Which of the following statements regarding periodic and perpetual inventory systems
is correct?
A) Perpetual inventory systems are inferior for determining optimal times to reorder
inventory.
B) Periodic inventory systems require a greater investment in technology.
C) Perpetual inventory systems may assist in determining inventory lost due to
shrinkage.
D) Periodic inventory systems allow sales personnel to provide more immediate
information regarding availability of inventory.
Which of the following statements about adjusting entries is not correct?
A) Adjustments are needed to ensure that the accounting system includes all of the
revenues and expenses of the period.
B) Adjustments help to ensure the related accounts on the balance sheet and income
statement are up to date and complete.
C) Adjusting entries often affect the cash account.
D) Adjusting entries generally include one balance sheet and one income statement
account.
Which of the following statements about the format of financial statements is correct?
A) A double underline is drawn below the subtotal for Total Liabilities on the balance
sheet.
B) Dollar signs are omitted if the heading states that amounts are reported in U.S.
dollars.
C) Dividends are shown in parentheses on the statement of retained earnings.
D) The order of the items included in the heading of each financial statement is as
follows: the name of the business, the time period covered by the financial statement,
and the title of the report.
When a customer returns for credit a defective product it had purchased, the seller
would record the transaction using which of the following accounts?
A) Purchase Returns & Allowances
B) Sales Returns & Allowances
C) Sales Revenue
D) Sales Discounts
The balance of which of the following accounts would appear in the debit column of an
adjusted trial balance?
A) Service Revenue
B) Dividends
C) Accumulated Depreciation
D) Unearned Revenue
Company Z has 8 million shares of common stock authorized with a par value of $1
and a market price of $72. There are 4 million outstanding shares and 1 million shares
held in treasury stock.
Required:
Part a. Prepare the journal entry if the company declares and distributes a 10% stock
dividend.
Part b. Show the effect of the 10% stock dividend on assets, liabilities, and
stockholders’ equity.
Part c. Prepare the journal entry if the company declares and distributes a 100% stock
dividend.
Part d. Show the effect of the 100% stock dividend on assets, liabilities, and
stockholders’ equity.
Which of the following statements about the closing process is correct?
A) Closing entries are recorded at the end of each reporting period which could be
monthly, quarterly or annually.
B) After closing entries are posted, the balances of the income statement accounts will
be zero.
C) Closing entries are made to zero out the balances of the permanent accounts on the
balance sheet.
D) After closing entries are posted, the only temporary account with a balance is the
Dividends account.
A trucking company sold its fleet of trucks for $55,000. The trucks originally cost
$1,410,000 and had Accumulated Depreciation of $1,269,000 recorded through the date
of disposal. What gain or loss did the trucking company record when it sold the fleet of
trucks?
A) Gain of $86,000
B) Gain of $55,000
C) Loss of $55,000
D) Loss of $86,000
On July 1, 2016, Empire Inc. lends $8,000 to a customer and receives a 9% note due in
two years. Interest is due in full on July 1, 2018, the due date of the note. What is the
amount of Interest Revenue that will be reported on Empire’s income statement for the
year ended December 31, 2016?
A) $1,440
B) $720
C) $420
D) $360
Jensen Company uses the percentage of credit sales method for calculating Bad Debt
Expense. The company reported $216,000 in total sales during the year; $178,000 of
which were on credit. Jensen has experienced bad debt losses of 6% of credit sales in
prior periods. What is the estimated amount of Bad Debt Expense for the year?
A) $12,960
B) $10,680
C) $38,000
D) $11,000
A company declared a $0.80 per share cash dividend. The company has 100,000 shares
authorized, 45,000 shares issued, and 42,000 shares of common stock outstanding.
What is the journal entry to record the dividend declaration?
A) Debit Dividends and credit Dividends Payable for $36,000
B) Debit Dividends and credit Dividends Payable for $33,600
C) Debit Dividends Payable and credit Cash for $36,000
D) Debit Dividends Payable and credit Cash for $80,000
Inventory levels increase by 10% at your company during the fourth quarter. Based on
this increase, which of the following statements must be correct?
A) This must be good news because inventories are an asset to the company.
B) This could be good news if the company is ordering more goods because sales
appear to be rising.
C) This could be bad news if the company is ordering more goods because unit costs
are falling.
D) This must be bad news because higher inventories mean higher costs.
Which of the following is not a correct statement?
A) Expense accounts are closed with credits.
B) Revenue accounts are closed with debits.
C) The Dividends account is closed with a credit.
D) The Retained Earnings account is closed with a debit.