Determine the interest on the following notes:
(a) $2,000 at 6% for 90 days.
(b) $900 at 9% for 5 months.
(c) $3,000 at 8% for 60 days
(d) $1,600 at 7% for 6 months
Answer:
Which of the following is not a true statement about the daily posting of the sales
journal?
a. There is a debit posting to accounts in the accounts receivable subsidiary ledger.
b. There is no credit posting.
c. The reference column in the sales journal is checked when the posting is complete for
each entry in the journal.
d. The invoice number supporting the sales transaction is posted to the reference
column in the subsidiary ledger.
Answer:
As a recent graduate of State University you’re aware that IFRS requires component
depreciation for plant assets. A friend has asked you to succinctly explain what
component depreciation means. Which of the following correctly describes component
depreciation?
a. The method used to ensure that the depreciation rate remains constant from year to
year.
b. The method that requires that significant parts of a plant asset with different useful
lives be depreciated separately.
c. The method used to prorate annual depreciation on a time basis.
d. The method of depreciation recommended for an asset that is expected to be
significantly more productive in the first half of its useful life.
IFRS:
Answer:
Which of the following investment classifications are the same for GAAP
and IFRS?
a. Available-for-sale
b. Held-to-maturity
c. Non-trading
d. Trading.
Answer:
Malone Co. recorded a payment of cash on account to a creditor by debiting Accounts
Receivable and crediting Cash. The correcting entry is
a. debit Accounts Payable and credit Cash.
b. debit Cash and credit Accounts Receivable.
c. debit Accounts Payable and credit Accounts Receivable.
d. Some other correcting entry is necessary.
Answer:
The future value of an annuity factor for 2 periods is equal to
a. 1 plus the interest rate.
b. 2 plus the interest rate.
c. 2 minus the interest rate.
d. 2.
Answer:
Identify whether each of the following items would be (a) added to the book balance, or
(b) deducted from the book balance in a bank reconciliation.
1> EFT transfer to a supplier
2> Bank service charge
3> Check printing charge
4> Error recording check # 214 which was written for $450 but recorded for $540
5> Collection of note and interest by bank on company’s behalf
Answer:
Using the percentage-of-receivables method for recording bad debt expense, estimated
uncollectible accounts are $15,000. If the balance of the Allowance for Doubtful
Accounts is $2,000 credit before adjustment, what is the amount of bad debt expense
for that period?
a. $2,000
b. $13,000
c. $15,000
d. $17,000
Answer:
At January 1, 2015, Orion Enterprises reported accounts receivable totaling $14,000.
During the month, the company had credit sales of $28,000 and collected cash on
accounts of $24,000. At the end of January, the balance in accounts receivable is
a. $14,000 credit.
b. $38,000 debit.
c. $10,000 credit.
d. $18,000 debit.
Answer:
The information for preparing a trial balance on a worksheet is obtained from
a. financial statements.
b. general ledger accounts.
c. general journal entries.
d. business documents.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
What are total current assets at December 31, 2015?
a. $26,000
b. $32,000
c. $36,000
d. $42,000
Answer:
Arm, Inc., has 10,000 shares of 5%, $100 par value, noncumulative preferred stock and
100,000 shares of $1 par value common stock outstanding at December 31, 2015. If the
board of directors declares a $200,000 dividend, the
a. preferred stockholders will receive 1/10thof what the common stockholders will
receive.
b. preferred stockholders will receive the entire $200,000.
c. $50,000 will be held as restricted retained earnings and paid out at some future date.
d. preferred stockholders will receive $50,000 and the common stockholders will
receive $150,000.
Answer:
The return on common stockholders’ equity is computed by dividing
a. net income by ending common stockholders’ equity.
b. net income by average common stockholders’ equity.
c. net income less preferred dividends by ending common stockholders’ equity.
d. net income less preferred dividends by average common stockholders’ equity.
Answer:
Which of the following would not be considered an external user of accounting data for
the GHI Company?
a. Internal Revenue Service Agent.
b. Management.
c. Creditors.
d. Customers.
Answer:
Flores Company publishes a monthly sports magazine, Hunting Preview. Subscriptions
to the magazine cost $25 per year. During October 2014, Flores sells 30,000
subscriptions beginning with the November issue. Flores prepares financial statements
quarterly and recognizes subscription revenue earned at the end of the quarter. The
company uses the accounts Unearned Subscription Revenue and Subscription Revenue.
Instructions
(a) Prepare the entry in October for the receipt of the subscriptions.
(b) Prepare the adjusting entry at December 31, 2014, to record subscription revenue
earned in December 2014.
(c) Prepare the adjusting entry at March 31, 2015, to record subscription revenue earned
in the first quarter of 2015.
Answer:
The cost of a purchased building includes all of the following except
a. closing costs.
b. real estate broker’s commission.
c. remodeling costs.
d. All of these answers are correct.
Answer:
IFRS treats the purchase of treasury stock as any of the following except
a. an increase to a contra equity account.
b. a decrease to retained earnings.
c. a decrease to share capital.
d. a decrease to share premium.
Answer:
If the market rate of interest is lower than the stated rate, bonds will sell at an amount
a. equal to face value.
b. not determinable from the given information.
c. lower than face value.
d. higher than face value.
Answer:
When an account becomes uncollectible and must be written off,
a. Allowance for Doubtful Accounts should be credited.
b. Accounts Receivable should be credited.
c. Bad Debt Expense should be credited.
d. Sales Revenue should be debited.
Answer:
Which of the following is not true regarding a promissory note?
a. Promissory notes may not be transferred to another party by endorsement.
b. Promissory notes may be sold to another party.
c. Promissory notes give a stronger legal claim to the holder than accounts receivable.
d. Promissory notes may be bearer notes and not specifically identify the payee by
name.
Answer:
Vega Corporation’s December 31, 2015 balance sheet showed the following:
Vega’s total stockholders’ equity was
a. $24,669,000.
b. $24,690,000.
c. $25,269,000.
d. $24,639,000.
Answer:
Which of the following liabilities are not related to the operating cycle?
a. Salaries and wages payable
b. Accounts payable
c. Utilities payable
d. Bonds payable
Answer:
An adjusting entry recording accrued salaries for a period indicates that Salaries
Expense has been ________________ but has not yet been ________________ or
recorded.
Answer:
Distinguish between FOB shipping point and FOB destination. Identify the freight
terms that will result in a debit to Inventory by the purchaser and a debit to Freight-out
by the seller.
Answer:
The study of accounting will be useful only if a student is interested in working for a
profit-oriented business firm.
Answer:
Identifying is the process of keeping a chronological diary of events measured in dollars
and cents.
Answer:
Sam Geller had earned (accumulated) salary of $103,000 through November 30. His
December salary amounted to $9,500. Lara Lane began employment on December 1
and will be paid her first month’s salary of $6,000 on December 3 Income tax
withholding for December for each employee is as follows:
The following payroll tax rates are applicable:
*Less a credit equal to the state unemployment contribution
Instructions
Record the payroll for the two employees at December 31 and record the employer’s
share of payroll tax expense for the December 31 payroll. Round all calculations to the
nearest dollar.
Answer:
