PayPal and national credit card companies charge a fee for their services. How do
sellers report these transaction fees on their financial statements?
A) In current assets on the balance sheet
B) As a deduction from net sales revenue on the income statement
C) As selling expenses on the income statement
D) As cost of goods sold on the income statement
In a perpetual inventory system, paying transportation charges on goods purchased FOB
shipping point would have which of the following effects?
A) Decrease Operating Expenses
B) Increase Selling, General, and Administrative Expenses
C) Decrease Cost of Goods Sold
D) Increase Inventory
Houghton Company began business on January 1, 2015 by issuing all of its 1,000,000
authorized shares of its $1 par value common stock for $20 per share. On June 30,
Houghton declared a cash dividend of $1 per share to stockholders of record on July 31.
Houghton paid the cash dividend on August 30. On November 1, Houghton reacquired
200,000 of its own shares of stock for $25 per share. On December 22, Houghton resold
100,000 of these shares for $30 per share.
Required:
Part a. Prepare all of the necessary journal entries to record the events described above.
Part b. Prepare the stockholders’ equity section of the balance sheet as of December 31,
2015 assuming that the net income for the year was $3,000,000.
The following information is available:
The receivables turnover ratio for 2016 is closest to:
A) 8.93 times
B) 8.48 times
C) 8.71 times
D) 9.14 times
A machine is purchased on January 1, 2016, for $90,000. It is expected to have a useful
life of five years and a residual value of $5,000. The company closes its books on
December 31. Under the double-declining balance method, what is the total amount of
depreciation to be expensed during the 2017?
A) $21,600
B) $22,000
C) $22,400
D) $34,000
Which of the following would be acceptable as an alternative name for the income
statement?
A) Statement of operations
B) Statement of financial position
C) Statement of retained earnings
D) Statement of revenues and expenses
Cash had a beginning balance of $68,900. During the month, Cash was credited for
$16,000 and debited for $18,300. At the end of the month, the balance is:
A) $71,200 credit.
B) $71,200 debit.
C) $66,600 debit.
D) $66,600 credit.
Hubbard Street Dance Company sells subscriptions for its monthly dance performances.
The company received annual subscription payments on November 15, 2015 for
performances that will take place during 2016 in the amount of $120,000. The
subscription payments will be earned equally throughout each month.
Required:
Part a. Describe how the subscription payments should be reported in the balance sheet
and income statement on December 31, 2015
Part b. Describe how the subscription payments should be reported in the balance sheet
and income statement on January 31, 2016.
Part c. Prepare the journal entry for the receipt of annual subscription payments on
November 15, 2015.
Part d. Prepare the required adjusting entry for the subscription payments on January
31, 2016.
Which of the following statements about revenues and expenses is correct?
A) Both revenues and expenses typically have credit balances.
B) Revenues and expenses are considered assets and liabilities, respectively.
C) Revenue is the same as cash.
D) Expenses decrease the amount of stockholders’ equity.
Which of the following is calculated by dividing net income by revenues?
A) Gross profit margin
B) Current ratio
C) Net profit margin
D) Asset turnover
The Sales Revenue account has a credit balance of $367,200 at year end. After the
closing entries have been posted, the account will:
A) have a debit balance of $367,200.
B) have a zero balance.
C) still have a credit balance of $367,200.
D) be removed entirely from the general ledger.
Which of the following would overstate a company’s net income?
A) Counting shipments of customers’ orders as revenue before payment has been
received.
B) Shipping goods to customers without receiving orders from those customers, and
recording the transactions as revenue.
C) Accruing liabilities for marketing expenses before they are incurred.
D) Making an accrual adjusting entry for interest earned on a bond investment.
The following summarizes the aging of accounts receivable for Johnston Supplies, Inc.
as of July 31, 2016:
Required:
Part a. The unadjusted balance of the Allowance for Doubtful Accounts of Johnston
Supplies, Inc. is a credit balance in the amount of $28,947 on July 31, 2016. Prepare the
required adjusting entry to record Bad Debt Expense for the year.
Part b. Johnston Supplies, Inc. writes off $3,081 of uncollectible accounts during on
August 15, 2016. Prepare the required adjusting entry to record the write-off.
Part c. Use a T-account to determine the account balance in the Allowance for Doubtful
Accounts on August 15, 2016.
During its first year of operations, Energy Inc. is experiencing increasing inventory
costs.
Required:
Part a. Explain how each of the inventory costing methods will affect the amount
reported for inventory at the end of the year. (Ignore the specific identification method.)
Part b. Explain how each of those three inventory costing methods will affect the
amount reported for cost of goods sold.
Part c. Identify the inventory costing methods that will produce the highest and lowest
inventory turnover ratios.
An internal report prepared to verify the accuracy of both the bank statement and the
cash accounts of a business or individual is a (n):A)internal audit.B) bank
reconciliation.C) bank audit.D) trial reconciliation.