Archives: Quiz

At December 31, 2014, the trading securities for Wolfe Company are as follows: Instructions Prepare the adjusting entry at December 31, 2014, to report the securities at fair value. Answer: The cost of natural resources is not allocated to expense […]

The multiple-step form of income statement is easier to read than the single-step form. Answer: Casey Company retired $500,000 face value, 9% bonds on June 30, 2015 at 96. The carrying value of the bonds at the redemption date was […]

Transactions that affect inventories on hand have an effect on both the balance sheet and the income statement. Answer: Free _______________ equals cash provided by operations less capital expenditures and cash dividends. Answer: cash flow S. Lamar performed legal services […]

The basic accounting equation is in balance when the creditor and ownership claims against the business equal the assets. Answer: If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in […]

Once an asset is fully depreciated, no additional depreciation can be taken even though the asset is still being used by the business. Answer: Journalize the following transactions for Xiu Xiu Company for June 2015, the company’s first month of […]

Gain on sale of equipment and interest expense are reported under other revenues and gains in a multiple-step income statement. Answer: To be classified as a short-term investment, the investment must be readily marketable and intended to be converted into […]

Transactions that can be measured in dollars and cents are recorded in the financial information system. Answer: An error in the physical count of goods on hand at the end of a period resulted in a $15,000 overstatement of the […]

Short-term receivables are reported in the current assets section before temporary investments. Answer: The worksheet for Gibler Rental Company appears below. Using the adjustment data below, complete the worksheet. Add any accounts that are necessary. Adjustment data: [a] Prepaid rent […]

1> Name at least three factors that influence the market value of stock. 2> Corporations acquire treasury stock for a variety of purposes. Name three reasons why treasury stock may be acquired by a corporation. Answer: Identify the impact on […]

Cash equivalents are highly liquid investments that can be converted into a specific amount of cash. Answer: Three dates are important in connection with cash dividends. Identify these dates, and explain their significance to the corporation and its stockholders. Answer: […]

What is the effect on total paid-in capital of a stock dividend and a stock split, respectively? Answer: A change in the estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in […]

The ______________ of an asset should not have access to the accounting records of that asset. Answer: Shellhammer Company’s inventory records show the following data for the month of September: A physical inventory on September 30 shows 200 units on […]

Roxy Inc. issues a $1,500,000, 10%, 10-year mortgage note on December 31, 2015, to obtain financing for a new building. The terms provide for semiannual installment payments of $122,643. Instructions Prepare the entry to record the mortgage loan on December […]

Accounts receivable, which are also referred to as ______________ receivables, are amounts owed by customers on account. Answer: The three primary accounting problems associated with accounts receivable are (1) ______________, (2) _______________, and (3) ______________ of accounts receivable. Answer: recognizing, […]

Sarah Denny purchased an investment for $40,260.48. From this investment, she will receive $6,000 annually for the next 10 years starting one year from now. What rate of interest will Sarah be earning on her investment? Answer: Which of the […]

The following transactions were made by Allen Company. Assume all investments are short-term and are readily marketable. Instructions Journalize the transactions. Answer: Gerber Corporation purchased the following long-term investments in stock securities on January 10, 2015: 10,000 shares of the […]

Prior period adjustments to income are reported in the current year’s income statement. Answer: If a corporation’s stock is traded on the major stock exchanges, the corporation must generally report periodically to a federal agency known as the ____________________. Answer: […]

Newton Company has the following accounts in its general ledger at July 31: Accounts Receivable $40,000 and Allowance for Doubtful Accounts $2,500. During August, the following transactions occurred. Oct. 15 Sold $15,000 of accounts receivable to Fast Factors, Inc. who […]

Foley Word Processing Service uses the straight-line method of depreciation. The company’s fiscal year end is December 31. The following transactions and events occurred during the first three years. Instructions Prepare the necessary entries. (Show computations.) Answer: A change in […]

If stock is issued in exchange for noncash assets, the assets should be valued at the ____________________ of the consideration ___________________ or the assets ____________________, whichever is more clearly evident. Answer: If a worksheet is used, financial statements can be […]

Return on common stockholders’ equity is computed by dividing net income by ending stockholders’ equity. Answer: In computing cash payments for operating expenses, a decrease in prepaid expenses is ______________ and an increase in accrued expenses payable is ______________ to […]

Which of the following show the proper effect of a stock split and a stock dividend? Answer: Internal control over cash disbursements is more effective when payments are made by ______________, rather than by ______________. Answer: check, cash The financial […]

Stine Co. sells Christmas angels. Patel determines that at the end of December, it has the following aging schedule of Accounts Receivable: Compute the net receivables based on the above information at the end of December. (There was no beginning […]

A debit balance in the Retained Earnings account is identified as a deficit. Answer: For each of the ratios listed below, indicate by the appropriate code letter, whether it is a liquidity ratio (L), a profitability ratio (P), or a […]

The entries in the Accounts Receivable Credit column of the cash receipts journal must be posted _______________ to the accounts in the accounts receivable subsidiary ledger and in _______________ to the control account in the general ledger. Answer: Identify the […]

The organization(s) primarily responsible for establishing generally accepted accounting principles is(are) the Answer: Treasury stock is a contra stockholders’ equity account. Answer: T Identify the factors that are considered in classifying an expenditure as a capital or a revenue expenditure. […]

Under generally accepted accounting principles, management has the choice of physically counting inventory on hand at the end of the year or using the gross profit method to estimate the ending inventory. Answer: Goodwill is an unusual asset in that […]

The accounts payable subsidiary ledger provides detailed information about amounts owed to creditors. Answer: The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest. Answer: T If […]

The cash proceeds from issuing par value stock may be equal to or greater than, but not less than par value. Answer: S. Lamar performed legal services for E. Garr. Due to a cash shortage, an agreement was reached whereby […]

Restricted retained earnings are available for preferred stock dividends but unavailable for common stock dividends. Answer: A subsidiary ledger is a group of control accounts which provides information to the managers for controlling the operation of the company. Answer: F […]

Ranier Company is authorized to issue 10,000 shares of 8%, $100 par value preferred stock and 500,000 shares of no-par common stock with a stated value of $1 per share. If Ranier issues 5,000 shares of preferred stock for land […]

The book value of an asset is equal to the a. asset’s fair value less its historical cost. b. blue book value relied on by secondary markets. c. replacement cost of the asset. d. asset’s cost less accumulated depreciation. Answer: […]

Stanton Corporation had net income for the year of $200,000 and a profit margin of 20%. If total average assets were $400,000, the asset turnover ratio was ____________ times. Answer: Yeloe Corporation sells 400 shares of common stock being held […]

After a transaction has been posted, the reference column in the journal should not be blank. Answer: Boxer Corporation is issuing $800,000 of 8%, 5-year bonds when potential bond investors want a return of 10%. Interest is payable semiannually. The […]

Carson Packaging Corporation began business in 2015 by issuing 30,000 shares of $3 par common stock for $8 per share and 12,000 shares of 6%, $10 par preferred stock for par. At year end, the common stock had a market […]

Sales Returns and Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly. Answer: The adjustments on a worksheet can be posted directly to the accounts in the ledger from the worksheet. Answer: F Halpern […]

The end of the period account balances after adjustments of Dixon Cleaners and Laundry are as follows: Instructions Prepare the end of the period closing entries for Dixon Cleaners and Laundry. You may omit journal entry explanations. Answer: A prior […]

Haven Company uses the percentage of sales method for recording bad debt expense. For the year, cash sales are $600,000 and credit sales are $2,700,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Haven […]

Which one of the following accounts is not closed at the end of an accounting period? a. Retained Earnings account b. Dividends account c. Service Revenue account d. Insurance Expense account Answer: Sandra Sikes sells exercise machines for home use. […]

Match the items below by entering the appropriate code letter in the space provided. 1> A twelve month accounting period 2> Expenses paid before they are incurred 3> Cost less accumulated depreciation 4> Divides the economic life of a business […]

Under IFRS, companies can choose which inventory system? Answer: All major financing and investing activities affect cash. Answer: F Cash which is restricted for a specific use should be separately reported. Answer: T C NMadisun Company issued common stock for […]

If the unit cost of inventory has continuously increased, the ______________, first-out inventory valuation method will result in a higher valued ending inventory than if the ______________, first-out method had been used. Answer: A corporation must be incorporated in each […]

Randie Company lends Luann Company $10,000 on April 1, accepting a four-month, 6% interest note. Randie Company prepares financial statements on April 30. What adjusting entry should be made before the financial statements can be prepared? Answer: When making a […]

Cost of goods sold for the year amounted to $130,000, and during the year, accounts payable ______________ by $9,000 and inventory ______________ by $5,000 resulting in cash paid to suppliers of $116,000. Answer: Richter Company sells merchandise on account for […]

The number of years of income statement information to be presented is a. 2 years under both GAAP and IFRS. b. 3 years under both GAAP and IFRS. c. 2 years under GAAP and 3 years under IFRS. d. 3 […]

Instructions: Place a check in the appropriate columns to designate whether each of the following accounts: (1) has a debit or credit normal balance; and (2) is an asset, liability, or stockholders’ equity account. Answer: Accrued revenues are amounts recorded […]

Why is it important to report discontinued operations separately from income from continuing operations? Answer: Buffalo Tom Cruises purchased a five-year insurance policy for its ships on April 1, 2015 for $60,000. Assuming that April 1 is the effective date […]

The following terms relate to the fundamental qualities of useful information. Match the key letter of the correct term with the descriptive statement below. _____ 1> Accounting information that is not biased toward one position or another. _____ 2> Providing […]

Which of the following presents key aspects of the process of accounting in the correct chronological order? a. Totaling, auditing, and budgeting b. Budgeting, recording, and communicating c. Recording, totaling, and auditing d. Identifying, recording, and communicating Answer: A company […]

To close net income to retained earnings, Income Summary is debited and Retained Earnings is credited. Answer: Postings are generally made more frequently to the general ledger control accounts than to the individual accounts in the subsidiary ledgers. Answer: F […]