Which of the following companies would be least concerned about a low inventory
turnover ratio?
A) A fish market selling fresh fish
B) A hardware company selling drywall screws
C) A dairy company selling butter and milk
D) A semiconductor company selling microchips
Which of the following statements is not correct about sales returns and allowances?
A) Sales returns and allowances can provide useful information about the quality of
inventory and the possibility of unsatisfied customers.
B) Sales returns and allowances are recorded in a separate contra-revenue account.
C) Sales returns and allowances are always disclosed in external financial statements.
D) Sales returns and allowance are subtracted to determine net sales.
Toque Inc. uses the allowance method for bad debts. If management is overly optimistic
about its ability to collect customer accounts, the company will understate Bad Debt
Expense and:
A) overstate net income and days to collect will decline.
B) overstate net income but days to collect will increase.
C) understate net income and days to collect will increase.
D) understate net income and days to collect will decline.
The balance of which of the following accounts would appear in the debit column of an
adjusted trial balance?
A) Service Revenue
B) Dividends
C) Accumulated Depreciation
D) Unearned Revenue
A 6-month note is issued on November 1. If no previous accruals have been made, how
many months of interest should be accrued at December 31?
A) Six
B) Two
C) Four
D) None
The following is a listing of some of the balance sheet accounts and all of the income
statement accounts for Aldine Inc. as they appear on the company’s adjusted trial
balance.
Use the information above to answer the following question. The gross profit
percentage would be closest to:
A) 25.6%.
B) 31.5%.
C) 55.6%.
D) 68.5%.
If interest revenue for the period is $14,000 and the beginning and ending interest
receivable balances are $1,320 and $5,900, respectively, cash received for interest is:
A) $14,000.
B) $9,420.
C) $18,500.
D) $8,100.
On January 1, a company lends a customer $90,000 for one year at a 7% annual interest
rate. The note requires the payment of interest twice each year on June 30 and
December 31. An adjusting entry to accrue interest is recorded at the end of every
month. On July 2, a check for the interest payment for January through June comes in
the mail. What journal entry will the company record on July 2?
A) Debit Interest Receivable for $3,150 and credit Interest Revenue for $3,150
B) Debit Cash for $3,150 and credit Notes Receivable for $3,150
C) Debit Interest Revenue for $3,150 and credit Cash for $3,150
D) Debit Cash for $3,150 and credit Interest Receivable for $3,150
Which of the following statements about the unadjusted trial balance is not correct?
A) It might only include a preliminary amount for income tax expense.
B) It might balance even if there is a mistake.
C) It does not yet include end-of-the-accounting period adjustments.
D) It is part of the financial statements issued to external decision makers.
A current dividend preference means that:
A) preferred stockholders are paid current dividends before common stockholders are
paid dividends.
B) unpaid dividends to preferred stockholders accumulate and must be paid before
common stockholders receive dividends.
C) preferred stockholders are paid their full fixed dividend rate each period as long as
the company is in operation.
D) unpaid cash dividends to preferred stockholders must be replaced with stock
dividends during the current period.
A company’s trial balance included the following account balances at year-end:
The amount of net sales reported on the income statement would be:
A) $114,400.
B) $128,400.
C) $112,000.
D) $111,400.
A company lends its supplier $150,000 for 3 years at a 6% annual interest rate. Interest
payments are to be made twice a year. The entry to record this lending transaction
includes a debit to:
A) Notes Receivable and a credit to Cash for $150,000.
B) Cash and a credit to Notes Payable for $150,000.
C) Cash and a credit to Interest Revenue for $9,000.
D) Interest Receivable and a credit to Interest Revenue for $4,500.
Use the information above to answer the following question. What is the depreciation
expense for 2016?
A) $4,000
B) $3,000
C) $6,000
D) $8,000
The following is a listing of some of the balance sheet accounts and all of the income
statement accounts for Aldine Inc. as they appear on the company’s adjusted trial
balance.
Use the information above to answer the following question. Net income would be:
A) $8,000.
B) $9,000.
C) $10,000.
D) $14,000.
Which of the following statements is correct when the straight-line method is used to
compute depreciation?
A) The carrying value of an asset is a constant amount during the asset’s useful life
B) Accumulated depreciation is a constant amount during the asset’s estimated useful
life
C) Depreciation Expense is a constant amount each year
D) The book value of an asset is an increasing amount during the asset’s useful life
Alphabet Company, which uses the periodic inventory method, purchases different
letters for resale. Alphabet had no beginning inventory. It purchased A thru G in January
at $4 per letter. In February, it purchased H thru L at $6 per letter. It purchased M thru R
in March at $7 per letter. It sold A, D, E, H, J and N in October. There were no
additional purchases or sales during the remainder of the year.
Use the information above to answer the following question. If Alphabet Company uses
the weighted average method, what is the cost of its ending inventory? (Round the per
unit cost to two decimal places and then round your answer to the nearest whole
dollar.)
A) $38
B) $48
C) $67
D) $75
On January 1, 2016, a company issues 3-year bonds with a face value of $200,000 and a
stated interest rate of 8%. Because the market interest rate is lower than the stated
interest rate, the company receives $209,000 for the bond. The company uses
straight-line bond amortization.
Required:
Part a. Determine the amount of the premium that will be amortized during the year
ending December 31, 2016.
Part b. Prepare the journal entry to record the first interest payment on December 31,
2016.
Because LIFO uses older costs for inventory, in times of rising units costs:
A) LIFO results in a higher book value of inventory and lower inventory turnover ratio
than FIFO.
B) LIFO results in a lower book value of inventory and lower inventory turnover ratio
than FIFO.
C) LIFO results in a higher book value of inventory and higher inventory turnover ratio
than FIFO.
D) LIFO results in a lower book value of inventory and higher inventory turnover ratio
than FIFO.
The following is a list of account balances for Pick-A-Pet, Inc., as of June 30, Year 3:
The company entered into the following transactions during July Year 3. Stockholders
contribute $300,000 cash for additional ownership shares and the company pays
$550,000 in cash and borrows $150,000 from a bank to buy new equipment. No other
transactions took place during July, Year 3.
Required:
Part a. Prepare a classified balance sheet for the company at June 30, Year 3.
Part b. Show the effects of the July transactions on the basic accounting equation.
Part c. Prepare the journal entries that would be used to record the transactions.
