If the sum of the debit column equals the sum of the credit column in a trial balance, it
indicates
a. no errors have been made.
b. no errors can be discovered.
c. that all accounts reflect correct balances.
d. the mathematical equality of the accounting equation.
Answer:
The balance sheet presentation of an unrealized loss on an available-for-sale security is
similar to the statement presentation of
a. treasury stock.
b. discount on bonds payable.
c. allowance for doubtful accounts.
d. prepaid expenses.
Answer:
If the cost method is used to account for a long-term investment in common stock,
a. it is presumed that the investor has significant influence on the investee.
b. the earning of net income by the investee is considered a proper basis for recognition
of income by the investor.
c. net income of the investee is not considered earned by the investor until dividends are
declared by the investee.
d. the Investment account may be, at times, greater than the acquisition cost.
Answer:
Which of the following rules is incorrect?
a. Credits decrease the dividends account.
b. Debits increase the common stock account.
c. Credits increase revenue accounts.
d. Debits decrease liability accounts.
Answer:
In performing a vertical analysis, the base for cost of goods sold is
a. total selling expenses.
b. net sales.
c. total revenues.
d. total expenses.
Answer:
A truck costing $110,000 was destroyed when its engine caught fire. At the date of the
fire, the accumulated depreciation on the truck was $50,000. An insurance check for
$125,000 was received based on the replacement cost of the truck. The entry to record
the insurance proceeds and the disposition of the truck will include a
a. Gain on Disposal of $15,000.
b. credit to the Truck account of $60,000.
c. credit to the Accumulated Depreciation account for $50,000.
d. Gain on Disposal of $65,000.
Answer:
Netta Shutters has the following inventory information.
A physical count of merchandise inventory on November 30 reveals that there are 90
units on hand. Assume a periodic inventory system is used. Cost of goods sold (rounded
to the nearest dollar) under the average-cost method is
a. $1,740.
b. $1,772.
c. $1,778.
d. $1,794.
Answer:
Writing off an uncollectible account under the allowance method requires a debit to
a. Accounts Receivable.
b. Allowance for Doubtful Accounts.
c. Bad Debt Expense.
d. Uncollectible Accounts Expense.
Answer:
The balance sheet for Tyde Corporation at the end of the current year
indicates the following:
Income before income taxes was $480,000 and income taxes expense for
the current year amounted to $144,000. Cash dividends paid on common
stock were $300,000, and the common stock was selling for $22.88 per
share at the end of the year. There were no ownership changes during the
year.
Instructions
Determine each of the following:
(a) Times that bond interest was earned.
(b) Earnings per share for common stock.
(c) Price-earnings ratio.
Answer:
Proving the postings of a single-column purchases journal would involve comparing the
a. general ledger posting to Accounts Payable to the debit postings of the accounts
receivable subsidiary ledger.
b. general ledger debit posting to Accounts Payable to the general ledger credit posting
to Inventory.
c. general ledger credit posting to Accounts Payable to the general ledger debit posting
to Inventory.
d. debit postings to the accounts receivable subsidiary ledger to the credit postings to
the accounts payable subsidiary ledger.
Answer:
Indicate where the issuance of common stock issued for cash would appear, if at all, on
the indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Answer:
The following ledger accounts are used by the Sebastopol Dog Track:
Accounts Receivable
Prepaid Advertising
Prepaid Rent
Unearned Ticket Revenue
Advertising Expense
Rent Expense
Ticket Revenue
Sales Revenue
Instructions
For each of the following transactions below, prepare the journal entry (if one is
required) to record the initial transaction and then prepare the adjusting entry, if any,
required on September 30, the end of the fiscal year.
(a) On September 1, paid rent on the track facility for three months, $210,000.
(b) On September 1, sold season tickets for admission to the racetrack. The racing
season is year-round with 25 racing days each month. Season ticket sales totaled
$900,000.
(c) On September 1, borrowed $350,000 from First National Bank by issuing a 9% note
payable due in three months.
(d) On September 5, programs for 20 racing days in September, 25 racing days in
October, and 15 racing days in November were printed for $3,600.
(e) The accountant for the concessions company reported that gross receipts for
September were $150,000. Ten percent is due to the track and will be remitted by
October 10.
Answer:
Which one of the following is shown first under current liabilities by many companies
as a matter of custom?
a. Accrued expenses
b. Current maturities of long-term debt
c. Sales taxes payable
d. Notes payable
Answer:
The reference column of a multiple-column cash payments journal after posting
a. will only contain check marks.
b. will be blank.
c. will only contain account numbers.
d. may contain either account numbers or check marks.
Answer:
A company just starting business made the following four inventory purchases in June:
A physical count of merchandise inventory on June 30 reveals that there are 250 units
on hand.
The inventory method which results in the highest gross profit for June is
a. the FIFO method.
b. the LIFO method.
c. the weighted average unit cost method.
d. not determinable.
Answer:
Eckman Company purchased equipment for $120,000 on January 1, 2014, and will use
the double-declining-balance method of depreciation. It is estimated that the equipment
will have a 5-year life and a $6,000 salvage value at the end of its useful life. The
amount of depreciation expense recognized in the year 2016 will be
a. $17,280.
b. $27,360.
c. $28,800.
d. $16,416.
Answer:
An exception to disbursements being made by check is acceptable when cash is paid
a. to an owner.
b. to employees as wages.
c. from petty cash.
d. to employees as loans.
Answer:
Bonds that may be exchanged for common stock at the option of the bondholders are
called
a. options.
b. stock bonds.
c. convertible bonds.
d. callable bonds.
Answer:
The maturity value of a $70,000, 8%, 3-month note receivable is
a. $70,467.
b. $70,560.
c. $71,400.
d. $75,600.
Answer:
In order to increase comparability, in recent years, the FASB and IASB have made
efforts to reduce the differences between U.S.GAAP and IFRS through a process known
as
a. convergence
b. monetary unit assumption
c. the cost principle
d. the fair value principle
Answer:
Preferred stockholders have a priority over common stockholders as to
a. dividends only.
b. assets in the event of liquidation only.
c. voting rights.
d. both dividends and assets in the event of liquidation.
Answer:
Which of the following reasons best explains why a company that experiences seasonal
fluctuations in sales may purchase investments in debt or stock securities?
a. The company may have excess cash.
b. The company may generate a significant portion of its earnings from investment
income.
c. The company may invest for the strategic reason of establishing a presence in a
related industry.
d. The company may invest for speculative reasons to increase the value in pension
funds.
Answer:
In ratio analysis, the ratios are never expressed as a
a. rate.
b. negative figure.
c. percentage.
d. simple proportion.
Answer:
A higher discount rate produces a higher present value.
Answer:
A company’s liquidity is concerned with the relationship between long-term
investments and long-term debt.
Answer:
The current ratio is a measure of all the ratios calculated for the current year.
Answer:
Common Stock Dividends Distributable is shown within the Paid-in Capital subdivision
of the stockholders’ equity section of the balance sheet.
Answer:
A company’s operating cycle and fiscal year are usually the same length of time.
Answer:
Checks from customers who pay their accounts promptly are called outstanding checks.
Answer:
A percentage change can be computed only if the base amount is zero or positive.
Answer:
The income statement is an important financial statement used by individuals who are
interested in the operations of a business enterprise. Explain how the time period
assumption and the revenue recognition and expense recognition principles provide
guidance to accountants in preparing an income statement.
Answer:
Two limitations of systems of internal control are the concept of ______________ and
the ______________.
Answer:
Weller Company purchased a truck for $66,000. The company expected the truck to last
four years or 100,000 miles, with an estimated residual value of $6,000 at the end of
that time. During the second year the truck was driven 27,000 miles. Compute the
depreciation for the second year under each of the methods below and place your
answers in the blanks provided.
Units-of-activity $
Double-declining-balance $
Answer: