The general ledger of Link Company provides the following information:
The company’s net sales for the year was $2,200,000 and cost of goods sold amounted
to $1,500,000.
Instructions
Compute the following:
(a) Cash receipts from customers.
(b) Cash payments to suppliers.
Answer:
Orr Corporation sold equipment for $30,000. The equipment had an original cost of
$90,000 and accumulated depreciation of $45,000. As a result of the sale,
a. net income will increase $30,000.
b. net income will increase $15,000.
c. net income will decrease $15,000.
d. net income will decrease $30,000.
Answer:
Stockholders of a corporation directly elect
a. the president of the corporation.
b. the board of directors.
c. the treasurer of the corporation.
d. all of the employees of the corporation.
Answer:
Under which of the following cases may a percentage change be computed?
a. The trend of the balances is decreasing but all balances are positive.
b. There is no balance in the base year.
c. There is a positive balance in the base year and a negative balance in the subsequent
year.
d. There is a negative balance in the base year and a positive balance in the subsequent
year.
Answer:
Effie Company uses a periodic inventory system. Details for the inventory account for
the month of January, 2015 are as follows:
An end of the month (1/31/15) inventory showed that 160 units were on hand. If the
company uses FIFO, what is the value of the ending inventory?
a. $800
b. $832
c. $848
d. $868
Answer:
Barker Company’s records show the following for the month of January:
Expenses for January were
a. $960,000.
b. $1,005,000.
c. $705,000.
d. $660,000.
Answer:
Inventoriable costs include all of the following except the
a. freight costs incurred when buying inventory.
b. costs of the purchasing and warehousing departments.
c. cost of the beginning inventory.
d. cost of goods purchased.
Answer:
The statement of cash flows is the only required financial statement that is not prepared
from an adjusted trial balance. (a) What are the sources of information for preparing a
statement of cash flows? (b) Explain how the accrual basis of accounting affects the
statement of cash flows.
Answer:
Which of the following statements is not true?
a. Comparability means using the same accounting principles from year to year within a
company.
b. Faithful representation is the quality of information that gives assurance that it is free
from error.
c. Relevant accounting information must be capable of making a difference in the
decision.
d. The primary objective of financial reporting is to provide financial information that is
useful to investors and creditors for making decision.
Answer:
In Alona Company, net income is $285,000. If accounts receivable increased $140,000
and accounts payable decreased $40,000, net cash provided by operating activities
using the indirect method is:
a. $105,000.
b. $185,000.
c. $385,000.
d. $465,000.
Answer:
At October 1, Arcade Fire Enterprises reported stockholders’ equity of $70,000. During
October, no stock was issued and the company earned net income of $18,000. If
stockholders’ equity at October 31 totals $78,000, what amount of dividends were paid
during the month?
a. $0
b. $8,000
c. $10,000
d. $26,000
Answer:
A company purchases a remote site building for computer operations. The building will
be suitable for operations after some expenditures. The wiring must be replaced to
computer specifications. The roof is leaky and must be replaced. All rooms must be
repainted and recarpeted and there will also be some plumbing work done. Which of the
following statements is true?
a. The cost of the building will not include the repainting and recarpeting costs.
b. The cost of the building will include the cost of replacing the roof.
c. The cost of the building is the purchase price of the building, while the additional
expenditures are all capitalized as Building Improvements.
d. The wiring is part of the computer costs, not the building cost.
Answer:
The concept of an ‘artificial being’ refers to which form of business organization?
a. Partnership
b. Sole proprietorship
c. Corporation
d. Limited partnership
Answer:
Long-term creditors are usually most interested in evaluating
a. liquidity and solvency.
b. solvency and marketability.
c. liquidity and profitability.
d. profitability and solvency.
Answer:
The retailer considers Visa and MasterCard sales as
a. cash sales.
b. promissory sales.
c. credit sales.
d. contingent sales.
Answer:
The SEC and FASB are two organizations that are primarily responsible for establishing
generally accepted accounting principles. It is true that
a. they are both governmental agencies.
b. the SEC is a private organization of accountants.
c. the SEC often mandates guidelines when no accounting principles exist.
d. the SEC and FASB rarely cooperate in developing accounting standards.
Answer:
In computing depreciation, salvage value is
a. the fair value of a plant asset on the date of acquisition.
b. subtracted from accumulated depreciation to determine the plant asset’s depreciable
cost.
c. an estimate of a plant asset’s value at the end of its useful life.
d. ignored in all the depreciation methods.
Answer:
Prepare the necessary journal entries on the books of Kelly Carpet Company to record
the following transactions, assuming a perpetual inventory system (you may omit
explanations):
(a) Kelly purchased $45,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $3,000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.
Answer:
Misra Company compiled the following financial information as of December 31,
2015:
Misra’s stockholders’ equity on December 31, 2015 is
a. $90,000.
b. $140,000.
c. $210,000.
d. $250,000.
Answer:
Match the internal control principle below with the appropriate cash receipts procedure
described.
a. Documentation procedures
b. Establishment of responsibility
c. Independent internal verification
d. Human resource controls
e. Physical controls
f. Segregation of duties
_____ 1> Only designated personnel are authorized to handle cash receipts.
_____ 2> Different individuals receive cash and record cash receipts.
_____ 3> Use remittance advice and cash register tapes.
_____ 4> Store cash in safes and bank vaults.
_____ 5> Treasurer compares total receipts to bank deposits daily.
_____ 6> Bonding of employees that handle cash.
Answer:
Romanoff Industries had the following inventory transactions occur during 2015:
The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using LIFO?
(rounded to whole dollars)
a. $3,318
b. $3,552
c. $6,948
d. $7,182
Answer:
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:
Lending money and collecting the loans are
a. operating activities.
b. investing activities.
c. financing activities.
d. Non-cash investing and financing activities.
Answer:
Country Company reported the following on its income statement:
An analysis of the income statement revealed that interest expense was $100,000.
Country Company’s times interest earned was
a. 3.4 times.
b. 9.5 times.
c. 6.5 times.
d. 8.5 times.
Answer:
For each of the following transactions of Neon Garden, identify the account to be
debited and the account to be credited.
1> Purchased 18-month insurance policy for cash.
2> Paid weekly payroll.
3> Purchased supplies on account.
4> Received utility bill to be paid at later date.
Answer:
Stone Roses Candies paid employee wages on and through Friday, January 26, and the
next payroll will be paid in February. There are three more working days in January
(29’“31). Employees work 5 days a week and the company pays $1,500 a day in wages.
What will be the adjusting entry to accrue wages expense at the end of January?
Answer:
The current sections of Remington Inc.’s balance sheets at December 31, 2014 and
2015, are presented here. Remington’s net income for 2015 was $173,000. The income
statement included depreciation expense, $20,000, amortization expense, $10,000, and
a gain on sale of equipment, $7,000. The equipment was sold for $47,000. Remington
also issued bonds for $60,000.
Instructions
Prepare the net cash provided by operating activities section of the company’s statement
of cash flows for the year ended December 31, 2015, using the indirect method.
Answer:
A company’s unadjusted balance in Inventory will usually not agree with the actual
amount of inventory on hand at year-end.
Answer:
Instructions
State the missing items identified by ?.
1> Gross profit ‘“ Operating expenses = ?
2> Cost of goods sold + Gross profit on sales = ?
3> Sales Revenue ‘“ (? + ?) = Net sales
4> Income from operations + ? ‘“ ? = Net income
5> Net sales ‘“ Cost of goods sold = ?
Answer:
At December 31, 2015, Wynne Company reported Accounts Receivable of $45,000 and
Allowance for Doubtful Accounts of $3,500. On January 7, 2016, Brown Enterprises
declares bankruptcy and it is determined that the receivable of $1,200 from Brown is
not collectible.
1> What is the cash realizable value of Accounts Receivable at December 31, 2015?
2> What entry would Wynne make to write off the Brown account?
3> What is the cash realizable value of Accounts Receivable after the Brown account is
written off?
Answer:
The declining-balance method of computing depreciation is known as an
_____________ depreciation method.
Answer:
The expense recognition principle attempts to match ______________ with
______________.
Answer:
The stockholders’ equity statement shows the changes in each stockholders’ equity
account and in total stockholders’ equity during the year.
Answer:
Premium on Bonds Payable is a contra account to Bonds Payable.
Answer: