Under cash basis accounting, an expense is recorded only when cash is paid.
The operating activities section of the statement of cash flows includes activities that
create revenue or expenses for the entity’s business.
When a company uses a perpetual inventory system, all merchandise transactions are
updated as and when they occur. However, the inventory account may not show the
current balance at all times.
If a business changes the estimated useful life, or estimated residual value, of a plant
asset, depreciation expense must be recalculated.
A deposit ticket is a document that instructs a bank to pay the designated person a
specified amount of money.
Gross pay is the total amount of salary, wages, commissions, and bonuses earned by an
employee during a pay period, after taxes or any other deductions.
Ending inventory is calculated by multiplying the number of units on hand by the unit
cost.
In the case of a deferred expense, the adjusting entry required at the end of a period will
consist of a credit to the Prepaid Expense account. Assume the deferred expense was
initially recorded as an asset.
Banks must return physical copies of the maker’s canceled checks.
A corporation purchased office supplies on account. As a result of this transaction,
expenses and liabilities will increase.
Jupiter Service Company decides to increase the amount of the petty cash fund from
$500 to $600. A journal entry must be made to debit the Cash account and credit the
Petty Cash account for $100.
When a bond is matured, the carrying value always equals the face value.
Which of the following is the least desirable business reason for a company to invest in
debt or equity securities?
A) to generate investment income
B) to invest short-term, excess cash
C) to pursue certain business strategies
D) to weaken the investing company’s supply chain
Ending inventory for the current accounting period is overstated by $2,700. What effect
will this error have on Cost of Goods Sold and Net Income for the current accounting
period?A)
B)
C)
D)
If goods are sold on terms FOB shipping point, the ________.
A) seller normally pays the transportation costs
B) buyer normally pays the transportation costs
C) buyer and the seller split the transportation costs
D) shipping company bears the transportation cost
Which of the following is a characteristic of a limited-liability company (LLC)?
A) An LLC’s life is terminated at any member’s choice or death.
B) Each member of an LLC is liable only for his or her own actions.
C) An LLC must have more than five members.
D) The income of members from an LLC is not taxed.
Which of the following sections of the statement of cash flows includes activities that
affect current assets and current liabilities on the balance sheet? (Assume the indirect
method is used.)
A) the investing activities section
B) the financing activities section
C) the operating activities section
D) the non-cash investing and financing section
Which of the following inventory valuation methods minimizes income tax expense
during a period of rising inventory costs?
A) first-in, first-out
B) last-in, first-out
C) weighted-average
D) specific identification
A check was written by a business for $549 but was recorded erroneously in the Cash
account as $459. How would this error be included on the bank reconciliation?
A) an addition on the book side
B) a deduction on the bank side
C) a deduction on the book side
D) an addition on the bank side
A reversing entry is ________.
A) a journal entry used to close the temporary accounts after preparation of financial
statements
B) a special journal entry used to make the adjustments that took place after preparing
the trial balance
C) a special journal entry that eases the burden of accounting for transactions in the
next period
D) a journal entry prepared at the end of an accounting period to match assets with
liabilities
Mason Painting Services has a weekly payroll of $24,000. December 31 falls on
Wednesday and Mason will pay its employees the following Monday (January 5) for
the previous full week. Assume that Mason has a five-day workweek and has an
unadjusted balance in Salaries Expense of $770,000. What amount should be debited to
Salaries Expense on December 31?
A) $770,000
B) $9,600
C) $24,000
D) $14,400
Going Places Adventure Travel signed a 14%, 10-year note for $152,000. The company
paid an installment of $2,200 for the first month. After the first payment, what is the
principal balance? (Round your answer to the nearest whole number.)
A) $149,800
B) $150,227
C) $151,573
D) $154,200
All assets that will not be converted to cash or used up within the business’s operating
cycle or one year, whichever is greater, are called ________.
A) long-term assets
B) fully depreciated assets
C) current assets
D) current liabilities
Sheehan, Inc. provides the following income statement for 2017:
Calculate the times-interest-earned ratio. (Round your answer to two decimal places.)
A) 73.00 times
B) 45.00 times
C) 39.70 times
D) 46.00 times
Which of the following is the basic internal control measure for cash?
A) keeping money in a bank account
B) checking for counterfeit bills
C) counting cash receipts twice
D) internal audit of cash procedures