Working capital measures a business’s ability to meet its long-term obligations with its
current assets.
The consistency principle states that businesses should report the same amount of
ending merchandise inventory from period to period.
The Common Stock account is increased by a debit.
An accounting information system creates the structure to encourage adherence to
management policies.
Mayfield, Inc. withholds $720 from Stephen’s paycheck for federal income tax. This
amount is part of the company’s payroll tax expense.
Federal unemployment compensation tax is paid by the employer and is not deducted
from an employee’s gross earnings.
Sandra, Inc. had 200 units of inventory on hand at the end of the year. These were
recorded at a cost of $15 each using the last-in, first-out (LIFO) method. The current
replacement cost is $11 per unit. The selling price charged by Sandra, Inc. for each
finished product is $18. In order to record the adjusting entry needed under the
lower-of-cost-or-market rule, the Cost of Goods Sold will be ________.
A) debited by $2,200
B) credited by $2,200
C) debited by $800
D) credited by $800
Which of the following financial statements reports cash receipts and cash payments
during a period of time?
A) Statement of cash flows
B) Balance sheet
C) Cash receipts budget
D) Statement of retained earnings
A company purchased inventory for $4,000 from a vendor on account, FOB shipping
point, with terms of 3/15, n/30. The company paid $100 cash for freight in. The entry to
record payment of invoice within 3 days by the purchaser would include ________.
(Assume a perpetual inventory system.)
A) a debit to Accounts Payable for $3,880 and a credit to Cash for $3,880
B) a debit to Accounts Payable for $4,000, a debit to Merchandise Inventory for $100,
and a credit to Cash for $3,880
C) a debit to Accounts Payable for $4,000, a credit to Merchandise Inventory for $120,
and a credit to Cash for $3,880
D) a debit to Accounts Payable for $3,880, a debit to Merchandise Inventory for $120,
and a credit to Cash for $4,000
Regarding net pay, which of the following statements is incorrect?
A) The net pay amount is not important for accounting purposes.
B) The amount of compensation that the employee actually takes home is net pay.
C) The employer either writes a paycheck to each employee for his or her net pay or
directly deposits the employee’s net pay into the employee’s bank account.
D) Net pay equals gross pay minus all deductions.
A company that uses the perpetual inventory system sold goods for $3,500 to a
customer on account. The company had purchased the inventory for $900. Which of the
following journal entries correctly records the cost of goods sold?A)
B)
C)
D)
Which of the following statements best defines financial statements?
A) Financial statements are the information systems that record monetary and
nonmonetary business transactions.
B) Financial statements are the verbal statements made to business news organizations
by chief financial officers.
C) Financial statements are documents that report on a business in monetary terms,
providing information to help people make informed business decisions.
D) Financial statements are plans and forecasts for future time periods based on
information from past financial periods.
The accountant of Omega Consulting, Inc. failed to make an adjusting entry to record
$6,000 for unearned service revenues that were earned before the end of the fiscal year.
Assume the company initially recorded a liability. Which of the following statements is
true?
A) The total liabilities will be overstated.
B) The total liabilities will be understated.
C) The total assets will be overstated.
D) The total assets will be understated.
Which of the following is a current asset that is expected to be converted to cash, sold,
or consumed during the next year (or the normal operating cycle, if longer)?
A) Land
B) Equipment
C) Building
D) Accounts Receivable
Accounts Receivable is a(n) ________ account and has a normal ________ balance.
A) liability; debit
B) asset; debit
C) liability; credit
D) asset; credit
When bonds are retired at maturity ________.
A) the bondholders are paid the the face value plus the unamortized premium or less the
unamortized discount
B) the carrying value equals the face value plus the unamortized premium or less the
unamortized discount
C) the carrying value always equals the face value
D) the entry to retire the bonds may include a gain or loss on retirement of bonds
Mitchell Florists & Co. reported assets of $1,000 and equity of $450. What is its debt
ratio? (Round your percentage answer to two decimal places.)
A) 55.00%
B) 45.00%
C) 100.00%
D) 60.00%
On March 1, 2016, Mandau Services issued a 3% long-term notes payable for $15,000.
It is payable over a 3-year term in $5,000 principal installments on March 1 of each
year, beginning March 1, 2017. Each yearly installment will include both principal
repayment of $5,000 and interest payment for the preceding one-year period. What is
the amount of total cash payment that Mandau will make on March 1, 2017?
A) $5,000
B) $5,450
C) $15,000
D) $5,225
The owners’ claims to the assets of the business are called ________.
A) return on assets
B) expenses
C) equity
D) debt
Skyler’s Wine Company uses the direct method to prepare its statement of cash flows.
Refer to the following financial statement information for the year ending December
31, 2017:Skyler’s Wine Company
Comparative Balance Sheet
December 31, 2017 and 2016
Skyler’s Wine Company
Income Statement
Year Ended December 31, 2017
Additional information provided by the company includes the following:
Equipment costing $60,000 was purchased for cash.
Equipment with a net asset value of $10,000 was sold for $16,000.
During 2017, the company repaid $43,000 of long-term notes payable.
During 2017, the company borrowed $34,000 on a new note payable.
There were no stock retirements during the year.
There were no sales of Treasury Stock during the year.Prepare a complete statement of
cash flows using the direct method.
Accrued Liabilities relate to other operating expenses.
Clark Sales sold 450 units of product to a customer on account. The company uses the
perpetual inventory system. The selling price was $28 per unit, and the cost, according
to the company’s inventory records, was $12 per unit. Provide the journal entries to
record the sale.
NewAge, Inc. made total cash sales in February of $666,000, which are subject to 7.5%
sales tax. Prepare the summary entry to record the transaction.
Larsen Corporation issued a $400,000, 5.5%, 10-year bonds payable at 101 on January
1, 2007. The bonds are retired on 1/1/2017. Prepare the journal entries on the date
issuance and at the date of retirement.
On January 1, 2017, Blizzard Manufacturing Corporation purchased a machine for
$40,000,000. The corporation expects to use the machine for 24,000 hours over the next
six years. The estimated residual value of the machine at the end of the sixth year is
$40,000. The corporation used the machine for 3,600 hours in 2017 and 5,000 hours in
2018. What is the depreciation expense for 2017 and 2018 if the corporation uses the
double-declining-balance method of depreciation?