A correction in income of a prior period involves either a debit or credit to the Retained
Earnings account.
Answer:
Recording depreciation each period is an application of the expense recognition
principle.
Answer:
A corporation acts under its own name rather than in the name of its stockholders.
Answer:
A 10% stock dividend is the equivalent of a $1,000 par value bond paying annual
interest of 10%.
Answer:
Under the double-entry system, revenues must always equal expenses.
Answer:
A general ledger should be arranged in the order in which accounts are presented in the
financial statements, beginning with the balance sheet accounts.
Answer:
The cash records of Barry Company show the following:
1> In September, deposits per the bank statement totaled $38,600; deposits per books
$39,000; and deposits in transit at September 30 were $4,600.
2> In September, cash disbursements per books were $36,500; checks clearing the bank
were $39,800; and outstanding checks at September 30 were $3,100.
There were no bank debit or credit memoranda and no errors were made by either the
bank or Barry Company.
Answer the following questions:
(a) What were the deposits in transit at August 31?
(b) What were the outstanding checks at August 31?
Answer:
Which of the following would be subtracted from net income using the indirect
method?
a. Depreciation expense
b. An increase in accounts receivable
c. An increase in accounts payable
d. A decrease in prepaid expenses
Answer:
The cost of goods available for sale is allocated between
a. beginning inventory and ending inventory.
b. beginning inventory and cost of goods on hand.
c. ending inventory and cost of goods sold.
d. beginning inventory and cost of goods purchased.
Answer:
A list of accounts and their balances at a given time is called a(n)
a. journal.
b. posting.
c. trial balance.
d. income statement.
Answer:
Which one of the following would not be considered a liquidity ratio?
a. Current ratio
b. Inventory turnover
c. Acid-test ratio
d. Return on assets
Answer:
An income statement
a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders’ equity over a period of
time.
c. reports the assets, liabilities, and stockholders’ equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
Answer:
Partridge Bookstore had 500 units on hand at January 1, costing $9 each. Purchases and
sales during the month of January were as follows:
Partridge does not maintain perpetual inventory records. According to a physical count,
365 units were on hand at January 31.
The cost of the inventory at January 31, under the LIFO method is:
a. $3,285.
b. $3,650.
c. $3,900.
d. $4,015.
Answer:
A post-closing trial balance is prepared
a. after closing entries have been journalized and posted.
b. before closing entries have been journalized and posted.
c. after closing entries have been journalized but before the entries are posted.
d. before closing entries have been journalized but after the entries are posted.
Answer:
Collection of a $1,000 Accounts Receivable
a. increases an asset $1,000; decreases an asset $1,000.
b. increases an asset $1,000; decreases a liability $1,000.
c. decreases a liability $1,000; increases stockholders’ equity $1,000.
d. decreases an asset $1,000; decreases a liability $1,000.
Answer:
In present value calculations, the process of determining the present value is called
a. allocating.
b. pricing.
c. negotiating.
d. discounting.
Answer:
Which one of the following is not a characteristic generally evaluated in analyzing
financial statements?
a. Liquidity
b. Profitability
c. Marketability
d. Solvency
Answer:
A number in the reference column in a general journal indicates
a. that the entry has been posted to a particular account.
b. the page number of the journal.
c. the dollar amount of the transaction.
d. the date of the transaction.
Answer:
The cash balance per books for Feagen Company on September 30, 2015 is $10,740.93.
The following checks and receipts were recorded for the month of October, 2015:
In addition, the bank statement for the month of October is presented below:
Check No. 18 was correctly written for $708.62 for a payment on account. The NSF
check was from S. Long, a customer, in settlement of an accounts receivable. An entry
had not been made for the NSF check. The credit memo is for the collection of a note
receivable including interest of $60 which has not been accrued. The bank service
charge is $25.00.
Instructions
(a) Prepare a bank reconciliation at October 31.
(b) Prepare the adjusting journal entries required by the bank reconciliation.
Answer:
Gable’s Wholesale uses a sales journal. An entry in this journal represents a
a. debit to Cash; credit to Sales Revenue.
b. debit to Accounts Receivable; credit to Sales Revenue.
c. debit to Sales Discounts; credit to Cash.
d. debit to Accounts Payable; credit to Sales Returns and Allowances.
Answer:
What is the proper adjusting entry at June 30, the end of the fiscal year, based on a
prepaid insurance account balance before adjustment, $18,500, and unexpired amounts
per analysis of policies of $6,000?
a. Debit Insurance Expense, $6,000; Credit Prepaid Insurance, $6,000.
b. Debit Insurance Expense, $18,500; Credit Prepaid Insurance, $18,500.
c. Debit Prepaid Insurance, $12,500; Credit Insurance Expense, $12,500.
d. Debit Insurance Expense, $12,500; Credit Prepaid Insurance, $12,500.
Answer:
Which of the following is usually not an accrued liability?
a. Interest payable
b. Wages payable
c. Taxes payable
d. Notes payable
Answer:
At September 1, the balance sheet accounts for Stanley’s Restaurant were as follows:
The following transactions occurred during the next two days:
The company issued additional shares of stock for $22,000 cash in the business. The
accounts payable were paid in full. (No payment was made on the notes payable.)
Instructions
Prepare a balance sheet at September 1, 2015.
Answer:
On December 1, Gilman Corporation borrowed $20,000 on a 90-day, 6% note. Prepare
the entries to record the issuance of the note, the accrual of interest at year end, and the
payment of the note.
Answer:
An account is an important accounting record where financial information is stored
until needed. Briefly explain (1) the nature of an account, (2) the different types of
accounts, and (3) the manner in which an account is increased and decreased and its
normal balance.
Answer:
Arquette Company’s financial information is presented below.
The missing amounts above are:
Answer:
Sales Returns and Allowances and Sales Discounts are both ______________ accounts
and have _______________ normal balances.
Answer:
A proxy is a legal document that instructs a stockholder’s agent how to vote shares of
stock for the stockholder.
Answer:
Sam Myers sells televisions with a 2-year warranty. Past experience
indicates that 2% of the units sold will be returned during the warranty
period for repairs. The average cost of repairs under warranty is estimated
to be $75 per unit. During 2015, 9,000 units were sold at an average price
of $400. During the year, repairs were made on 50 units at a cost of $3,900.
Instructions
Prepare journal entries to record the repairs made under warranty and
estimated warranty expense for the year.
Answer:
In a voucher system, vouchers are prepared in the accounts receivable department.
Answer:
The percentage of sales basis for estimating uncollectible accounts always results in
more Bad Debt Expense being recognized than the percentage of receivables basis.
Answer:
Corporations sometimes segregate retained earnings into two categories:
(1)__________ retained earnings and (2)________________ retained earnings.
Answer: