Archives: Quiz

Situation where the investor owns less than 20% of the common stock of another company and therefore is not attempting to exert influence over the operating and financial policies of the investee Match the following terms to their correct definition: […]

Which of the following statements is false regarding the reason that inventory costs are recorded as expenses when sold rather than when incurred? a. It gives the user’s of the company’s financial statements a clearer picture of profitability. b. It […]

Refer to A2Z Events. What are the effects on the accounting equation when the company writes off a bad debt under the allowance method? A2Z Events The following data are from the company’s records for 2013: a. Assets decrease and […]

Which of the following statements regarding bonds payable is true? a. Generally, bonds are issued in denominations of $100. b. When an issuing company’s bonds are traded in the ‘secondary” market, the company will receive part of the proceeds when […]

A company purchased inventory on credit. The effect of this transaction is that the a. earnings per share decreased. b. earnings per share increased. c. working capital increased. d. debt-to-equity ratio increased. Refer to Rags to Riches. Which of the […]

A depositor may endorse checks with a rubber stamp. ____________________ is the amount by which business assets exceed the business liabilities. Answer: Owner’s equity While certain distinctive problems may arise in keeping the accounts of any specific enterprise, the principles […]

An erasure may suggest that you are hiding something. When the trial balance indicates that the ledger is in balance, you can assume there are no errors in the ledger. Answer: F The business or professional person using the cash […]

No entries are made in the Posting Reference column in a two-column journal when journalizing. The information in the Posting Reference columns of the journal and the ledger that provides a link between the journal and the ledger is known […]

The journal entry to record payroll transactions for the accounting period is to debit Wages and Salaries Expense for the gross pay and credit the appropriate liability and cash accounts. A business that makes a product to sell is called […]

(Appendix) The three types of business activities are operating activities, investing activities, and financing activities. A form of balance sheet that shows the liabilities and owner’s equity sections below the assets section is called an account form of balance sheet. […]

Financial statements are normally prepared at the end of the fiscal year. A special ledger account entitled “Change Fund” is used to keep track of day-to-day shortages and overages of cash. Answer: F A withholding allowance exempts a specific dollar […]

Doug Allen has decided to go into the insect extermination business and to operate as Doug’s Extermination Service. The following transactions were completed during the first month of operations, May, 20–. Enter the transactions in the T accounts, then enter […]

An employee’s total earnings is referred to as net pay. A credit journal entry to the cash short and over account is used to record a cash overage. Answer: T When entering titles of accounts in the two-column journal, the […]

A receipt called a petty cash voucher should be prepared for every payment from the petty cash fund. The ____________________ requires employers to pay overtime at 1 1/2 times the regular rate to any hourly employee who works over 40 […]

Adjusting and closing entries are made differently in the combination journal and in the general journal. The accounting equation must remain in balance. Answer: T A computer workstation cost $28,000, has an expected life of 7 years, and an expected […]

A balance sheet that classifies (or groups) items by similarities is called a unified balance sheet. Payroll taxes withheld to provide Social Security and Medicare benefits are called ____________________. Answer: FICA taxes A depositor is not responsible or liable to […]

When an account balance is not affected by an adjusting entry, the amount shown in the Trial Balance columns is extended directly to the Adjusted Trial Balance columns. SUTA tax payments vary among states but are usually required on a […]

The cost of plant assets less the accumulated depreciation is called the salvage value of the asset. ____________________ is a method of matching an asset’s original cost against the revenues produced over its useful life. Answer: Depreciation ____________________ represent items […]

Posting must be done from the petty cash payments record. The balance in the checking account of York Company as of July 31 is $5,852.1 The bank statement shows an ending balance of $4,870.00. The following information is discovered by […]

Long-term liabilities or ____________________ are obligations that are not expected to be paid within a year and do not require the use of current assets. Under the ____________________ principle, assets are recorded at their actual cost, and this cost remains […]

The heading for a balance sheet includes the name of the business, the title of the statement, and a period of time. Employer payroll taxes may be deposited either through the Electronic Federal Tax Payment System or by using ____________________. […]

The net income or loss for the year can be found on the work sheet as the balance item at the bottom of either the Balance Sheet columns or the Income Statement columns. If services for the month total $3,300 […]

Accounting for revenue on a cash basis means that no entry of revenue is made in the account until the cash is received for the services performed. Current assets include cash and other assets that will be converted into cash […]

The ____________________ encourages employers to provide regular employment to workers. An employee’s total earnings are also known as ____________________. Answer: gross pay Reviewing the events that have taken place and determining how this affects the business is called interpreting. Answer: […]

Under the modified cash basis of accounting, adjustments are made only for prepaid items and depreciation on plant and equipment. The earnings base, against which the FICA tax is applied, and the tax rate have been changed several times since […]

The owner’s capital account in the last two columns of the work sheet is an up-to-date account and includes net income and withdrawals of the current period. FICA taxes include amounts for both Social Security and Medicare programs. Answer: T […]

The terms “profit and loss statement” or “operating statement” are sometimes used as synonyms for the balance sheet. The original cost of an asset added to its salvage value represents the depreciable cost of an asset. Answer: F When two […]

A(n) ____________________ is an economic event that has a direct impact on the business. To debit an account is to enter an amount on the left side of the account. Answer: T The date by which federal income tax withholding, […]

Self-employment tax is double the Social Security and Medicare rates. A contra-asset appears on the income statement. Answer: F Revenues decrease owner’s equity. Answer: F In general, the larger the amount of Social Security and Medicare taxes due from an […]

If services for the month total $7,000 in cash and $1,500 on account, the revenue account increases $8,500. In using a combination journal, posting requires less time; however, the danger of making a posting error is increased. Answer: F Source […]

A statement of account issued by a bank to each depositor once a month is known as a(n) ____________________. Professional service enterprises include real estate, insurance, advertising, transportation, and various other firms. Answer: F Base and rate changes in payroll […]

The six major steps of the accounting process are analyzing, recording, classifying, summarizing, reporting, and interpreting. Cash usually means only currency and coins. Answer: F Any accounting period of twelve months’ duration is usually referred to as a calendar year. […]

In the columns below, insert the entry that would be made for each transaction under each accounting basis, using appropriate debit and credit account titles. Answer: The accounting equation may be expressed as assets – liabilities = owner’s equity. Answer: […]

An increase or decrease in any asset, liability, owner’s equity, revenue, or expense is always accompanied by an offsetting change within the basic accounting elements. From the following partial work sheet for Walter Searing, journalize the closing entries necessary for […]

The amount of depreciation taken each period will be the same using the straight-line method. A trial balance is a formal business report. Answer: F According to the business entity concept, a proprietor may include nonbusiness assets and liabilities in […]

A system for making federal tax deposits electronically is called the ____________________. To a business, ____________________ includes currency, coins, checks received from customers, money orders, and bank cashier’s checks. Answer: cash Each entry in the journal affects two or more […]

The employee’s earnings record is a summary of the earnings of all employees for each pay period. The Income Statement and Balance Sheet columns of a work sheet are produced below. Indicate with an “X” the specific Income Statement or […]

Transactions which do not affect the cash account do not need to be entered in the journal, since they do not affect net income or loss. The trial balance is used in preparing financial statements. Answer: T The income summary […]

A(n) ____________________ is a reduction in owner’s equity as a result of the owner taking cash or other assets out of the business for personal use. The historical cost principle allows for assets to be recorded at actual cost. Answer: […]

Accumulated Depreciation-Delivery Equipment is an example of a(n) ____________________ account. Answer: contra-asset Businesses commonly use cash registers with tapes that accumulate a record of the day’s cash receipts. Answer: T The Account Title and Balance Sheet columns of the work […]

The ____________________ method is a depreciation method in which the depreciable cost is divided by the estimated useful life. The ____________________ column in the combination journal is used to credit accounts that are used infrequently. Answer: General Credit To close […]

The accounts shown in the post-closing trial balance are the ____________________ accounts. Employers use the ____________________ to transmit employees’ W-2 forms to the Social Security Administration. Answer: Form W-3[/cpmembership] A list of all the accounts used by a business is […]

The difference between the footings of an account is called the balance. A(n) ____________________ exempts a specific dollar amount of an employee’s gross pay from federal income tax withholding. Answer: withholding allowance On December 31, 20–, after adjustments, Tuscany Company’s […]

Revenues and expenses are temporary accounts and are closed at the end of the accounting period. Payroll expenditures represent a relatively small part of the total expenditures of most companies. Answer: F A contra-asset is deducted from the related asset […]

In most states, if an employer has very few former employees who collect unemployment compensation, the employer qualifies for a lower state unemployment tax rate. If an employer qualifies for a lower state unemployment tax rate, this lowers the credit […]

Any item a business owns that will provide future benefits is called owner’s equity. Since financial information is communicated in accounting terms, accounting is said to be the “language of business.” Answer: T Since there is no maximum earnings on […]

R. L. Ybarra employs John Ince at a salary of $53,000 a year. Ybarra is subject to employer Social Security taxes at a rate of 6.2% and Medicare taxes at a rate of 1.45% on John’s salary. In addition, Ybarra […]

The accounting equation shows the relationship among the three basic accounting elements¾assets, revenues, and owner’s equity. Firms are more likely to use a four-column journal account than T accounts. Answer: T Compensation for managerial or administrative services usually is expressed […]

From the following information from the payroll register of Veronica’s Auto Supply Store, calculate the amount of taxable earnings for unemployment and FICA tax, and prepare the journal entry to record the employer’s payroll taxes as of April 30, 20–. […]

The payroll register is a key source of information for computing employer payroll taxes. Plastic cards or badges encoded with basic employee data are now being used in computer-based time keeping systems. Answer: T The ____________________ tax is levied on […]