Corporations may not retire preferred stock in order to avoid paying the preferred
dividends.
The asset turnover ratio is calculated by dividing cost of goods sold by average total
assets.
The revenue recognition principle is the basis for recording revenues-both when to
record revenue and the amount of revenue to record.
All asset accounts and equity accounts increase with a debit.
When using the LIFO inventory costing method, ending merchandise inventory will be
the lowest, as compared to FIFO and weighted-average inventory costing methods,
when costs are increasing.
Cash is a highly liquid asset, but cash equivalents are not highly liquid assets.
The purchase discount amount is calculated on the amount of the invoice minus the
returns and allowances.
The sales journal is used for all sales of merchandise inventory.
The future value is the bond’s market price.
Generally Accepted Accounting Principles (GAAP) require every organization to
prepare reversing entries.
FICA tax is paid by the employee only and is deducted from gross earnings.
Preferred Stock is included in the long-term asset section of the balance sheet.
Short-term notes payable represent a written promise by the business to pay a debt,
without the addition of interest, within one year or less.
Regarding controls over cash receipts by mail, the accounting department should
compare the bank deposit slip to the remittance advices.
Which of the following describes the environment in internal control?
A) Internal auditors monitor company controls to safeguard assets, and external
auditors monitor the controls to ensure that the accounting records are accurate.
B) The environment is the “tone at the top” of the business.
C) The environment is designed to ensure that the business earns profit.
D) A company must identify its risks.
FOB destination refers to a situation where title to goods while in transit belongs to the
________.
A) buyer
B) seller
C) transport agency
D) insurance agency
Which of the following is true of an effective accounting information system?
A) It has little influence in improving a company’s internal control activities.
B) The cost of using an accounting information system is the same for both small and
large businesses.
C) A compatible accounting information system works smoothly with the business’s
employees and organizational structure.
D) Large private companies prefer a manual accounting information system since their
financial statements are not audited.
The equity of Autumn Company is $160,000 and the total liabilities are $50,000. The
total assets are ________.
A) $320,000
B) $100,000
C) $110,000
D) $210,000
Gross profit is calculated as the difference between net sales revenue and ________.
A) purchases
B) cost of goods sold
C) cost of merchandise inventory
D) selling and administrative expenses
Which of the following accounts will be credited by the borrower when a promissory
note is issued?
A) Note Payable
B) Note Receivable
C) Interest Payable
D) Cash
A debt security ________.
A) represents a credit relationship with another company or governmental entity, and
typically pays interest for a fixed period
B) represents stock ownership in another company and sometimes pays dividends
C) is a standardized contract between two parties to buy or sell an underlying security at
a predetermined price on a specific date
D) is a cash market transaction in which the ownership of the underlying asset is
deferred until a specific date
The field of accounting that focuses on providing information for external decision
makers is ________.
A) managerial accounting
B) financial accounting
C) cost accounting
D) nonmonetary accounting
Transactions are first record in a ________.
A) chart of accounts
B) trial balance
C) journal
D) ledger
________ represents a debt owed for renting a building currently.
A) Prepaid Rent
B) Rent Payable
C) Rent Revenue
D) Rent Expense
A $49,000, three-month, 12% note payable was issued on December 1, 2017. What is
the amount of accrued interest on December 31, 2017?
A) $490
B) $708
C) $354
D) $823
Calculate the interest on a 270-day, 11% note for $36,000. (Use a 360-day year to
compute interest. Round your answer to the nearest dollar.)
A) $5,940
B) $2,970
C) $3,960
D) $330
The following is the adjusted trial balance as of December 31, 2016 of Aims
Photography:
Provide the closing entry for expenses.
At the end of a month, a business shows the following balances in its ledger.
Use this data to prepare a trial balance.
List the order in which the balance sheet, statement of retained earnings, and income
statement are prepared. Briefly discuss why this order is necessary.
Marisol Company has just completed operations for the year ended December 31, 2016.
This is the second year of operations for the company. The following data have been
assembled for the business.
Prepare the statement of retained earnings. Use a proper heading.
Universal, Inc. purchased 500 units of inventory at $25 per unit by payment of cash.
Provide the journal entry to record the purchase of inventory. (Assume a perpetual
inventory system.)
Describe the transactions recorded in the purchases journal.
Which accounts are closed at the end of the accounting period? Why is it necessary to
close these accounts?
On November 1, 2017, Kelemen Jewelers accepted a 3-month, 15% note for $6,000 in
settlement of an overdue account receivable. The accounting period ends in December.
Give the journal entry to record the accrued interest at the year end.
