Debits are always journalized after credits.
Public accountants are those whose services are offered to the general public on a fee
basis.
Both the direct and indirect methods yield the same net cash flow from operations.
The write-downs of receivables and inventory are generally regarded as extraordinary
items.
If the net present value of the expected cash flows from the use of the asset and its
disposal is greater than the carrying value of an asset, then the asset is considered to be
impaired.
On a multiple-step income statement, operating expenses are deducted from cost of
goods sold to obtain operating income.
The LIFO costing method can result in misleading inventory costs on the balance sheet
because the oldest costs are left in ending inventory.
If the board of directors declares a $210,000 dividend in 20X3, current year dividends
on cumulative preferred stock are $80,000, dividends in arrears on cumulative preferred
stock are $60,000, and the common shareholders are entitled to $70,000 of the 20X3
dividend amount.
Using accelerated depreciation instead of straight-line depreciation results in a lower
net income but a higher cash balance in the initial years of a fixed asset’s life.
Land is always depreciated using double-declining-balance depreciation.
Reliability is the assumption that, ordinarily, an entity persists indefinitely.
The following information is associated with the bank reconciliation of Tall Hills Ski
Resort as of October 31, 20X4:
a. Prepare a bank reconciliation for Tall Hills Ski Resort dated October 31, 20X4.
b. Prepare the adjusting entries needed by Tall Hills Ski Resort as a result of the bank
reconciliation.
Printers for You began operations on June 1, 2X13. The company authorized 15,000
shares of $1 par value common stock. Printers for You sold 15,000 shares of common
stock for $5 per share on June 2, 2X13. On August 15, 2X13, Printers for You
repurchased 1/2 of the outstanding common stock for $6 per share. On August 31,
2X13, Printers for You sold 1,000 of the treasury stock. On September 1, 2X13, the
company declared a three-for-one stock split. After the split
A) total stockholders’ equity remained the same.
B) total stockholders’ equity increased.
C) total stockholders’ equity decreased.
D) assets and liabilities increased.
E) assets and liabilities decreased.
An example of a current asset is
A) paid-in capital.
B) equipment.
C) accounts receivable.
D) retained earnings.
E) accounts payable.
Purple Company has the following data available:
What is the current ratio for Purple Company in 2X13? Has the current ratio improved
or not improved since 2X12?
A) 2.11, improved
B) 0.76, improved
C) 0.76, not improved
D) 0.36, improved
E) 2.11, not improved
________ are subject to redemption before maturity at the option of the issuer.
A) Debentures
B) Mortgage bonds
C) Callable bonds
D) Sinking fund bonds
E) Convertible bonds
What is the final step in the recording process?
A) preparation of trial balance
B) preparation of journal entries
C) preparation of source documents
D) transferring journal entries in the general journal to the ledger
E) preparation of financial statements
The collection in cash of interest receivable previously accrued has what effect on the
basic accounting equation?
A) Increase assets, increase liabilities
B) Decrease assets, decrease liabilities
C) Increase assets, decrease liabilities
D) Increase liabilities, decrease stockholders’ equity
E) It has no effect as one asset increases while another asset decreases.
Which of the following transactions would not affect owners’ equity?
A) Recording cost of goods sold
B) Recording a cash sale
C) Recording a sale on account
D) Recording utilities expense
E) Purchasing inventory for cash
Which of the following statements is false?
A) Most states require stock certificates to have some dollar amount printed on them.
B) Additional paid-in capital is part of total liabilities on the balance sheet.
C) The ultimate responsibility for management of a company is delegated by
stockholders to professional managers.
D) Typically, stock is sold for an amount above par value.
E) An advantage of the corporate form of organization is the separation of ownership
and management.
If bonds are purchased at more than face value, then the amortization of the premium
________ the interest revenue of the investors.
A) increases or decreases depending on the current market rate
B) increases
C) decreases
D) does not change
E) Cannot be determined without more information
Using the LIFO method, the earliest purchases of inventory are assumed to be
contained
A) on the balance sheet as part of ending inventory.
B) on the income statement as part of cost of goods sold.
C) equally split between the income statement and the balance sheet.
D) Impossible to determine from the given data
E) The earliest purchases of inventory under LIFO are not shown on any financial
statement.
What is the purpose of closing the books?
A) To reset the revenue and expense accounts to zero so that they are ready to record
the next period’s transactions
B) To reset the asset and liability accounts to zero so that they are ready to record the
next period’s transactions
C) To transfer all account activity to retained earnings so that they are ready to record
the next period’s transactions
D) To transfer all account activity to paid-in-capital so that they are ready to record the
next period’s transactions
E) To transfer and reset any account with activity during the prior period to zero
The decision whether to expense or capitalize expenditures for plant assets depends on
many factors. Which of the following is NOT a factor for a company choosing to
expense or capitalize an expenditure?
A) The decision of whether to expense or capitalize an expenditure is based on
management’s judgment.
B) The decision of whether to expense or capitalize an expenditure is influenced by
cost-benefit and materiality tests.
C) The decision of whether to expense or capitalize an expenditure is not based on
management’s judgment since U.S. GAAP provides clear rules on specific types of
assets.
D) The decision of whether to expense or capitalize an expenditure has the potential to
cause ethical issues for companies.
E) The decision of whether to expense or capitalize an expenditure is influenced by the
principle of conservatism causing accountants to expense an expenditure as opposed to
capitalize it when faced with contradictory evidence.
Elton Enterprises has recently upgraded its delivery truck. The various expenditures
related to the upgrades occurred at the end of year 2 and are as follows:
Required:
1) Determine whether the expenditure is a capital improvement or ordinary operating
expense.
2) Suppose the delivery truck with an original cost of $35,000 was being depreciated using
straight line depreciation over 5 years and was expected to have a $3,000 residual value,
however the upgrades are expected to increase the useful life from 5 years to 7 years.
Based on the upgrades above, what is the revised depreciation expense for years 3 through
7?
Sally publishes the Sunshine News. In March, she collected $600 in advance for 1-year
subscriptions. The journal entry to record the receipt of $600 in March would be
Palladia Publishing paid $450 for an advertisement that will appear in today’s
newspaper. Which of the following is the journal entry to record this transaction?
On April 30, Hilte Corporation owes $14,100 for wages to be paid on May 6. What
adjusting entry is necessary on April 30?
Presented below are the balance sheets of Blanco, Inc. and Stalle Company at January
1, 2X13:
On January 1, 2X13, Stalle Company acquired 70% of the outstanding common stock
of Blanco, Inc., for $119 in cash. Assume the book value of Blanco’s assets and
liabilities equals the market value.
What journal entry will Stalle Company make on January 1, 2X13?
Kasper Shack, Inc. acquired merchandise inventory for $1,300 cash on January 12th. On
January 21st, it noticed that the wrong merchandise had been shipped and returned it to
the supplier for a cash refund. Which of the following is the journal entry that would be
required for the return of the merchandise on January 21st?
Tablet Trade & Commerce has 100,000 shares of common stock authorized, 10,000
shares issued and outstanding. On June 1, 20X3, the company declared a $5.00 per
share dividend for those of record on July 1, 20X3, to be paid on August 1, 20X3.
Which of the following journal entries would Tablet Trade & Commerce make on June
1, 20X3?
