Total accounts receivable are one of the denominators for the debt ratios.
Cash received from customers is equal to sales plus the increase in accounts receivable.
Once a company begins to make revaluation adjustments for plant assets, it must
continue to make them.
The effects of the form of ownership of a business entity on income taxes may vary
significantly.
If the entry to journalize expired supplies is not prepared, liabilities will be overstated.
Inventory turnover is calculated as cost of goods sold divided by average inventory.
When equity ownership of another company is below 20%, the market method is
required.
Under the indirect method, a gain from the early extinguishment of long-term debt is
subtracted from net income.
The gross profit percentage is calculated as sales divided by gross profit.
The investor will debit Investment in Bonds when the premium on a held-to-maturity
security is amortized.
The U.S. Congress has charged the Public Company Accounting Oversight Board with
the ultimate responsibility for developing generally accepted accounting principles.
An interim period is a time span that is less than a year and is established for accounting
purposes.
Pension plan assets decrease by cash payments to retirees.
To determine depreciation expense for a plant asset, all of the following must be known
except:
A) estimated useful life.
B) current market value.
C) estimated residual value.
D) historical cost.
E) All of the above must be known to determine depreciation expense for a plant asset.
Under the effective-interest method of amortizing bond premium, the interest expense
recorded for each semiannual interest payment
A) is equal to the market rate of interest times the bond’s carrying value at the
beginning of the period.
B) will increase over the life of the bond.
C) is equal to the carrying value of the bond times the nominal rate of interest for each
semiannual interest payment.
D) will equal the amount of cash paid for each semiannual interest payment.
E) will be the same amount each interest payment date.
The primary goal of the separation of duties is
A) to provide greater training to employees by allowing them to work on different
tasks.
B) to make sure that one person, acting alone, cannot defraud the company.
C) to ensure that no one in management accumulates too much organizational power
and control.
D) to provide clear promotion tracks within one’s discipline.
E) to provide a work environment where no one person is overloaded with work or does
so many things that he or she becomes indispensable to the company.
The difference between gross sales and net sales may include
A) Cash Discounts on Sales.
B) Sales Returns and Allowances.
C) Trade Discounts.
D) both A and B
E) both A and C
Cash Discounts on Sales are
A) a contra account to Accounts Receivable.
B) a contra account to Accounts Payable.
C) a contra account to gross sales.
D) an adjunct account to gross sales.
E) neither an addition nor a deduction to gross sales.
The following selected information is for Porter Handbags at, and for the year ended,
December 31, 2012, and 2011:
Using the indirect method, what is the net cash flow from operations for Porter
Handbags for the year ended December 31, 2012?
A) $30,000
B) $33,000
C) $36,000
D) $43,000
E) $44,000
In a periodic inventory system the quantity of ending inventory is determined by
A) subtracting units sold from units purchased.
B) a physical inventory count.
C) looking at the balance in the inventory account.
D) subtracting cost of goods sold from the beginning inventory balance.
E) adding units sold to the beginning inventory balance.
If ending inventory is understated by $8,000 in 20X3, and assuming a constant 30% tax
rate, then what will be the effect on retained earnings on December 31, 20X4?
A) The 20X4 ending retained earnings will be understated by $2,400.
B) The 20X4 ending retained earnings will be overstated by $2,400.
C) The 20X4 ending retained earnings will be understated by $5,600.
D) The 20X4 ending retained earnings will be overstated by $5,600.
E) The 20X4 ending retained earnings will not be understated or overstated.
Depreciation expense computed under double-declining-balance will decrease each
year because the
A) book value used in the computation each year increases.
B) book value used in the computation each year decreases.
C) rate used in the computation each year increases.
D) rate used in the computation each year decreases.
E) All the above are correct.
Useful Organizing began operations on January 1, 20X3, when the owners invested
$80,000 cash in the company. Also on January 1, the company paid for a $30,000
machine. The machine has a useful life of 4 years and a $2,000 residual value. During
its first year of operations, the company had sales of $96,000 and operating expenses
except depreciation of $67,000. All sales were cash sales and all non-depreciation
operating expenses were paid in cash. Useful Organizing has a 30% tax rate and pays
all taxes on December 31. What is the cash balance after taxes on December 31, 20X3,
if Useful Organizing uses straight-line depreciation?
A) $55,300
B) $72,400
C) $72,550
D) $94,050
E) $94,400
Kitty Clips acquired $2,800 worth of merchandise inventory on account. Upon
inspection, the company discovered that $400 worth of the merchandise inventory was
defective. Kitty Clips returned the defective merchandise inventory and received full
credit. The effect of the return transaction on Kitty Clips would be to
A) decrease the merchandise inventory account by $400 and increase the accounts
payable account by $400.
B) decrease the merchandise inventory account by $400 and decrease the accounts
payable account by $400.
C) decrease the merchandise inventory account by $400 and increase the accounts
receivable account by $400.
D) decrease the merchandise inventory account by $400 and decrease the accounts
receivable account by $400.
E) Because the merchandise inventory was never used, Kitty Clips would not record the
return of the merchandise inventory.
Equipment costing $20,000 with $17,800 of accumulated depreciation is sold for
$2,500 cash. The journal entry will involve a
A) debit to depreciation expense for $17,800.
B) credit to depreciation expense for $17,800.
C) credit to accumulated depreciation for $17,800.
D) debit to accumulated depreciation for $17,800.
E) debit to accumulated depreciation for $2,200.
Montreal Electronics has the following data available:
What is the working capital for Montreal Electronics in 2X13? Has the working capital
improved or not improved since 2X12?
A) $101, not improved
B) $101, improved
C) $ 71, improved
D) $ 71, not improved
E) $150, not improved