The cash payments journal is a special journal used to record cash payments by
currency but not by check.
The journal entry for the purchase of treasury stock includes a credit to Cash.
If the total debits equal the total credits on the trial balance, the individual account
balances will be error free.
Using the LIFO method of inventory valuation will always produce the same results
whether a company uses perpetual or periodic inventory costing methods.
An overstatement of ending merchandise inventory in the current period results in an
overstatement of net income in the current period.
In a bank reconciliation, a book error will be shown on the bank side of the
reconciliation.
Liabilities represent creditors’ claims on the business’s assets.
In a periodic inventory system, the Cost of Goods Sold account is continuously updated
as and when sales occur.
Entries in the sales journal are posted to both the accounts receivable subsidiary ledger
and the general ledger.
A vertical analysis of a financial statement reveals the relationship of each statement
item to its base amount, which is 100%.
Selling property, plant, and equipment for $10,000 cash is considered a cash inflow
from investing activities on the statement of cash flows.
The old age, survivors, and disability insurance component of FICA tax is imposed on
the entire amount of an individual employee’s earnings.
A wholesaler is a merchandiser who buys merchandise from a manufacturer and sells
the same to a retailer.
When using the effective-interest amortization method, the amount of the interest
expense is calculated using the carrying value of the bonds and the market interest rate.
The disclosure principle states that a company should report enough information for
outsiders to make knowledgeable decisions about the company.
A company that uses the perpetual inventory system purchases inventory for $63,000 on
account, with terms of 2/10, n/30. Which of the following is the journal entry to record
the payment made within 10 days?
A) a debit to Accounts Payable for $63,000, a credit to Cash for $61,740, and a debit to
Merchandise Inventory for $1,260
B) a debit to Accounts Payable for $63,000, a credit to Merchandise Inventory for
$1,260, and a credit to Cash for $61,740
C) a debit to Merchandise Inventory for $1,260, a debit to Accounts Payable for
$63,000, and a credit to Cash for $64,260
D) a debit to Accounts Payable for $61,740, a debit to Merchandise Inventory for
$1,260, and a credit to Cash for $63,000
Indicate the effects on the accounting equation of the following business transactions of
Mayflower Service Corporation for b) to d) below. Use proper account titles.
Transaction a) is answered as a guide.
a) Received cash from Don Jones; issued common stock to him.
In preparing a statement of cash flows using the indirect method, the Depreciation
Expense ________.
A) is added back as an adjustment to Net Income in the operating activities section
B) is shown as a negative cash flow in the investing activities section
C) is added back to Purchases of Plant Assets under investing activities
D) is shown as a negative cash flow under operating activities
Which of the following activities is handled by selecting the “Make payment” action of
QuickBooks?
A) entering sales receipts
B) selecting bills to be paid
C) recording a bill that has been received
D) recording customer payments
Aaron earns $24.00 per hour with time-and-a-half for hours in excess of 40 per week.
He worked 50 hours at his job during the first week of March 2017. Aaron pays income
taxes at 15% and 7.65% for OASDI and Medicare. All of his income is taxable under
FICA. Determine Aaron’s net pay for the week.
A) $1,122.00
B) $1,021.02
C) $835.80
D) $799.80
Which of the following is required to be deducted from employees’ paychecks?
A) federal income tax
B) SUTA
C) FUTA
D) charitable contributions
Merchant Corporation provides plumbing services. Transactions of Merchant during the
first year of operations are given below.
a) Received $12,000 cash and issued common stock to Sharon.
b) Paid $1,600 cash for equipment to be used for plumbing repairs.
c) Borrowed $14,000 from a local bank and deposited the money in the checking
account.
d) Paid $600 rent for the year.
e) Purchased $200 of office supplies by cash.
f) Completed a plumbing repair project for a local lawyer and received $3,000 cash.
Calculate the amount of total liabilities at the end of the first year.
A) $14,000
B) $12,000
C) $24,400
D) $3,000
A company reports net accounts receivable of $152,000 on its December 31, 2017
balance sheet. The Allowance for Bad Debts has a credit balance of $16,000. What is
the balance of Accounts Receivable?
A) $157,000
B) $152,000
C) $168,000
D) $136,000
Paid-in capital consists of ________.
A) amounts received from customers
B) amounts raised by issuing bonds or preferred stocks
C) earnings generated by the corporation
D) amounts received from stockholders in exchange for stock
Treasury stock is ________.
A) a contra equity account
B) a contra asset account
C) a liability account
D) an asset account
Which of the following is true of the balance sheet presentation of the Allowance for
Bad Debts?
A) It is reported as a current liability.
B) It is reported as an operating expense.
C) It is reported as a separate, independent line item under current assets.
D) It is shown as a contra account related to accounts receivable.
An invoice, with payment terms of 2/10, n/30, was issued on April 28 for $235.00. If
the payment was made on May 12, the amount of payment will be ________. (Round
your answer to the nearest cent.)
A) $235.00
B) $211.50
C) $230.30
D) $233.00
The net income of Edwards Corporation amounted to $73,000 for this year. The
beginning balance of stockholders’ equity was $30,000 and the ending balance was
$70,000. The company issued no common stock during the year. What was the amount
of dividends distributed during the year?
A) $70,000
B) $33,000
C) $143,000
D) $30,000
Cash purchases are generally recorded in the ________.
A) sales journal
B) cash receipts journal
C) cash payments journal
D) purchases journal
The percentage of assets that are financed with liabilities can be calculated using the
________.
A) accounting equation
B) debt ratio
C) journal
D) ledger
A special journal is ________.
A) an accounting journal designed to record a specific type of transaction
B) an accounting journal that holds individual accounts that support a specific general
ledger account
C) a record of accounts that provides supporting details on individual balances, the total
of which appears in a general ledger account
D) a created list of the accounts used by a business entity to define each class of items
for which cash is spent or received
Anglin Corporation has excess cash to invest and pays $200,000 to buy 7%, five-year
bonds of Richmond Corporation, at face value, on June 30, 2016. The bonds pay
interest on June 30 and December 31. Anglin intends to hold the bonds to maturity. The
bonds are disposed of, at face value, on June 30, 2021.Prepare the journal entry for June
30, 2016 (omit the explanation).
Portian Merchandisers has purchased merchandise on account and paid $450 for freight
in. Give the journal entry for freight paid. (Assume a perpetual inventory system.)
Use the balance sheet of Maine, Inc. to calculate the current ratio for 2017 and
2018Maine, Inc.
Comparative Balance Sheet
December 31, 2018 and 2017
2018 2017
Assets
Total Current Assets $200,000 $100,000
Property, Plant, and Equipment, Net 550,000 500,000
Other Assets 50,000 50,000
Total Assets $800,000 $650,000
Liabilities
Total Current Liabilities $150,000 $100,000
Long-term Debt 350,000 250,000
Total Liabilities 500,000 350,000
Stockholders’ Equity
Total Stockholders’ Equity 300,000 300,000
Total Liabilities and Stockholders’ Equity $800,000 $650,000
What is the accounting equation? Briefly explain each of the three parts.
The following is the adjusted trial balance as of December 31, 2017 of Martin Watch,
Inc.:
Provide the closing entry for revenues.
On January 1, 2016, a corporation acquired a truck for $100,000. Residual value was
estimated to be $20,000. The truck can be driven for 50,000 miles over the next three
years. Actual usage of the truck was recorded as 8,640 miles for the first year. Give the
journal entry to record depreciation for the first year calculated as per the
units-of-production method. (Do not round your intermediate calculations.)
Barkin Corporation’s accounting records include the following items for the year ending
December 31, 2017:Gain on Sale of Equipment $12,000 Gain on Discontinued
Operations $75,000
Loss on Disposal of Equipment 5,000 Extraordinary Loss 15,000
Net Sales 650,000 Cost of Goods Sold 285,000
Operating Expenses 120,000The income tax rate for the company is 25%. Prepare
Barkin’s income statement for the year ended December 31, 2017. Omit earnings per
share.
For available-for-sale investments, state:
– Reporting method used
– How unrealized holding gain or loss is reported
– Balance sheet effects
– Income statement effects
Complete the following table:
A business renders services to its customer for $50,000 on account. Record the
transaction in the journal.