Regular earnings include hours of overtime worked during the weekend.
Merchandise Inventory is an asset account.
To find the percent of increase or decrease of an item in a comparative balance sheet
you use the formula: % change = amount of change/base (new year).
In departmental accounting, it is necessary to break down revenue and expenses by
departments.
A 90-day note dated July 9 would be due on October 7.
When the owner invests personal equipment in the business, cash is decreased.
The statement of owner’s equity ending capital is equal to the capital on the worksheet.
If a mistake is made in calculating ending inventory, it will take three accounting
periods to be self-correcting.
Beginning inventory is adjusted by crediting Merchandise Inventory and debiting
Income Summary.
Book value per share is found by dividing total assets by total stockholders’ equity.
The premium rate for workers’ compensation insurance is based on the age of the
employees.
When an asset expires or is used up, it becomes an liability.
To determine cash received from customers for the cash flow statement using the direct
method, an increase in accounts receivable is added to sales.
The Allowance for Doubtful Accounts is shown on the balance sheet as a contra-asset.
All states charge a state income tax.
The par value of stock represents the market value of the capital of the corporation.
If equipment is sold for $50,000, it is shown in the investing activities section.
Revenue and cash will always be the same amount.
When treasury stock is sold, the Paid-in Capital in Excess of Par Value is decreased.
A common shareholder’s right to purchase an equivalent percentage of new stock is his
participating right.
When there is a return after the original voucher has been prepared, the first step is to
create a new voucher for the amount owed.
A 3-month note dated September 30 is due December 31.
Work-in-Process Inventory is credited when goods are transferred to finished goods.
The steps of the accounting cycle for a manufacturing company are different from those
used for a merchandise company.
The Allowance account is a contra-revenue account.
Some of the past depreciation is canceled in recording an extraordinary repair.
A common way to apportion janitorial expense is to base it on square footage.
A debit balance in Allowance for Doubtful Accounts indicates the estimate for Bad
Debts was too low.
Interim statements are statements that are usually prepared for a portion of the
business’s fiscal year.
Both employer and employee contribute to FICA-OASDI and SUTA tax.
Track and Smith are partners sharing profits and losses in a 3:2 ratio for Track and
Smith, respectively. Their capital balances are $12,000 and $18,000, respectively. The
partners agree to admit Don for $8,000 for a 30% interest in the partnership. Smith’s
capital balance after admitting Don is:
A) $12,000.
B) $19,200.
C) $16,640.
D) $10,000.
B&B Lumber reports gross sales of $80,000. If sales returns and allowances are
$20,000 and sales discounts are $3,000, what are the net sales?
A) $83,000
B) $63,000
C) $57,000
D) $70,000
Identify where each of the following transactions would be shown on the statement of
cash flows when it is prepared by the indirect method. Identify each transaction as an
operating activity (O), an investing activity (I), a financing activity (F), or transaction
that is not reported on the statement of cash flows (N).
a) ________ Paid for fire insurance in advance
b) ________ Cash used to purchase new computers
c) ________ Cash used to retire bonds outstanding
d) ________ Depreciation expense
e) ________ Cash used to purchase fixed assets
f) ________ Cash proceeds from sale of the company’s own stock
g) ________ Bought back own stock
h) ________ Received cash dividends
When the corporation has both preferred and common stock, the steps to compute book
value for common stock would be:
A) compute common shares divided by number of shares outstanding.
B) compute preferred stock book value first; the remainder is assigned to common
stock.
C) divide total stockholders’ equity by total shares outstanding.
D) None of these answers is correct.
Which of the following is a cash flow from investing activities?
A) Receiving cash from a bank
B) Payment of cash dividends
C) Sale or purchase of land
D) Cash received from customers.
The entry to record Tom’s payment of a home telephone bill is:
A) debit Accounts Payable; credit Telephone Expense.
B) debit Tom, Withdrawals; credit Cash.
C) debit Telephone Expense; credit Cash.
D) debit Tom, Withdrawals; credit Accounts Payable.
Merchandise purchased for resale under the perpetual inventory method is added to:
A) Merchandise Inventory.
B) Sales.
C) Purchases.
D) Supplies Expense.
Sue’s Jewelry Shoppe’s July payroll includes the following data:
The employer’s payroll tax for the period would be:
A) $918.
B) $1,128.
C) $210.
D) $1,000.
The type of business organization that can continue indefinitely is known as a:
A) sole proprietorship.
B) partnership.
C) corporation.
D) All of the above
The proper sequence used in recording a business transaction is:
A) analyze, post, journalize, post the account balance, and complete the reference
column in the journal.
B) analyze, journalize, post, record the account balance, and complete the reference
column in the journal.
C) analyze, journalize, post, complete the reference column in the journal, and record
the account balance.
D) journalize, analyze, post, post the account balance, and complete the reference
column in the journal.
The amount found in the Income Statement debit column on the worksheet for Income
Summary is the:
A) total amount of expenses.
B) total amount of revenues.
C) beginning inventory.
D) ending inventory.
Which report would an employer review if they wanted to check how much an
employee has earned to date?
A) Individual employee earnings record
B) Payroll register
C) W-4 form
D) A and B.
The accounts receivable subsidiary ledger:
A) is organized in alphabetical order.
B) is not kept in the same book as Accounts Receivable.
C) should equal the controlling account in the general ledger.
D) All of the above are correct.
Which of the following is NOT generally written into the articles of partnership
agreement?
A) How new partners are admitted
B) How accounting records will be maintained
C) The marital status of each partner
D) All are written into the agreement.
The following data are available for Skyway:
If overhead is applied based on machine hours, the predetermined overhead rate is:
A) $2.00.
B) $20.00.
C) $0.50.
D) 200%.
A liability would be credited and an expense debited if:
A) the business paid a creditor.
B) the business incurred an expense and did not pay the expense immediately.
C) the business bought supplies on account.
D) the business bought supplies for cash.
A credit to an asset account was posted as a credit to a liability account. This error
would cause:
A) assets to be understated.
B) liabilities to be overstated.
C) capital to be understated.
D) None of the above is correct.
Which of the following is a temporary account?
A) Wages Expense
B) Service Fees Earned
C) Rent Expense
D) All of the above are temporary accounts
Sales would be found on the worksheet in the:
A) income statement debit column.
B) income statement credit column.
C) balance sheet debit column.
D) balance sheet credit column.
Which of the following accounts would appear on the post-closing trial balance?
A) Fees Earned
B) Rent Expense
C) Accounts Receivable
D) Income Summary
A law firm would be considered a:
A) merchandise company.
B) manufacturer.
C) service company.
D) None of the above is correct.
Smith Corporation reported net income of $54,000, depreciation expenses of $10,000,
an increase in Accounts Payable of $3,000 and a decrease in Accounts Receivable of
$1,500. Under the indirect method, net cash flow from operating activities is:
A) $62,500.
B) $59,500.
C) $68,500.
D) $65,500.
A purchase discount was recorded as a credit to the Purchases account and a debit to
Accounts Payable. This error will cause:
A) net income to be overstated.
B) net income to be understated.
C) net income to not be affected.
D) total liabilities to be overstated.
Which of the below allowances would have the least amount of taxes withheld for
federal income tax purposes?
A) S-1
B) S-0
C) S-3
D) S-2
A promissory note:
A) is a written promise to pay.
B) is an oral promise to pay.
C) is due in 30 days.
D) entitles the maker to a discount.
If goods are shipped FOB shipping point by the seller, when does title pass?
A) When the goods arrive at the buyer’s location
B) When the goods leave the seller’s location
C) When the goods are signed for
D) None of the above
A share of stock may be sold at any given time according to the stock’s:
A) stated value.
B) book value.
C) market value.
D) par value.
The bank statement included bank charges. On the bank reconciliation, this item is:
A) an addition to the balance per company books.
B) an addition to the balance per bank statement.
C) a deduction from the balance per bank statement.
D) a deduction from the balance per company books.
Which of the following should NOT be included in inventory costs?
A) Goods that are not resalable
B) Goods on consignment to you
C) Goods for sale at a value that is greater than cost
D) Both A and B are correct.
Workers’ compensation:
A) insures employees against losses they may incur due to injury or death while on the
job.
B) is based on the total estimated gross payroll.
C) is paid for by the employer.
D) All of the above are correct.
The net income earned by the Cooper, Cross, and Crane partnership is $21,000. Their
respective average capital balances are $20,000, $20,000, and $40,000. What is the
closing entry to allocate the net income if no agreement was made for division of
income?
A) Debit Income Summary $21,000; credit Cooper, Capital $7,000; credit Cross,
Capital $7,000; credit Crane, Capital $7,000
B) Debit Income Summary $21,000; credit Cooper, Capital $5,250; credit Cross,
Capital $5,250; credit Crane, Capital $10,500
C) Debit Cooper, Capital $7,000; debit Cross, Capital $7,000; debit Crane, Capital
$7,000; credit Income Summary $21,000
D) Not enough information given to allocate
A gain on disposal of an asset is listed as:
A) a liability on the balance sheet.
B) an asset on the balance sheet.
C) other expense on the income statement.
D) other income on the income statement.
For tax purposes, ________ establishes the guidelines and the percentages for
depreciation.
Using the following accounts:
[1] Cash
[2] Subscription receivable-common stock
[3] Machinery
[4] Building
[5] Land
[6] Organization costs
[7] Preferred stock
[8] Common stock
[9] Paid in capital in excess of par value – preferred
[10] Paid in capital in excess of par value – common
[11] Common stock subscribed
[12] Discount on common stock
[13] Organization Expense
Indicate the account(s) to be debited and credited to record the following transaction.
Sold common stock at a price above the par value.
Debit ________ Credit ________ & ________
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the nature of the
account (permanent/temporary).
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the nature of the
account (permanent/temporary).
Example:
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the nature of the
account (permanent/temporary).
Example:
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement in which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, and in Column 3 the financial
statement that the account in which the account balance is reported.
The Bixby Co. had the following transactions involving the purchase of merchandise.
Prepare the necessary general journal entries. Any applicable freight costs are prepaid
by the seller. The perpetual inventory method is in use.
June 16 Purchased merchandise having a price of $6,000 from the Shelby
Manufacturing Co.
on account with credit terms 2/10, n/30. Transportation terms F.O.B destination.
June 16 Purchased merchandise having a price of $9,000 from the Ajax Supply House
on account with credit terms 2/10, n/30. Transportation terms F.O.B shipping point.
The freight costs of $175 were added to the invoice. Merchandise was shipped June 16.
June 17 Received the goods from Shelby.
June 17 Received the goods from Ajax.
June 20 Returned for credit merchandise with an invoice price of $800 to Ajax.
June 25 Paid Shelby the amount owed.
June 28 Paid Ajax the amount owed.
June 30 Returned for cash, merchandise with an invoice price of $400 to Shelby.
Prepare the necessary general journal entry for June 28.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
The following are transactions for Brian for the month of October. Indicate how the
following transactions would be recorded by completing the necessary journal entries as
appropriate (omit explanations). Also post to the subsidiary general and subsidiary
ledgers.
Oct. 1 Brian invested $15,000 in his business.
Oct. 3 Sold $2,500 of merchandise on account to H. Holand, sales invoice No. 1, terms
1/10, n/30.
Oct. 5 Sold $1,200 of merchandise on account to T. Traer, sales invoice No. 2, terms
1/10, n/30.
Oct. 13 Received cash from H. Holand in payment for October 3 transaction, less the
discount.
Oct. 14 Issued credit memorandum No. 1 to T. Traer for $100 for merchandise returned
from October 5 sale on account.
Oct. 15 Received cash from T. Traer for the amount due, less the discount.
GENERAL JOURNAL
Explain how the record keeping differs between a cash sale and a credit sale.
Explain some possible reasons a company may declare a stock dividend instead of a
cash dividend.
For each of the following, identify in column 1 the category to which the account
belongs, in column 2 the normal balance for the account, in column 3 the financial
statement that the account in which the account balance is reported, and in column 4 the
account’s nature (permanent/temporary).
A company purchased a new delivery van on January 1, 2012 for $25,000. The
company expects to use the van for 5 years and then sell it for $5,000. Complete the
following depreciation table assuming straight-line depreciation:
For each of the following items, indicate (by placing an X) whether the item would be
found on the statement of cash flows in column 1, the direct approach for determining
the cash flows from operating activities, column 2, the indirect approach for
determining the cash flows from operating activities, column 3, cash flows from
investing activities, column 4, cash flows from financing activities. If you identify that
an item affects the cash flows from operation, indirect method, also indicate whether it
will be increasing (+) or decreasing (-) the cash flows.
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement on which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).