If a company receives $20,000 cash from its customers on account and uses the cash to
pay $20,000 to its suppliers on accounts, the net result is that:
A) assets would increase by $20,000 while liabilities would decrease by $20,000.
B) liabilities would decrease by $20,000 while stockholders’ equity would increase by
$20,000.
C) assets would decrease by $20,000 and liabilities would decrease by $20,000.
D) liabilities would decrease by $20,000 and stockholders’ equity would decrease by
$20,000.
In a period of rising prices, the inventory costing method that will cause the company to
have the lowest income tax expense is:
A) LIFO.
B) FIFO.
C) Weighted average.
D) Specific identification.
Use the information above to answer the following question. What is the amount of
total stockholders’ equity that would be reported on the Balance Sheet at the end of the
year?
A) $30,000.
B) $57,000.
C) $87,000.
D) $102,000.
A company starts the period with 100 computers in inventory, purchases 30 more,
returns 4 of them to suppliers, and has 83 in inventory at the end of the period. If there
is no shrinkage, how many computers were sold?
A) 47
B) 43
C) 17
D) 83
Use the information above to answer the following question. What is the amount of
stockholders’ equity at the end of the year?
A) $9,450.
B) $15,750.
C) $15,050.
D) $14,450.
If an apartment leasing company receives the rent for January 2016 from a tenant in
December 2015, this will be reported by the leasing company as:
A) revenue in 2015.
B) an expense in 2015.
C) a liability in 2015.
D) stockholders’ equity in 2015.
A high accounts receivable turnover ratio indicates:
A) the company’s sales are increasing.
B) a large proportion of the company’s sales are on credit.
C) customers are making payments very quickly.
D) the company is taking longer to sell inventory.
Which of the following is not a correct statement regarding the Cash Shortage account?
A) It account normally has a debit balance.
B) It is reported on the balance sheet.
C) It is reported as a miscellaneous expense.
D) If the recorded cash exceeds the cash counted, a shortage exists.
A firm’s beginning inventory is $35,000, goods purchased during the period cost
$120,000, and the cost of goods sold for the period is $140,000. What is the amount of
its ending inventory?
A) $45,000
B) $20,000
C) $25,000
D) $15,000
Which one of the statements appearing below is correct regarding bank reconciliations?
A) A bank reconciliation is an external report prepared to report the cash balance to
investors and creditors.
B) After preparing a bank reconciliation, no journal entries need to be made for
outstanding checks or deposits in transit.
C) If a company’s records show a different cash balance from that shown on the
company’s bank statement, either the company or the bank has made an error.
D) The up-to-date ending cash balance on the bank statement side should not equal the
up-to-date ending cash balance on the book side.
When the direct method is used to determine the cash flows from operating activities,
which of the following adjustments must be made to income tax expense to determine
total income tax payments?
A) Add all changes in income taxes and income taxes payable.
B) Add decreases in income taxes payable and subtract increases in income taxes
payable.
C) Add increases in income taxes payable and subtract decreases in income taxes
payable.
D) Subtract all changes in income taxes payable.