The date the board of directors declares a dividend is known as the record date.
Investors purchase capital stock expecting to receive dividends and an increase in the
value of the stock.
An income statement without any intermediate subtotals is referred to as a multiple-step
income statement.
The board of directors’ duty is to manage a company.
T-accounts focus on account balances while journal entries focus on transactions.
The cornerstone of financial statement analysis is the use of ratios.
Net income must be greater than zero in order to pay dividends.
Compared with a pure cost method, the lower-of-cost-or-market method reports less net
income in the period of decline in the market value of the inventory and more net
income in the period of sale.
For the week ended May 16, Cheap Printing Company had a total payroll of $183,000.
Three items are withheld from employee’s paychecks: (1) Social Security (FICA) tax of
7.1% of payroll; (2) income taxes, which average 20% of the payroll; and (3)
employees’ savings that are deposited in their credit union, which are $12,020. In
addition, Cheap Printing Company pays (1) Social Security tax equal to the amount
withheld from employees, (2) health insurance premiums of $12,750, and (3)
contributions to the employees’ pension fund of $17,000.
Prepare the journal entries to record the compensation expense and the employee
benefit expense.
If a company using a periodic inventory system has beginning inventory of 15 units,
purchases an additional 40 units, has ending inventory of 10 units, and sells 45 units,
what is the company’s number of units available for sale?
A) 55 units
B) 45 units
C) 65 units
D) 60 units
E) 15 units
Using the account format to prepare a balance sheet is
A) as acceptable as using a report format.
B) an unacceptable method under GAAP rules.
C) permitted as long as the company has $1 million or less in total assets.
D) permitted as long as the company has $1 million or less in total revenues.
E) used primarily by companies following IFRS.
Which of the following errors would a trial balance help the accounting staff to find?
A) A sale for $8,300 occurred, and instead of debiting Cash for $8,300, Accounts
Receivable was debited for $8,300.
B) A sale for $8,300 occurred, and instead of debiting Cash for $8,300, Accounts
Payable was debited for $8,300.
C) A sale for $8,300 occurred, and instead of debiting Cash and crediting Sales for
$8,300, Cash was credited and Sales was debited for $8,300.
D) A sale for $8,300 occurred, and instead of debiting Cash and crediting Sales for
$8,300, Cash was debited for $700, and Sales was credited for $8,300.
E) A sale for $8,300 occurred and instead of debiting Cash for $8,300 and crediting
Sales for $8,300, Cash was debited for $7,000 and Sales was credited for $7,000.
Those shares which have been issued and that are still in the hands of shareholders are
known as
A) authorized shares.
B) issued shares.
C) treasury shares.
D) outstanding shares.
E) convertible shares.
________ requires accountants to present information clearly and concisely.
A) Verifiability
B) Validity
C) Understandability
D) Relevance
E) Reliability
Cref, Inc., estimated at January 1, 20X3, that its income before taxes for the year ended
December 31, 20X3, would be $600,000. Cref, Inc.’s tax rate for the year is 40%. The
company made quarterly tax payments on April, June, September, and December 15.
The actual income before taxes for the year ended December 31, 20X3, for Cref, Inc.,
was $620,000. What was the balance in the income tax payable account at December
31, 20X3 after payment of yearly taxes?
A) $0
B) $8,000
C) $15,000
D) $10,000
E) $20,000
When inventory prices are rising, all of the following are reasons for choosing the LIFO
method versus the FIFO method except:
A) LIFO generally results in lower income taxes paid.
B) LIFO uses more current costs in calculating cost of goods sold.
C) LIFO permits management to influence income by the timing of inventory
purchases.
D) LIFO reports the most up-to-date inventory values on the balance sheet.
E) None of the above is correct.
Sales tax
A) is a tax on sales and is an expense to the company who collects it.
B) is collected from the customer and remitted to the state or local government.
C) is paid daily to the state or local government and, thus, never appears as a payable.
D) is classified as a long-term payable on the balance sheet.
E) is not collected from customers.
Two of the largest developers of ERP systems are ________ and ________.
A) Microsoft and Oracle
B) Microsoft and Apple
C) Windows and SAP
D) QuickBooks and NetSuite
E) SAP and Oracle
Application Technologies has acquired equipment costing $15,000. The company paid
$5,000 and gave a 10-month note for the balance. The bookkeeper should
A) debit Equipment for $15,000, credit Cash for $5,000, and credit Notes Receivable
for $10,000.
B) debit Cash for $5,000, debit Notes Receivable for $10,000, and credit Equipment for
$15,000.
C) debit Equipment for $15,000, credit Cash for $5,000, and credit Notes Payable for
$10,000.
D) debit Cash for $5,000, debit Notes Payable for $10,000, and credit Equipment for
$15,000.
E) debit Equipment for $15,000, debit Cash for $5,000, credit Notes Payable for
$10,000, and credit Paid-in Capital for $5,000.
Wilham Roofing acquired merchandise inventory for $12,000, paying one-fourth in
cash and the remainder on open account. Which of the following is the journal entry
necessary to record this transaction?
On January 1, 2X13, Soothing Massage Company acquired, as a long-term investment,
20 bonds with a face value of $1,000 each. The bonds have a 10-year life, a 10%
coupon rate, and pay interest semi-annually every June 30 and December 31. What is
the journal entry to be made by Soothing Massage Company on January 1, 2X13, if the
bonds were purchased at a price to yield 12%?
Fruit King Company purchased 100% of the outstanding common shares of Berries,
Inc., for $23,750 on January 1, 2X13. Berries Inc.’s balance sheet just before the
acquisition was as follows:
The fair market value of Berries Inc.’s assets and liabilities were equal to their book
value. On January 1, 2X13, compute the amount of goodwill (if any) Fruit King
Company would recognize on this purchase. Where would this goodwill appear on Fruit
King Company’s financial statements?
Given the following year-end balances, prepare a classified balance sheet for Briggs
Manufacturing dated December 31, 2012. (Hint: Compute net income first.)
On April 30, Hilte Corporation performed services valued at $3,325. The company did
not bill for the services until May 1. What adjusting entry would Hilte Corporation
make on April 30?
On October 1, Hurt Enterprises paid 4 months’ insurance in advance for $3,600. At the
time of the payment, prepaid insurance was increased by $3,600. What adjusting entry
is necessary as of December 31?
E) No adjusting entry is necessary
Floatlin Company has the following income statements available:
Determine the increase or decrease in dollars and percentage for each line in the income
statement.
Soxlette Company has 700,000 shares authorized and 250,000 shares issued and
outstanding of its $4 par value common stock. The stock is currently selling for $60 per
share. If Soxlette Company declared and issued a 30% stock dividend, what journal
entry would the company make?