An increase in revenue always:
A) increases stockholders’ equity.
B) increases assets.
C) decreases stockholders’ equity.
D) decreases assets.
Transactions include which two types of events?
A) Direct events, indirect events
B) Monetary events, production events
C) External exchanges, internal events
D) Past events, future events
Use the information above to answer the following question. What is the depreciation
expense for 2016?
A) $4,000
B) $3,000
C) $6,000
D) $8,000
The characteristic shared by all liabilities is that they:
A) provide a future economic benefit.
B) result in an inflow of resources to the company.
C) always end in the word “payable.”
D) obligate the company to do something in the future.
Which of the following measures would assist in assessing the liquidity of a company?
A) Return on equity
B) Fixed asset turnover ratio
C) Receivables turnover ratio
D) Times interest earned
On January 5, Arlington Inc. purchases $23,000 of supplies; payment is not required
until February 4. What action should be taken by Arlington Inc. on January 5?
A) No journal entry is required; this transaction should not be recorded until the
payment is made.
B) A journal entry that includes a credit to Accounts Payable should be prepared.
C) A journal entry that includes a debit to Accounts Payable should be prepared.
D) A journal entry that includes a debit to Prepaid Expenses should be prepared.
Use the information above to answer the following question. What journal entry will be
prepared by Darin Company on October 8 to record the receipt of payment from Dee?
A) Debit Cash and credit Accounts Receivable for $6,500
B) Debit Cash for $5,880, debit Sales Discount for $120, and credit Accounts
Receivable for $6,000
C) Debit Cash for $6,370, debit Sales Discount for $130, and credit Accounts
Receivable for $6,500
D) Debit Cash for $6,300, debit Sales Returns & Allowances for $200, and credit
Accounts Receivable for $6,500
The following is a list of account balances for Pick-A-Pet, Inc., as of June 30, Year 3:
The company entered into the following transactions during July Year 3. Stockholders
contribute $300,000 cash for additional ownership shares and the company pays
$550,000 in cash and borrows $150,000 from a bank to buy new equipment. No other
transactions took place during July, Year 3.
Required:
Part a. Prepare a classified balance sheet for the company at June 30, Year 3.
Part b. Show the effects of the July transactions on the basic accounting equation.
Part c. Prepare the journal entries that would be used to record the transactions.
A company issues 100,000 shares of preferred stock for $40 per share. The stock has a
fixed dividend rate of 5% and a par value of $3 per share. The company records the
issuance with a debit to Cash for:
A) $4 million and a credit to Preferred Stock for $4 million.
B) $300,000 and a credit to Preferred Stock for $300,000.
C) $4 million, a credit to Preferred Stock for $300,000, and a credit to Additional
Paid-in Capital for $3.7 million.
D) $300,000, a debit for $3.7 million to Long-term Investments , a credit to Preferred
Stock for $300,000, and a credit to Additional Paid-in Capital for $3.7 million.
Which of the following nonfinancial factors is most likely to be a cause of a
going-concern problem?
A) Hiring a new CEO
B) Loss of a key patent
C) Announcing a new stock issue
D) Replacing an old product line
At the end of the accounting period, but before closing entries are made, Harry, the
proprietor of Harry’s Bar and Grill, has a debit balance of $24,500 in his drawing
account and a credit balance of $72,300 in his capital account. Which of the following
statements is correct?
A) Harry’s net income was $47,800.
B) During the closing process, Harry will debit the drawing account for $24,500 and
credit the capital account for $24,500.
C) During the closing process, Harry will debit the capital account for $24,500 and
credit the drawing account for $24,500.
D) Harry’s Retained Earnings account was $47,800.
Lexington Company updates its inventory periodically. The company’s beginning
inventory was $1,000 and purchases were $5,000 during the year. The company’s
ending inventory count was $2,000. What was the amount of its cost of goods sold?
A) $6,000
B) $4,000
C) $8,000
D) $2,000
Which of the following ratios does not use net income in its calculation?
A) Net profit margin
B) Earnings per share
C) Return on equity
D) Fixed asset turnover
Lock Security Company updates its inventory perpetually. The company reported a
beginning inventory of $1,500. During the year, the company recorded inventory
purchases of $4,500 and cost of goods sold of $5,000. What was the amount of its
ending inventory?
A) $1,000
B) $2,500
C) $2,600
D) $2,700
The direct write-off method:
A) results in better matching of costs with revenues than the allowance method.
B) is an acceptable method under generally accepted accounting principles (GAAP).
C) requires that losses from bad debts be recorded in the period in which sales are
made.
D) does not report accounts receivable on the balance sheet at their net realizable value.
When the indirect method is used, details from which of the following balance sheet
accounts are used in calculating both operating and financing cash flows?
A) Bonds Payable
B) Taxes Payable
C) Retained Earnings
D) Common Stock