The use of MACRS is acceptable for financial reporting under GAAP.
The Common Stock account is increased by a debit.
A company is uncertain whether a complex transaction should result in an asset being
recorded at $100,000 or at $150,000. Under the conservatism principle, it should
choose to show it at $100,000.
Usually a company does not know the amount of the year-end bonus at year-end.
The credit department must have access to cash in order to exercise effective internal
control over receivables.
If inventory turnover is too slow, a company may be unable to sell goods or it may be
understating merchandise inventory.
As a part of the internal control over cash receipts by mail, the mailroom sends both the
customer checks and the remittance advices to the accounting department.
The matching principle requires businesses to record Warranty Expense when the
warranty costs are incurred.
Wellesley, Inc. uses the indirect method to prepare the statement of cash flows. Refer to
the following section of the comparative balance sheet:Wellesley, Inc.
Comparative Balance Sheet
December 31, 2017 and 2016
The change in Merchandise Inventory is shown as a negative cash flow in the
adjustments to net income.
Under the terms FOB destination, title to the merchandise will pass to the purchaser
when the goods are received by the purchaser.
When a business records the earning of service revenue, the Service Revenue account is
credited.
Consolidation accounting is the way to combine the financial statements of two or more
companies that have the same owners.
Fred, Inc. owns a delivery truck. Which of the following costs, associated with the
truck, will be capitalized and depreciated?
A) modification for new use
B) change of oil filters
C) replacement of tires
D) normal engine repair
A merchandiser purchased inventory on account for $10,000. Under the periodic
inventory system, the journal entry to record the purchase would include ________.
A) a debit to Purchases for $10,000 and a credit to Accounts Payable for $10,000
B) a debit to Accounts Payable for $10,000 and a credit to Purchases for $10,000
C) a debit to Merchandise Inventory for $10,000 and a credit to Accounts Payable for
$10,000
D) a debit to Accounts Payable for $10,000 and a credit to Merchandise Inventory for
$10,000
Under the perpetual inventory system, when a wholesaler returns the goods purchased
on account, the ________ account is credited.
A) Accounts Receivable
B) Merchandise Inventory
C) Cost of Goods Sold
D) Accounts Payable
The Accounts Payable account of Golden, Inc. has the following postings:
Calculate the ending balance of the account.
A) $12,000 credit
B) $18,000 debit
C) $18,000 credit
D) $5,000 debit
An invoice of $600 for merchandise purchased is showing 3/15, n/30 as terms of credit.
If the invoice is paid on or before the fifteenth day, the amount to be paid is ________.
A) $582
B) $600
C) $618
D) $621
When there is an unrealized loss on trading investments, the ________ will decrease.
A) total equity
B) cash
C) total liabilities
D) long-term investments
A business has the following transactions:- The business receives $25,000 cash and
issues common stock to stockholders.
– The business purchases $800 of office supplies on account.
– The business purchases $4,000 of furniture on account.
– The business renders services to various clients totaling $17,000 on account.
– The business pays $2,000 for salaries expense and $5,000 for rent expense.
– The business pays $800 to a supplier for the office supplies purchased earlier.
– The business collects $3,000 from one of its clients for services rendered earlier in the
month.At the end of the month, all journal entries are posted to the ledger. Accounts
Receivable will appear as which of the following?
A)
B)
C)
D)
Sean’s gross pay for this month is $9,150. His gross year-to-date pay, prior to this
month, totaled $112,500. Sean’s rate for federal income tax is 28%. His voluntary
deductions total $1,050. What is Sean’s net pay? (Assume an OASDI rate of 6.2%,
applicable on the first $117,000 earnings, and a Medicare rate of 1.45%, applicable on
all earnings.)
A) $6,176.32
B) $5,538.00
C) $6,588.00
D) $5,126.32
When using the allowance method, after a company has previously written off an
account, ________.
A) the company continues to send monthly statements to the customers whose accounts
have been written off
B) the company cannot collect from these customers because their accounts have been
written off
C) when a customer pays on an account that has been written off, the company needs to
reverse the write-off to the Allowance for Bad Debts account and then record the receipt
of cash
D) the company does not need to re-establish the receivable account
The balance of stockholders’ equity at the beginning of the year and the end of the year
was $50,000 and $60,000, respectively. The company issued no common stock during
the year. Dividends were $20,000. What was the net income or loss for the year?
A) Net income of $80,000
B) Net loss of $80,000
C) Net loss of $30,000
D) Net income of $30,000
On November 1, 2017, Rodgers Enterprises sold merchandise with a cost of $5,000 for
$10,000, FOB destination, with payment terms of 2/10, n/40. The company paid
transportation costs of $100. Customer returns on this sale were $3,000 (with a cost of
$1,500). The merchandise was returned on November 6. The company received the
payment for the balance amount on November 10, 2017. Calculate the net sales
revenue.
A) $6,860
B) $7,000
C) $3,500
D) $7,100
List the steps of the accounting cycle that take place during the period.
Melody Instruments, Inc. sells musical instruments. On December 31, 2017, after its
first month of business, Melody Instruments, Inc. had the following balances in its
accounts, listed alphabetically.
Determine the balance in the cash account and prepare the trial balance.
For each transaction, identify which account is debited and which account is credited.
Use proper account titles.
Starfire Telescopes Company uses the indirect method to prepare the statement of cash
flows. Refer to the following income statement:Starfire Telescopes Company
Income Statement
Year Ended December 31, 2017Sales Revenue $275,000
Interest Revenue 2,600
Total Revenues $277,600
Cost of Goods Sold 135,000
Salary Expense 66,500
Depreciation Expense 32,000
Other Operating Expenses 35,900
Interest Expense 2,400
Income Tax Expense 6,500
Loss on Sale of Plant Assets 2,000
Total Expenses 280,300
Net Loss ($2,700)Additional information provided by the company includes the
following:
Current assets other than cash decreased by $25,000.
Current liabilities increased by $3,000.
Prepare the operating activities section of the statement of cash flows.
On January 1, Springfield Corp. accepted a one-year note for $5,000 at 4% from one of
its customers. When the note matured on December 31, the customer was unable to pay,
and the company treated it as a dishonored note. Prepare the journal entry that
Springfield will make to record the dishonored note.
The income statement and a partial balance sheet of Hart Alloy Company for the year
ended December 31, 2017 is presented below. Prepare the operating activities section of
the statement of cash flows using the direct method. Accrued Liabilities relate to
miscellaneous operating expenses.Hart Alloy Company
Income Statement
For the Year Ended December 31, 2017Sales Revenues $1,500,000
Cost of Goods Sold 1,170,000
Gross Profit $330,000
Operating Expenses:
Salaries Expense $210,000
Depreciation Expense 60,000
Miscellaneous Expenses 30,000 300,000
Net Income $30,000Hart Alloy Company
Partial Balance Sheet
2017 2016
Cash $240,000 $195,000
Accounts Receivable (net) 150,000 150,000
Inventories 306,000 258,000
Accrued Liabilities 13,500 15,000
Accounts Payable Merchandise Inventory) 174,000 153,000
Salaries Payable 22,500 18,000
