Arens Corporation purchased 4,000 shares of its $5 par value common stock for a cash
price of $10 per share. Two months later, Arens sold the treasury stock for a cash price
of $8 per share.
Instructions
Prepare the journal entry to record the sale of the treasury stock assuming
(a) No balance in Paid-in Capital from Treasury Stock.
(b) A $3,000 balance in Paid-in Capital from Treasury Stock.
Answer:
Electric Sunset Company gathered the following reconciling information in preparing
its July bank reconciliation:
The adjusted cash balance per books on July 31 is
a. $17,640.
b. $18,840.
c. $25,640.
d. $26,840.
Answer:
Jake’s Market recorded the following events involving a recent purchase of
merchandise:
Received goods for $60,000, terms 2/10, n/30.
Returned $1,200 of the shipment for credit.
Paid $300 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company’s inventory increased by
a. $57,624.
b. $57,918.
c. $57,924.
d. $59,100.
Answer:
At December 1, 2015, Cursive Company’s accounts receivable balance was $1,800.
During December, Cursive had credit revenues of $7,200 and collected accounts
receivable of $6,000. At December 31, 2015, the accounts receivable balance is
a. $600 debit.
b. $3,000 debit.
c. $600 credit.
d. $3,000 credit.
Answer:
If $250,000 of bonds are issued during the year but $130,000 of old bonds are retired
during the year, the statement of cash flows will show a(n)
a. net increase in cash of $120,000.
b. net decrease in cash of $120,000.
c. increase in cash of $250,000 and a decrease in cash of $130,000.
d. net gain on retirement of bonds of $120,000.
Answer:
A consolidated income statement will show
a. revenue and expense transactions between the consolidated entity and parties outside
the affiliated group.
b. only the parent company’s net income.
c. only the income of partially owned subsidiaries.
d. only the income of wholly owned subsidiaries.
Answer:
Which of the following would be considered as an unlikely occurrence?
a. Manufacturer offers a cash discount to a wholesaler.
b. Wholesaler offers a cash discount to a retailer.
c. Retailer offers a cash discount to a customer.
d. All of these answers are correct.
Answer:
The step in the accounting cycle that is performed on a periodic basis (i.e., monthly,
quarterly) is
a. analyzing transactions.
b. journalizing and posting adjusting entries.
c. preparing a post-closing trial balance.
d. posting to ledger accounts.
Answer:
The initials ‘CPA’ stand for
a. Certified Practical Auditor.
b. Chartered Public Auditor.
c. Certified Public Accountant.
d. Can’t Pass Accounting.
Answer:
All of the following would involve a debit memorandum except
a. a bank service charge.
b. an NSF check.
c. the cost of printing checks.
d. interest earned.
Answer:
Which one of the following is shown on a multiple-step but not on a single-step income
statement?
a. Net sales
b. Net income
c. Gross profit
d. Cost of goods sold
Answer:
An account is a part of the financial information system and is described by all except
which one of the following?
a. An account has a debit and credit side.
b. An account is a source document.
c. An account may be part of a manual or a computerized accounting system.
d. An account has a title.
Answer:
Which of the following would not be reported on the balance sheet as a cash
equivalent?
a. Money market fund
b. Sixty-day certificate of deposit
c. Six-month Treasury bill
d. Money market savings certificate
Answer:
If total liabilities decreased by $30,000 and stockholders’ equity increased by $20,000
during a period of time, then total assets must change by what amount and direction
during that same period?
a. $50,000 decrease
b. $10,000 decrease
c. $10,000 increase
d. $50,000 increase
Answer:
Which one of the following is not an external user of accounting information?
a. Regulatory agencies.
b. Customers.
c. Investors.
d. All of these are external users.
Answer:
The income statement for the month of June, 2015 of Camera Obscura Enterprises
contains the following information:
The entry to close the revenue account includes a
a. debit to Income Summary for $1,300.
b. credit to Income Summary for $1,300.
c. debit to Income Summary for $7,000.
d. credit to Income Summary for $7,000.
Answer:
Management could determine the amounts due from customers by examining which
ledger account?
a. Service Revenue
b. Accounts Payable
c. Accounts Receivable
d. Supplies
Answer:
The selection of an appropriate inventory cost flow assumption for an individual
company is made by
a. the external auditors.
b. the SEC.
c. the internal auditors.
d. management.
Answer:
A corporation has a separate __________________________ apart from its owners.
Answer:
Electronic Funds Transfer (EFT) is a disbursement system that uses telephone or
computer to transfer cash from one location to another.
Answer:
Firms use physical controls primarily to safeguard their assets.
Answer:
The following information was used to prepare the March 2015, bank reconciliation for
Walker Machine Works. Identify the items that require adjustment to the cash balance
per books and prepare the appropriate adjusting entries.
1> Included with the bank statement materials was a check from Bob Simpson for $40
stamped “NSF.”
2> A personal deposit by Annie Walker to her personal account in the amount of $300
for dividends on her General Electric common stock was credited to the company
account.
3> The bank statement included a debit memorandum for $22.00 for two books of
blank checks for Walker Machine Works.
4> The bank statement contains a credit memorandum for $24.75 interest on the
average checking account balance.
5> The daily deposits of March 30 and March 31, for $3,362 and $3,125 respectively,
were not included in the bank statement postings.
6> Two checks totaling $316.86, which were outstanding at the end of February, cleared
in March and were returned with the March statement.
7> The bank statement included a credit memorandum dated March 28, 2015, for
$45.00 for the monthly interest on a 6-month, $15,000 certificate of deposit that the
company owns.
8> Four checks, #8712, #8716, #8718, #8719, totaling $5,369.65, did not clear the bank
during March.
9> On March 24, 2015, Walker Machine Works delivered to the bank for collection a
$4,500,
3-month note from Don Decker. A credit memorandum dated March 29, 2015, indicated
the collection of the note and $90.00 of interest.
10> The bank statement included a debit memorandum for $25.00 for the collection
service on the above note and interest.
Answer:
Preferred stock has contractual preference over common stock in certain areas.
Answer:
A long-term note that pledges title to specific property as security for a loan is known as
a mortgage payable.
Answer:
Wise Company had the following transactions.
1> Issued 7,000 shares of common stock with a stated value of $10 for $130,000.
2> Issued 2,000 shares of $100 par preferred stock at $108 for cash.
Instructions
Prepare the journal entries to record the above stock transactions.
Answer:
Both a stock split and a stock dividend will _________________ the number of shares
outstanding and have _________________ on total stockholders’ equity.
Answer: