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Centennial, Inc. sold 600 units of inventory at $20 per unit on account. The company
uses the perpetual inventory system and the last-in, first-out (LIFO) inventory costing
system. The beginning inventory included 200 units at $9 per unit. The most recent
purchases include 700 units at $12 per unit. The sale occurred after the last purchase.
a. Prepare the journal entries to record the sale. Omit explanations.
b. Compute the cost of the ending inventory. Label your work.
The interest rate that investors demand to earn for loaning their money is known as the
________.
A) stated interest rate
B) coupon rate
C) differential rate
D) market interest rate
The ability of a company to pay its debts can be evaluated by using the ________.
A) earnings per share
B) return on assets ratio
C) debt ratio
D) fully diluted earnings per share
On December 31, 2018, Restaurant Sales has a Bonds Payable balance of $72,000 and a
Premium on Bonds Payable balance of $4000. On the balance sheet, how will this
information be shown?
A) $72,000 less premium of $4000 for a net balance of $68,000
B) $72,000 less one-tenth of $4000 for a net balance of $71,600
C) $72,000
D) $72,000 plus a premium of $4000 for a net balance of $76,000
In a cash receipts journal, ________.
A) cash sales are recorded in the Accounts Receivable CR column and the Cash DR
column
B) collections on account are recorded in the Accounts Receivable DR column and the
Cash DR column
C) the miscellaneous cash receipt transactions are ignored
D) the cash sales are recorded in the Sales Revenue CR column
Thirty years ago, Citywide Grocery Corporation purchased a building for its grocery
store for $30,000. Based on inflation estimates, the amount of the building has been
adjusted in the accounting records. The building is now reported at $75,000 in
Citywide's financial statements. Which of the following concepts or principles of
accounting is being violated?
A) going concern assumption
B) revenue realization concept
C) economic entity assumption
D) cost principle
St. Petersburg Corporation makes a $1,200 purchase of merchandise inventory for cash.
This transaction will be recorded in the ________.
A) cash payments journal
B) general journal
C) cash receipts journal
D) purchase journal
Which of the following accounts is debited when employees take their paid vacations?
A) Vacation Benefits Expense
B) Vacation Benefits Payable
C) Salaries Expense
D) No entry is needed.
Which of the following is a column in a purchases journal?
A) Cost of Goods Sold CR
B) Accounts Payable CR
C) Sales Revenue DR
D) Other Accounts CR
Under which of the following categories would bonds held as an investment for more
than a year appear?
A) current assets
B) long-term liabilities
C) long-term assets
D) current liabilities
Which of the following components of internal control consist of work performed by
internal and external auditors?
A) monitoring of controls
B) information systems
C) control procedures
D) control environment
Restrictions on retained earnings are ________.
A) reported on the statement of cash flows
B) usually reported in the notes to the financial statements
C) reported on the income statement
D) designed to maximize dividends paid to shareholders
A parent company is a company that ________.
A) is controlled by another corporation
B) owns a controlling interest in another company
C) is the first to begin operations in an industry
D) has any level of investment in another company
Regarding the four-step closing process under the periodic inventory system, ________.
A) Purchase Returns and Allowances and Purchase Discounts accounts are closed with
a credit via the Income Summary account
B) Sales Revenue is closed with a credit via the Income Summary account
C) the beginning Merchandise Inventory, Purchases, and Freight In are closed with a
debit via the Income Summary account
D) the ending merchandise inventory balance must be recorded as a debit via the
Income Summary account
At the beginning of 2019, Elliott, Inc. has the following account balances:
Accounts Receivable $41,000 (debit balance)
Allowance for Bad Debts $6,000 (credit balance)
Bad Debts Expense $0
During the year, credit sales amounted to $820,000. Cash collected on credit sales
amounted to $780,000, and $15,000 has been written off. At the end of the year, the
company adjusted for bad debts expense using the percent-of-sales method and applied
a rate, based on past history, of 2.5%. The ending balance in the Allowance for Bad
Debts is ________.
A) $6,000
B) $5,500
C) $10,500
D) $11,500
A company purchased inventory for $2,500 from a vendor on account, FOB shipping
point, with terms of 2/10, n/30. The company paid the shipper $200 cash for freight in.
The company then returned damaged goods worth $400. The invoice was then paid
eight days after the invoice date. Assuming that there was no beginning inventory
balance, the cost of inventory would be ________. (Assume a perpetual inventory
system.)
A) $2,058
B) $2,258
C) $2,300
D) $2,450
Which of the following is the order of steps to journalize an entry?
A) Identify the accounts and the account type → Decide whether each account
increases or decreases, then apply the rules of debits and credits → Record the
transaction
B) Identify the accounts and the account type → Record the transaction → Decide
whether each account increases or decreases, then apply the rules of debits and credits
C) Record the transaction → Identify the accounts and the account type → Decide
whether each account increases or decreases, then apply the rules of debits and credits
D) Decide whether each account increases or decreases, then apply the rules of debits
and credits → Identify the accounts and the account type → Record the transaction
Available-for-sale (AFS) debt investments that are expected to be held longer than a
year are reported as ________.
A) equity
B) current assets
C) long-term assets
D) either current assets or long-term assets
Which of the following statements regarding intangible assets is incorrect?
A) Intangible assets have no physical form.
B) Intangible assets are valuable because of the special rights they carry.
C) Intangible assets are not reported on the balance sheet.
D) Intangible assets include the exclusive right to produce or sell an invention.
Which of the following is an intangible asset?
A) plant and machinery
B) goodwill
C) building
D) land
The entity that signs the promissory note and promises to pay the required amount is the
________.
A) maker of the note
B) banker of the note
C) holder of the note
D) payee of the note
An account that is not closed at the end of the period is called a(n) ________.
A) expense account
B) temporary account
C) permanent account
D) revenue account
Which of the following is the correct formula for calculating rate of return on total
assets?
A) (Net income + Interest expense) / Average total assets
B) (Net income - Interest expense) / Average total asset
C) (Net income - Interest expense) / Total assets
D) Total equity / Total assets
May, Inc. had the following transactions in 2019, its first year of operations:
• Issued 20,000 shares of common stock. The stock has a par value of $3.00 per share
and was issued at $19.00 per share.
• Issued 2000 shares of $200 par value preferred stock at par.
• Earned net income of $40,000.
• Paid no dividends.
At the end of 2019, what is the total amount of paid-in capital?
A) $820,000
B) $460,000
C) $380,000
D) $780,000
Maybridge, Inc. has 3000 shares of common stock outstanding. A stockholder has 300
shares. If the company distributes a 25% stock dividend, the stockholder now holds
________ shares of Maybridge stock.
A) 375
B) 750
C) 300
D) 75
Regarding generally accepted accounting principles (GAAP), which of the following
statements is incorrect?
A) GAAP rests on a conceptual framework that identifies the objectives, characteristics,
elements, and implementation of financial statements.
B) The primary objective of financial reporting is to provide information useful for
making investment and lending decisions.
C) Relevant information is complete, neutral, and free from error.
D) GAAP is currently formulated by the Financial Accounting Standards Board.
Electronic funds transfers ________.
A) are more expensive than mailing a check to make a payment
B) are a way of moving cash by paper documents
C) include direct deposits and debit card transactions
D) do not appear on the bank statement
Autumn Services, Inc. acquired 140,000 shares of Spring Metals, Inc. on January 1,
2018. Spring declares a cash dividend of $3.00 per share on February 15, 2019 and pays
the cash dividend on March 2, 2019. With the current investment, Autumn Services,
Inc. holds 8% of Spring's voting stock. Which of the following will be the correct
journal entry for the day when the dividend payment is made (March 2, 2019)?
A)
B)
C) No Entry
D)
Which of the following organizations is responsible for the creation and governance of
accounting standards in the United States?
A) Financial Accounting Standards Board
B) Institute of Management Accountants
C) American Institute of Certified Public Accountants
D) Securities and Exchange Commission
Which of the following is included in the entry to record estimated warranty payable?
A) a credit to Estimated Warranty Payable
B) a credit to Merchandise Inventory
C) a credit to Warranty Expense
D) a debit to Estimated Warranty Payable
The bank statement ________.
A) must include physical copies of canceled checks
B) must be mailed to customers each month
C) does not include an ending balance of the customer's account because the bank
cannot determine which checks have been cashed during the statement period
D) may show service charges, EFT collections from customers, and EFT withdrawals
Trading debt investments are classified on the balance sheet as ________.
A) current or long-term assets, depending on how long the investor intends to hold the
debt securities
B) current assets
C) intangible assets
D) current liabilities
Forever Jewelers uses the gross method and a perpetual inventory system. On April 2,
Forever sold merchandise with a cost of $1,400 for $5,400 to a customer on account
with terms of 1/15, n/30. Which of the following journal entries correctly records the
sales revenue?
A)
B)
C)
D)
Which of the following entries would be recorded by a company that uses the cash basis
method of accounting?
A)
B)
C)
D)
On October 1, 2018, Parker, Inc. made a loan to one of its customers. The customer
signed a 9-month note for $110,000 at 14%. Calculate the maturity value of the note.
(Round any intermediate calculations to two decimal places, and your final answer to
the nearest dollar.)
A) $121,550
B) $125,400
C) $94,600
D) $98,450
