An overstatement of ending merchandise inventory in the current period results in an
understatement of net income in the current period.
Cash dividends cause a decrease in both assets and stockholders’ equity of the
corporation.
The lump-sum amount paid for a group of assets is divided among the acquired assets
based on their relative market values. This method is known as the
relative-market-value method.
Days’ sales in inventory measures how quickly a company can collect its receivables.
The non-cash investing and financing activities section of the statement of cash flows
appears as a separate schedule of the statement of cash flows or in the notes to the
financial statements.
Under the perpetual inventory system, two journal entries are used to record the sales of
merchandise. One entry records the Sales Revenue and another entry records the Cost
of Goods Sold.
When using the weighted-average inventory costing method, the dollar amounts for
ending inventory and cost of goods sold are the same for both the perpetual and
periodic inventory costing methods.
If a company fails to make an adjusting entry for accrued revenues, the net income will
be overstated.
When using the periodic inventory system, the process of recording the ending
Merchandise Inventory is completed by making an adjusting entry.
In a bank reconciliation, a NSF check will be shown on the book side of the
reconciliation.
If a plant asset is sold for more than its book value, a loss is recorded.
A retailer purchases goods from a manufacturer and sells them to customers.
Which of the following is the correct formula for calculating depreciation under the
straight-line method?
A) Straight-line depreciation = (Cost + Residual value) / Useful life
B) Straight-line depreciation = (Cost – Residual value) / Useful life
C) Straight-line depreciation = (Cost + Residual value) x Useful life
D) Straight-line depreciation = (Cost – Residual value) x Useful life
A business maintains subsidiary accounts for each of its customers. On May 15, the
business sells services on account: $2,100 to customer J. Simmons; $4,000 to customer
A. Jones; and $1,500 to customer J. Williams. Which journal entry is needed to record
this sales transaction?A)
B)
C)
D)
The current portion of long-term notes payable is ________.
A) the amount of principal that will be paid within five years
B) typically included with the long-term liabilities on the balance sheet
C) recorded as an adjusting entry
D) reclassified as current for reporting purposes on the balance sheet
A business collects cash from a customer for services that were preformed one month
earlier. Which of the following accounts is credited?
A) Cash
B) Accounts Receivable
C) Service Revenue
D) Accounts Payable
The financial statement that reports assets, liabilities, and stockholders’ equity as of the
last day of the period is called the ________.
A) income statement
B) statement of retained earnings
C) balance sheet
D) unadjusted trial balance
Misty, Inc. had 24,000 units of ending inventory that were recorded at the cost of $6.00
per unit using the FIFO method. The current replacement cost is $4.75 per unit. Which
of the following amounts would be reported as Ending Merchandise Inventory on the
balance sheet using the lower-of-cost-or-market rule?
A) $144,000
B) $258,000
C) $168,000
D) $114,000
The following Office Supplies account information is available for Able, Inc.
From the above information, calculate the amount of office supplies purchased.
A) $5,200
B) $5,000
C) $1,800
D) $2,000
Which of the following accounts is debited when employees take paid vacation?
A) Vacation Benefits Expense
B) Vacation Benefits Payable
C) Salaries Expense
D) No entry is needed.
What is the effect of the adjusting entry for Depreciation Expense?
A) It increases total liabilities and increases total expenses.
B) It increases total assets and increases total expenses.
C) It decreases total assets and increases total expenses.
D) It decreases total liabilities and increases total expenses.
Which of the following statements is true of a trial balance?
A) A trial balance is the first step in the accounting cycle.
B) A trial balance is also known as a balance sheet.
C) A trial balance is a list of all accounts with their balances.
D) A trial balance is also known as the chart of accounts.
Which of the following statements is true of a good merchandise inventory control
system?
A) It eliminates the need for authorization of merchandise purchases.
B) It ensures that a physical count of inventory is not required.
C) It often prevents the company from a stockout.
D) It eliminates the need to examine inventory purchases for damage.
Adams Bakery uses the modified half month convention to calculate depreciation
expense in the year an asset is purchased or sold. Adams has a calendar year accounting
period and uses the straight-line method to compute depreciation expense. On March
17, 2016, Adams acquired equipment at a cost of $200,000. The equipment has a
residual value of $40,000 and an estimated useful life of 6 years. What amount of
depreciation expense will be recorded for the year ending December 31, 2016? (Round
your answer to the nearest dollar.)
A) $26,667
B) $22,222
C) $20,000
D) $13,333
Which of the following is the correct formula to calculate average merchandise
inventory?
A) Average merchandise inventory = (Beginning merchandise inventory – Ending
merchandise inventory) / 2
B) Average merchandise inventory = (Beginning merchandise inventory x Ending
merchandise inventory) / 2
C) Average merchandise inventory = (Beginning merchandise inventory / Ending
merchandise inventory) / 2
D) Average merchandise inventory = (Beginning merchandise inventory + Ending
merchandise inventory) / 2
MultiMet Corporation sold merchandise for $4,450 to Simpsons, Inc. on account. The
cost of goods sold was $1,185. MultiMet uses a perpetual inventory system and special
journals. The $4,450 is recorded as ________.
A) an entry in the general journal
B) Accounts Receivable DR, Sales Revenue CR column of the sales journal
C) Merchandise Inventory DR column of the purchases journal
D) Accounts Receivable CR column of cash receipts journal
A ________ ownership in the investee’s voting stock can significantly influence the
investee’s decisions.
A) 10 percent
B) 5 percent to 10 percent
C) 15 percent to 20 percent
D) 20 percent to 50 percent
Which of the following statements about franchises is correct?
A) Franchises are privileges granted by a government to use public property in
performing services.
B) The acquisition cost of a franchise is always amortized over its legal life.
C) Franchises are privileges granted by a business to sell goods or services under
qualified conditions.
D) The acquisition cost of a franchise cannot be amortized because its useful life cannot
be determined.
A business purchases $3,500 of office supplies for cash. Which of the following sets of
ledger accounts reflects the posting of this transaction?
A)
B)
C)
D)
The only part that differs in a statement of cash flows prepared by the direct method
from one prepared by the indirect method is the ________.
A) financing activities section
B) investing activities section
C) operating activities section
D) non-cash investing and financing activities section
Common Stock is a separate account in the ________ category of the accounting
equation.
A) equity
B) asset
C) liability
D) revenue
A business paid salaries of $6,000 in cash. Record the transaction in the journal.
Cambridge Sales, Inc. has gross salaries and wages for March of $45,000. Provide the
journal entry to record salaries and wages expense and payroll withholdings. (Assume a
FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.) Salaries and wages to
date are under the OASDI limit. Assume no federal or state income taxes are due.
On January 1, 2016, Belden, Inc. issued long-term notes payable for $50,000. The note
will be paid over 10 years with payments of $5,000 plus 12% interest due each January
1, beginning January 1, 2017. Prepare the amortization schedule for the first three
payments.
On January 1, 2017, Gaskin Cabinetry Company purchases $300,000 of equipment by
paying $50,000 in cash and signing a 10-year mortgage note at 13% for the balance.
Gaskin will make yearly payments of $46,072. The amortization schedule for the first
five payments is provided.
Prepare the journal entry for the purchase of the equipment and for the January 1, 2018
mortgage payment.
For each transaction, identify which account is debited and which account is credited.
Use proper account titles.
For trading investments, provide the following:
– Reporting method used
– How unrealized holding gain or loss is reported
– Balance sheet effects
– Income statement effects
Main Street Restaurant incurred salaries expense of $60,000 for 2016. The payroll
expense includes employer FICA tax, in addition to state unemployment tax and federal
unemployment tax. Of the total salaries, $17,000 is subject to unemployment tax. Also,
the company provides the following benefits for employees: health insurance (cost to
the company, $2,500), life insurance (cost to the company, $700), and retirement
benefits (cost to the company, 10% of salaries expense). Journalize Main Street’s
expenses for employee benefits and for payroll taxes. Explanations are not required.
Magnolia Tree Service has a weekly payroll of $50,000. December 31, 2016 falls on
Thursday and Magnolia will pay its employees the following Monday (January 4, 2017)
for the previous full week. Assume that Anthony has a five-day workweek and has an
unadjusted balance in Salaries Expense of $845,000. Prepare the December 31, 2016
adjusting entry.