When two proprietors decide to combine their businesses and form a partnership,
GAAP usually requires that noncash assets be taken over at their:
A) residual value on the date of the partnership.
B) book value on the date of the partnership.
C) fair market value on the date of the partnership.
D) historical cost on the date of the partnership.
The check register is:
A) a special journal.
B) used when paying out of petty cash.
C) used to record customer receipts.
D) used to house unpaid vouchers.
Betsy’s pottery sold 200 tiles at $25.00 each to a charge customer, terms 1/10, n/30.
Which entry is required to record this transaction?
A) Debit Cash $5,000; credit Tile Sales $5,000
B) Debit Accounts Payable $4,050; credit Tile Sales $4,050
C) Debit Accounts Receivable $4,050; debit Sales Discount $50.00; credit Tile Sales
$5,000
D) Debit Accounts Receivable $5,000; credit Tile Sales $5,000
When the adjustment for depreciation is made:
A) total assets decrease.
B) total expenses decrease.
C) total liabilities increase.
D) None of the answers are correct.
Which of the following accounts should be closed to Income Summary at the end of the
fiscal year?
A) Salaries Expense
B) Fees Earned
C) Utilities Expense
D) All of the above are correct
If current assets were $88,000 in 20X7 and $100,000 in 20X8, what was the amount of
increase or decrease? (Round to nearest percent.)
A) The percentage increase is 14%.
B) The percentage decrease is 12%.
C) The percentage decrease is 14%.
D) The percentage increase is 12%.
Emily purchased $2,000 of merchandise on April 1 and recorded it in the voucher
register. On April 8, $400 of the merchandise proved to be defective. The company uses
the gross method and the periodic inventory system. The entry would be to:
A) reduce the original voucher.
B) record a purchase return in the general journal.
C) cancel the original voucher and record a revised voucher.
D) None of these answers is correct.
The purchase of direct materials was recorded as the purchase of office supplies. This
error will cause:
A) the cost of goods manufactured to be overstated.
B) the cost of goods sold to be overstated.
C) the net income to be overstated.
D) None of these is correct.
Office Supplies bought on account were returned for credit and recorded with a debit to
Accounts Payable and a credit to Merchandise Inventory. This error would cause:
A) the period end Cost of Goods Sold to be understated.
B) the period end Cost of Goods Sold to be overstated.
C) the period’s net income to be overstated.
D) None of these is correct.
Which of the following statements is true in regards to a profit center?
A) A profit center incurs costs.
B) A profit center does generate revenues
C) A profit center generates revenue
D) Both A and C
As Prepaid Rent Expense is used, the asset becomes a(n):
A) liability.
B) expense.
C) contra-asset.
D) revenue.
Which form contains information about gross earnings and is given to the employee by
January 31?
A) Form W-2
B) Form W-3
C) Form 941
D) Form W-4E
Sales minus cost of goods sold yields:
A) operating expenses.
B) gross profit.
C) income before taxes.
D) net income.
If management wishes to measure a business’s ability to pay upcoming debts, they
could refer to measures for:
A) leverage.
B) liquidity.
C) debt management.
D) profitability.
Ohio Company uses the Allowance for Doubtful Accounts Method. When Ohio writes
off an uncollectible account, there is:
A) an increase in Accounts Receivable.
B) a decrease in Accounts Receivable.
C) an increase in the Allowance Account.
D) None of these answers is correct.
What are the annual dividends on preferred stock, $25 par, 2,000 shares authorized, 600
shares issued, and a dividend rate of 3%?
A) $450
B) $45
C) $1,500
D) $150
Sales $1,300 Beginning Inventory $
11Sales Discount 5 Net purchases
1,050Sales Returns & Ending
Inventory 16Allowances 15
Operating Expenses 100
Scotch Services received a credit memorandum from the bank. During the bank
reconciliation they should:
A) increase their cash account on the company’s books.
B) decrease their cash account on the company’s books.
C) increase the ending cash balance on the bank statement.
D) decrease the ending cash balance on the bank statement.
Jane invests $5,000 for a one-fourth interest in a partnership in which the other partners
have capital totaling $20,000 before admitting Jane. After distribution of the bonus,
Jane’s capital is:
A) $4,000.
B) $6,000.
C) $8,000.
D) $6,250.
Proof that the dollar amount of the debits equals the dollar amount of the credits in the
ledger means:
A) all of the information from the journal was correctly transferred to the ledger.
B) all accounts have their correct balances in the ledger.
C) only the ledger is accurate; the journal may be incorrect.
D) only that the debit dollar amounts equal the credit dollar amounts.
What is the entry to record subscriptions received for 1,700 shares of $100 par value
common stock at $130 per share?
A) Debit Common Stock Subscribed $221,000; credit Cash $221,000
B) Debit Subscriptions Receivable-Common Stock $221,000; credit Common Stock
Subscribed $170,000; credit Paid-in Capital in Excess of Par ValueCommon $51,000.
C) Debit Subscriptions ReceivableCommon Stock $221,000; credit Common Stock
Subscribed $221,000
D) None of these answers is correct.
The entry to record the expiration of part of the Prepaid Rent Expense will:
A) decrease total liabilities and increase total expenses at the end of the month.
B) decrease total assets and decrease total expenses at the end of the month.
C) increase total assets and increase total expenses at the end of the month.
D) increase total assets and decrease total expenses at the end of the month.
Mindy and Heather are partners who have agreed to allow Carol to purchase Heather’s
share for a direct payment of $30,000 to Heather. Mindy and Heather’s previous capital
balances were $10,000 and $15,000, respectively. What will be the amount in Carol’s
capital account?
A) $15,000
B) $10,000
C) $30,000
D) Some other number
In exchange for $1,500 legal services to help set up the new company, Hickory Grove
Corporation issued 100 shares of $10 par value stock to its attorney. The entry to record
the issuance of the stock would include a:
A) credit to Common Stock for $1,000.
B) debit to Common Stock for $1,000.
C) credit to Paid-in Capital in Excess of Par Value-Common for $500.
D) Both A and C
Hardware Restoration had net purchases of $55,000. If Purchases Returns and
Allowances are $10,000 and Purchases Discounts are $1,500, what are gross purchases?
A) $38,500
B) $55,000
C) $66,500
D) $40,000
Which of the following entries would be used to record the billing of fees earned?
A) Debit Accounts Receivable and credit Rental Fees
B) Credit Cash and credit Rental Fees
C) Debit Accounts Payable and credit Rental Fees
D) Debit Cash and debit Rental Fees
A common-size comparative statement shows:
A) percents.
B) dollar increases/decreases.
C) whole dollar amounts.
D) None of the above
Mortgage Payable is what type of account?
A) Asset
B) Liability
C) Expense
D) Contra-asset
A credit may signify a(n):
A) increase in assets.
B) decrease in liabilities.
C) increase in revenue.
D) increase in withdrawals.
Which of the following bank reconciliation items would be reflected in a journal entry?
A) Error made by the bank
B) Outstanding Checks
C) Bank service charges
D) Deposit in transit
The information needed to make the journal entries to record the wages and salaries
expense comes from:
A) form W-2.
B) the look-back period.
C) the payroll register.
D) form 941.
A major cost of selling goods on account could be:
A) accounts payable.
B) cash shortages.
C) easy credit.
D) uncollectible accounts.
For a corporation, bond interest:
A) is treated the same as dividends for tax purposes.
B) has no effect on earnings and therefore has no effect on income taxes.
C) increases income tax by reducing earnings.
D) None of the above
The entry to replenish a $300 petty cash fund, which has cash of $140 and valid receipts
for $148, would include:
A) a credit to Cash for $160.
B) a debit to Petty Cash for $160.
C) a credit to Cash for $148.
D) a credit to Petty Cash for $148.