McKendrick Shoe Store has a beginning inventory of $45,000. During the period,
purchases were $195,000; purchase returns, $6,000; and freight-in $15,000. A physical
count of inventory at the end of the period revealed that $30,000 was still on hand. The
cost of goods available for sale was
a. $189,000.
b. $204,000.
c. $219,000.
d. $249,000.
Answer:
Long Company recently incurred the following costs:
The building should be recorded on Long’s books at
a. $580,000.
b. $624,000.
c. $663,000.
d. $892,000.
Answer:
When bonds are sold, the gain or loss on sale is the difference between the
a. sales price and the cost of the bonds.
b. net proceeds and the cost of the bonds.
c. sales price and the market value of the bonds.
d. net proceeds and the market value of the bonds.
Answer:
SurferRosa Music Store borrowed $30,000 from the bank signing a 9%, 3-month note
on September 1. Principal and interest are payable to the bank on December 1. If the
company prepares monthly financial statements, the adjusting entry that the company
should make for interest on September 30, would be
a. Debit Interest Expense, $2,700; Credit Interest Payable, $2,700.
b. Debit Interest Expense, $225; Credit Interest Payable, $225.
c. Debit Notes Payable, $2,700; Credit Cash, $2,700.
d. Debit Cash, $675; Credit Interest Payable, $675.
Answer:
Writing off an uncollectible account under the allowance method requires a debit to
a. Accounts Receivable.
b. Allowance for Doubtful Accounts.
c. Bad Debt Expense.
d. Uncollectible Accounts Expense.
Answer:
Selected financial statement data for Homer Company are presented below.
Total assets at the beginning of the year were $800,000; total common stockholders’
equity was $500,000 at the beginning of the period.
Instructions
Compute each of the following:
(a) Asset turnover
(b) Profit margin
(c) Return on assets
(d) Return on common stockholders’ equity
Answer:
If a transaction cannot be recorded in a special journal, it is
a. not recorded.
b. a correcting entry.
c. recorded in the general journal.
d. an error.
Answer:
The party who has the right to exercise a call option on bonds is the
a. investment banker.
b. bondholder.
c. bearer.
d. issuer.
Answer:
A basic assumption of accounting assumes that the dollar is
a. unrelated to business transactions.
b. a poor measure of economic activities.
c. the common unit of measure for all business transactions.
d. useless in measuring an economic event.
Answer:
Consolidated financial statements are prepared when a company owns _________ of
the common stock of another company.
a. less than 20%
b. between 20% and 50%
c. less than 50%
d. more than 50%
Answer:
Lucie Ball’s regular rate of pay is $15 per hour with one and one-half times her regular
rate for any hours which exceed 40 hours per week. She worked 48 hours last week.
Therefore, her gross wages were
a. $720.
b. $600.
c. $780.
d. $1,080.
Answer:
In an exchange of plant assets that has commercial substance, any difference between
the fair value and the book value of the old plant asset is
a. recorded as a gain or loss.
b. recorded if a gain but is deferred if a loss.
c. recorded if a loss but is deferred if a gain.
d. deferred if either a gain or loss.
Answer:
Posting a sales journal to the accounts in the general ledger requires a
a. debit to Cash and a credit to Sales Revenue.
b. debit to Sales Revenue and a credit to Inventory.
c. debit to Accounts Receivable and a credit to Inventory.
d. debit to Accounts Receivable and a credit to Sales Revenue.
Answer:
Comparisons can be made on each of the following bases except
a. industry averages.
b. intercompany basis.
c. intracompany basis.
d. Each of these is a basis for comparison.
Answer:
If the equity method is being used, cash dividends received
a. are credited to Dividend Revenue.
b. require no entry because investee net income has already been recorded at the proper
proportion on the investor’s books.
c. are credited to the Stock Investments account.
d. are credited to the Revenue from Stock Investments account.
Answer:
Bonds that may be exchanged for common stock at the option of the bondholders are
called
a. options.
b. stock bonds.
c. convertible bonds.
d. callable bonds.
Answer:
When bonds are converted into common stock, the carrying value of the bonds is
transferred to paid-in capital accounts.
Answer:
Based on the following information, compute the (1) current ratio and (2) working
capital.
Answer:
The periodicity assumption states that the business will remain in operation for the
foreseeable future.
Answer:
Jim’s Pharmacy has collected $600 in sales taxes during March. If sales taxes must be
remitted to the state government monthly, what entry will Jim’s Pharmacy make to
show the March remittance?
Answer:
Compute the maturity value for each of the following notes receivable.
1> A $5,000, 6%, 3-month note dated July 20.
Maturity value $____________.
2> A $12,000, 9%, 150-day note dated August 5.
Maturity value $____________.
Answer:
On January 15, 2015, Craig Company received a two-month, 9%, $9,000 note from
William Pentel for the settlement of his open account. The entry by Craig Company on
March 15, 2015 if Pentel dishonors the note and collection is expected is:
Answer:
When an investor owns between 20% and 50% of the common stock of a corporation, it
is generally presumed that the investor has _______________ influence over the
investee and therefore, the appropriate method of accounting for this type of investment
is the _______________ method.
Answer:
One of the reasons a corporation may purchase investments is that it has excess cash.
Answer: