The two optional steps in the accounting cycle are preparing
a. a post-closing trial balance and reversing entries.
b. a worksheet and post-closing trial balances.
c. reversing entries and a worksheet.
d. an adjusted trial balance and a post-closing trial balance.
Answer:
The preparation of consolidated financial statements is useful to
a. only the subsidiary company.
b. creditors of the subsidiary company.
c. only the parent company.
d. both the parent and the subsidiary company.
Answer:
A merchandising company using a perpetual system may record an adjusting entry by
a. debiting Income Summary.
b. crediting Income Summary.
c. debiting Cost of Goods Sold.
d. debiting Sales Revenue.
Answer:
Dinosaur Junior Corporation purchased a one-year insurance policy in January 2015 for
$75,000. The insurance policy is in effect from May 2015 through April 2016. If the
company neglects to make the proper year-end adjustment for the expired insurance
a. net income and assets will be understated by $50,000.
b. net income and assets will be overstated by $50,000.
c. net income and assets will be understated by $25,000.
d. net income and assets will be overstated by $25,000.
Answer:
Carter Corporation reported net sales of $250,000, $400,000, and $600,000 in the years
2013, 2014, and 2015 respectively. If 2013 is the base year, what is the trend percentage
for 2015?
a. 100%
b. 40%
c. 140%
d. 240%
Answer:
An enterprise which sells goods to customers is known as a
a. proprietorship.
b. corporation.
c. retailer.
d. service firm.
Answer:
A company receives $265, of which $15 is for sales tax. The journal entry to record the
sale would include a
a. debit to Sales Tax Expense for $15.
b. credit to Sales Taxes Payable for $15.
c. debit to Sales Revenue for $265.
d. debit to Cash for $250.
Answer:
Which one of the following would not be considered an advantage of the corporate
form of organization?
a. Limited liability of owners
b. Separate legal existence
c. Continuous life
d. Government regulation
Answer:
Which one of the following is not an objective of a system of internal controls?
a. Safeguard company assets
b. Overstate liabilities in order to be conservative
c. Enhance the accuracy and reliability of accounting records
d. Reduce the risks of errors
Answer:
When listing accounts in the statement of cash flows worksheet, the accumulated
depreciation account is shown
a. with accounts that have credit balances.
b. with accounts that have debit balances.
c. as a credit under the reconciling items.
d. as a debit under the reconciling items.
Answer:
What is the purpose of a post-closing trial balance?
a. Prove that all income statement accounts have been properly posted.
b. Prove the equality of income statement account balances.
c. Prove the equality of all account balances.
d. Prove the equality of permanent account balances.
Answer:
Which of the following discount rates will produce the smallest present value?
a. 8%
b. 9%
c. 10%
d. 4%
Answer:
At October 1, 2015, Padilla Industries had an accounts payable balance of $40,000.
During the month, the company made purchases on account of $33,000 and made
payments on account of $48,000. At October 31, 2015, the accounts payable balance is
a. $25,000.
b. $41,000.
c. $55,000.
d. $121,000.
Answer:
The sale of receivables by a business
a. indicates that the business is in financial difficulty.
b. is generally the major revenue item on its income statement.
c. is an indication that the business is owned by a factor.
d. can be a quick way to generate cash for operating needs.
Answer:
The Hartley Clinic purchased a new surgical laser for $90,000. The estimated salvage
value is $5,000. The laser has a useful life of five years and the clinic expects to use it
10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in
year 3; 1,800 hours in year 4; 2,000 hours in year 5.
Instructions
(a) Compute the annual depreciation for each of the five years under each of the
following methods:
(1) straight-line.
(2) units-of-activity.
(b) If you were the administrator of the clinic, which method would you deem as most
appropriate? Justify your answer.
(c) Which method would result in the lowest reported income in the first year? Which
method would result in the lowest total reported income over the five-year period?
Answer:
Gonzo Company reports a $25,000 increase in inventory and a $12,000 decrease in
accounts payable during the year. Cost of Goods Sold for the year was $185,000. Using
the direct method of reporting cash flows from operating activities, cash payments
made to suppliers were
a. $185,000.
b. $197,000.
c. $222,000.
d. $148,000.
Answer:
Each of the following accounts is reported as long-term liabilities except
a. Interest Payable.
b. Bonds Payable.
c. Discount on Bonds Payable.
d. Premium on Bonds Payable.
Answer:
Silk Company issued $500,000 of 7%, 10-year bonds on one of its interest dates for
$431,850 to yield an effective annual rate of 9%. The effective-interest method of
amortization is to be used. Interest is paid annually.
What amount of discount (to the nearest dollar) should be amortized for the first interest
period?
a. $4,770
b. $6,133
c. $7,732
d. $3,867
Answer:
The debt to assets ratio
a. is a solvency ratio.
b. is computed by dividing total assets by total debt.
c. measures the total assets provided by stockholders.
d. is a profitability ratio.
Answer:
The income statement and balance sheet columns of Iron and Wine Company’s
worksheet reflect the following totals:
The net income (or loss) for the period is
a. $44,000 income.
b. $28,000 income.
c. $28,000 loss.
d. not determinable.
Answer:
For accounting purposes, business transactions should be kept separate from the
personal transactions of the owners of the business.
Answer:
The specific identification method of inventory valuation is desirable when a company
sells a large number of low-unit cost items.
Answer:
All business transactions must be entered first in the general ledger.
Answer:
A single-step income statement reports all revenues, both operating and other revenues
and gains, at the top of the statement.
Answer:
The following stockholders’ equity accounts, arranged alphabetically, are in the ledger
of Star Corporation at December 31, 2015.
Instructions
Prepare the stockholders’ equity section of the balance sheet at December 31, 2015.
Answer:
Short-term receivables are reported in the current assets section before temporary
investments.
Answer:
A loss on the exchange of plant assets occurs when the fair market value of
the old asset is less than its book value.
Answer: