An expenditure that increases the capacity or efficiency of a plant asset that extends the
asset’s life is known as a revenue expenditure.
The main computer where data are stored, which can be accessed from many different
computers, is known as software.
All intangible assets must be amortized each year.
Transnational Company plans to purchase a property to build its corporate headquarters.
An investor is willing to exchange land worth $500,000 for common stock. This
transaction would be shown in the financing activities section of the statement of cash
flows.
An exchange of plant assets has commercial substance if the future cash flows change
as a result of the transaction.
If a long-term debt is paid in installments, the business will report the current portion of
the note payable as a current liability.
Accounts Receivable are generally reported at the gross amount on the balance sheet.
Bergan Corp. has gross pay for March of $50,000. The journal entry to record salaries
expense would include a debit to Salaries and Wages Payable for $50,000.
Bonds are short-term debt issued to multiple lenders called bondholders, usually in
increments of $1,000 per bond.
In the case of deferred revenue, the adjusting entry at the end of the period includes a
debit to Service Revenue. Assume the deferred revenue is initially recorded as a
liability.
The debt ratio is the ratio of total debt divided by total equity.
When a company has issued both preferred and common stock, the common
stockholders receive their dividends first.
The two major types of receivables are interest receivable and taxes receivable.
An asset account is increased by a debit.
Balancing errors can be detected by computing the difference between total debits and
total credits on the trial balance.
Gross profit represents the mark-up on ________.
A) sales revenue
B) merchandise inventory
C) operating expenses
D) transportation cost
Which of the following accounts would appear in the income statement debit column?
A) Unearned Revenue
B) Service Revenue
C) Depreciation Expense
D) Prepaid Insurance
Which of the following is true of a sales journal prepared under the perpetual inventory
system?
A) It includes a Cost of Goods Sold DR, Merchandise Inventory CR column.
B) It records both cash and credit sales transactions.
C) All transactions recorded in a sales journal also are entered in the general journal.
D) It cannot be used with a perpetual inventory system.
Seidner, Inc. provides the following data:
Calculate the asset turnover ratio for 2017. (Round your answer to two decimal places.)
A) 4.01 times
B) 1.07 times
C) 0.60 times
D) 2.14 times
Assets with no physical form are called ________.
A) current assets
B) intangible assets
C) long-term investments
D) mortgaged investments
Which of the following is the correct formula to calculate weighted-average unit cost
for merchandise inventory?
A) Weighted-average unit cost = Cost of goods available for sale + Number of units
available
B) Weighted-average unit cost = Cost of goods available for sale x Number of units
available
C) Weighted-average unit cost = Cost of goods available for sale – Number of units
available
D) Weighted-average unit cost = Cost of goods available for sale / Number of units
available
On January 1, A Plus Services has the following balances:Accounts Receivable $25,000
(debit)
Bad Debts Expense $0A Plus Services has the following transactions during January:
Credit sales of $140,000, collections of credit sales of $90,000, and write-offs of
$16,000. A Plus Services uses the direct write-off method. At the end of January, the
balance of Accounts Receivable is ________.
A) $10,286
B) $59,000
C) $24,889
D) $75,000
Which of the following is an attribute of the internal control procedure-assignment of
responsibilities?
A) To validate their accounting records, a company should have an audit by an external
accountant.
B) The company should separate the custody of assets from accounting.
C) The external auditors will monitor internal controls.
D) Each position has clearly assigned responsibilities.
Which of the following statements, regarding International Financial Reporting
Standards (IFRS), is correct?
A) International Financial Reporting Standards are issued by the Financial Accounting
Standards Board.
B) The Securities and Exchange Commission is the private organization that oversees
the creation and governance of International Financial Reporting Standards.
C) International Financial Reporting Standards represent a set of global accounting
standards that are generally more specific and based less on principle than U.S.
Generally Accepted Accounting Principles.
D) Companies who are incorporated in or do significant business in another country
might be required to publish financial statements using International Financial
Reporting Standards.
The accounting process of transferring a transaction from the journal to the ledger is
called ________.
A) journalizing
B) posting
C) compounding
D) sourcing
The following information is available for Jack’s, Inc. for the current month.
What is the adjusted book balance on the bank reconciliation?
A) $10,205
B) $7,635
C) $6,880
D) $6,960
The following are the current month’s balances for Adams Marketing Company.
What is the net income for Adams Marketing for the current month?
A) $11,000
B) $9,500
C) $12,500
D) $14,000
An asset is considered to be obsolete ________.
A) only when it wears out
B) only at the end of its useful life
C) when it is fully depreciated
D) when a newer asset can perform the job more efficiently than the old asset can
Which of the following is a basic right of stockholders?
A) Stockholders may sell their stock back to the company if they wish.
B) Stockholders may authorize a business contract on behalf of the corporation.
C) Stockholders may receive dividends from corporate earnings.
D) Stockholders may determine the issue price of common stock.
The employees of Sinclair Services, Inc. worked the last two weeks of December. They
received their paychecks on January 2. Which of the following accounts should appear
on the balance sheet as of December 31?
A) Accounts Payable
B) Salaries Payable
C) Salaries Expense
D) Prepaid Expense
On May 1, 2016, Butler Services issued a long-term note payable for $35,000. The note
will be paid over five-years with annual principal payments of $7,000, plus interest, on
May 1 of each year beginning on May 1, 2017. Prepare the journal entry for the
issuance of the note.
Provide an explanation for each of the follow asset accounts.
On January 1, 2017, Ellis, Inc. purchased a patent for $200,000 cash. Although the
patent gives legal protection for 20 years, the patent is expected to be used for only 10
years. Journalize the amortization expense for 2017. Assume straight-line amortization.
List the three steps, in order of occurrence, of the operating cycle of a merchandising
business.
On January 16, Whole Circle, Inc. sold $5,000 merchandise to Smith, on account.
Whole Circle could not collect cash from Smith and wrote off the account. Prepare a
journal entry to record the write-off, assuming Whole Circle uses the allowance
method.
On January 1, 2017, Partridge Advertising Company issued $50,000 of six-year, 3%
bonds when the market interest rate was 4%. The bonds were issued for $47,356.
Partridge uses the effective-interest method of amortization for bond discount.
Semiannual interest payments are made on June 30 and December 31 of each year.
Prepare the amortization table for the first four interest payments. (Round your answers
to the nearest dollar number.)
Sunrays, Inc. wrote off the account of one of its customers, Brad Doe, in 2016 for $500.
On January 21, 2017, Brad unexpectedly repaid his account in full. The company uses
the direct write-off method to account for uncollectible receivables. Journalize the
entries required for Sunrays, Inc. on January 21, 2017.
The Allowance for Bad Debts account has a credit balance of $2,000 before the
adjusting entry for bad debts expense. The company’s management estimates that 2% of
net credit sales will be uncollectible for the year 2017. Net credit sales for the year were
$250,000. Prepare the journal entry to record the bad debts expense on December 31,
2017.