The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be
a. $3,000.
b. $1,667.
c. $750.
d. $500.
Answer:
Adjusting entries are
a. not necessary if the accounting system is operating properly.
b. usually required before financial statements are prepared.
c. made whenever management desires to change an account balance.
d. made to balance sheet accounts only.
Answer:
Current liabilities generally appear
a. after long-term debt on the balance sheet.
b. in decreasing order of magnitude on the balance sheet.
c. in order of maturity on the balance sheet.
d. in increasing order of magnitude on the balance sheet.
Answer:
Under the equity method, the investor records dividends received by crediting
a. Dividend Revenue.
b. Investment Income.
c. Revenue from Investment.
d. Stock Investments.
Answer:
At April 1, 2015, Spiderland Company reported a balance of $20,000 in the Retained
Earnings account. Spiderland Company earned revenues of $50,000 and incurred
expenses of $32,000 during April 2015. The company paid dividends of $10,000 during
the month.
(a) Prepare the entries to close Income Summary and the Dividends acccount at April
30, 2015.
(b) What is the balance in Retained Earnings on the April 30, 2015 post-closing trial
balance?
Answer:
Treasury stock is generally accounted for by the
a. cost method.
b. market value method.
c. par value method.
d. stated value method.
Answer:
During 2015, Alfred Inc. had sales on account of $198,000, cash sales of $81,000, and
collections on account of $126,000. In addition, they collected $2,175 which had been
written off as uncollectible in 2014. As a result of these transactions, the change in the
accounts receivable balance indicates a
a. $69,825 increase.
b. $72,000 increase.
c. $150,825 increase.
d. $153,000 increase.
Answer:
An error has occurred in the closing entry process if
a. revenue and expense accounts have zero balances.
b. the retained earnings account is credited for the amount of net income.
c. the dividends account is closed to the retained earnings account.
d. the balance sheet accounts have zero balances.
Answer:
The directors of Chandler Corp. are trying to decide whether they should issue par or no
par stock. They are considering two alternatives for their new stock, which they are
assuming will be issued at $8 per share. The alternatives are: (A) $5 par value and (B)
no par, no stated value. If 100,000 shares are issued, what amount will be credited to the
common stock account in each of these cases?
Answer:
The following transactions represent part of the activities of Bloc Party Company for
the first month of its existence. Indicate the effect of each transaction upon the total
assets of the business by one of the following phrases: increased total assets, decreased
total assets, or no change in total assets.
(a) Issued stock in exchange for cash.
(b) Purchased a computer for cash.
(c) Purchased office equipment with money borrowed from the bank.
(d) Paid the first month’s utility bill.
(e) Collected an accounts receivable.
(f) Paid dividends.
Answer:
The difference between the cost of a depreciable asset and its related accumulated
depreciation is referred to as the
a. market value of the asset.
b. blue book value of the asset.
c. book value of the asset.
d. depreciated difference of the asset.
Answer:
For each of the following, describe a transaction that will have the stated effect on the
elements of the accounting equation.
(a) Increase one asset and decrease another asset.
(b) Increase an asset and increase a liability.
(c) Decrease an asset and decrease a liability.
(d) Increase an asset and increase stockholders’ equity.
(e) Increase one asset, decrease one asset, and increase a liability.
Answer:
Accounting for treasury stock is done by the
a. FIFO method.
b. LIFO method.
c. cost method.
d. lower of cost or market method.
Answer:
When a note receivable is honored, Cash is debited for the note’s
a. net realizable value.
b. maturity value.
c. gross realizable value.
d. face value.
Answer:
The ending retained earnings amount is shown on
a. the balance sheet only.
b. the retained earnings statement only.
c. both the income statement and the retained earnings statement.
d. both the balance sheet and the retained earnings statement.
Answer:
A. ACCOUNTS RECEIVABLE’”UNCOLLECTIBLE ACCOUNTS
Instructions: Present the journal entries specified below; show supporting calculations.
The trial balance of Hiller Company at December 31, 2014 includes the following:
(1) If Hiller uses the aging method and estimates that $6,000 of receivables will be
uncollectible, prepare the adjusting entry.
(2) If Hiller estimates uncollectibles at 1% of net credit sales, prepare the appropriate
adjusting entry.
(3) Assume that on February 10, 2015 the specific account of Mark Nolan with a
balance of $600, is deemed uncollectible. Record the write-off.
(4) Assume that on May 12, 2015 Nolan pays one-half of the above balance in full and
is expected to pay the remainder within 30 days. Record the appropriate entries.
B. SALE OF ACCOUNTS RECEIVABLE
Instructions: Present the journal entries specified below.
(1) Rosen Company sells $600,000 of accounts receivable to National Factors, Inc. for
cash less a 2.5% service charge. Record the sale.
(2) Made Visa credit card sales totaling $9,500. A 2% service fee is charged by Visa.
Record the sale on the books of Rosen Company.
Answer:
Using vertical analysis of the income statement, a company’s net income as a
percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales
must be 90%.
Answer:
Compound interest is computed on the principal and any interest earned that has not
been paid or received.
Answer:
The following information is available for Moiz Company:
Instructions
Using the above information, prepare the closing entries for Moiz Company.
Answer:
Sigur Ros Company is a newly organized business. The list of accounts to be opened in
the general ledger is as follows:
Instructions
Organize the accounts into the order in which they should appear in the ledger of Sigur
Ros Company and assign account numbers. Use the following system to assign account
numbers.
Answer:
Goods that have been purchased FOB destination but are in transit, should be excluded
from a physical count of goods.
Answer:
The petty cash fund of $200 for Ginther Company appeared as follows on December
31, 2015:
Instructions
1> Briefly describe when the petty cash fund should be replenished. Because there is
cash on hand, is there a need to replenish the fund at year end on December 31?
Explain.
2> Prepare in general journal form the entry to replenish the fund.
3> On December 31, the office manager gives instructions to increase the petty cash
fund by $50. Make the appropriate journal entry.
Answer:
Assume that Swann Company uses a periodic inventory system and has these account
balances: Purchases $630,000; Purchase Returns and Allowances $25,000; Purchase
Discounts $11,000; and Freight-In $19,000; beginning inventory of $45,000; ending
inventory of $55,000; and net sales of $750,000. Determine the cost of goods sold.
Answer:
A trial balance does not prove that all transactions have been recorded or that the ledger
is correct.
Answer:
Generally accepted accounting principles require that the direct write-off method be
used for financial reporting purposes if it is also used for tax purposes.
Answer:
Dividends received on stock investments of less than 20% should be credited to the
Stock Investments account.
Answer: