The allowance method of accounting for uncollectible accounts is required if
a. the company makes any credit sales.
b. bad debts are significant in amount.
c. the company is a retailer.
d. the company charges interest on accounts receivable.
Answer:
The double’“entry accounting system is the basis of accounting systems
a. worldwide.
b. worldwide, except for the U.S.
c. in the U.S. only
d. neither internationally nor in the U.S.
Answer:
When three or more accounts are required in one journal entry, the entry is referred to
as a
a. compound entry.
b. triple entry.
c. multiple entry.
d. simple entry.
Answer:
The lower-of-cost-or-market basis of valuing inventories is an example of
a. comparability.
b. the cost principle.
c. conservatism.
d. consistency.
Answer:
The use of remittance advices for mail receipts is an example of
a. documentation procedures.
b. other controls.
c. physical controls.
d. independent internal verification.
Answer:
If an item meets one (but not both) of the criteria for an extraordinary item, it
a. only needs to be disclosed in the footnotes of the financial statements.
b. may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a
loss).
c. is reported as an “other revenue or gain” or “other expense and loss,” net of tax.
d. is reported at its gross amount as an “other revenue or gain” or “other expense or
loss.”
Answer:
If a company has sales revenue of $630,000, net sales of $600,000, and cost of goods
sold of $390,000, the gross profit rate is
a. 35%.
b. 38%
c. 62%.
d. 65%.
Answer:
A credit to a liability account
a. indicates an increase in the amount owed to creditors.
b. indicates a decrease in the amount owed to creditors.
c. is an error.
d. must be accompanied by a debit to an asset account.
Answer:
Which of the following depicts the proper sequence of steps in the accounting cycle?
a. Journalize the transactions, analyze business transactions, prepare a trial balance
b. Prepare a trial balance, prepare financial statements, prepare adjusting entries
c. Prepare a trial balance, prepare adjusting entries, prepare financial statements
d. Prepare a trial balance, post to ledger accounts, post adjusting entries
Answer:
The following items were taken from the financial statements of Henager, Inc., over a
three-year period:
Instructions
Compute the following for each of the above time periods.
a. The amount and percentage change from 2014 to 2015.
b. The amount and percentage change from 2015 to 2016.
Answer:
The following items are taken from the financial statements of the Postal Service for the
year ending December 31, 2015:
What is the company’s net income for the year ending December 31, 2015?
a. $12,000
b. $28,000
c. $42,000
d. $133,000
Answer:
If a purchaser using a perpetual system agrees to freight terms of FOB shipping point,
then the
a. Inventory account will be increased.
b. Inventory account will not be affected.
c. seller will bear the freight cost.
d. carrier will bear the freight cost.
Answer:
Romanoff Industries had the following inventory transactions occur during 2015:
The company sold 150 units at $70 each and has a tax rate of 30%. Assuming that a
periodic inventory system is used, what is the company’s gross profit using FIFO?
(rounded to whole dollars)
a. $3,318
b. $3,552
c. $6,948
d. $7,182
Answer:
Which one of the following is not a justification for adjusting entries?
a. Adjusting entries are necessary to ensure that the revenue recognition principle is
followed.
b. Adjusting entries are necessary to ensure that the expense recognition principle is
followed.
c. Adjusting entries are necessary to enable financial statements to be in conformity
with GAAP.
d. Adjusting entries are necessary to bring the general ledger accounts in line with the
budget.
Answer:
If the month-end bank statement shows a balance of $72,000, outstanding checks are
$54,000, a deposit of $15,000 was in transit at month end, and a check for $3,000 was
erroneously charged by the bank against the account, the correct balance in the bank
account at month end is
a. $33,000.
b. $36,000.
c. $72,000.
d. $114,000.
Answer:
Companies adopt different cost flow methods for each of the following reasons except
a. balance sheet effects.
b. cost effects.
c. income statements effects.
d. tax effects.
Answer:
Ermler Company purchased a machine at a cost of $80,000. The machine is expected to
have a $5,000 salvage value at the end of its 5-year useful life.
Instructions
Compute annual depreciation for the first and second years using the
(a) straight-line method.
(b) double-declining-balance method.
Answer:
One major purpose of the statement of cash flows is to provide information about
a. the firm’s profitability.
b. the firm’s cash receipts and payments during a period.
c. the firm’s resources and claims against those resources.
d. changes in retained earnings.
Answer:
If companies have identical inventoriable costs but use different inventory flow
assumptions when the price of goods have not been constant, then the
a. cost of goods sold of the companies will be identical.
b. cost of goods available for sale of the companies will be identical.
c. ending inventory of the companies will be identical.
d. net income of the companies will be identical.
Answer:
The cash payments journal only has one column because all entries recorded in this
journal require a credit to the Cash account.
Answer:
A loss on disposal of a plant asset as a result of a sale or a retirement is calculated in the
same way.
Answer:
Bellingham Corporation has the following stockholders’ equity balances at December
31, 2015.
Answer:
A company’s calendar year and fiscal year are always the same.
Answer:
Bonds that permit bondholders to convert them into common stock at their option are
known as callable bonds.
Answer:
Debt investments are investments in government and _____________ bonds.
Answer:
Internal control consists of the related methods and measures adopted to ____________
its assets and enhance the ______________ and ______________ of its accounting
records.
Answer: