The operating cycle of a merchandiser begins when the company purchases inventory
from a vendor and ends when the company then sells the inventory to a customer.
When using the periodic inventory system, there is no need to record an adjusting entry
for inventory shrinkage.
Equity decreases with expenses and revenues.
A mortgage payable is a long-term debt that is backed with a security interest in specific
property.
The audit report in the annual report is prepared by an internal auditor of a company.
Acer, Inc. plans to develop a shopping center. In the first quarter, the following amounts
were spent:
What amount should be recorded as the cost of the land in the corporation’s books?
A) $23,400
B) $18,400
C) $19,960
D) $22,800
The following are the current month’s balances for Jackson, Inc.
Calculate the total amount of credits for the trial balance.
A) $24,500
B) $22,750
C) $25,750
D) $33,750
In regards to extraordinary items, which of the following statements is not correct?
A) Losses due to lawsuits do not qualify as extraordinary.
B) An extraordinary gain is reported the same as a loss – net of the income tax effect.
C) Taking of a company assets by a foreign government are generally considered to be
extraordinary items.
D) Extraordinary items are reported separately from continuing operations because of
their infrequent and unusual nature.
Short-term investments ________.
A) are debt and equity securities that the investor expects to hold for more than a year
B) are investments in debt securities or equity securities in which the investor holds less
than 50 percent of the voting stock and that the investor plans to sell in the very near
future
C) are investments in debt and equity securities that are highly liquid and that the
investor intends to convert to cash within one year
D) are investments in debt securities that the investor intends to hold until maturity
Which of the following is an advantage of enterprise resource planning (ERP) systems?
A) It is inexpensive to implement.
B) It provides financial benefits only to small corporations.
C) It replaces separate software systems, such as sales and payroll.
D) Its implementation requires smaller commitment of time and people.
A business makes a cash payment of $12,000 to a creditor. Which of the following
accounts is credited?
A) Cash
B) Accounts Payable
C) Bank
D) Accounts Receivable
Which of the following is a requirement of the Sarbanes-Oxley Act?
A) An outside auditor must evaluate the client’s internal controls and report on the
internal controls as part of the audit report.
B) The Public Company Oversight Board must conduct audits of public companies.
C) The accounting firm that audits a public client must also provide consulting services
for the same client.
D) The Public Company Oversight Board must create new accounting standards.
On January 1, 2017, Carter Sales issued $38,000 in bonds for $16,700. These are
six-year bonds with a stated interest rate of 11%, and pay semiannual interest. Carter
Sales uses the straight-line method to amortize the Bond Discount. What amount is
debited to Interest Expense on June 30, 2017?
A) $2,090
B) $3,865
C) $1,775
D) $43,297
A business repays the amount borrowed on a note with cash. Which of the following
accounts is debited?
A) Cash
B) Accounts Payable
C) Notes Payable
D) Notes Receivable
A business pays cash for dividends. Which of the following accounts is credited?
A) Common Stock
B) Dividends
C) Cash
D) Accounts Payable
On September 1, 2016, Joy, Inc. paid $8,000 in advance for an eight-month rental space
covering the period of September, 2016 through April 2017. The deferred expense was
initially recorded as an asset. Joy, Inc. makes adjusting entries once a year at year-end.
The adjusting entry on December 31, 2016 would include a ________.
A) debit of $8,000 to Cash
B) credit of $8,000 to Prepaid Rent
C) debit of $4,000 to Rent Expense
D) credit of $4,000 to Rent Expense
Which of the following financial statements lists the entity’s assets, liabilities, and
stockholders’ equity as of a specific date?
A) Balance sheet
B) Statement of retained earnings
C) Income statement
D) Statement of cash flows
Niagara Art is a new business. During its first year of operations, credit sales were
$41,000 and collections of credit sales were $37,000. One account, $700, was written
off. Management uses the percent-of-sales method to account for bad debts expense and
estimates 2% of credit sales to be uncollectible. Bad debts expense for the first year of
operations is ________.
A) $120
B) $820
C) $700
D) $1,560
The net income of Harriet, Inc. for the year is $35,000. The dividends declared during
the year were $43,000. Which of the following statements is true?
A) Retained Earnings account decreases by $35,000.
B) Retained Earnings account decreases by $8,000.
C) Retained Earnings account increases by $43,000.
D) Retained Earnings will remain the same.
York Casting Services started the year with total assets of $110,000 and total liabilities
of $50,000. The revenues and the expenses for the year amounted to $140,000 and
$50,000, respectively. During the year, the company did not issue any common stock,
but it distributed dividends of $70,000. Calculate the amount of increase or decrease in
stockholders’ equity for the year.
A) a $20,000 increase
B) a $80,000 increase
C) a $60,000 decrease
D) a $70,000 increase
A company’s accountant capitalized a payment that should have been recorded as a
revenue expenditure. How will this error affect the company’s financial statements?
A) Net income will be overstated.
B) Revenues will be understated.
C) Assets will be understated.
D) Liabilities will be understated.
Prepare the journal entries for the following petty cash transactions of Morrison Dental
Supplies.
On June 30, 2017, Regal Furniture discarded fully depreciated equipment with a cost
$35,000 and no residual value. Prepare the journal entry for the disposal of the
equipment.
List and discuss two common reasons why companies invest in debt or equity
securities.
William Smith is a sole proprietor of a successful business. He is interested in
incorporating to protect his personal assets. What are some disadvantages of organizing
as a corporate entity?
Hometown Resources, Inc. has a 9% rate of return on total assets and the industry
average is 12%. How was the 9% rate of return on total assets computed? Comment on
this information.
What are Generally Accepted Accounting Principles (GAAP)? Which entity is currently
responsible for determining GAAP?
Luminous Electrical, Inc. performed services of $8,000 on January 24 and invoiced the
customer. Luminous received the $8,000 on January 31. Provide the journal entry on
January 24 when services were performed. (Ignore explanation.)
MacLean Corp. purchased a mine on January 1, 2016, for $500,000 .The mine is
estimated to contain 30,000 tons of iron ore. There is no residual value. The business
has extracted and sold 2,500 tons of ore in 2016. Prepare the journal entry to record
depletion expense for 2016. (Round your intermediate calculations to the nearest cent.)
State the purpose of a subsidiary ledger? What is included in the accounts receivable
subsidiary ledger?