In a multi-step income statement, interest revenue and interest expense are included in
operating income.
An amount that a merchandiser earns by selling its inventory is known as sales revenue
or sales.
Warranties pose an accounting challenge because a company does not know which or
how many products will have to be repaired.
The acid-test ratio measures a company’s ability to pay all its current liabilities if they
came due immediately.
Even in a perpetual inventory system that updates the inventory account as and when
transactions occur, the business must count its inventory at least once in a year.
The cash flow from investing activities section appears exactly the same, whether the
company uses the direct or the indirect method to prepare the statement of cash flows.
Ending inventory equals the cost of goods available for sale less beginning inventory.
Companies make a year-end adjustment of the trading investment to bring the account
to historical value.
In cash basis accounting, revenue is recorded when cash is received, and expenses are
recorded when they are paid.
Benchmarking is the comparison of a company’s current year results with a previous
year’s performance.
Investments accounted for by the equity method are recorded at cost at the time of
purchase.
Assets are economic resources that have no future benefits for the business.
The effective-interest amortization method allocates an amount of bond discount or
premium, based on the stated rate of interest, to each interest period over the life of the
bond.
Journal entries are required for the reconciling items on the book side because
________.
A) those transactions have not yet been recorded by the bank
B) the adjusted balances on both sides are the same amounts
C) the amounts are immaterial
D) those transactions have not yet been recorded on the company’s books
The cash basis of accounting ignores ________.
A) payables
B) revenue
C) cash
D) expenses
The entry to record the payment of a previously declared dividend of $0.25 per share on
18,500 shares of common stock includes a ________.
A) debit to Cash Dividends for $4,625
B) debit to Cash $4,625
C) credit to Cash Dividends for $4,625
D) debit to Dividends Payable for $4,625
Which of the following statements is true of the Common Stock account?
A) It is an equity account that has a normal credit balance.
B) It is a liability account that has a normal credit balance.
C) It is a liability account that has a normal debit balance.
D) It is an equity account that has a normal debit balance.
Which of the following account’s balance is carried forward to the next accounting
period?
A) Accumulated Depreciation
B) Depreciation Expense
C) Dividends
D) Service Revenue
Under which of the following categories would bonds held as an investment for more
than a year appear?
A) Current assets
B) Long-term liabilities
C) Long-term assets
D) Current liabilities
A business purchased equipment for $140,000 on January 1, 2017. The equipment will
be depreciated over the five years of its estimated useful life using the straight-line
depreciation method. The business records depreciation once a year on December 31.
Which of the following is the adjusting entry required to record depreciation on
equipment for the year 2017? (Assume the residual value of the acquired equipment to
be zero.)
A) Debit $140,000 to Equipment, and credit $140,000 to Cash.
B) Debit $28,000 to Depreciation Expense-Equipment, and credit $140,000 to
Accumulated Depreciation-Equipment.
C) Debit $28,000 to Depreciation Expense-Equipment, and credit $28,000 to
Accumulated Depreciation-Equipment.
D) Debit $28,000 to Depreciation Expense, and credit $28,000 to Equipment.
Which of the following journal entries would be recorded if a business renders service
and receives cash of $900 from the customer?A)
B)
C)
D)
Investors who want to know the amount of cash a company has available for new
opportunities, such as expanding into a new sales region, should analyze the company’s
________.
A) free cash flow
B) net cash flow from investing activities
C) acid ratio
D) earnings per share
Which of the following are NOT included in a post-closing trial balance?
A) Assets and liabilities
B) Retained Earnings and assets
C) Common Stock and liabilities
D) Revenues and expenses
Prepare an income statement and a statement of retained earnings for the month of May.
Also, prepare a balance sheet as of May 31, 2017, for McGuire Corporation. The
financial transactions of McGuire Corporation for the month of May, their first month
of operations, are as follows:
– On May 1, 2017, McGuire Corporation issued common stock in exchange for $20,000
cash from a stockholder, Deborah Merchant.
– On May 3, the corporation borrowed $5,000 from a creditor and executed a note
payable with the principal and interest to be due in one year.
– On May 7, the corporation purchased $15,000 of equipment for cash.
– On May 8, McGuire Corporation rendered service to a client and earned $3,000 in
cash.
– On May 12, the corporation incurred a repair expense of $1,800 and promised to pay
the repair contractor the following month.
– On May 18, the corporation rendered service to a new client in the amount of $8,000
on account, as the client promised to pay the following month.
– At the end of May, McGuire Corporation distributed cash dividends of $1,500.
When computing a bond’s cash flow for interest, which interest rate is used? Why?
Clothesall, Inc., a retailer, accepts payment through credit cards. During August, credit
card sales amounted to $12,000. The processor charges a 3% fee. Assume that the
processor deposits the net amount. Prepare the journal entry for card sales. (Ignore cost
of goods sold.)
A business purchases a building for $250,000. The current market value is $375,000.
The assessment value is $325,000. What value should the building be recorded at, and
which accounting principle supports your answer?
An adjusted trial balance for a merchandiser is given below.
Give the journal entry to close the Sales Revenue account.
At Sea, a cruise industry magazine, collected $480,000 in subscription revenue in May.
Each subscriber will receive an issue of the magazine for each of the next 12 months,
beginning with the June issue. The company uses the accrual basis of accounting.
Provide the adjusting entry needed on June 30. (Ignore explanation). Assume the
magazine initially records a liability for the subscription revenue.
A business paid salaries of $6,000 in cash. Record the transaction in the journal.
A company purchased inventory for $2,200 on account, and recorded the following
journal entry:
The vendor’s invoice showed terms of 3/10, n/30. Give the journal entry for the
payment of the invoice 17 days after the invoice date.
On January 1, 2017, Door #2 Services issued $20,000 of 8% bonds that mature in five
years. They were issued at par. The bonds pay semiannual interest payments on June 30
and December 31 of each year. Provide the journal entry for the payment made on June
30, 2017.