Markus Company maintains a separate accounts receivable account for each customer.
On June 18, Markus sells $6,400 services on account to customer Anthony and $1,000
services on account to customer Walker. How will these two transactions affect the
control and subsidiary accounts?
A) The control account, Accounts Receivable, will be increased with a debit of $7,400.
B) The individual customer accounts in the subsidiary ledger will be increased with
credits.
C) After posting this sales transaction, the sum of the balances in subsidiary accounts
receivable will not equal the control account balance.
D) The control account will have a debit balance and the subsidiary accounts will have
a credit balance. This keeps the accounting equation in balance.
A business makes a cash payment of $12,000 to a supplier for supplies purchased two
weeks earlier. Which of the following accounts is debited?
A) Cash
B) Accounts Payable
C) Supplies
D) Accounts Receivable
Which of the following is considered an operating activity on the statement of cash
flows prepared using the direct method?
A) dividends paid to stockholders
B) sale of merchandise inventory for cash
C) payment to purchase equipment
D) the receipt of cash from sale of equipment
Lorna Smith decided to start her own CPA practice as a professional corporation, Smith
CPA PC. Her corporation purchased an office building for $35,000 that her real estate
agent said was worth $50,000 in the current market. The corporation recorded the
building as a $50,000 asset because Lorna believes that is the real value of the building.
Which of the following concepts or principles of accounting is being violated?
A) cost principle
B) economic entity assumption
C) monetary unit assumption
D) going concern assumption
Rosewood, Inc. recently signed a $350,000, six-month note on August 22, 2017. The
interest rate is 7%. How much interest will be due at maturity?
A) $10,208
B) $24,500
C) $12,250
D) $8,167
Investors and creditors can evaluate a company by examining only one year’s data.
The purchase of treasury stock ________.
A) decreases assets and stockholders’ equity
B) increases assets and stockholders’ equity
C) increases assets and decreases stockholders’ equity
D) decreases assets and increases stockholders’ equity
Which of the following is the correct accounting treatment for a patent?
A) A patent must be shown as a current asset on the balance sheet.
B) A patent must be depreciated or impaired, but not amortized.
C) A patent must be capitalized and amortized over 20 years or less.
D) A patent must be expensed, not capitalized, in the period in which it is purchased.
A journal entry for a $50 payment for rent expense was posted as a debit to Salaries
Expense and a credit to Cash. Which of the following statements correctly states the
effect of the error on the trial balance?
A) The sum of the credits will equal the sum of the debits.
B) The sum of the debits will exceed the sum of the credits by $50.
C) The sum of the debits will exceed the sum of the credits by $100.
D) The sum of the credits will exceed the sum of the debits by $100.
Which of the following is true of a network?
A) It connects a computer’s hardware to the software.
B) It does not link computers.
C) It is the same as software.
D) It allows different computers to share the same information.
Which of the following is true of trading investments?
A) They are held for more than two years.
B) They are generally recorded as long-term investments.
C) They must be adjusted and reported at fair value at the end of each accounting
period.
D) They are always reported on the balance sheet at their historical cost.
Wallace Repair Corporation incurred $1,500 as a labor expense and promised to pay the
labor agency within 30 days. Which of the following will decrease as a result of this
transaction?
A) Assets
B) Stockholders’ equity
C) Liabilities
D) Revenues
On July 7, Smithview Bank lent $430,000 to Andrews Retail Shop on a 90 day, 6%
note. What is the maturity date of the note?
A) October 7
B) October 5
C) October 6
D) October 8
As per the ________, the entity will remain in operation for the foreseeable future.
A) economic entity concept
B) monetary unit assumption
C) going concern assumption
D) cost principle
Which of the following represents a privilege granted by a government to use public
property in performing services?
A) goodwill
B) license
C) franchise
D) trademark
If there is an unrealized holding gain on available-for-sale investments, it is reported
________.
A) as an adjustment to stockholders’ equity on the balance sheet
B) as a debit to the long-term assets
C) as a separate line item on the income statement
D) as a credit to the short-term assets
Which of the following is the most liquid asset?
A) Building
B) Prepaid Expenses
C) Accounts Receivable
D) Cash
Gene’s gross pay for the week is $1,400. His yearly pay is under the limit for OASDI.
Assume that the rate for state and federal unemployment compensation taxes is 6% and
that Gene’s year-to-date pay has previously exceeded the $7,000 cap. His yearly pay is
under the limit for OASDI. What is the total amount of payroll taxes that Gene’s
employer must record as payroll tax expenses? (Do not round your intermediate
calculations. Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)
A) $86.80
B) $58.80
C) $20.30
D) $107.10