Generally accepted accounting principles (GAAP) require that research and
development costs to develop a new product be
a. capitalized in the patents account.
b. expensed in the period incurred.
c. capitalized in the research and development costs account.
d. amortized over the expected economic life of the new product.
Refer to Gainesville Truck Center. Which of the following statements is true regarding
the entry to record wages and the related liabilities?
Gainesville Truck Center This company has a weekly payroll of $10,000 for its
employees who work Monday through Friday. Federal and state income taxes are
withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld
at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In
addition, the federal and state unemployment taxes are applied at rates of 2% and 5%,
respectively. The company’s year-end is December 31. a. Social security tax payable
will be debited in the amount of $765.
b. Social security tax payable will be credited in the amount of $620.
c. Medicare tax payable will be debited in the amount of $145.
d. Federal income taxes payable will be credited in the amount of $2,100.
On January 1, 2011, P Company purchased all of the outstanding common stock of S
Company. Which of the following represents the worksheet entry needed to consolidate
the balance sheets of the two companies?
a. Investment in S XXX Common stock XXX Retained earnings XXX
b. Investment in S XXX Retained earnings XXX
c. Common stock XXX Retained earnings XXX Investment in S XXX
d. Retained earnings XXX Investment in S XXX
During the bank reconciliation process, an accountant identified an error. A check
written for $20 to pay a supplier for goods purchased on credit was erroneously
recorded in the company’s records for $200. Which of the following entries would
correct this error?
a. Cash 180 Accounts Payable 180
b. Cash 180 Accounts Receivable 180
c. Account Receivable 180 Accounts Payable 180
d. None of these, as the error should be corrected by the supplier’s personnel
Having one employee prepare company checks and sign those checks relates to which
internal control activity?
a. a violation of proper segregation of duties
b. a violation of adequate documents and records
c. a good example of checks on recorded amounts
d. a good example of clearly defined authority and responsibility
Which of the following terms best describes a distribution of the net income of a
corporation to its owners?
a. retained earnings
b. dividends
c. liquidation of assets
d. monetary unit
Refer to Memorial Corporation. Assume that there were no retained earnings
transactions other than those dealing with dividends and net income. Dividends
declared during 2014 totaled
Memorial Corporation
Information from the financial records is presented below:
a. $150,000.
b. $350,000.
c. $ 30,000.
d. $ 50,000.
Reduce the amount that is owed to the seller for payment within the discount period.
Match the terms with the descriptions provided.
a. Consignment f. Purchase allowance
b. Discount period g. Purchase discounts
c. Inventory h. Purchase returns
d. LIFO Reserve i. Purchases
e. Lower of cost or market rule
Failure to record the supplies used during the year would result in which of the
following?
a. Net income being understated.
b. An overstatement of liabilities.
c. Assets and Stockholders’ equity being overstated.
d. Total assets being understated.
The relationship between net sales and total assets. Select the ratio that each definition
most properly satisfies.
a. Dividend yield ratio
b. Operating cash flow ratio
c. Debt-to-total assets ratio
d. Return on common equity ratio
e. Times interest earned ratio
f. Asset turnover ratio
g. Debt-to-equity ratio
h. Dividend payout ratio
Policies and procedures established by top management to help ensure that the
company’s accounting system and financial statements are as accurate as possible
Match the following terms with their correct definitions.
a. Accounting system e. Internal control system
b. Business process risks f. Safeguarding
c. Control activities g. Segregation of duties
d. Control environment h. Strategic risks
On January 1, 2011, P Company purchased all of the outstanding common stock of S
Company. Which of the following represents the worksheet entry needed to consolidate
the balance sheets of the two companies?
a. Investment in S XXX Common stock XXX Retained earnings XXX
b. Investment in S XXX Retained earnings XXX
c. Common stock XXX Retained earnings XXX Investment in S XXX
d. Retained earnings XXX Investment in S XXX
The ____________________ date is the date on which a corporation announces that it
will pay a dividend.
Document that authorizes the creation of the corporation, setting forth its name and
purpose and the names of the incorporators.
____________________ is the liability created when customers pay for goods or
services in advance.
A check written by a company but not yet presented to the bank for payment is called
a(n) ____________________.
Issuing stock increases the company’s cash flows from investing activities.
The corporate _________________ is the legal document that authorizes the creation of
a corporation.
When a corporation is in the process of being dissolved, any additional dividends are
referred to as ____________________ dividends.
The equity method of accounting is used if the investor owns between 20-50% of
another company and the investor is able to exert influence over the other company.
____________________ is the amortization method of transferring the same amount
from the bond discount or premium each time period to adjust interest expense.