Archives: Quiz

Match the following external users of financial accounting information with the type of decision that user will make with the information. a. Creditor b. Investor c. Regulatory Agency d Internal Revenue Service _______ (1) Is the company operating within prescribed […]

A typical investment to house excess cash until needed is a. stocks of companies in a related industry. b. debt securities. c. low-risk, highly liquid securities. d. stock securities. Answer: Bacher Company developed the following reconciling information in preparing its […]

On the statement of cash flows worksheet, a. significant noncash investing and financing activities are not entered in the reconciling columns. b. a decrease in cash will be offset by a debit in the reconciling items columns at the bottom […]

Presented below are two independent situations: (a) Yount Company exchanged an old machine (cost $150,000 less $90,000 accumulated depreciation) plus $10,000 cash for a new machine. The old machine had a fair value of $54,000. Prepare the entry to record […]

Sargent Corporation bought equipment on January 1, 2015. The equipment cost $360,000 and had an expected salvage value of $60,000. The life of the equipment was estimated to be 6 years. Assuming straight-line deprecation, the book value of the equipment […]

Which of the following items would not be identified if a contingent liability were disclosed in a financial statement note? a. The nature of the item b. The expected outcome of the future event c. A numerical probability of the […]

Mott Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $4,000. […]

The economic entity assumption requires that the activities a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from […]

Which accounts in the general ledger are affected when the monthly posting is made from the sales journal? a. Accounts Receivable; accounts receivable subsidiary accounts b. Accounts receivable subsidiary accounts; Sales Revenue c. Accounts Receivable; Sales Revenue d. Accounts Receivable; […]

Debit postings to the individual accounts in an accounts receivable subsidiary ledger generally come from the a. sales journal. b. cash receipts journal. c. purchases journal. d. cash payments journal. Answer: A $100 petty cash fund has cash of $16 […]

Patton Company bought real estate, on which there was an old office building, for $500,000. It paid $50,000 in cash as a down payment and signed a 10% mortgage for the remainder. It immediately had the old building razed at […]

A purchased patent has a legal life of 20 years. It should be a. expensed in the year of acquisition. b. amortized over 20 years regardless of its useful life. c. amortized over its useful life if less than 20 […]

Which of the following accounts is not included in the computation of net sales? a. Sales Discounts b. Sales c. Sales Returns and Allowances d. Freight Out Answer: The information in a statement of cash flows will not help investors […]

Stahl Consulting started the year with total assets of $60,000 and total liabilities of $15,000. During the year, the business recorded $48,000 in catering revenues and $30,000 in expenses. Stahl issued stock of $9,000 and paid dividends of $15,000 during […]

North Company reports the following amounts for 2015: The 2015 rate of return on common stockholders’ equity is: a. 5.8%. b. 6.6%. c. 8.0%. d. 9.1%. Answer: A factory machine was purchased for $375,000 on January 1, 2015. It was […]

During the year, Salaries Payable decreased by $5,000. If Salary Expense amounted to $174,000 for the year, the cash paid to employees (including deductions from gross pay) is a. $179,000. b. $174,000. c. $169,000. d. $184,000. Answer: A statement of […]

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 […]

A journal provides a. the balances for each account. b. information about a transaction in several different places. c. a list of all accounts used in the business. d. a chronological record of transactions. Answer: An increase in an expense […]

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. […]

Determine the interest on the following notes: (a) $2,000 at 6% for 90 days. (b) $900 at 9% for 5 months. (c) $3,000 at 8% for 60 days (d) $1,600 at 7% for 6 months Answer: Which of the following […]

Double Nickels Company purchased equipment for $9,000 on January 1, 2015. The company expects to use the equipment for 3 years. It has no salvage value. Monthly depreciation expense on the asset is a. $0. b. $250. c. $3,000. d. […]

Blank checks a. should be safeguarded. b. should be pre-signed. c. do not need to be safeguarded since they must be signed to be valid. d. should not be prenumbered. Answer: For companies that use a perpetual inventory system, all […]

On May 1, 2015, Pinkley Company sells office furniture for $300,000 cash. The office furniture originally cost $750,000 when purchased on January 1, 2008. Depreciation is recorded by the straight-line method over 10 years with a salvage value of $75,000. […]

Sales Returns and Allowances is increased when a. an employee does a good job. b. goods are sold on credit. c. goods that were sold on credit are returned. d. customers refuse to pay their accounts. Answer: An account will […]

Which of the following is a true statement about inventory systems? a. Periodic inventory systems require more detailed inventory records. b. Perpetual inventory systems require more detailed inventory records. c. A periodic system requires cost of goods sold be determined […]

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company? a. Current ratio b. Acid-test ratio c. Asset turnover d. Accounts receivable turnover Answer: The […]

Salon Company originally issued 4,000 shares of $10 par value common stock for $120,000 ($30 per share). Salon subsequently purchases 400 shares of treasury stock for $27 per share and resells the 400 shares of treasury stock for $29 per […]

Which of the following methods of computing depreciation is production based? a. Straight-line b. Declining-balance c. Units-of-activity d. None of these answer choices are correct. Answer: Additions and improvements a. occur frequently during the ownership of a plant asset. b. […]

At June 30, Yaddof Company has the following bank information: cash balance per bank $1,800; outstanding checks $340; deposits in transit $275; credit memo for interest $75; bank service charge $10. What is Mareska’s adjusted cash balance on June 30? […]

Postings are made daily to subsidiary ledgers so that a. employees are kept busy. b. debits equal credits. c. individual account information is kept current. d. the control account will balance to the subsidiary ledger. Answer: An aging of a […]

If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11 years, what annual rate of interest will she be earning on her investment? a. 8% b. 8.5% c. 9% d. 10% Answer: Ward Corporation […]

Which of the following is not a true statement about a multiple-step income statement? a. Operating expenses are similar for merchandising and service enterprises. b. There may be a section for nonoperating activities. c. There may be a section for […]

The principles of internal control include all of the following except a. establishment of responsibility. b. combining of duties. c. physical, mechanical, and electronic controls. d. independent internal verification. Answer: Depreciable cost is the a. book value of an asset […]

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates a. no errors have been made. b. no errors can be discovered. c. that all accounts reflect correct balances. d. […]

King Corporation had net income of $260,000 and paid dividends of $40,000 to common stockholders and $10,000 to preferred stockholders in 2015. King Corporation’s common stockholders’ equity at the beginning and end of 2015 was $870,000 and $1,130,000, respectively. There […]

[a) What is the term used to describe the owner’s equity section of a corporation? [b) Identify the two owners’ equity accounts in a corporation and indicate the purpose of each. Answer: The entry to replenish a petty cash fund […]

In 2015, Warehouse 13 had net credit sales of $750,000. On January 1, 2015, Allowance for Doubtful Accounts had a credit balance of $16,000. During 2015, $29,000 of uncollectible accounts receivable were written off. Past experience indicates that the allowance […]

A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is a. common size analysis. b. horizontal analysis. c. ratio analysis. d. vertical analysis. Answer: Which of the following events cannot be quantified […]

Under IFRS, equity investments are generally recorded and reported at a. amortized cost. b. fair value. c. original cost. d. maturity value. Answer: Dividends are predominantly paid in a. earnings. b. property. c. cash. d. stock. Answer: c A company […]

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is a. $1,200. b. $4,484. c. $4,477. d. $4,200. Answer: […]

Which of the following items will increase inventoriable costs for the buyer of goods? a. Purchase returns and allowances granted by the seller b. Purchase discounts taken by the purchaser c. Freight charges paid by the seller d. Freight charges […]

Bates Company has a $300,000 balance in Accounts Receivable and a $1,000 debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled $1,800,000. What is the amount of the bad debt adjusting entry if Bates uses a […]

The interest charged on a $50,000, 60-day note payable, at the rate of 6%, would be a. $3,000. b. $1,667. c. $750. d. $500. Answer: Adjusting entries are a. not necessary if the accounting system is operating properly. b. usually […]

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 […]

A comparative balance sheet for Halpern Corporation is presented below: Additional information: 1> Net loss for 2015 is $20,000. 2> Cash dividends of $14,000 were declared and paid in 2015. 3> Land was sold for cash at a loss of […]

The following ledger accounts are used by the Sebastopol Dog Track: Accounts Receivable Prepaid Advertising Prepaid Rent Unearned Ticket Revenue Advertising Expense Rent Expense Ticket Revenue Sales Revenue Instructions For each of the following transactions below, prepare the journal entry […]

Short-term liquidity ratios include the a. profit margin ratio. b. payout ratio. c. debt to assets ratio. d. acid-test ratio. Answer: Either the straight-line method or the effective-interest method of amortization will always result in a. the same amount of […]

Anne Company has total cash register receipts of $39,690. This total includes a 5% sales tax. The entry to record the receipts will include a a. debit to Sales Tax Expense for $1,890. b. credit to Sales Revenue for $36,690. […]

Of the items below, the one that appears first on the statement of cash flows is a. noncash investing and financing activities. b. net increase (decrease) in cash. c. cash at the end of the period. d. cash at the […]

Profitability ratios include a. times interest earned. b. inventory turnover. c. the payout ratio. d. the acid-test ratio. Answer: The principles of internal control activities are used in the a. U.S. but not globally. b. internationally but not in the […]