Archives: Quiz

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Monetary unit assumption. b. Economic entity assumption. c. Periodicity assumption. d. Going concern assumption. Answer: The standard form […]

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is: a. $7,155. b. $6,726. c. $7,584. d. $6,750. Answer: […]

An adjusting entry is not required for a. outstanding checks. b. collection of a note by the bank. c. NSF checks. d. bank service charges. Answer: A flower shop makes a large sale for $1,200 on November 30. The customer […]

Fitzgerald Company wrote checks totaling $34,160 during October and $37,300 during November. $32,480 of these checks cleared the bank in October, and $36,440 cleared the bank in November. What was the amount of outstanding checks on November 30? a. $2,860 […]

Saira, Inc. has the following income statement (in millions): Using vertical analysis, what percentage is assigned to Cost of Goods Sold? a. 40% b. 60% c. 100% d. None of these answer choices are correct. Answer: The receivable that is […]

The X Company has the following stock outstanding: Preferred stock dividends are in arrears for 2013 and 2014. If the company declares and pays $150,000 in dividends in 2015, the amount received by the preferred stockholders would be a. $84,000. […]

The closing entry process consists of closing a. all asset and liability accounts. b. out the retained earnings account. c. all permanent accounts. d. all temporary accounts. Answer: Prior period adjustments are reported a. in the footnotes of the current […]

The income statement for the month of June, 2015 of Camera Obscura Enterprises contains the following information: The entry to close the expense accounts includes a a. debit to Income Summary for $1,300. b. credit to Rent Expense for $1,500. […]

Match the basic step in the recording process described by each of the following statements. A. Analyze each transaction B. Enter each transaction in a journal C. Transfer journal information to ledger accounts ____ 1> This step is called posting. […]

The current source of “GAAP” in the private sector is the a. Accounting Principles Board. b. Internal Revenue Service. c. Financial Accounting Standards Board. d. Securities Exchange Commission. Answer: Jack’s, a popular pizza hang-out, has a thriving delivery business. Jack’s […]

The post-closing trial balance contains only a. income statement accounts. b. balance sheet accounts. c. balance sheet and income statement accounts. d. income statement, balance sheet, and retained earnings statement accounts. Answer: A lease where the intent is temporary use […]

Which of the following assets does not decline in service potential over the course of its useful life? a. Equipment b. Furnishings c. Land d. Fixtures Answer: The following financial statement information is available for James Corporation: The profit margin […]

Cross-footing a cash receipts journal means a. the equality of debits and credits in the journal has been proved. b. each line of the journal has a horizontal total. c. the columns of the journal have been cross-referenced. d. all […]

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 […]

Delta72 Company received a cash advance of $700 from a customer. As a result of this event, a. assets increased by $700. b. stockholders’ equity increased by $700. c. liabilities decreased by $700. d. assets and stockholders’ equity increased by […]

If a parent company acquires wholly owned subsidiary at an amount greater than the book value, the excess should be a. allocated to expense on the date of acquisition. b. allocated to identifiable assets to the extent of their fair […]

Short-term investments are a. (1) readily marketable and (2) intended to be converted into cash after the current year or operating cycle, whichever is shorter. b. (1) readily marketable and (2) intended to be converted into cash within the current […]

Mize Company owns 30% interest in the stock of Lyte Corporation. During the year, Lyte pays $20,000 in dividends to Mize, and reports $300,000 in net income. Mize Company’s investment in Lyte will increase Mize ‚s net income by a. […]

In a periodic inventory system, a return of defective merchandise to a supplier is recorded by crediting a. Accounts Payable. b. Inventory. c. Purchases. d. Purchase Returns and Allowances. Answer: Which of the following would not be needed to determine […]

On a classified balance sheet, inventory is classified as a. an intangible asset. b. property, plant, and equipment. c. a current asset. d. a long-term investment. Answer: The usual sequence of steps in the transaction recording process is: a. journal […]

The calculation of depreciation using the declining balance method, a. ignores salvage value in determining the amount to which a constant rate is applied. b. multiplies a constant percentage times the previous year’s depreciation expense. c. yields an increasing depreciation […]

A credit is not the normal balance for which account listed below? a. Common stock account b. Revenue account c. Liability account d. Dividends account Answer: Each of the following is correct regarding bonds except they are a. a form […]

Internal control is defined, in part, as a plan that safeguards a. all balance sheet accounts. b. assets. c. liabilities. d. capital stock. Answer: The entry to record an installment payment on a long-term note payable is a. Mortgage Payable […]

The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which a. is used for tax purposes. b. must be used for financial statement purposes. c. is required by the SEC. d. expenses an asset over a single year […]

If the market interest rate is greater than the contractual interest rate, bonds will sell a. at a premium. b. at face value. c. at a discount. d. only after the stated interest rate is increased. Answer: The consistent application […]

The steps in the preparation of a worksheet do not include a. analyzing documentary evidence. b. preparing a trial balance on the worksheet. c. entering the adjustments in the adjustment columns. d. entering adjusted balances in the adjusted trial balance […]

Which of the following would not be an adjustment to net income using the indirect method? a. Depreciation Expense b. An increase in Prepaid Insurance c. Amortization Expense d. An increase in Land Answer: Lager Company has other operating expenses […]

If a corporation distributes cash to its stockholders, then a. there has been a violation of accounting principles. b. stockholders’ equity will increase. c. stockholders’ equity will decrease. d. there will be a new liability showing the stockholders owes money […]

Replenishing the petty cash fund requires a. a debit to Cash. b. a credit to Petty Cash. c. a debit to various expense accounts. d. no accounting entry. Answer: Which of the following receivables would not be classified as an […]

Arens Corporation purchased 4,000 shares of its $5 par value common stock for a cash price of $10 per share. Two months later, Arens sold the treasury stock for a cash price of $8 per share. Instructions Prepare the journal […]

A truck that cost $72,000 and on which $60,000 of accumulated depreciation has been recorded was disposed of for $18,000 cash. The entry to record this event would include a a. gain of $6,000. b. loss of $6,000. c. credit […]

The income statement for the year 2015 of Fugazi Co. contains the following information: The entry to close the expense accounts includes a a. debit to Income Summary for $7,500. b. credit to Income Summary for $7,500. c. debit to […]

The basic accounting equation may be expressed as a. Assets = Equities. b. Assets ‘“ Liabilities = Stockholders’ Equity. c. Assets = Liabilities + Stockholders’ Equity. d. All of these answers are correct. Answer: A small stock dividend is defined […]

The sale of bonds above face value a. is a rare occurrence. b. will cause the total cost of borrowing to be less than the bond interest paid. c. will cause the total cost of borrowing to be more than […]

The acid-test (quick) ratio a. is used to quickly determine a company’s solvency and long-term debt paying ability. b. relates cash, short-term investments, and net receivables to current liabilities. c. is calculated by taking one item from the income statement […]

Which of the following is not an external user of accounting data? a. Company officers b. Regulatory agency c. Labor union d. Taxing authority Answer: Which of the following is false? a. Current assets are listed in the order of […]

Molina Company had a $700 credit balance in Allowance for Doubtful Accounts at December 31, 2015, before the current year’s provision for uncollectible accounts. An aging of the accounts receivable revealed the following: Instructions (a) Prepare the adjusting entry on […]

Which of the following factors does not affect the initial market price of a stock? a. The company’s anticipated future earnings b. The par value of the stock c. The current state of the economy d. The expected dividend rate […]

Shipping terms of FOB destination mean that the a. purchaser is responsible for the shipping charges. b. shipping charges are debited to Freight-Out. c. items should be in the purchaser’s inventory account at year-end if the items are in transit. […]

English Company billed its customers a total of $1,785,000 for the month of November. The total includes a 5% state sales tax. Instructions (a) Determine the proper amount of revenue to report for the month. (b) Prepare the general journal […]

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: On January 1, Soft Corporation had 80,000 […]

Eaton Company’s ledger at the end of the current year shows Accounts Receivable of $150,000. Instructions a. If Allowance for Doubtful Accounts has a credit balance of $4,400 in the trial balance and bad debts are expected to be 10% […]

Horizontal analysis evaluates a series of financial statement data over a period of time a. that has been arranged from the highest number to the lowest number. b. that has been arranged from the lowest number to the highest number. […]

In preparing its bank reconciliation for the month of April 2015, Delano, Inc. has available the following information. What should be the adjusted cash balance at April 30, 2015? a. $77,260. b. $77,600. c. $78,020. d. $78,200. Answer: The following […]

Which one of the following payroll taxes does not result in a payroll tax expense for the employer? a. FICA tax b. Federal income tax c. Federal unemployment tax d. State unemployment tax Answer: The December 31, 2014 balance sheet […]

Cobb Company’s accounting records show the following at the year ending on December 31, 2015: Using the periodic system, the cost of goods sold is a. $378,000. b. $383,000. c. $393,600. d. $404,200. Answer: Deerhoof Company purchases equipment for $2,700 […]

The following information was taken from the financial statements of Lawson Company: Instructions (a) Compute the net sales for each year. (b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year. […]

On January 1, 2014, Gene Corp. paid $800,000 for 100,000 shares of Onofine Company’s common stock, which represents 30% of Onofine ‚s outstanding common stock. Onofine reported net income of $200,000 and paid cash dividends of $60,000 during 2014. Gene […]

Generally, notice to the agent is notice to the principal if it relates to the business of the agency. Answer: When the express terms of a contract and the past course of dealings are in conflict, the express terms will […]

In order to exclude the implied warranty of merchantability, the seller must put the exclusion in writing. Answer: People who are involved in a nonprofit association are considered partners. Answer: FALSE Goods sold “with all faults” are sold without the […]