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A one-time error in the application of the lower of cost or market (LCM) rule in the
current period distorts financial results for the current accounting period:
A) only.
B) and the period before.
C) and the period after.
D) and all periods after.
Plasma Inc. uses the percentage of credit sales method to estimate Bad Debt Expense.
The company reported net credit sales of $500,000 during the year. Plasma has
experienced bad debt losses of 2% of credit sales in prior periods. At the beginning of
the year, Plasma has a credit balance in its Allowance for Doubtful Accounts of $4,000.
No write-offs or recoveries were recorded during the year. What amount of Bad Debt
Expense should Plasma recognize for the year?
A) $4,000
B) $6,000
C) $10,000
D) $14,000
Which of the following is a correct statement about the nature of equipment?
A) While equipment is an asset, its use is recorded as an expense.
B) While equipment is an asset, its use is recorded as a liability.
C) While equipment is an asset; its use is recorded as affects Common Stock.
D) Equipment and its use both affect liabilities.
The amount of beginning retained earnings is equal to the:
A) beginning retained earnings of the prior year.
B) ending retained earnings of the prior year.
C) beginning retained earnings of the next year.
D) ending retained earnings of the next year.
Which of the following ratios is calculated by dividing net income by revenues?
A) Return on equity ratio
B) Net profit margin ratio
C) Current ratio
D) Fixed asset turnover ratio
The following information is available for a company for the current year:
Required:
Part a. Calculate the receivables turnover ratio for the current year.
Part b. Calculate the days to collect for the current year.
Part c. Calculate the inventory turnover ratio for the current year.
Part d. Calculate the days to sell for the current year.
Round all ratios to two decimal points.
During one pay period, your company distributes $130,500 to employees as net pay.
The income tax withholdings were $19,000 and the FICA withholdings were $5,000.
Total payroll costs to the company for this pay period, excluding any unemployment
taxes, was:
A) $149,500.
B) $130,500.
C) $154,500.
D) $159,500.
Which of the following statements about cash basis accounting and accrual basis
accounting is correct?
A) Net income is generally larger under accrual basis accounting than cash basis
accounting.
B) GAAP does not require the use of accrual basis accounting for external reporting.
C) Accrual basis accounting and cash basis accounting will always produce the same
amount of net income.
D) Accrual basis accounting provides a better measure of operating performance than
cash basis accounting.
Creditors are:
A) people or organizations who owe money to a business.
B) people or organizations to whom a business owes money.
C) stockholders of a business.
D) customers of a business.
When goods are sold to a customer with credit terms of 2/15, n/30, the customer will
receive a:
A) 15% discount if they pay within 2 days.
B) 2% discount if they pay 15% of the amount due within 30 days.
C) 15% discount if they pay within 30 days.
D) 2% discount if they pay within 15 days.
A company incurred $5,000 in salaries and wages for employees for the year; $4,500 of
these salaries and wages had been paid by the end of the year. Which of the following
statements about this situation is correct?
A) Salaries and Wages Payable on the income statement will be $4,500.
B) Salaries and Wages Expense on the income statement will be $500.
C) Salaries and Wages Expense on the balance sheet will be $5,000.
D) Salaries and Wages Payable on the balance sheet will be $500.
Use the information above to answer the following question. What is the amount of net
income on the income statement for the year?
A) $30,000.
B) $38,000.
C) $88,000.
D) $47,000.
Which of the following statements about financial accounting is correct?
A) Financial accounting reports are used primarily by employees to make business
decisions related to production.
B) Financial accounting reports are used primarily by management to understand
whether a product line should be discontinued.
C) Financial accounting reports are primarily prepared to provide information for
external decision makers.
D) Financial accounting reports primarily contain detailed internal records of the
company.
A corporation prepared its statement of cash flows for the year. The following
information is taken from that statement:
What is the amount of net cash provided by (used in) financing activities?
A) $15,400
B) ($3,300)
C) ($15,400)
D) $3,300
A company uses $100,000 in cash to pay off $100,000 in notes payable. This would
result in a:
A) $100,000 debit to Notes Payable and a $100,000 credit to Cash.
B) $100,000 credit to Cash and a $100,000 credit to Notes Payable.
C) $100,000 debit to Cash and a $100,000 credit to Notes Payable.
D) $100,000 debit to Cash and a $100,000 debit to Notes Payable.
Use the information above to answer the following question. What is the amount of
cash flows from (used in) financing activities?
A) ($40,000)
B) $5,000
C) $49,000
D) $10,000
