The amount of FICA-OASDI and FICA-Medicare withheld from the employee’s check
is determined by the employee’s:
A) W-2.
B) net pay.
C) earnings for the period and cumulative earnings.
D) W-4.
Under the perpetual system, when merchandise is sold the journal entry would include
a:
A) debit to Merchandise Inventory; credit to Accounts Payable or Cash.
B) debit to Cost of Goods Sold; credit to Merchandise Inventory.
C) debit to Accounts Receivable or Cash and a credit to Sales.
D) Both B and C are correct.
Mary withdrew cash in her new business. What effect will this have?
A) Increase an asset and increase a liability
B) Decrease an asset and increase a liability
C) Increase an asset and increase owner’s equity
D) Decrease an asset and decrease owner’s equity
Bill returned all of the $5,700 purchase of equipment to Sue. The company uses the
voucher system. The entry to record this is:
A)
B)
C)
D) None of these answers is correct.
Partners Eric and Jeremy each have $3,000 capital balances and share income and
losses in a 2:1 ratio for Eric and Jeremy, respectively. Cash equals $1,000, noncash
assets are $10,000, and liabilities are $5,000. If all the noncash assets are sold for
$4,000, and each partner is personally insolvent, Jeremy eventually will receive cash of:
A) $0.
B) $1,000.
C) $1,500.
D) $2,000.
Closing entries:
A) are posted to the general ledger.
B) are done to update Cash.
C) can be done before adjusting entries.
D) are done to update accounts receivable.
Straight Company sold merchandise to Cross Company and received a promissory note
from Cross. Straight should record the transaction as:
A) debit Notes Receivable and credit Sales for the principal amount of the note.
B) debit Notes Receivable and credit Sales for the maturity value of the note.
C) debit Accounts Receivable and credit Sales for the maturity amount of the note.
D) debit Accounts Receivable and credit Sales for the principal amount of the note.
The statement of cash flows provides information about all of the following except:
A) organizing activities.
B) investing activities.
C) operating activities.
D) financing activities.
To record receipt of money after an account has been written off using the direct
method in the previous year, you would need to:
A) credit cash.
B) debit the allowance account.
C) credit Bad Debts Recovered.
D) All of the above.
The entry to close the Withdrawal account was entered in reversethe Withdrawal
account was debited and Capital credited. This error would cause:
A) Capital to be understated.
B) net income to be overstated.
C) net income to be understated.
D) Withdrawals to be overstated.
The entry to close the Depreciation Expense account would cause:
A) the Capital account balance to increase.
B) the Capital account balance to decrease.
C) the Depreciation Expense account balance to decrease.
D) None of these is correct.
Which of the following items generally has a credit balance in the income statement
columns of the worksheet?
A) Purchase Returns and Allowances
B) Purchases
C) Accumulated Depreciation
D) Accounts Payable
As accumulated depreciation is recorded, the book value:
A) increases.
B) decreases.
C) remains the same.
D) is closed out.
Prepare the journal entries for Fit City Company for the following transactions:
a) Fit City sold $7,500 of merchandise to AllSport Company on account. The company
uses the periodic method.
b) Fit City received a 120-day, $7,500, 8% note for a time extension of past-due account
of AllSport.
c) Collected the AllSport note on the maturity date.
Which of the following accounts would NOT be considered a permanent account?
A) Accounts Receivable
B) Depreciation Expense
C) Accounts Payable
D) Office Supplies
What would be the effect on the accounts if the business provided services to a
customer on account?
A) An asset would be debited and an expense credited.
B) Capital would be debited and Revenue credited.
C) An asset would be debited and Revenue credited.
D) An asset would be debited and Capital credited.
Corbin Corporation has a plant asset with a cost of $40,000 that is traded for a similar
asset priced at $70,000. Assuming accumulated depreciation of $15,000 and a trade-in
allowance of $10,000, what is the cost basis for the new asset?
A) $40,000.
B) $95,000.
C) $85,000.
D) $70,000.
Historical cost is the same as:
A) residual value.
B) original cost.
C) depreciable value.
D) book value.
The perpetual inventory system is a system which:
A) updates inventory only at the end of each period.
B) uses only LIFO method.
C) needs a physical inventory taken.
D) Both A and B are correct.
Closing entries:
A) need not be journalized since they appear on the worksheet.
B) are prepared before adjusting entries.
C) are not needed if adjusting entries are prepared.
D) must be journalized and posted.
Using the aging method, estimated uncollectible accounts are $3,000. If the balance in
the Allowance for Doubtful Accounts is a $600 debit before adjustment, what is the Bad
Debts Expense adjustment for the period?
A) $3,000
B) $3,600
C) $2,400
D) $600
Jody Sport and Hobby’s Allowance for Doubtful Accounts had an unadjusted credit
balance of $600. The manager estimates that $700 of the Accounts Receivable is
uncollectible. Using the balance sheet approach, the year-end adjusting entry for Bad
Debts Expense:
A) includes a debit to the Bad Debt Expense account for $100.
B) includes a debit to the Bad Debts Expense account for $700.
C) includes a credit to the Bad Debts Expense account for $1,300.
D) includes a credit to the Bad Debts Expense account for $100.
A company uses the gross method of recording purchases. An invoice was paid after the
discount date. The full amount of the invoice would be recorded in the:
A) check register.
B) voucher register.
C) general journal.
D) A and B are correct
A company uses the allowance method and expects not to collect $21,000 of sales. The
journal entry to record the estimated bad debt is:
A)
B)
C)
D)
If Vouchers Payable has been credited, it is most likely that:
A) the business took out a loan.
B) the business made a payment to a vendor.
C) a purchase was made on account.
D) None of the above has occurred.
The work-in-process ending inventory was overstated. This error will cause:
A) the cost of goods manufactured to be understated.
B) the cost of goods sold to be overstated.
C) the net income to be understated.
D) All of these are correct.
Adjusting journal entries:
A) need not be journalized since they appear on the worksheet.
B) need not be posted if the financial statements are prepared from the worksheet.
C) are not needed if closing entries are prepared.
D) must be journalized and posted.
Under the perpetual inventory system, in addition to making the entry to record a return
of goods from a customer, a company would:
A) debit Merchandise Inventory and credit Cost of Goods Sold.
B) debit Cost of Goods Sold and credit Merchandise Inventory.
C) debit Sales and credit Cost of Goods Sold.
D) debit Purchases and credit Cost of Goods Sold.
Amortization of a patent was ignored. This error would cause:
A) the period’s net income to be overstated.
B) the period’s net income to be understated.
C) the period end assets to be understated.
D) None of these is correct.
If Cara’s Piano sales increased from $40,000 to $60,000 and its cost of goods sold
decreased from $24,000 to $12,000, then vertical analysis based on sales would show
the following for cost of goods sold (rounded to the nearest percent):
A) 60% and 20%.
B) 10% and 30%.
C) 50% and 67%.
D) 67% and 40%.
A debit to a revenue account was posted to an expense account. This would cause:
A) expenses to be overstated.
B) revenue to be overstated.
C) expenses to be understated.
D) None of the above
Determine the amount of the adjustment for bad debts given:
Bad debts are estimated to be 6% of receivables
Accounts receivable balance $85,000
Allowance for bad debts, balance (debit) $240
Net Sales $750,000
$ ________
Kristi’s Mentoring had the following information for the pay period ending September
30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Employees contribute to their retirement fund at a rate of 5.5% of their gross earnings
Compute the total gross earnings for the office.
Equipment was purchased for $50,000, residual value is $2,000 and it is expected that
the useful life is 10 years. What is the annual depreciation adjustment amount after the
first year assuming straight-line depreciation?
$ ________
Using the following accounts:
[1] Cash
[2] Dividends payable
[3] Preferred stock
[4] Common stock
[5] Common Stock dividend distributable
[6] Paid-in capital in excess of par value-common
[7] Paid-in capital in excess of par value – preferred
[8] Paid-in capital from treasury stock
[9] Retained earnings
[10] Appropriation for plant expansion
[11] Treasury stock
[12] Income summary
[13] Paid-in capital in excess of par value-Stock dividend
Indicate the account(s) to be debited and credited to record the following transactions.
Declared a cash dividend.
Debit ________ Credit ________
Discuss the reasons a company would consider using a periodic inventory system.
An employee earns $16 per hour. He worked 45 hours the last week of January
(assuming time and a half for overtime).
Calculate the total amount of employee deductions.
The business is involved in interstate commerce.
Federal Income Tax rate = 20%
State Income Tax rate = 5%
FICA rate OASDI = 6.2% and Medicare = 1.45%
FUTA rate = .8%
SUTA rate = 5.6%
$ ________
Compare and contrast the controlling account Accounts Payable to the accounts payable
subsidiary ledger. Discuss why the balance of the controlling account, Accounts
Payable, does not equal the sum of the accounts payable ledger during the month.
Prepare journal entries for the following transactions for Jane’s Violin Shop applying
the perpetual inventory system. Omit explanations.
May 12 Purchased on account 2 boxes of bows for $200.
16 Returned 2 bows for $20 credit.
22 Sold 5 bows for $200, cost $50.
29 Paid the balance due on account.
Journalize the following stock transactions for Rick Corporation.
July 22 Issued 10,000 shares of $6 par common stock for $45,000 cash.
28 Issued 6,000 shares of $4 par common stock for $35,000 cash.
31 Issued 4,000 shares of $10 par, 7% preferred stock for $50,000 cash.
A computer server system, which had cost $250,000 and had accumulated depreciation
of $170,000, was traded for a new system with a fair market value of $245,000. The old
system and cash of $190,000 were given for the new system. Prepare the journal entry
for the exchange of these similar assets.
On May 31, Mason Corporation has the following stockholders’ equity:
Common Stock, $12 par value, 8,000 shares
issued and outstanding $96,000
Retained Earnings 20,000
Total Stockholders’ Equity $116,000
The board of directors declared a 10% stock dividend on June 5 to the stockholders of
record on June 15. The stock is to be distributed on June 30. On the date of declaration,
the stock had a market value of $15 per share. Prepare the appropriate journal entries
for these transactions.
Determine the amount to be paid to the vendor within the discount period for purchase
with an invoice price of $3,000 and credit terms of 2/10, n/30 when $500 has already
been returned for credit. The goods were purchased with freight terms of F.O.B
shipping point and freight of $50 was included on the invoice.
$ ________
Indicate which effect(s) each situation will have:
1. New check written
2. Recorded in the general journal
3. Recorded in auxiliary petty cash record
4. Petty cash voucher prepared
________ Establishment of petty cash
Below is a list of departments; you are to identify each as either [1] a profit center or [2]
a cost center.
The maintenance office of a mall. ________
Below is a list of expenses (direct and indirect). You are to determine the total direct
cost for departments A and B.
Salary Expense $80,000
Depreciation Expense –
Office Equipment 4,000
Depreciation Expense –
Building 24,000
Heating Expense 1,800
Lighting Expense 2,400
Cleaning & Maintenance Expense 900
Department [A]
[B]
Cost of Goods Sold $100,000 $300,000
Employees 2 6
Value of Equipment in each area $8,000 $12,000
Square footage of use 200 sq. ft. 400 sq. ft.
Direct cost for department A $ ________ B $ ________
Norm and Sam agreed on October 1, 201x to enter into a partnership. Norm contributes
$100,000 and Sam contributes $75,000. Journalize their initial investments.
Prepare the required journal entries from the bank reconciliation below as of the end of
June:
The balance per general ledger is $200.
There is a debit memo for interest expense, $125.
There is a debit memo for a customer’s NSF check $430.
Outstanding checks amount to $2,000.
This month’s service charge amounts to $50.
Deposits in transit amount to $1,500.
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).