After posting the journal entries from the journal to the ledger, the accounting equation
should be in balance.
The last two columns generally found on the right side of the worksheet are the income
statement columns.
Liabilities are economic resources that are expected to benefit the business in the future.
An annual report provides information about a company’s financial condition.
For good controls over cash payments, the person who orders goods from a supplier
should always be different from the person who approves the payment.
The Merchandise Inventory account is an asset account that is used only for goods
purchased that the business owns and intends to resell to customers.
Depletion expense should not be recorded for natural resources because they do not
decrease in value over time.
When a business records an accrued utility liability, the Utilities Expense account is
credited.
Prepaid Rent is an expense account that appears on the income statement.
Cash purchases are recorded in the purchases journal.
The journal entry to record the employer’s payroll tax expense will include a debit to
Employee Income Taxes Payable.
Distribution of dividends represents increases in retained earnings.
The current ratio may indicate that the company is using its assets effectively.
In the case of deferred revenue, the adjusting entry at the end of the period includes a
credit to Service Revenue. Assume the deferred revenue is initially recorded as a
liability.
Held-to-maturity investments applies only to debt securities because ________.
A) these securities earn periodic interest
B) equity securities do not mature on a specific date
C) these are long-term investments
D) equity securities are held for a short period of time
The balances of select accounts of Stephanie, Inc. as of December 31, 2016 are given
below.
What amount of total long-term assets would be shown on the balance sheet?
A) $100,000
B) $130,300
C) $133,000
D) $139,000
Peterson, Inc. issued 4,000 shares of preferred stock for $240,000. The stock has a par
value of $60 per share. The journal entry to record this transaction would ________.
A) credit Cash $240,000, debit Preferred Stock-$60 Par Value $4,000, and debit Paid-In
Capital in Excess of Par-Preferred $236,000
B) debit Cash $240,000, credit Preferred Stock-$60 Par Value $4,000, and credit
Paid-In Capital in Excess of Par-Preferred $236,000
C) credit Cash $240,000 and debit Preferred Stock-$60 Par Value $240,000
D) debit Cash $240,000 and credit Preferred Stock-$60 Par Value $240,000
In regards to benchmarking, which of the following statements is incorrect?
A) Benchmarking is the practice of comparing a company with other leading
companies.
B) The industry average is not a useful benchmark for evaluating a company.
C) Providing common-size percentages in a graphical manner highlights differences.
D) The two main types of benchmarks in financial statement analysis include
benchmarking against the industry average and benchmarking against a key competitor.
On the first day of January, Harris, Inc. borrowed $2,000 on a one-year note payable
bearing interest at 7% per year. The note specifies that principal and interest must be
paid in full at the end of the one-year period. On June 30, the adjusted trial balance will
show Interest Payable of ________.
A) $70 credit
B) $70 debit
C) $140 credit
D) $140 debit
Equity of a corporation is broken out into two components. Which of the following are
the two components of the equity of a corporation?
A) current assets and fixed assets
B) common stock and liabilities
C) revenues and expenses
D) contributed capital and retained earnings
The time span during which cash is paid for goods and services, which are then sold to
customers from whom the business collects cash, is called the ________.
A) production time
B) operating cycle
C) accounting cycle
D) sales time
Which of the following is the amount the borrower must pay back to the bondholders at
maturity?
A) market value
B) present value
C) stated interest value
D) principal amount
Which of the following items must be examined by the controller or treasurer before
signing a check?
A) the ledger
B) the purchase order
C) the confirmation report
D) the journal entry
Which of the following journal entries would be recorded if a business purchased office
supplies on account in a previous accounting period and now makes a cash payment of
$750 to the supplier to settle the account?A)
B)
C)
D)
Which of the following is the correct description of dividends in arrears?
A) the cumulative amount of dividends that were not paid in previous years
B) the cumulative amount of dividends that were paid in previous years
C) the amount of dividends that were paid after the payment date
D) the amount of dividends that will be paid in the next year
The accountant of Delta, Inc. failed to make an adjusting entry to record $6,000 of
unearned service revenue that has now been earned. Assume the deferred revenue was
initially recorded as a liability. Which of the following statements is true?
A) The total revenue will be overstated.
B) The total revenue will be understated.
C) The total expenses will be overstated.
D) The total expenses will be understated.
A business makes a payment in cash for advertising expense. Which of the following
accounts is credited?
A) Notes Payable
B) Accounts Receivable
C) Cash
D) Advertising Expense
Jones Retail. had the following balances and transactions during 2017:
The company maintains its records of inventory on a perpetual basis using the first-in,
first-out inventory costing method. Calculate the amount of ending Merchandise
Inventory on December 31, 2017 using the lower-of-cost-or-market rule.
A) $2,240
B) $1,600
C) $1,850
D) $1,480
Which of the following is an input device in an accounting information system?
A) keyboard
B) internet protocol
C) printer
D) router
Unrealized holding gains or losses on trading investments are reported in the ________.
A) current assets section of the balance sheet
B) other revenues and expenses section of the income statement
C) intangible assets section of the balance sheet
D) accumulated other comprehensive income section of stockholder’s equity
The following information is from the 2017 records of Robin Antique Shop:
Bad debts expense is estimated by the percent-of-sales method. Management estimates
that 5% of net credit sales will be uncollectible. The ending balance of the Allowance
for Bad Debts account after adjustment will be ________.
A) $9,900
B) $9,050
C) $11,250
D) $7,700
Journalize the following transaction for a merchandiser that uses the perpetual
inventory system.
Received returned goods from a customer, $1,000 (cost, $740).
On October 1, 2017, Carlos, Inc. borrowed $225,000 by signing a nine-month, 8% note
payable. Interest was accrued on December 31, 2017. Prepare the journal entry July, 1,
2017, the date the note was paid.
An adjusted trial balance a merchandiser is given below.
Provide journal entries to close the Income Summary account and the Dividends
account.
Data for Dumouchelle, Inc. follow:Dumouchelle, Inc.
Comparative Balance Sheet
December 31, 2017 and 2016
2017 2016
Assets
Current Assets:
Cash $12,000 $10,200
Accounts Receivable, Net 16,100 16,800
Merchandise Inventory 45,000 31,000
Prepaid Expenses 6,500 3,900
Total Current Assets 79,600 61,900
Property, Plant, and Equipment, Net 265,000 233,000
Total Assets $344,600 $294,900
Liabilities
Total Current Liabilities $9,900 $11,200
Long-term Liabilities 60,000 50,000
Total Liabilities 69,900 61,200
Stockholders’ Equity
Preferred Stock, 3%, $50 par 75,000 75,000
Common Stockholders’ Equity, no par 199,700 158,700
Total Liabilities and Stockholders’ Equity $344,600 $294,900Prepare a horizontal
analysis of the comparative balance sheet of Dumouchelle, Inc. (Round to one decimal
place.)
What does the debt to equity ratio show, and how is it calculated?