Postings are made daily to subsidiary ledgers so that
a. employees are kept busy.
b. debits equal credits.
c. individual account information is kept current.
d. the control account will balance to the subsidiary ledger.
Answer:
An aging of a company’s accounts receivable indicates that $14,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance, the
adjustment to record bad debts for the period will require a
a. debit to Bad Debt Expense for $14,000.
b. debit to Allowance for Doubtful Accounts for $12,900.
c. debit to Bad Debt Expense for $12,900.
d. credit to Allowance for Doubtful Accounts for $14,000.
Answer:
On December 31, 2015 the adjusted trial balance of the Yellin Personnel Agency shows
the following selected data:
Accounts Receivable, $8,000
Service Revenue, $60,000
Interest Expense, $10,500
Interest Payable, $3,500
Utilities Expense, $4,800
Accounts Payable, $2,700
Analysis indicates that adjusting entries were made for [a) $8,000 of employment
commission revenue earned but not billed, [b) $3,500 of accrued but unpaid interest,
and [c) $2,700 of utilities expense accrued but not paid.
Instructions
[a] Prepare the closing entries at December 31, 2015.
[b] Prepare the reversing entries on January 1, 2016.
[c] Enter the adjusted trial balance data in T-accounts. Post the entries in [a) and [b) and
rule and balance the accounts.
[d] Prepare the entries to record [1) the collection of the accrued commission on
January 8, [2) payment of the utility bill on January 10, and [3) payment of all the
interest due [$4,000) on January 15.
[e] Post the entries in [d) to the temporary accounts.
[f] What is the interest expense for the month of January 2016?
Answer:
Under IFRS, companies do not use a
a. discount account but do use a premium account.
b. premium account but do use a discount account.
c. bonds payable account.
d. discount or premium account.
Answer:
Vertical analysis is a technique which expresses each item within a financial statement
a. in dollars and cents.
b. in terms of a percentage of the item in the previous year.
c. in terms of a percent of a base amount.
d. starting with the highest value down to the lowest value.
Answer:
$4 million, 8%, 10-year bonds are issued at face value. Interest will be paid
semi-annually. When calculating the market price of the bond, the present value of
a. $320,000 received for 10 periods must be calculated.
b. $4 million received in 10 periods must be calculated.
c. $4 million received in 20 periods must be calculated.
d. $160,000 received for 10 periods must be calculated.
Answer:
Lake Company reported the following on its income statement:
An analysis of the income statement revealed that interest expense was $60,000. Lake
Company’s times interest earned was
a. 11 times.
b. 10 times.
c. 8.5 times.
d. 7.5 times.
Answer:
Which of the following receivables would not be classified as an “other receivable”?
a. Advance to an employee
b. Refundable income tax
c. Notes receivable
d. Interest receivable
Answer:
For each of the following accounts, indicate (a) the type of adjusting entry (prepaid
expense, accrued revenue, etc.) and (b) the related account in the adjusting entry.
1> Depreciation Expense
2> Salaries and Wages Payable
3> Service Revenue
4> Supplies
5> Unearned Service Revenue
Answer:
Net sales is sales revenue less
a. sales discounts.
b. sales returns.
c. sales returns and allowances.
d. sales discounts and sales returns and allowances.
Answer:
Macrinez Company assembled the following information in completing its July bank
reconciliation: balance per bank $22,920; outstanding checks $4,650; deposits in transit
$7,500; NSF check $480; bank service charge $150; cash balance per books $26,400.
As a result of this reconciliation, Macrinez will
a. reduce its cash account by $150.
b. reduce its cash account by $630.
c. reduce its cash account by $2,850.
d. increase its cash account by $330.
Answer:
Bright Eyes Downtown Diner received a bill of $600 from the Jronand Wine
Advertising Agency. The owner, A. A. Bondy, is postponing payment of the bill until a
later date. The effect on specific items in the basic accounting equation is
a. a decrease in Cash and an increase in Accounts Payable.
b. a decrease in Cash and an increase in Retained Earnings.
c. an increase in Accounts Payable and a decrease in Retained Earnings.
d. a decrease in Accounts Payable and an increase in Retained Earnings.
Answer:
The return on common stockholders’ equity is computed by dividing net income
available to common stockholders by
a. ending total stockholders’ equity.
b. ending common stockholders’ equity.
c. average total stockholders’ equity.
d. average common stockholders’ equity.
Answer:
Which one of the following items is not necessary in preparing a statement of cash
flows?
a. Determine the change in cash
b. Determine the cash provided by operations
c. Determine cash from financing and investing activities
d. Determine the cash in all bank accounts
Answer:
Depreciation is the process of allocating the cost of a plant asset over its service life in
a. an equal and equitable manner.
b. an accelerated and accurate manner.
c. a systematic and rational manner.
d. a conservative market-based manner.
Answer:
The three accounts shown below appear in the general ledger of Lawson Corp. during
2014.
Instructions
From the postings in the accounts, indicate how the information is reported on a
statement of cash flows using the indirect method. The loss on sale of equipment was
$7,000. (Hint: Cost of equipment constructed is reported in the investing activities
section as a decrease in cash of $56,000.)
Answer:
A loss on disposal of a plant asset can only occur if the cash proceeds received from the
asset sale are less than the asset’s book value.
Answer:
Carson Company uses the periodic inventory method and had the following inventory
information available for the month of November.
A physical count of units on November 30 revealed that 650 units were on hand.
Answer the following independent questions and show computations supporting your
answers.
1> Assume that the company uses the average cost method. What is the dollar value of
the ending inventory on November 30?
2> Assume that the company uses the LIFO inventory method. What is the dollar value
of the cost of goods sold during November?
3> Assume that the company uses the FIFO inventory method. The dollar value of the
ending inventory on November 30 is:
Answer:
Accumulated Depreciation is a liability account and has a normal credit account
balance.
Answer:
The revenue recognition principle dictates that revenue be recognized in the accounting
period in which cash is received.
Answer:
Niebuhr Company issued $400,000 of bonds on January 1, 2015.
Instructions
•Prepare the journal entry to record the retirement of the bonds at maturity,
assuming the bonds were issued at 100.
•Prepare the journal entry to record the retirement of the bonds before maturity at
97. Assume the balance in Premium on Bonds Payable is $4,000.
•Prepare the journal entry to record the conversion of the bonds into 15,000 shares
of $10 par value common stock. Assume the bonds were issued at par.
•
Answer:
Daniel Corporation acquired 100% of the common stock of Tysen Company for
$1,100,000. On the date of acquisition, Tysen Company’s stockholders’ equity consisted
of: Common Stock, $530,000; Retained Earnings, $410,000. The intercompany
elimination to be made on a worksheet to prepare a consolidated balance sheet is
Answer: