Archives: Quiz

The ratios used in evaluating a company’s liquidity and short-term debt paying ability that complement each other are the ______________ ratio and the ______________ ratio. Answer: Each bondholder may vote for the board of directors in proportion to the number […]

The expense recognition principle requires that expenses be matched with revenues. Answer: Sales returns and allowances and sales discounts are subtracted from sales in reporting net sales in the income statement. Answer: T Natural resources are long-lived productive assets that […]

An inexperienced accountant made the following entries. In each case, the explanation to the entry is correct. Instructions Prepare the correcting entries. Answer: If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the […]

The balance in the Prepaid Rent account before adjustment at the end of the year is $21,000, which represents three months’ rent paid on December 1. The adjusting entry required on December 31 is to a. debit Rent Expense, $7,000; […]

An adjusted trial balance should be prepared before the adjusting entries are made. Answer: After all closing entries have been journalized and posted, the final step in the accounting cycle is to prepare a ______________ trial balance. Answer: post-closing With […]

Show Company had total operating expenses of $153,000 in 2014, which included Depreciation Expense of $30,000. Also during 2014, prepaid expenses decreased by $9,500 and accrued expenses increased by $8,500. Instructions Calculate the amount of cash payments for operating expenses […]

The board of directors of Moore Corporation is considering two plans for financing the purchase of new plant equipment. Plan #1 would require the issuance of $5,000,000, 6%, 20-year bonds at face value. Plan #2 would require the issuance of […]

On January 2, 2012, Porter Corporation issued 30,000 shares of 5% cumulative preferred stock at $100 par value. On December 31, 2015, Porter Corporation declared and paid its first dividend. What dividends are the preferred stockholders entitled to receive in […]

On February 1, 2015, Fugit Company sells merchandise on account to Armen Company for $6,500. The entry to record this transaction by Fugit Company is Answer: There are three parties to a check: (1)_______________, (2)______________, and the (3)______________. Answer: maker, […]

The information needs of a specific user of financial accounting information depends upon the kinds of decisions that user makes. Identify the major users of accounting information and discuss what questions financial accounting information answers for each group of users. […]

The financial statement columns of the worksheet for Booer Company as of December 31, 2015 are as follows: Instructions Prepare a classified balance sheet for Booer Company. Answer: For accounting purposes, business transactions should be kept separate from the personal […]

A good internal control feature is to have several employees choose one person to punch all of their time cards. Answer: Other receivables include nontrade receivables such as loans to company officers. Answer: T Indicate in the space provided by […]

Your friend, Dean, has opened a movie theater. Dean states that he does not have time to develop and implement a system of internal controls. a. Provide Dean with the objectives of a system of internal controls. b. Explain to […]

In accordance with the historical cost principle, brokerage fees should be added to the cost of an investment. Answer: Treasury stock purchased for $25 per share that is reissued at $20 per share, results in a Loss on Sale of […]

Which of the following journal entries is recorded correctly and in the standard format? Answer: A fellow classmate is confused about how debits and credits relate to the basic accounting equation. State the basic accounting equation, convert it into the […]

Holmes Corporation manufactures electronic components for use in many consumer products. Their raw materials are purchased literally from all over the world. Depending on the country involved, purchase terms vary widely. Some suppliers, for example, require full prepayment, while others […]

On May 1, Howard Corporation purchased 2,000 shares of its $10 par value common stock at a cash price of $15/share. On July 15, 900 shares of the treasury stock were sold for cash at $17/share. Instructions Journalize the two […]

Under the cost method, dividends received from an investee company are credited to the _______________ account, whereas under the equity method, dividends received from an investee company are credited to the _______________ account. Answer: Identify which principle of internal control […]

Which account below is not a subdivision of retained earnings? a. Dividends b. Revenues c. Expenses d. Common stock Answer: At January 31, 2015, the balance in Aislers Inc.’s supplies account was $750. During February, Aislers purchased supplies of $900 […]

In calculating depreciation, both plant asset cost and useful life are based on estimates. Answer: The dividends account is a permanent account whose balance is carried forward to the next accounting period. Answer: F F Using the cash payments journal […]

Jim’s Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Jim’s Pharmacy make to show the March remittance? Answer: Interest expense on a note payable is […]

The lower-of-cost-or-market basis is an example of the accounting concept of conservatism. Answer: A company uses the periodic inventory method and the beginning inventory is overstated by $7,000 because the ending inventory in the previous period was overstated by $7,000. […]

Which board(s) has(have) faced bitter opposition when working to implement fair value measurement for financial instruments? a. FASB, but not IASB. b. IASB, but not FASB. c. both FASB and IASB. d. neither FASB nor IASB. Answer: Costs incurred to […]

The process of transferring the information in the journal to the general ledger is called posting. Explain the posting process, including the importance of the journal page number and the account numbers. Answer: The ________________ principle states that assets should […]

An unrealized gain or loss on trading securities is reported as a separate component of stockholders’ equity. Answer: Financial information is presented below for two different companies. Instructions Determine the missing amounts. Answer: (*Missing amount) F On January 1, 2014, […]

The accounts receivable turnover is calculated by dividing _________________ by average ___________________. Answer: The gross profit method is based on the assumption that the rate of gross profit remains constant from one year to the next. Answer: T Transactions for […]

The renting of an apartment is an example of a capital lease. Answer: Harnish Company needs to make adjusting entries for each of the following reconciling items. Identify the account to be debited and the account to be credited in […]

Which of the following errors will cause a trial balance to be out of balance? The entry to record a payment on account was a. not posted at all. b. posted as a debit to Cash and a credit to […]

Management of a business enterprise is the major external user of information. Answer: Recognition of depreciation permits the accumulation of cash for the replacement of the asset. Answer: F If an acquired franchise or license has an indefinite life, the […]

The _________________ assumption requires that the activities of an entity be kept separate from the activities of its owner. Answer: Trane Corporation has the following stockholders’ equity accounts: Preferred Stock Paid-in Capital in Excess of Par’”Preferred Stock Common Stock Paid-in […]

Match the items below by entering the appropriate code letter in the space provided. 1> An entry that involves three or more accounts. 2> Transferring journal entries to ledger accounts. 3> The side which increases an account. 4> A list […]

Cost of goods sold is determined only at the end of the accounting period in a. a perpetual inventory system. b. a periodic inventory system. c. both a perpetual and a periodic inventory system. d. neither a perpetual nor a […]

Profitability ratios are frequently used as a basis for evaluating management’s operating effectiveness. Answer: At June 1, 2015, Coquehcot Industries had an accounts receivable balance of $12,000. During the month, the company performed credit services of $30,000 and collected accounts […]

Allowance for Doubtful Accounts is a _____________ account which is ______________ from Accounts Receivable on the balance sheet. Answer: The fair value of a plant asset is always the same as its book value. Answer: F Owners’ claims to total […]

Identify which of the following reconciling items would require an adjusting entry to be made by Danielle Doyle Company. 1> Deposits in transit totaled $2,000. 2> A check written to the company for $415 by Cartography Company was returned NSF. […]

Greyhound Stables, Inc. operates several dog racing tracks throughout the United States. Since most facilities are outdoor tracks only, most of the cash receipts for Greyhound are received from April through October. These funds are usually invested in short-term, very […]

The general ledger of Link Company provides the following information: The company’s net sales for the year was $2,200,000 and cost of goods sold amounted to $1,500,000. Instructions Compute the following: (a) Cash receipts from customers. (b) Cash payments to […]

Vertical and horizontal analyses are concerned with the format used to prepare financial statements. Answer: The following information was used to prepare the March 2015, bank reconciliation for Walker Machine Works. Identify the items that require adjustment to the cash […]

An incorrect debit to Accounts Receivable instead of the correct account Notes Receivable does not require a correcting entry because total assets will not be misstated. Answer: When recording bond interest, Interest Receivable is reported as a fixed asset in […]

Stocks traded on the New York Stock Exchange are considered readily marketable. Answer: The percentage of sales basis for estimating uncollectible accounts always results in more Bad Debt Expense being recognized than the percentage of receivables basis. Answer: F Short-term […]

The specific identification method of inventory valuation is desirable when a company sells a large number of low-unit cost items. Answer: Unearned revenues should be classified as Other Revenues and Gains on the Income Statement. Answer: F In preparing a […]

Corporations invest excess cash for short periods of time in each of the following except a. equity securities. b. highly liquid securities. c. low-risk securities. d. government securities. Answer: Liabilities are generally classified on a balance sheet as a. small […]

Ford Co. uses a periodic inventory system. Its records show the following for the month of May, in which 75 units were sold. Instructions Compute the ending inventory at May 31 and cost of goods sold using the FIFO and […]

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed. Answer: Consolidated financial statements should be prepared only when […]

Firms use physical controls primarily to safeguard their assets. Answer: A debit memorandum could show the collection of a note receivable by the bank. Answer: F Identify which of the following would be classified as current liabilities as of December […]

McKendrick Shoe Store has a beginning inventory of $45,000. During the period, purchases were $195,000; purchase returns, $6,000; and freight-in $15,000. A physical count of inventory at the end of the period revealed that $30,000 was still on hand. The […]

Goodwill is not recognized in accounting unless it is acquired from purchasing another business enterprise. Answer: Personnel who handle cash receipts should have the option of taking a vacation or not. Answer: F Garth Company sold goods on account to […]

On October 1, Steve’s Carpet Service borrows $350,000 from First National Bank on a 3-month, $350,000, 8% note. The entry by Steve’s Carpet Service to record payment of the note and accrued interest on January 1 is Answer: Transactions are […]

Current liabilities are obligations that the company is to pay within the coming year. Answer: Wise Company had the following transactions. 1> Issued 7,000 shares of common stock with a stated value of $10 for $130,000. 2> Issued 2,000 shares […]

If a company uses the FIFO cost flow assumption, the cost of goods sold for the period will be the same under a perpetual or periodic inventory system. Answer: The Financial Accounting Standards Board is a part of the Securities […]