The collection period of accounts receivable is usually long: therefore, it is classified as
a long-term asset on the balance sheet.
If the bank reconciliation includes a bank service charge, a journal entry is required,
which debits Bank Expense and credits Cash.
Under cash basis accounting, revenue is recorded when it is earned, regardless of when
cash is received.
The effective-interest amortization method allocates an amount of bond discount or
premium, based on the market interest rate at issuance, to each interest period over the
life of the bond.
The Dividends account is increased by a debit.
The normal balance of an account is the increase side of the account.
A company discovers that its cost of goods sold is understated by an insignificant
amount. It does not need to correct the error because of the conservatism principle.
For inventories, market value generally means the current replacement cost.
Investors and management use the statement of cash flows to evaluate a firm’s
profitability.
While preparing a statement of cash flows using the indirect method, an increase in
current assets is added to net income to arrive at net cash flow from operating activities.
Contra asset accounts, such as Accumulated Depreciation, always have normal debit
balances.
The Accounts Payable account is a temporary account.
In reconciling a bank statement, the bank balance is $1,500, and the checkbook balance
is $2,105, Which of the following is the most probable reason for the checkbook
balance being larger than the bank balance?
A) The bank has not cleared certain outstanding checks.
B) The bank has added interest revenue to the account balance.
C) A deposit in transit was made at the end of the month.
D) The bank received an EFT from a customer.
Frazier Service Company had a net income of $14,500 for the year ending December
31, 2016. The total assets on January 1, 2016 were $28,000. The total assets on
December 31, 2016 were $16,000.
Calculate Frazier’s return on assets (ROA). Show your computations and label your
work. Round your answer to one decimal place.
For Revenues, the category of account and its normal balance is ________.
A) equity and a credit balance
B) assets and a debit balance
C) assets and a credit balance
D) equity and a debit balance
A company received $5,000 for 100 one-year subscriptions on July 1. The journal entry
to record this cash receipt would include a ________. The company uses a liability
account for revenue received in advance.
A) credit to Accounts Payable for $5,000
B) debit to Prepaid Expenses for $5,000
C) credit to Unearned Revenue for $5,000
D) debit to Note Payable for $5,000
For the month of September, Countrywide Sales, Inc. recorded gross pay of $74,500.
The net pay for the month amounted to $59,500. The salaries are paid on October 5.
Which of the following is the journal entry for the payment of salaries?A)
B)
C)
D)
A coal mine cost $1,003,000 and is estimated to hold 51,000 tons of coal. There is no
residual value. During the first year of operations, 6,000 tons are extracted and sold.
Calculate depletion expense for the first year. (Round any intermediate calculations to
the nearest cent.)
A) $100,300
B) $150,450
C) $200,600
D) $118,020
The Sarbanes-Oxley Act (SOX) ________.
A) requires independent accountants to take responsibility for the accuracy and
completeness of the financial reports
B) created the SEC
C) ensures that financial scandals will no longer occur
D) requires companies to take responsibility for the accuracy and completeness of their
financial reports
Cameron Enterprises uses special journals. The company borrowed $10,000 from First
Bank. This transaction is recorded in the ________.
A) general journal
B) debt journal
C) cash receipts journal
D) cash payments journal
Which of the following is true of the acid-test ratio?
A) It measures a company’s ability to pay its current liabilities.
B) It measures the ability of the company to earn net income.
C) It measures a company’s ability to meet its short-term obligations with cash and cash
equivalents.
D) It indicates how much cash could be realized by selling the inventory.
Berkley’s gross pay for the month is $14,400.00. His deduction for federal income tax is
based on a rate of 18%. He has no voluntary deductions. His yearly pay is under the
limit for OASDI. What is Berkley’s net pay? (Assume a FICA-OASDI Tax of 6.2% and
FICA-Medicare Tax of 1.45%.)
A) $10,706.40
B) $14,400.00
C) $13,298.40
D) $11,808.00
The employees of Royal Clothes achieved all of the sales goals for 2017. Royal decides
to reward the employees with a bonus of 20% on annual net income, after deducting the
bonus. The net income before the calculation of the bonus is $312,000. What is the
amount of the bonus?
A) $62,400
B) $52,000
C) $55,059
D) $12,480
On July 1, 2017, Miniature Company has bonds with balances as shown below.Bonds
Payable
Discount on Bonds Payable
If the company retires the bonds for $71,150, what will be the effect on the income
statement?
A) loss on retirement of $4,750
B) gain on retirement of $4,750
C) sales revenue of $66,400
D) no effect on net income
An accounting information system is said to have good compatibility, if it ________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
When performing vertical analysis of a balance sheet, the base amount is ________.
A) total assets
B) total cash and cash equivalents
C) net income
D) gross profit
Prepare an income statement and a statement of retained earnings for the month of June.
Also, prepare a balance sheet at June 30. The transactions of Magna Designer
Corporation for the first month of their operations are as follows:
– On June 1, 2017, Magna Designer Corporation received $25,000 cash from its
stockholders and gave common stock to the stockholders.
– The company rendered services to three clients on account with total revenues earned
of $9,000.
– It then incurred an advertising expense on four different websites and promised to pay
a total of $1,200 at a later date.
– On June 13, Magna Designers purchased $1,000 worth of office supplies for cash.
(The supplies are not used by June 30.)
– On June 22, it received $2,000 on account from a client and deposited it into the
business account.
– On June 23, it incurred $1,300 for a legal expense and paid cash.
– On June 30, Magna Designers made a payment of $500 to one of the websites that it
owed for advertising provided earlier in the month.
– No dividends were paid during the month.
Marketplace, Inc. completed the following treasury stock transactions in 2016:June. 3
Purchased 2,000 shares of the company’s $5 par value common stock as treasury stock,
paying cash of $15 per share.
June 14 Sold 800 shares of the treasury stock for cash of $20 per share.Journalize these
transactions. Explanations are not required.
How will Marketplace, Inc. report treasury stock on its balance sheet as of December
31, 2016?
Describe the transactions recorded in the cash payments journal.
Oscar Packers received an allowance from the vendor for an amount of $400. Give the
journal entry for this transaction. The company uses a perpetual inventory system.
Jupiter Services sells service plans for commercial computer maintenance. The price for
each service plan is $1,650 per year, paid in advance. On October 1, 2017, a service
plan was sold to a new customer for cash. Prepare the journal entry to record this
transaction.
Complete the table to show how each type of employee pay is generally stated.
Refer to the following bank reconciliation.Bank Book
Balance, June 30, 2017 $11,240 Balance, June 30, 2017 $10,200
Add: Add:
Deposit in transit 3,110 Note collected by bank 2,100
Interest revenue 55
Less: Less:
Outstanding checks #506 1,200 NSF check 85
Outstanding checks #510 900 Bank service charge 20
________ ________
Adjusted balance, Adjusted balance,
June 30, 2017 $12,250 June 30, 2017 $12,250Journalize the adjusting entry for the
fourth reconciling item: Bank service charge.