Cross-footing a cash receipts journal means
a. the equality of debits and credits in the journal has been proved.
b. each line of the journal has a horizontal total.
c. the columns of the journal have been cross-referenced.
d. all necessary postings have been completed.
Answer:
Which of the following is an external user of accounting information?
a. Labor unions.
b. Finance directors.
c. Company officers.
d. Managers.
Answer:
In Jude Company, land decreased $150,000 because of a cash sale for $150,000, the
equipment account increased $60,000 as a result of a cash purchase, and Bonds Payable
increased $120,000 from issuance for cash at face value. The net cash provided by
investing activities is
a. $150,000.
b. $210,000.
c. $90,000.
d. $270,000.
Answer:
The entry to record depletion expense
a. decreases stockholders’ equity and assets.
b. decreases net income and increases liabilities.
c. decreases assets and liabilities.
d. decreases assets and increases liabilities.
Answer:
Cork Inc. declared a $160,000 cash dividend. It currently has 6,000 shares of 6%, $100
par value cumulative preferred stock outstanding. It is one year in arrears on its
preferred stock. How much cash will Cork distribute to the common stockholders?
a. $88,000.
b. $72,000.
c. $124,000.
d. None of these answers are correct.
Answer:
Cost of goods sold is computed from the following equation:
a. beginning inventory ‘“ cost of goods purchased + ending inventory.
b. sales ‘“ cost of goods purchased + beginning inventory ‘“ ending inventory.
c. sales + gross profit ‘“ ending inventory + beginning inventory.
d. beginning inventory + cost of goods purchased ‘“ ending inventory.
Answer:
Inventory turnover is calculated by dividing
a. cost of goods sold by the ending inventory.
b. cost of goods sold by the beginning inventory.
c. cost of goods sold by the average inventory.
d. average inventory by cost of goods sold.
Answer:
Restrictions of retained earnings may result from each of the following except
a. contractual restrictions.
b. legal restrictions.
c. prior period adjustment restrictions.
d. voluntary restrictions.
Answer:
Beta’s Bunny Barn has experienced a $80,000 loss due to tornado damage to its
inventory. Tornados have never before occurred in this area. Assuming that the
company’s tax rate is 30%, what amount will be reported for this loss on the income
statement?
a. $80,000
b. $56,000
c. $24,000
d. $72,000
Answer:
An increase in an expense
a. increases revenues.
b. increases assets.
c. decreases liabilities.
d. decreases stockholders’ equity.
Answer:
Financial information is presented below:
Gross profit would be
a. $26,000.
b. $116,000.
c. $128,000.
d. $134,000.
Answer:
When assets are distributed to the owners of a corporation, these distributions are
termed
a. depletions.
b. consumptions.
c. dividends.
d. a credit line.
Answer:
Kill Corporation’s unadjusted trial balance includes the following balances (assume
normal balances):
Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt
expense will the company record?
a. $15,000
b. $36,000
c. $50,100
d. $51,000
Answer:
Land Inc. has retained earnings of $800,000 and total stockholders’ equity of
$2,000,000. It has 300,000 shares of $5 par value common stock outstanding, which is
currently selling for $30 per share. If Land declares a 10% stock dividend on its
common stock:
a. net income will decrease by $150,000.
b. retained earnings will decrease by $150,000 and total stockholders’ equity will
increase by $150,000.
c. retained earnings will decrease by $900,000 and total stockholders’ equity will
increase by $900,000.
d. retained earnings will decrease by $900,000 and total paid-in capital will increase by
$900,000.
Answer:
Which of the following events is not a business transaction?
a. Issuance of stock in exchange for cash.
b. Hired employees.
c. Incurred utility expenses for the month.
d. Earned revenue for services provided.
Answer:
Ed’s Bookstore has collected $750 in sales taxes during April. If sales taxes must be
remitted to the state government monthly, what entry will Ed’s Bookstore make to show
the April remittance?
Answer:
Financial statements are the major means of communicating accounting information to
interested parties.
Answer:
Shoemaker Department Store prepares monthly financial statements but only takes a
physical count of merchandise inventory at the end of the year. The following
information has been developed for the month of July:
The net sales for July amounted to $142,000.
Instructions
Use the retail inventory method to estimate the ending inventory at cost for July. Show
all computations to support your answer.
Answer:
Unearned revenues should be classified as Other Revenues and Gains on the Income
Statement.
Answer:
1> Wells Construction gave up a used crane and $224,000 cash for a new crane. The old
crane cost $336,000, had $126,000 of accumulated depreciation, and a fair value of
$228,000. The exchange had commercial substance. In recording this exchange, the
new crane should be recorded at
$_.
2> Brown Builders gave up a used diesel-powered electric generator and $25,000 cash
for a new truck. The generator cost $85,000, had $50,000 of accumulated depreciation,
and a fair value of $30,000. The exchange had commercial substance. In recording this
exchange, the new truck should be recorded at
$_.
3> Midwest Mining purchased an iron mine for $4,000,000. The mine was expected to
produce 10,000,000 tons of ore over twenty years with no salvage value. During the
first year, 600,000 tons of ore were mined and sold. Depletion expense for the first year
is
$_.
4> Morris Industries purchased equipment costing $80,000 on January 1, 2013. The
equipment has a four-year useful life, $16,000 salvage value, and is being depreciated
using the straight-line method. It was sold at a $24,000 loss on June 30, 2015. The
selling price of the equipment was
$_.
5> Hi-Tech Corporation incurred $630,000 of research and development costs to
produce a high technology solar computer, paid filing fees of $60,000 to register a
patent on this product, and paid $420,000 to defend the patent against infringement by a
competitor. All of these costs were incurred in 2014. Production of solar computers
began on January 1, 2015. Assuming the patent has a useful life of 12 years, patent
expense for 2015 is
$_.
Answer:
Agler Company suffered a loss of its inventory on March 28 due to a fire in its
warehouse. As a basis for filing a claim with its insurance company, Agler Company
developed the following information:
The company has experienced an average gross profit rate of 35% in the past and this
rate appears to be appropriate in the current period.
Instructions
Using the gross profit method, prepare an estimate of the cost of the inventory
destroyed by fire on March 28. Show all computations in good form.
Answer:
Maria Queen was reviewing her business activities at the end of the year (2015) and
decided to prepare a Retained Earnings Statement. At the beginning of the year her
assets were $700,000 and her liabilities were $210,000. At the end of the year the assets
had grown to $930,000 but liabilities had also increased to $340,000. Common Stock
was $200,000 in both years. The net income for the year was $220,000. The company
paid dividends of $120,000 during the year.
Prepare a Retained Earnings statement in good form.
Answer:
Shanrock Company uses the periodic inventory method and had the following inventory
information available:
A physical count of inventory on December 31 revealed that there were 400 units on
hand.
Instructions
Answer the following independent questions and show computations supporting your
answers.
1> Assume that the company uses the FIFO method. The value of the ending inventory
at December 31 is $__________.
2> Assume that the company uses the Average-Cost method. The value of the ending
inventory on December 31 is $__________.
3> Assume that the company uses the LIFO method. The value of the ending inventory
on December 31 is $__________.
4> Determine the difference in the amount of income that the company would have
reported if it had used the FIFO method instead of the LIFO method. Would income
have been greater or less?
Answer:
Book value per share of common stock is the same amount as the market value per
share.
Answer: