Maintaining good controls over merchandise inventory ensures that inventory purchases
are properly authorized and accounted for by the accounting system.
Purchase discounts are calculated on the amount of the merchandise purchased
including freight costs.
Worksheet procedures for a merchandising business using the perpetual inventory
system are different from the worksheet procedures for a service business.
Holland, Inc. purchased manufacturing equipment for $12,600. It has an estimated
useful life of seven years and no residual value. The company should record
depreciation expense of $100 per month. (Assume that the company uses the
straight-line method.)
A business that has a vacant building that is not currently being used would classify the
building as a plant asset.
Gilbert, Inc. generated sales revenues of $1,400,000 in 2017. Its cost of goods sold
amounted to Calculate Gilbert’s gross profit percentage.
A) 40%
B) 60%
C) 167%
D) 250%
Which of the following accounts would appear in the balance sheet debit column?
A) Unearned Revenue
B) Accumulated Depreciation
C) Service Revenue
D) Prepaid Insurance
Trek Holidays Company signed a 9%, 10-year note for $154,000. The company paid an
installment of $2,900 for the first month. What portion of the first monthly payment is
principal? (Round your answer to the nearest whole number.)
A) $1,745
B) $4,645
C) $1,540
D) $15,733
A business repays the amount borrowed on a note with cash. Which of the following
accounts is debited?
A) Cash
B) Accounts Payable
C) Notes Payable
D) Notes Receivable
The accounting records of Marcus Service Company include the following selected,
unadjusted balances at June 30: Accounts Receivable, $2,700; Office Supplies, $1,800;
Prepaid Rent, $3,600; Equipment, $15,000; Accumulated Depreciation – Equipment,
$1,800; Salaries Payable, $0; Unearned Revenue, $2,400; Office Supplies Expense,
$2,800; Rent Expense, $0; Salaries Expense, $15,000; Service Revenue, $40,500.
The following data developed for adjusting entries are as follows:
a. Service revenue accrued, $1,400
b. Unearned Revenue that has been earned, $800
c. Office Supplies on hand, $700
d. Salaries owed to employees, $1,800
e. One month of prepaid rent has expired, $1,200
f. Depreciation on equipment, $1,500Journalize the adjusting entries. Omit
explanations.
Which of the following is an application of conservatism?
A) reporting inventory at the lower of cost or market
B) reporting only material amounts in the financial statements
C) reporting all relevant information in the financial statements
D) using the same depreciation method from period to period
On June 1, 2017, Wilke Services issued $31,000 of 7% bonds that mature in five years.
The bonds were issued at a premium, for a total of $32,292. The bonds pay semiannual
interest payments on June 30 and December 31 of each year. On December 31, 2017,
what is the total amount paid to bondholders?
A) $1,085
B) $2,170
C) $1,130
D) $2,260
Best Plumbing Corporation provides plumbing services. Selected transactions of Best
Plumbing Corporation are described as follows:
a) Received $9,000 cash and issued common stock to Sharon.
b) Paid $5,000 cash for equipment to be used for plumbing repairs.
c) Borrowed $10,000 from a local bank and deposited the money in the checking
account.
d) Paid $900 rent for the year.
e) Paid $400 cash for plumbing supplies to be used next year.
f) Completed a plumbing repair project for a local lawyer and received $4,000 cash.
Calculate the net income. Assume plumbing supplies of $400 are left.
A) $500
B) $3,600
C) $4,000
D) $3,100
Which of the following journal entries would be recorded if a business renders service
and receives cash of $900 from the customer?
A)
B)
C)
D)
Extra compensation items that are not paid directly to an employee are called
________.
A) bonuses
B) benefits
C) wages
D) commissions
Which of the following statements is true of a trial balance?
A) A trial balance has the same format as a balance sheet.
B) A trial balance presents data in debit and credit format.
C) A trial balance shows the total amounts of assets and liabilities, but not equity.
D) A trial balance is prepared after the balance sheet.
A company with significant amounts of accounts receivable experiences uncollectible
accounts from time to time. If the company uses the direct write-off method, the effect
of writing off an uncollectible receivable will be ________.
A) a reduction in net income
B) negligible on net income
C) an increase in total assets
D) a generation of positive cash flow
The periodic inventory records of Zucker Sales indicate the following for the month of
April:
As of April 30, Zucker Sales counts 8 units of merchandise inventory on hand.
Compute ending merchandise inventory and cost of goods sold for Zucker using the
LIFO inventory method.
Use the following to calculate the inventory turnover ratio for the year 2017.2017 2016
Cost of Goods Sold 585,000 475,000
Merchandise Inventory 320,000 295,000
When using the periodic inventory system and weighted-average inventory costing
method, when is the weighted average cost per unit computed?
Complete the following statement:
When a company invests in equity securities with 20% to 50% ownership in the
investee’s _______ stock, the investor can ________ ________ the investee’s decisions.
These types of investments must be accounted for using the ________ method.
Prepare a vertical analysis for the balance sheet data given below. (Round to two
decimal places.)Flowers, Inc.
Balance Sheet
December 31, 2017
Assets
Current Assets:
Cash and Cash Equivalents $10,000
Accounts Receivable, Net 15,600
Merchandise Inventory 38,000
Total Current Assets 63,600
Long-term Investments 15,000
Property, Plant, and Equipment, Net 195,000
Total Assets $273,600
Liabilities
Current Liabilities:
Accounts Payable $8,500
Notes Payable 1,400
Total Current Liabilities 9,900
Long-term Liabilities 54,000
Total Liabilities 63,900
Stockholders’ Equity
Common Stock 161,000
Retained Earnings 48,700
Total Stockholders’ Equity 209,700
Total Liabilities and Stockholders’ Equity $273,600
