Which of the following statements about equity and debt financing is correct?
A) Equity financing is always better than debt financing.
B) Equity financing requires dividends to be paid.
C) Dividends are tax deductible.
D) Equity financing can change stockholder control.
Pixie Products reported net sales revenue of $18.8 billion and cost of goods sold of $5.6
billion, while Stardust Inc. reported net sales revenue of $22.3 billion and cost of goods
sold of $9.3 billion. Which of the following statements is correct?
A) While Stardust Inc. generated more revenue than Pixie Inc., Stardust Inc. generated
a lower gross profit percentage.
B) Pixie Inc. generated a lower gross profit percentage because its sales revenue was
lower.
C) Stardust Inc. did a better job of controlling product costs as a percentage of sales
than did Pixie Inc.
D) The selling price of the products sold by Pixie Inc. must have been higher than the
price of products sold by Stardust Inc.
Which of the following statements about adjustments is correct?
A) An accrual adjustment that increases an asset will include an increase in an expense.
B) A deferral adjustment that decreases an asset will include an increase in an expense.
C) An accrual adjustment that increases an expense will include an increase in assets.
D) A deferral adjustment that increases a contra account will include an increase in an
asset.
A company declared and paid a dividend of $8,000 this year. The entry to close the
Dividend at the end of the year will include a debit to:
A) Dividends and a credit to Cash for $8,000.
B) Retained Earnings and a credit to Dividends for $8,000.
C) Dividends and a credit to Retained Earnings for $8,000.
D) Dividends and a credit to Dividends Payable for $8,000.
Jim’s Gymnastics Training’s operations for the month of October are summarized as
follows:
A. Provided $5,000 of training to students on account.
B. Received $4,000 cash from students for training provided in October.
C. Received $1,000 cash for training to be provided in November.
D. Received $3,000 cash from students on account for training provided in September.
E. Paid September’s gym rental bill on account in the amount of $1,000.
F. Received October’s rental bill of $1,500; set it aside.
Required:
Prepare journal entries to record the transactions identified among activities (A) through
(F).
Temporary accounts are closed at what stage of the accounting process?
A) At the time that adjustments are made.
B) After adjustments are made and before the income statement is prepared.
C) After the income statement and the statement of retained earnings are prepared, but
before the balance sheet is prepared.
D) As the last journal entries at the end of each accounting year.
Use the information above to answer the following question. What journal entry will be
recorded by Flynn Company on November 8?
A) Debit Inventory and credit Cost of Goods Sold for $800
B) Debit Accounts Payable and credit Inventory for $800
C) Debit Inventory and credit Accounts Payable for $800
D) Debit Accounts Payable and credit Purchase Returns for $800
The MegaHit Film Studio has a licensing right (or agreement) to distribute films
produced by the Artsy Film Company. How would the MegaHit Company classify this
licensing right?
A) Tangible asset
B) Research and development
C) Intangible asset
D) Fixed asset
The potential disadvantages of extending credit include all of the following except:
A) increased bad debt costs.
B) customers buying too much.
C) the need to hire employees to undertake collection efforts.
D) higher wage costs in the accounting department.
Company A uses an accelerated depreciation method while Company B uses the
straight-line method. All other things being equal, during the first few years of the
asset’s use, Company B will show which of the following compared to Company A?
A) A smaller fixed asset turnover ratio and a smaller gain on asset disposal
B) A larger fixed asset turnover ratio and a larger gain on asset disposal
C) A smaller fixed asset turnover ratio and a larger gain on asset disposal
D) A larger fixed asset turnover ratio and a smaller gain on asset disposal
Which of the following would be acceptable as an alternative name for the income
statement?
A) Statement of operations
B) Statement of financial position
C) Statement of retained earnings
D) Statement of revenues and expenses
Deposits in transit have:
A) been recorded by the company but not yet by the bank.
B) been recorded by the bank but not yet by the company.
C) not been recorded by the bank or the company.
D) been recorded by both the bank and the company.
At December 31, 2016, a company’s records include the following:
Required:
Part a. The company estimates bad debts as 1.3% of credit sales. Prepare the required
adjusting entry to record Bad Debt Expense for the year.
Part b. Assume instead that the company uses the aging of receivables method. Its aging
analysis reveals that the estimate of uncollectible receivables is $11,250. Prepare the
required adjusting entry to record Bad Debt Expense for the year.
Part c. Assume instead that the company estimates that its Bad Debt Expense for the
year is $8,250. Use a T-account to determine the adjusted balance in the Allowance for
Doubtful Accounts.
Use the information above to answer the following question. The amount of total
current assets that will be reported on the company’s balance sheet at the end of the year
is:
T-account:
Partial list of account balances at the end of the year:
A) $362,600.
B) $368,500.
C) $139,500.
D) $327,000.
After preparing adjusting entries, the equality of recorded debits and credits is checked
by preparing a(n):
A) post-closing trial balance
B) adjusted trial balance.
C) income statement.
D) balance sheet.