The percent-of-sales method calculates bad debts expense based on a percentage of net
cash sales.
Financial accounting focuses on information for decision makers outside of the
business, such as creditors and taxing authorities.
An overstatement of ending merchandise inventory in the current period results in an
understatement of cost of goods sold in the current period.
Premium on Bonds Payable is additional Interest Expense of the company that issues
the bond.
A small increase in the gross profit percentage may indicate an important rise in
income.
GAAP requires publicly traded companies to prepare a post-closing trial balance and
publish it in their annual report.
Common stock represents the basic ownership of every corporation.
An accounting firm collected cash on account. As a result of this transaction, total
assets, liabilities, and equity are all unchanged.
The percent-of-sales method, used to compute bad debt expense, is also known as the
balance sheet approach.
The T-account is a summary device that is shaped like a capital T with debits posted on
the right side of the vertical line and credits posted on the left side of the vertical line.
According to Generally Accepted Accounting Principles, goodwill must be amortized.
A disadvantage of a typical enterprise resource planning system is that it cannot be
offered through cloud computing.
The gross profit percentage measures the profitability of each sales dollar above the
cost of goods sold.
If preferred stock is noncumulative, the company is required to pay dividends that were
passed in previous years.
A sales journal is ________.
A) a special journal used to record all the cash sales
B) used to record the sales of assets other than merchandise inventory
C) a special journal used to record credit sales
D) a general journal used to record the adjustments in revenue account
Which of the following is included in comprehensive income?
A) Foreign currency translation adjustments
B) Owners’ investments
C) Purchase of capital assets
D) Payment of dividend
Which of the following is the last step in the daily control over cash receipts by mail?
A) A mailroom employee sends all customer checks to the treasurer who has the cashier
make the bank deposit.
B) The controller opens the mail and sends the remittance advices to the accounting
department.
C) The controller compares the records of the day’s bank deposit amount from the
treasurer and the debit to cash from the accounting department.
D) The accounting department prepares journal entries to cash and the customers’
accounts.
Which of the following is a disadvantage when a business accepts credit cards or debit
cards from customers?
A) The business bears the responsibility of collecting cash from the customer.
B) The business bears the risk of nonpayment by the customer.
C) The business pays a processing fee.
D) The business checks customers’ credit ratings.
A debt that a business owes is called ________.
A) an asset
B) a liability
C) stockholders’ equity
D) revenue
The accounts receivable turnover ratio for a merchandiser is 10 times. Calculate the
days’ sales in receivables for the merchandiser. (Round your answer to the nearest day.)
A) 33 days
B) 37 days
C) 28 days
D) 40 days
For a company with significant uncollectible receivables, the direct write-off method is
unsuitable because ________.
A) it overstates liabilities on the balance sheet
B) it violates the matching principle
C) it uses estimates for determining the bad debt expense
D) companies are not able to track customer payment histories
Which of the following is the final step in the journalizing and posting process?
A) Posting the accounts to the ledger.
B) Identifying each account affected and its type.
C) Determining whether the accounting equation is in balance.
D) Determining whether each account has increased or decreased.
A company has a petty cash fund amount of $300. When replenished, it has petty cash
receipts of $33 for gas expense, $31 for postage expense, $11 for supplies expense, and
$12 for miscellaneous expenses. Assume the cash balance is not over or short. In the
journal entry, Cash would be credited for ________.
A) $87
B) $76
C) $64
D) $75
Securities are ________.
A) commonly traded on an exchange
B) assets traded between companies working in the same industry
C) intangible assets traded in the stock exchange
D) always considered to be long-term investments
Regarding discontinued operations, which of the following statements is correct?
A) Gains and losses on the sale of plant assets are reported as discontinued operations.
B) A loss on discontinued operations is reported with an addition for the applicable
income tax.
C) Most analysts include the results of discontinued operations in financial analysis.
D) The disposal of the financing segment of a large corporation would be reported as a
discontinued operation.
The petty cash fund at Bryan Company has a designated balance of $300. The fund
currently holds $120 in cash and $187 in petty cash tickets. Based on this information,
which of the following statements is correct?
A) The total of the cash on hand plus petty cash tickets is more than the designated fund
balance.
B) A shortage of $7 exists.
C) To replenish the petty cash fund, the company must write a check, payable to Petty
Cash, for $187.
D) The petty cash fund custodian must locate the $7 discrepancy.
Gladiator, Inc. uses the direct method to prepare its statement of cash flows. Use the
following information reported for 2016 to compute the amount of cash paid for
merchandise inventory.Cost of Goods Sold, $134,000
Merchandise Inventory, beginning balance, $27,000
Merchandise Inventory, ending balance, $67,000
Accounts Payable, beginning balance, $7,600
Accounts Payable, ending balance, $5,000A) $176,600
B) $94,000
C) $174,000
D) $171,400
Which of the following entries would be made as the result of the revenue recognition
principle?A)
B)
C)
D)
Harrison Recyclers Company uses the indirect method to prepare its statement of cash
flows. Refer to the following information for 2017:1. Retained Earnings, beginning
balance, $138,000
2. Retained Earnings, ending balance, $122,000
3. There is a net loss of $15,000 for the year.What is the amount of dividends declared
during the year?
A) $31,000
B) $2,000
C) $1,000
D) $16,000
