Rent paid in advance
Match the most probable matching method to the costs listed. (Choices may be used
more than once.)
a. Directly match a specific revenue
b. Indirectly match with the period during which it will provide revenue
c. Not recognized in this period
The journal entry required to record the receipt of dividends under the fair value
method of accounting for investments includes a
a. credit to the investment account.
b. debit to the investment account.
c. credit to dividend income.
d. debit to retained earnings.
A way to estimate bad debt expense.
Match each statement to the item listed below
a. Bad debt expense d. Percentage of credit sales
b. Net sales revenue e. Profitability ratios
c. Nontrade receivables f. Trade receivables
The use of borrowed capital to produce more income than needed to pay the interest on
the debt. Match these terms with their definitions.
a. Bond i. Lessor
b. Contract, coupon, stated rate j. Leverage
c. Discount k. Long-term debt
d. Effective interest rate method l. Market rate, yield
e. Face value, par value, principal m. Maturity
f. Interest amortization n. Premium
g. Lease o. Straight-line method
h. Lessee
The gross profit percentage decreased from 36.5% in 2014 to 24.8% in 2015. What is
the trend in this change?
a. This increase represents an upward, or favorable, trend.
b. This increase represents a downward, or negative, trend.
c. The answer depends upon whether net sales increased or decreased during the period.
d. The trend cannot be determined unless the dollar amount of the change is also know.
Refer to Delco Construction. What is the company’s unadjusted cash balance in its
accounting records at March 31st before the reconciliation was completed?
Delco Construction The following items relate to the company’s March bank
reconciliation:
a. $28,700
b. $29,100
c. $28,300
d. $29,600
Which of the assets listed below is considered the most liquid?
a. Accounts receivable
b. Cash
c. Inventory
d. Prepaid insurance
Paying utilities
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
Which one of the following statements regarding internal control is false?
a. It is not possible to design a system of internal controls that is foolproof.
b. A well-designed system of internal controls should be the goal of every organization
whether for profit or not-for-profit.
c. Separation of duties is the easiest control activity to implement in small companies.
d. It is easiest to implement effective internal controls in large companies which are
able to devote substantial resources to those systems.
Gave a customer a cash refund.
Deeter Company, which sells auto parts, uses a perpetual inventory system. Identify the
effects on the accounting equation. (Choices may be used more than once.)
a. Increase in assets and liabilities
b. Decrease in assets and liabilities
c. Increase in assets and stockholders’ equity
d. Decrease in assets and stockholders’ equity
e. Increase in liabilities and decrease in stockholders’ equity
f. Decrease in liabilities and increase in stockholders’ equity
The amount recognized on the balance sheet as the cost of inventory will ultimately be
recognized as
a. sales revenue.
b. cost of goods sold.
c. operating expenses.
d. administrative expenses.
The amount of money the borrower agrees to repay at maturity is usually referred to as
the ____________________.
When each payment reduces the outstanding loan balance, which, in turn, reduces the
interest expense in the subsequent period, it is call an ____________________ debt.
The weighted average cost per unit must be continually updated under the perpetual
inventory system.
The amount of money borrowed when a promissory note is issued is called the
____________________.
In the independent auditors’ report included with the annual report, management
discusses the financial statements and provides the shareholders with explanations for
certain amounts reported in the statements.
The collection of accounts receivable results in a cash ____________________
reported in the operating activities section of the statement of cash flows using the
indirect method.
The accountant prepared the firm’s bank reconciliation and noted the following
adjustments to the company records for its checking account. In the table below,
indicate the impact on the accounting equation of recording the various adjusting
journal entries for these items by inserting an “I” for increase or “D” for decrease. It is
possible that an adjustment both increases and decreases an element of the accounting
equation, as in the case of the first adjustment which has been completed as an example.
The stronger the system of internal control, the higher the accuracy of the company’s
accounting records and financial reports.
Refer to Merry Maids Company. At the end of each year, the company’s cash balance
was approximately $5 to $7 million. What does this indicate about its cash management
techniques?
Merry Maids Company
Merry Maids Company began 2013 with a cash and cash equivalents balance of $7,670.
Consolidated statements of cash flows for the years ended December 31, 2014 and
2013, are presented below:
According to the revenue recognition principle, revenues are recognized when they are
____________________ and ____________________.