Adjusting entries may involve any account, including Cash.
In a corporation, the board of directors is elected by the chairperson of the company.
Asset and liability accounts are closed to the Income Summary account.
Brookside Market recently traded in store fixtures. The exchange had commercial
substance. The old fixtures had a cost of $72,000 and accumulated depreciation of
$66,000. Brookside paid $100,000 for the new store fixtures. These new fixtures had a
market value of $127,000. There is a loss of $21,000 on this exchange.
FICA tax is a tax that is paid both by the employer and the employee.
The days’ sales in inventory ratio is calculated by dividing cost of goods sold by the
average merchandise inventory.
In a balance sheet, assets are classified as either current or long term, depending on
their liquidity.
The units-of-production method is used to compute depletion expense.
Equity securities, in which the investor owns less than 20% ownership in the voting
stock of the investee, can be either trading investments or available-for-sale
investments.
The ability of a company to repay its liabilities can be determined from its ________.
A) bankers
B) creditors
C) debt ratio
D) journal
Server Solutions paid $209,000 to acquire Tabletz, Inc., an electronic
gadget-advertising website. At the time of the acquisition, Tabletz’s balance sheet
reported total assets of $209,000 and liabilities of $104,500. The fair market value of
Tabletz’s assets was $209,000. The fair market value of its liabilities was $104,500.
How much goodwill did Server Solutions purchase as part of the acquisition of Tabletz?
A) $209,000
B) $52,250
C) $104,500
D) $156,750
Which of the following is a benefit of using a computerized accounting information
system?
A) The software can accurately measure the intrinsic value of the firm using the built-in
simulation techniques.
B) There is no need to review the financial statements for accuracy.
C) The software is easy to use, thus no training or review is necessary.
D) The software automatically transfers the amounts from the general ledger to the
financial statements.
Milford Lighting Supply expects the following for 2016:
Milford expects to spend $157,000 to modernize its showroom.
How much free cash flow does Milford expect for 2016?
A) $124,000
B) $277,000
C) $100,000
D) $107,000
It is mandatory for both the employer and employee to pay ________.
A) FICA
B) SUTA
C) employee income tax
D) federal unemployment tax
A company purchased inventory for $73,000 from a vendor on account, FOB shipping
point, with terms of 4/10, n/30. The company paid the shipper $1,500 cash for freight
in. The company paid the vendor nine days after the sale. If there was no beginning
inventory, the cost of inventory would be ________. (Assume a perpetual inventory
system.)
A) $71,580
B) $74,500
C) $68,580
D) $71,500
Which one of the following account groups normally has a credit balance?
A) assets and liabilities
B) equity and assets
C) liabilities and revenues
D) assets and expenses
A business renders services to a client and issues a sales invoice. The amount will be
collected from the customer at a later time. Which of the following is true at the time
the invoice is issued?
A) Equity will decrease.
B) Total liabilities will increase.
C) Total assets will decrease.
D) Net income will increase.
On December 1, 2017, Falcon, Inc. sold machinery to a customer for $25,000. The
customer could not pay at the time of sale but agreed to pay 11 months later and signed
a 11-month note at 8% interest. How much interest revenue was earned for the entire
term of the note? (Round your answer to the nearest dollar.)
A) $1,833
B) $1,670
C) $167
D) $2,000
A company decides to ignore a very small error in its inventory balance. This is an
example of the application of the ________.
A) conservatism
B) materiality concept
C) disclosure principle
D) consistency principle
On January 1, 2017 Hillop, Inc. had total assets of $369,000. During the year, the
company purchased new machinery worth $90,000 and promised to pay the amount due
after two years. Throughout the year, it earned revenue of $59,000 every month.
Calculate the asset turnover ratio.
A) 1.04 times
B) 1.80 times
C) 1.71 times
D) 1.54 times
Which of the following is a condition to record an investment as an available-for-sale
security?
A) The investor plans to hold the debt security until it matures.
B) The investor should have a significant interest in the voting stock of the investee.
C) It must be a debt security.
D) The ownership in the voting stock of the investee should be less than 20 percent.
The ending Merchandise Inventory for the current accounting period is understated by
$2,700. What effect will this error have on Cost of Goods Sold and Net Income for the
current accounting period?A)
B)
C)
D)
A business makes a payment in cash for advertising expense. Which of the following
accounts is credited?
A) Notes Payable
B) Accounts Receivable
C) Cash
D) Advertising Expense
Which of the following is a permanent account?
A) Wages Expense
B) Salaries Payable
C) Service Revenue
D) Utilities Expense
A business borrows cash by signing a note payable. Which of the following accounts is
credited?
A) Notes Payable
B) Accounts Payable
C) Notes Receivable
D) Cash
Which of the following appears on both the income statement and statement of retained
earnings?
A) Ending stockholders’ equity
B) Total revenues
C) Net income
D) Dividends
Wilson, Inc. provides the following data:
Calculate accounts receivable turnover ratio form 2017. (Round your answer to two
decimal places.)
A) 5.60 times
B) 3.40 times
C) 2.95 times
D) 2.19 times
Which of the following serves as the “journal of last resort?”
A) purchases journal
B) sales journal
C) general journal
D) cash payments journal
Swan Song’s adjusted trial balance as of December 31, 2016 is given below:
Compute the current ratio. (Round your answer to two decimals.)
A) 7.01
B) 2.07
C) 1.80
D) 2.73
Jones Corp. purchased equipment for $45,000. Total depreciation of $36,000 was
recorded. On January 1, 2017, Jones exchanged the equipment for new equipment,
paying $56,000 cash. The market value of the new equipment is $65,000. Prepare the
journal entry to record this transaction. Assume the exchange has commercial
substance.
On July 1, 2017, Ferrero, Inc. purchased merchandise inventory for $350,000 by
signing a note payable. The note is for 6 months and bears interest at a rate of 8%.
Prepare the journal entry for this transaction, using a perpetual inventory system.
The following is the adjusted trial balance as of December 31, 2017 of Peri Brothers,
Inc.:
Provide the closing entry for expenses.
A company using the perpetual inventory system purchased merchandise on account for
$5,000. Give the journal entry to record this transaction.
Define enterprise resource planning (ERP) systems and state one advantage and one
disadvantage of ERP systems.
List the four basic rights of stockholders.
What is the difference between simple interest and compound interest?
On October 1, 2017, Mulcahy, Inc. purchased a patent for $100,000 cash. Although the
patent gives legal protection for 20 years, it is expected to be used for only eight years.
Journalize the amortization expense for 2017. Assume straight-line amortization.
On December 1, 2017, Sheehan, Inc. sold machinery to a customer for $2,000. Sheehan
regularly sells machinery. The customer could not pay at the time of sale but agreed to
pay 9 months later and signed a 9-month note at 12% interest. Prepare the journal entry
to record the revenue at the time of sale. Ignore the entry for cost of goods sold.