If a merchandiser uses the periodic inventory system, it is necessary to conduct a
physical count of inventory to determine the quantity of inventory on hand.
To complete the statement of cash flows, the net change in cash and cash balances must
be shown.
The debt ratio shows the proportion of assets financed with debt.
When preparing the worksheet for a merchandising business using the perpetual
inventory system, the main new account is the Merchandise Inventory account.
Stated value stock is no-par stock that has been assigned an amount similar to par value.
Many companies use free cash flow to estimate the amount of cash that would be
available for unexpected opportunities.
Cash in the bank is more liquid than a petty cash fund.
The debt ratio shows the proportion of assets financed with debt.
Retained earnings represents amounts received from stockholders of a corporation in
exchange for stock.
On October 1, 2016, Lee’s Electronic sold merchandise in exchange for a 4 month,
$10,000 note receivable, with 6% interest. Interest revenue of $200 is earned in 2017.
The debt to equity ratio shows the proportion of total liabilities relative to total equity.
Which of the following statements is true of revenues?
A) Revenues decrease equity, so a revenue account’s normal balance is a credit balance.
B) Revenues decrease equity, so a revenue account’s normal balance is a debit balance.
C) Revenues increase equity, so a revenue account’s normal balance is a debit balance.
D) Revenues increase equity, so a revenue account’s normal balance is a credit balance.
To Go Company is preparing its statement of cash flows using the indirect method.
During the year, they purchased equipment for $15,000 cash. Which of the following
statements is true?
A) $15,000 would be shown as a negative cash flow in the operating activities section.
B) $15,000 would be shown as a negative cash flow in the investing activities section.
C) $15,000 would be shown as a positive cash flow in the investing activities section.
D) $15,000 would be shown as a positive cash flow in the financing activities section.
Which of the following statements is true if the income statement debit column exceeds
the income statement credit column of a worksheet?
A) The company incurred a net loss.
B) The retained earnings account increased during the period.
C) The company made a net profit.
D) An error was made.
Taylor Chemicals Company follows the indirect method to prepare its statement of cash
flows. Refer to the following portion of the comparative balance sheet:Taylor Company
Comparative Balance Sheet
December 31, 2017 and 2016
Net Income for the year was $89,000.
Based on the above information, determine the amount of dividends declared during
2016.
A) $3,100
B) $89,000
C) $62,000
D) $27,000
Which of the following transactions would be shown in the non-cash investing and
financing activities section of the statement of cash flows?
A) sold equipment with book value of $8,000 in exchange for $8,000 cash
B) borrowed $32,000 cash on a note payable
C) issued 15,000 shares of common stock at $3 per share
D) purchased a building in exchange for 20,000 shares of common stock
Murphy, Inc. had the following balances and transactions during 2017.
The company maintains its records of inventory on a perpetual basis using the last-in,
first-out inventory costing method. Calculate the amount of ending Merchandise
Inventory at December 31, 2017 using the lower-of-cost-or-market rule.
A) $820
B) $1,260
C) $630
D) $1,890
Sunlight Company has assets and equity that amount to $200,000 and $90,000,
respectively. Liabilities total ________.
A) $90,000
B) $110,000
C) $200,000
D) $290,000
On November 1, 2017, Lotz, Inc. sold merchandise for $10,000, FOB destination, with
payment terms of 3/10, n/40. Customer returns on this sale amounted to $5,000. The
company received payment for the balance on November 10, 2017. The cost of goods
sold was $3,600. Calculate the amount of gross profit from these transactions.
A) $6,400
B) $1,300
C) $1,400
D) $4,900
A posting reference column is used ________.
A) while preparing the trial balance using the ledger
B) when the information is transferred from the journal to the ledger
C) when the information is transferred from the ledger to the post-closing trial balance
D) while preparing the balance sheet using the trial balance
Which of the following accounts will be closed by crediting the Income Summary
account?
A) Service Revenue
B) Depreciation Expense
C) Accounts Payable
D) Accumulated Depreciation
For Retained Earnings, the category of account and its normal balance is ________.
A) equity and a credit balance
B) assets and a debit balance
C) equity and a debit balance
D) assets and a credit balance
When recording the sale of merchandise inventory, using a periodic inventory system,
________.
A) a running record of merchandise inventory is maintained during the accounting
period
B) the Sales Revenue account is credited only as an adjusting entry because sales
information is not needed during the accounting period
C) sales discounts and sales returns and allowances are not recorded
D) there is no need to record an entry to the Merchandise Inventory and the Cost of
Goods Sold accounts
Argentina Moving Company reported the following amounts on its balance sheet as of
December 31, 2016 and December 31, 2017:
For the vertical analysis, what is the percentage of stockholders’ equity as of December
31, 2017? (Round your answer to two decimal places.)
A) 100.00%
B) 59.53%
C) 54.76%
D) There is not enough information provided to make this computation.
Which of the following occurs when a cash dividend is declared?
A) liabilities remain unchanged
B) stockholders’ equity decreases
C) liabilities decrease
D) assets increase
Salaries Payable, Interest Payable, and Unearned Revenue are examples of ________.
A) short-term investments
B) fixed assets
C) current liabilities
D) long-term liabilities
A company purchased 110 units for $40 each on January 31. It purchased 200 units for
$25 each on February 28. It sold 200 units for $50 each from March 1 through
December 31. If the company uses the weighted-average inventory costing method,
calculate the amount of Cost of Goods Sold on the income statement for the year ending
December 31. (Assume the company uses the perpetual inventory system. Round any
intermediate calculations two decimal places, and your final answer to the nearest
dollar.)
A) $9,400
B) $6,064
C) $4,400
D) $5,000
A merchandiser uses a perpetual inventory system. The beginning Retained Earnings
balance of the merchandiser was $99,000. During the year, Sales Revenue amounted to
$73,000, Sales Returns and Allowances were $1,400, Sales Discounts were $3,100,
Cost of Goods Sold was $30,000, and all other expenses totaled $16,000. The company
declared and paid $25,000 as dividends. The last step in the closing process would
include ________.
A) a debit to Income Summary for $50,500
B) a credit to Income Summary for $73,000
C) a debit to the Retained Earnings account for $20,500
D) a debit to the Retained Earnings account for $25,000
Which one of the following is an example of investment income from securities?
A) deferred tax assets
B) depreciation of long-term assets
C) gain on the sale of fixed assets
D) interest earned from debt securities
Martell, Inc. purchased inventory on account for $6,500. Provide the journal entry to
record the purchase of inventory on account. (Assume a perpetual inventory system.)
List and briefly discuss three measures that can be taken to maintain good controls over
merchandise inventory.
Rally Auto Supplies uses a perpetual inventory system. Journalize the following sales
transactions for this company. Explanations are not required.
For each of the following amounts paid by a purchaser, determine whether the amount
is debited to Land, Land Improvements, or Building.
Karaoke Records Company uses the indirect method to prepare its statement of cash
flows. Refer to the following sections of the comparative balance sheet:Karaoke
Records Company
Comparative Balance Sheet
December 31, 2017 and 20162017 2016 Increase (Decrease)
Accounts Payable $ 6,000 $ 9,000 $(3,000)
Accrued Liabilities 3,000 1,500 1,500
Long-term Notes Payable 126,000 135,000 (9,000)
Total Liabilities $ 135,000 $ 145,500 $(10,500)Common Stock 45,000 3,000 42,000
Retained Earnings 169,500 111,000 58,500
Treasury Stock (12,000) (7,500) (4,500)
Total Equity 202,500 106,500 96,000Total Liabilities and Stockholders’ Equity
$337,500 $252,000 $85,500Additional information for 2017:
– No stock was retired.
– No treasury stock was sold.
– The company repaid $60,000 of long-term notes payable.
– The company borrowed $51,000 on a new long-term note payable.
– Net income for the year was $68,000.Prepare the financing section of the statement of
cash flows for the year ended December 31, 2017.
Anderson Plumbing Fixtures reported the following income statement for the year
ended December 31, 2017.Anderson Plumbing Fixtures
Income Statement
Year Ended December 31, 2017
Compute inventory turnover rate for the year. (Round to two decimal places.)
Compute days’ sales in inventory for the year. (Round to two decimal places.)
Complete the following table to show how FOB terms apply to merchandise inventory
purchased by a merchandiser.
Kapow, Inc. provides the following:Kapow, Inc.
Comparative Balance Sheet
December 31, 2017 and 2016
2017 2016
Assets
Total Current Assets $200,000 $100,000
Property, Plant, and Equipment, Net 550,000 500,000
Other Assets 50,000 50,000
Total Assets $800,000 $650,000
Liabilities
Total Current Liabilities $150,000 $100,000
Long-term Liabilities 350,000 250,000
Total Liabilities 500,000 350,000
Stockholders’ Equity
Total Stockholders’ Equity 300,000 300,000
Total Liabilities and Stockholders’ Equity $800,000 $650,000Perform a vertical analysis
of Kapow’s balance sheet for each year. (Round to one decimal place.)
A business hired a repair service to overhaul its plumbing system. The repair service
began work on September 15 and intends to complete it on October 15. The business
will pay the repair service $4,000 when the work is completed. As of September 30, the
work was 50% complete. Provide the adjusting entry to accrue repair expense by the
end of September. (Ignore explanation).
For each transaction, identify which account is debited and which account is credited.
Use proper account titles.