Archives: Quiz

Stable Company issued $500,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the total interest cost of the bonds? a. $150,000 b. $160,000 c. $145,000 d. $140,000 Answer: Which of the following is […]

Winsor Company uses the perpetual inventory system and the LIFO method. The following information is available for the month of May: Instructions Prepare a schedule to show cost of goods sold and the value of the ending inventory for the […]

Prepare the necessary adjusting entry for each of the following: 1> Services provided but unrecorded totaled $700. 2> Accrued salaries at year-end are $1,000. 3> Depreciation on equipment for the year is $600. Answer: If a company has sales of […]

Under a double-entry system, show how the entry in each statement is entered in the ledger by using debit or credit to indicate the increase or decrease in the affected account. Answer: If the unit price of inventory is increasing […]

The process of excluding intercompany transactions in preparing consolidated statements is referred to as intercompany eliminations. Answer: At the end of an accounting period, all revenue and expense accounts are closed to a temporary account called ______________. Answer: Income Summary […]

Interest expense on an interest-bearing note is a. always equal to zero. b. accrued over the life of the note. c. only recorded at the time the note is issued. d. only recorded at maturity when the note is paid. […]

A capital lease requires the lessee to record the lease as a purchase of an asset. Answer: The residual claim on total assets of a business is known as ________________ and is equal to total assets minus total liabilities. Answer: […]

The ledger accounts of the Fabulous Muscles Gym at June 30, 2015 are shown below: Instructions Prepare a trial balance with the ledger accounts arranged in the proper financial statement order. Include the appropriate heading. Answer: Comparative information taken from […]

Adama Company reported a net loss of $6,000 for the year ended December 31, 2014. During the year, accounts receivable increased $15,000, merchandise inventory decreased $12,000, accounts payable decreased by $20,000, and depreciation expense of $12,000 was recorded. During 2014, […]

A Sales Returns and Allowances account is not debited if a customer a. returns defective merchandise. b. receives a credit for merchandise of inferior quality. c. utilizes a prompt payment incentive. d. returns goods that are not in accordance with […]

The following information is available for Lighten Company: Lighten’s cost of goods sold is a. $125,000. b. $120,000. c. $108,000. d. $105,000. Answer: The purpose of the post-closing trial balance is to a. prove that no mistakes were made. b. […]

If a plant asset is retired before it is fully depreciated and no salvage value is received, a. a gain on disposal occurs. b. a loss on disposal occurs. c. either a gain or a loss can occur. d. neither […]

Indicate where the purchase of land for cash would appear, if at all, on the indirect statement of cash flows. a. Operating activities section b. Investing activities section c. Financing activities section d. Does not represent a cash flow Answer: […]

Bond discount should be amortized to comply with a. the historical cost principle. b. the matching principle. c. the revenue recognition principle. d. conservatism. Answer: A reversing entry a. reverses entries that were made in error. b. is the exact […]

A credit balance in retained earnings represents a. the amount of cash retained in the business. b. a claim on specific assets of the corporation. c. a claim on the aggregate assets of the corporation. d. the amount of stockholders’ […]

Monthly and quarterly time periods are called a. calendar periods. b. fiscal periods. c. interim periods. d. quarterly periods. Answer: The interest rate investors demand for loaning funds is the a. market interest rate. b. stated rate. c. contractual interest […]

Ramos Corporation sold 400 shares of treasury stock for $45 per share. The cost for the shares was $35. The entry to record the sale will include a a. credit to Gain on Sale of Treasury Stock for $14,000. b. […]

The distribution of the burden between suppliers and demanders does not depend on ___. A. relative elasticities B. who writes the check to the government C. either relative elasticities or who writes the check to the government D. whether the […]

If profit occurs in year 2, then it should be divided by ___. A. r B. (1+r) C. r2 D. (1+r)2 Answer: There ___ to charge a price for the air or water: ____. A. is one way; levy a […]

Coase pointed out that when victims are few, government need not ___, but should simply ___. A. regulate behavior; charge a price B. charge a price; regulate behavior C. assign property rights; charge a price D. charge a price; assign […]

Local revenue comes mainly from the ___ tax. A. personal income B. corporate income C. property D. sales Answer: Selling versus giving permits: firms want ___; taxpayers should want ___. A. selling; giving B. giving; selling C. selling; selling D. […]

The estate tax is a tax on a person’s ___ at death plus ____ earlier in life. Answer: With federal spending 20% of GDP and borrowing 4% of GDP in the 1980s, for every $100 the federal government spent, ___ […]

Explain why government borrowing shifts the burden from present taxpayers to future taxpayers. Answer: If the supply curve of X is flat (elastic) and the demand curve is steep (inelastic), then a $2 tax on producers of X raises price […]

To make a free market work, government must provide A. protection of property rights. B. social security. C. health insurance. D. education. Answer: If labor supply is steeper than demand, a payroll tax on workers is born mostly by ___. […]

A public school system ______. A. has selective admissions and tuition B. has selective admissions and no tuition C. has no admissions testing and has tuition D. has no admissions testing and no tuition Answer: Another way to reduce the […]

The long-term federal budget outlook is challenging because _______ steadily as a percent of GDP. A. tax revenue is projected to fall B. low-income assistance is projected to rise C. defense spending is projected to rise D. Medicare plus Medicaid […]

If a citizen doesn’t pay for national defense, the citizen ______ get it. Hence, national defense is a ___ good. A. doesn’t; public B. doesn’t; private C. does; public D.does; private Answer: An individual requirement is aimed at preventing ______. […]

The balance in the Unrealized Gain or Loss’”Equity account will a. appear on the balance sheet as a contra asset. b. appear on the income statement under Other Expenses and Losses. c. appear as a deduction in the stockholders’ equity […]

Wainwright Stores accepts both its own and national credit cards. During the year the following selected summary transactions occurred. Instructions (a) Journalize the transactions for Wainwright Stores. (b) Indicate the statement presentation of the financing charges and the credit card […]

Stable Company issued $500,000 of 6%, 5-year bonds at 98, with interest paid annually. Assuming straight-line amortization, what is the total interest cost of the bonds? a. $150,000 b. $160,000 c. $145,000 d. $140,000 Answer: Stanley Company had inventory of […]

Stockholders are most interested in evaluating a. liquidity and solvency. b. profitability and solvency. c. liquidity and profitability. d. marketability and solvency. Answer: In the Garnet Company, the beginning and ending balances in Land were $198,000 and $240,000 respectively. During […]

The use of reversing entries a. is a required step in the accounting cycle. b. changes the amounts reported in the financial statements. c. simplifies the recording of subsequent transactions. d. is required for all adjusting entries. Answer: A stock […]

What do the following classes of ratios measure? (a) Liquidity ratios. (b) Profitability ratios. (c) Solvency ratios. Answer: At April 30, Yaddof Company has the following bank information: cash balance per bank $2,300; outstanding checks $390; deposits in transit $275; […]

Which of the following statements about liabilities in incorrect? Under IFRS, companies sometimes show a. liabilities before assets. b. long-term liabilities before current assets. c. current liabilities netted against current assets. d. liabilities in order of magnitude. Answer: Goods in […]

Which one of the following items would not be considered cash? a. Coins b. Money orders c. Currency d. Postdated checks Answer: At May 1, 2015, Kibbee Company had beginning inventory consisting of 200 units with a unit cost of […]

The use of fair value to report assets a. is not allowed under GAAP or IFRS. b. is required by GAAP and IFRS. c. is increasing under GAAP and IFRS, but GAAP has adopted it more broadly. d. is increasing […]

For each of the following accounts indicate (a) the type of account (Asset, Liability, Stockholders’ Equity, Revenue, Expense), (b) the debit and credit effects, and (c) the normal account balance. Example 0 Cash a. Asset account b. Debit increases, credit […]

Journal entries are required by the depositor for all of the following except a. collection of a note receivable. b. bank errors. c. bank service charges. d. an NSF check. Answer: IFRS defines market for lower-of-cost-or market as a. net […]

On July 1, 2015, Jenks Company purchased the copyright to Jackson Computer tutorials for $324,000. It is estimated that the copyright will have a useful life of 5 years with an estimated salvage value of $24,000. The amount of Amortization […]

In its first year of operations, Arid Corporation had the following transactions pertaining to its $20 par value preferred stock. Instructions (a) Journalize the transactions. (b) Indicate the amount to be reported for (1) preferred stock, and (2) paid-in capital […]

The operating expense section of an income statement for a wholesaler would not include a. freight-out. b. utilities expense. c. cost of goods sold. d. insurance expense. Answer: Match the principle of internal control to each of the following cases. […]

A corporation purchases 30,000 shares of its own $15 par common stock for $30 per share, recording it at cost. What will be the effect on total stockholders’ equity? a. Increase by $450,000 b. Decrease by $900,000 c. Increase by […]

The following information was available for Pete Company at December 31, 2015: beginning inventory $90,000; ending inventory $70,000; cost of goods sold $984,000; and sales $1,350,000. Pete’s inventory turnover in 2015 was a. 10.9 times. b. 12.3 times. c. 14.1 […]

The selection of an appropriate inventory cost flow assumption for an individual company is made by a. the external auditors. b. the SEC. c. the internal auditors. d. management. Answer: The historical cost principle requires that when assets are acquired, […]

Present value is based on a. the dollar amount to be received. b. the length of time until the amount is received. c. the interest rate. d. all of these. Answer: Which of the following is a true statement about […]

If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the a. Inventory account will be increased. b. Inventory account will not be affected. c. seller will bear the freight cost. d. carrier will […]

The allowance method of accounting for uncollectible accounts is required if a. the company makes any credit sales. b. bad debts are significant in amount. c. the company is a retailer. d. the company charges interest on accounts receivable. Answer: […]

Transactions are initially recorded in the a. general ledger. b. trial balance. c. general journal. d. balance sheet. Answer: Horton Company uses four special journals, (cash receipts, cash payments, sales, and purchases journal) in addition to a general journal. On […]

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? a. FIFO b. LIFO c. Average Cost d. Income tax expense for the period will be the same under all […]

The primary source of revenue for a wholesaler is a. investment income. b. service fees. c. the sale of merchandise. d. the sale of fixed assets the company owns. Answer: Under IFRS, the term reserves relates to each of the […]