A fully depreciated asset that is still in service is not reported as an asset on the balance
sheet.
The total amount of assets a business possesses may or may not be equal to the total of
liabilities and equity of the business.
In order to keep accurate records about the collection of cash for a previously written
off account, collection of cash for a previously written off account, a business should
re-establish the Accounts Receivable by debiting the receivable account.
If an asset is disposed of when it is fully depreciated and has no residual value, the
business does not need to make a journal entry because the book value is zero.
Merchandise inventory and prepaid expenses are excluded from the acid-test ratio.
Income from continuing operations includes ________.
A) extraordinary losses but not extraordinary gains
B) gains and losses from discontinued operations
C) the taking of company assets by a foreign government
D) losses due to labor strikes
Which of the following will be categorized as an investing activity on the statement of
cash flows?
A) Purchase of land with a mortgage
B) Cash paid for purchase of new machinery
C) Cash paid for purchase of office supplies
D) Cash received from issuance of shares of common stock
Which of the following is an expense that results from the usage of a natural resource?
A) depletion
B) amortization
C) depreciation
D) obsolescence
A reversing entry ________.
A) is required by GAAP
B) is dated the last day of an accounting period
C) exactly resembles the prior adjusting entry prepared in the books
D) switches the debit and the credit of a previous entry
Pretty, Inc. provides the following data:
Calculate days’ sales in inventory for 2017. (Round any intermediate calculations and
your final answer to two decimal places.)
A) 84.23
B) 148.81
C) 63.11
D) 116.61
Which of the following would be included in the entry to record the replenishment of a
petty cash fund?
A) a credit to Petty Cash
B) a debit to Accounts Receivable
C) a credit to Cash
D) a credit to Miscellaneous Expense
Which of the following is representative of safeguarding assets?
A) attaching electronic sensors to merchandise inventory
B) reducing expense to increase operating profit
C) increasing operating profit to increase net income
D) allowing company accountants to handle cash
Which of the following corporate characteristics is a disadvantage of a corporation?
A) Stockholders have limited liability.
B) A corporation has a continuous life.
C) There is no mutual agency between the stockholders and the corporation.
D) Earnings of a corporation may be subject to double taxation.
Ross Corporation reported the following:
Which of the following is included in the entry to record the corporation’s purchase of
40,000 shares of its common stock for $10.00 per share?
A) Treasury Stock-Common is debited for $400,000.
B) Paid-In Capital From Treasury Stock Transactions is credited for -$25,000.
C) Retained Earnings is debited for $400,000.
D) Common Stock-$5 Par Value is credited for $200,000.
The balance sheet is a snapshot of the entity. Which of the following is included on the
balance sheet?
A) Revenues
B) Expenses
C) Assets
D) Dividends
Weston Jewelers uses the perpetual inventory system. On April 2, Weston sold
merchandise with a cost of $6,000 for $9,000 to a customer on account with terms of
2/15, n/30. On April 4, the customer reported damaged goods, and Michelin granted a
$1,000 sales allowance. On April 10, Weston received payment from the customer.
Calculate the amount of net sales revenue.
A) $8,840
B) $9,000
C) $8,000
D) $7,840
The entry to write off an account receivable under the allowance method will
________.
A) reduce net income
B) have no effect on net income
C) increase total assets
D) increase net income
The journal entry for accrued interest on a note payable includes ________.
A) a debit to Interest Expense and credit to Cash
B) a debit to Interest Expense and credit to Interest Payable
C) a debit to Interest Payable and credit to Cash
D) a credit to Interest Expense and debit to Notes Payable
Hexagon Corporation sold a product on credit for $2,235 to Merin Lynch. The cost of
goods sold was $1,324. Assuming the firm is following a perpetual inventory system
and using a sales journal, it will record $2,235 in the ________.
A) Accounts Receivable CR, Sales Revenue DR column
B) Cost of Goods Sold DR, Merchandise Inventory CR column
C) Merchandise Inventory DR, Cost of Goods Sold CR column
D) Accounts Receivable DR, Sales Revenue CR column
The percentage of assets that are financed with liabilities can be calculated using the
________.
A) accounting equation
B) debt ratio
C) journal
D) ledger
The Public Company Accounting Oversight Board (PCAOB) was created ________.
A) by the Sarbanes-Oxley Act (SOX)
B) to perform audits of public companies
C) to make restitution to investors who were defrauded by the issuance of fraudulent
financial reports
D) to require auditors to take responsibility for the accuracy and completeness of
financial reports
Which of the following sequences states the order in which accounts are listed on a trial
balance?
A) Equity Assets Liabilities
B) Liabilities Assets Equity
C) Assets Equity Liabilities
D) Assets Liabilities Equity
An asset was purchased for $31,000 on January 1, 2016. The asset’s estimated useful
life was five years, and its residual value was $8,000. The straight-line method of
depreciation was used. Calculate the gain or loss if the asset is sold for $21,000 on
December 31, 2016, the last day of the accounting period.
A) $2,700 gain
B) 5,400 loss
C) 5,400 gain
D) no gain or no loss
An adjusted trial balance for a merchandiser is given below.
Give journal entry to close the expense accounts and contra revenue accounts with a
debit balance.
Smith Electronics reported the following figures in its 2017 and 2016 financial
statements.
Compute the cash ratio for 2017 and 2016. What does the cash ratio measure? Use this
information to discuss the business performance of Smith Electronics.
Define extraordinary items. Describe the types of items that would be reported in the
extraordinary items section of the income statement.
Peterson, Inc. issued 4,000 shares of preferred stock for $240,000. The stock has a par
value of $60 per share. Prepare the journal entry for this transaction.
Office Supplies, Inc. uses a perpetual inventory system. Journalize the following sales
transactions for this company. Explanations are not required.
The following selected transactions occurred during 2016 for Mitchell Movers. The
company ends it accounting year on December 31.
Prepare the journal entries to record these transactions.
Rimsone, Inc. purchases 8,500 shares of the company’s own $6 par common stock for
$8 per share. Journalize the transaction.
General, Inc. purchased a van on May 1, 2016, for $800,000. Estimated life of the van
was five years, and its estimated residual value was $80,000. General uses the
straight-line method of depreciation. Prepare the journal entry to record the depreciation
expense for 2016 on the van.
List and briefly discuss the two basic components of a computerized accounting
information system.