Add all changes in Interest Payable
B) Add decreases in Interest Payable and subtract increases in Interest Payable
C) Add increases in Interest Payable and subtract decreases in Interest Payable
D) Subtract all changes in Interest Payable
A company pays $18,000 in interest on notes, consisting of $12,000 interest that was
accrued during the last accounting period and $6,000 of interest that accumulated
during the current accounting period but has not yet been accrued on the books. The
journal entry for the interest payment should:
A) debit Interest Expense for $18,000 and credit Cash for $18,000.
B) debit Cash for $18,000 and credit Interest Payable for $18,000.
C) debit Interest Expense for $6,000, debit Interest Payable $12,000 and credit Cash for
$18,000.
D) debit Interest Payable for $12,000, debit Accrued Interest $6,000 and credit Cash for
$18,000.
The issuance price of a bond does not depend on the:
A) face value of the bond.
B) market rate of interest.
C) perceived risk associated with the bond.
D) method used to amortize the discount or premium.
The carrying value of a long-lived asset is referred to as its:
A) residual value.
B) book value.
C) market value.
D) sales value.