The cash balance in a company’s general ledger and the bank’s balance on the bank
statement will always be the same.
The balance in the Bonds Payable account is a credit of $92,000. The balance in the
Premium on Bonds Payable account is a credit of $1,990. The bond’s carrying amount
is $93,990.
A chart of accounts is a detailed record of the changes in a particular asset, liability, or
equity account during a specified period.
The Service Revenue account is a temporary account.
The unrealized holding gains and losses on available-for-sale investments are recorded
as an adjustment to the Unrealized Holding Gain-Available-for-Sale account or
Unrealized Holding Loss-Available-for-Sale account.
On January 1, 2016, Prepaid Insurance of Maywood, Inc. had a beginning balance of
$1,400. Three months of insurance premiums remain in the beginning balance. On
February 1, 2016, the company paid an annual insurance premium in the amount of
$3,700 for the period beginning April 1. On February 28, 2016, the balance in Prepaid
Insurance is $934. The deferred expense was initially recorded as an asset.
In a period of rising costs, the last-in, first-out (LIFO) method results in higher cost of
goods sold and lower net income than the first-in, first-out (FIFO) method.
In the case of deferred revenue, the cash is received first, and the revenue is earned
later.
The sum of all the depreciation expenses recorded to date for a depreciable asset is
called residual value.
The United Way Payable account would normally be shown on the balance sheet under
current liabilities.
An imprest system is a way to account for petty cash by maintaining a constant balance
in the petty cash account. Cash plus petty cash tickets total the amount allocated to the
petty cash fund.
The process of transferring data from the ledger to the journal is called posting.
All available-for-sale investments are reported as long-term assets on the balance sheet.
The higher the debt ratio, the lower the risk.
Treasury stock is a contra equity account.
The fair value of an investment is the price that ________.
A) existed at the time of acquisition
B) would be received if the company were to sell the investment on the market
C) is always equal to the weighted average cost of the investment
D) is not relevant for trading investments
A company purchased inventory for $3,000 from a vendor on account, FOB shipping
point, with terms of 3/10, n/30. The company paid the shipper $300 cash for freight in.
The company then returned damaged goods worth $300. The invoice was then paid
eight days after the purchase. Assuming that there was no beginning inventory balance,
the cost of inventory would be ________. (Assume a perpetual inventory system.)
A) $2,619
B) $2,919
C) $2,700
D) $2,910
The issuance of common stock for cash is shown as a ________.
A) negative cash flow in the investing activities section of the statement of cash flows
B) positive cash flow in the investing activities section of the statement of cash flows
C) negative cash flow in the financing activities section of the statement of cash flows
D) positive cash flow in the financing activities section of the statement of cash flows
A business prepays four months’ office rent. Which of the following accounts is
debited?
A) Rent Expense
B) Cash
C) Prepaid Rent
D) Unearned Rent
Which of the following would be considered a long-term asset?
A) Accounts Payable
B) Land
C) Cash
D) Common Stock
An accounting information system is said to have good flexibility, if it ________.
A) works smoothly with the business’s employees and organizational structure
B) safeguards a business’s assets and reduces the likelihood of fraud and errors
C) provides information that will improve decision making and reduce uncertainty
D) accommodates changes in the business over time
Which of the following are debit columns in a typical cash payments journal?
A) Merchandise Inventory column and Cash column
B) Other Accounts column and Accounts Payable column
C) Merchandise Inventory column and Accounts Payable column
D) Other Accounts column and Cash column
Camile Plastics Company had the following total assets, liabilities, and equity as of
December 31.
What is the company’s debt ratio as of December 31? (Round your percentage answer
to two decimal places.)
A) 30.70%
B) 69.30%
C) 100.00%
D) 44.30%
Which of the following statements is true?
A) Accounts receivable are more liquid than cash.
B) Notes receivable are always classified as current assets.
C) Notes receivable usually have longer collection terms than accounts receivable.
D) Accounts receivable are liabilities.
Which of the following accounts will be included in a post-closing trial balance?
A) Service Revenue
B) Rent Expense
C) Interest Expense
D) Unearned Revenue
A company purchased 400 units for $20 each on January 31. It purchased 200 units for
$30 each on February 28. It sold a total of 270 units for $90 each from March 1 through
December 31. If the company uses the last-in, first-out inventory costing method,
calculate the amount of ending inventory on December 31. (Assume that the company
uses a perpetual inventory system.)
A) $9,900
B) $23,100
C) $6,600
D) $330
Which of the following accounts decreases with a credit?
A) Cash
B) Common Stock
C) Accounts Payable
D) Notes Payable
If a company is financing more assets with debt than with equity, the ________.
A) debt to equity ratio will be more than 1
B) debt to equity ratio will be between 0 to 1
C) debt to equity ratio will be equal to 1
D) debt to equity ratio will be negative
A company’s accountant capitalized a payment that should have been recorded as a
revenue expenditure. How will this error affect the company’s financial statements?
A) Net income will be understated.
B) Expenses will be overstated.
C) Assets will be overstated.
D) Liabilities will be overstated.
Olivera, Inc. provides the following data for 2017:
The gross profit as a percentage of net sales is ________. (Round your answer to two
decimal places.)
A) 31.79%
B) 33.22%
C) 66.78%
D) 34.22%
The Interest Expense in the worksheet’s unadjusted trial balance column is $3,500.
Interest Expense in the income statement column is $9,000. Which of the following
entries would have caused this difference?
A) a $9,000 credit to Interest Expense in the worksheet’s adjustments column
B) a $9,000 credit to Interest Payable in the worksheet’s adjustments column
C) a $5,500 debit to Interest Expense in the worksheet’s adjustments column
D) a $5,500 credit to Interest Expense in the worksheet’s adjustments column
Lush Lawns Corporation earned $1,000 for lawn mowing services rendered. The
customer promised to pay at a later time. Which of the following accounts increased as
a result of this transaction?
A) Accounts Payable
B) Supplies
C) Cash
D) Accounts Receivable
Which of the following accounts will be included in a post-closing trial balance?
A) Service Revenue
B) Interest Payable
C) Interest Expense
D) Utilities Expense