Cary Inc. reported net credit sales of $300,000 for the current year. The unadjusted
credit balance in its Allowance for Doubtful Accounts is $500. The company has
experienced bad debt losses of 1% of credit sales in prior periods. Using the percentage
of credit sales method, what amount should the company record as an estimate of Bad
Debt Expense?
A) $2,500
B) $3,000
C) $2,980
D) $3,200
Generally accepted accounting principles (GAAP) require that the inventory be
reported at:
A) market value.
B) historical cost.
C) lower of cost or market.
D) retail value.
Under the cost principle, a company capitalizes:
A) all ordinary repair expenditures incurred in the use of an asset.
B) any interest incurred in borrowing money to help pay for asset acquisitions.
C) all reasonable and necessary costs of acquiring an asset and preparing it for use.
D) the total market value of individual assets acquired in a €basket purchase.’
Which of the following statements about dividends is correct?
A) Companies sometimes issue stock dividends to lower the market price per share of
stock.
B) Stock dividends immediately increase the total value of the stockholders’ investment.
C) Cash dividends and stock dividends both decrease total stockholders’ equity.
D) A corporation has a legal obligation to pay dividends each year.
Which of the following statements about the income statement is not correct?
A) Amounts received from customers for services performed in the current month
would be revenues on the income statement.
B) Costs incurred in the current month but not paid as of the end of the month would be
expenses on the income statement for the current month.
C) Amounts received from customers in payment of their accounts arising from service
in the prior period would be revenues in the income statement for the current period.
D) Amounts received from customer as deposits for services to be rendered next month
will not be recorded as revenues on the income statement for the current month.
What of the following statements about Accumulated Other Comprehensive Income
(Loss) is not correct?
A) Accumulated Other Comprehensive Income (Loss) reports unrealized gains and
losses, which are temporary changes in the value of certain assets and liabilities the
company holds.
B) Accumulated Other Comprehensive Income (Loss) can relate to pensions, foreign
currencies, and financial investments.
C) Accumulated Other Comprehensive Income (Loss) is a component of stockholders’
equity.
D) Accumulated Other Comprehensive Income (Loss) is reported on the income
statement.
Which of the following statements about extending credit is notcorrect?
A) It is common for companies to sell on account to other companies.
B) Some companies extend credit to individual consumers.
C) Bad debts arise from credit sales to individual consumers, but not from credit sales
to other companies.
D) When credit is available, customers often buy more products and services.
The company uses up $5,000 of an existing asset and the company adjusts its accounts
accordingly. This is an example of a(n):
A) accrual adjustment.
B) closing adjustment.
C) deferral adjustment.
D) unethical adjustment.
Your company has net sales of $468,300 and average net receivables of $111,500 for
the year. Which of the following statements is correct? (Round all calculations to one
decimal place.)
A) The receivables turnover ratio is 4.2 and the days-to-collect is 0.01.
B) The receivables turnover ratio is 0.2 and the days-to-collect is 1,520.
C) The receivables turnover ratio is 4.2 and the days-to-collect is 86.9.
D) The receivables turnover ratio is 0.2 and the days-to-collect is 87.6.
Under what circumstances should a company record an asset impairment loss?
A) When residual value is greater than the repairs and maintenance expenses needed to
keep up the asset
B) When book value is less than the residual value of the asset
C) When Accumulated Depreciation equals the purchase cost of the asset
D) When book value is greater than the fair value of the asset
The following items are taken from an adjusted trial balance prepared as of December
31, 2015. All accounts have normal balances.
Required:
Part a. Determine the Credits column total on the adjusted trial balance.
Part b. Determine that amount of net income (net loss) for the year.
Part c. Determine the Total Assets amount that will be reported on the Balance Sheet at
December 31, 2015.
Part d. Determine the Total Liabilities amount that will be reported on the Balance
Sheet at December 31, 2015.
Part e. Determine the amount of Retained Earnings that will be reported on the Balance
Sheet at December 31, 2015.
A company has earnings per share of $1.20, it paid a dividend of $.50 per share, and the
market price of the company’s stock is $45 per share. The price/earnings ratio is closest
to:
A) 37.50.
B) 64.29.
C) 2.40.
D) 2.0.
Which of the following statements about gross profit percentages is correct?
A) Because gross profit percentages are so consistent from period to period, they are
not very useful for analyzing one company over time.
B) Because gross profit percentages are so variable across industries, they are most
useful in comparing companies from different industries.
C) Because gross profit percentages are so variable across industries, they are more
useful in analyzing one company over time.
D) Because gross profit percentages are so consistent across industries, they are most
useful in comparing companies from different industries.
Which of the following statements about the Dividends account is not correct?
A) It has a debit balance.
B) It reduces Retained Earnings.
C) It is an expense.
D) It is an account that is reported only on the statement of retained earnings.
On October 1, 2015, Attra Inc. borrows $200,000 on a three-year note that requires the
company to pay 6% interest on March 31 and September 30. On December 31, 2015,
the adjusting entry to accrue interest on the note should debit:
A) Interest Expense and credit Interest Payable for $3,000.
B) Interest Payable and credit Interest Expense for $3,000.
C) Interest Expense and credit Cash for $6,000.
D) Interest Expense and credit Interest Payable for $6,000.
Which one of the following accounts would not necessarily be classified as a current
liability?
A) Accounts payable
B) Accrued liabilities
C) Contingent liabilities
D) Current portion of long-term debt