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The number of times a company collects the average accounts receivable balance in a
year is known as the accounts receivable turnover ratio.
Ending inventory is calculated by multiplying the number of units on hand by the unit
cost.
Par value is an arbitrary amount that is assigned by the state when the corporate charter
is issued.
In a periodic inventory system, the Cost of Goods Sold account is continuously updated
as and when sales occur.
If competent, reliable, and ethical employees are hired, there is no need to adequately
supervise their work.
Evaluated receipts settlement (ERS) compresses the payment approval process into a
single step.
If preferred stock is issued for an amount above the par value, the amount of the par
value times the number of shares issued is credited to Paid-In Capital in Excess of Par
—Preferred.
If a company fails to make an adjusting entry for deferred expense, the assets will be
overstated. Assume the deferred expense is initially recorded as an asset.
Vacation, health, and pension benefits must be estimated and recorded as a liability.
The T-account is a summary device that is shaped like a capital T with debits posted on
the left side of the vertical line and credits posted on the right side of the vertical line.
A corporation is a business organized under federal law that is a separate legal entity.
Trend analysis is a form of horizontal analysis.
Cost of goods available for sale represents beginning merchandise inventory plus net
purchases less freight in.
Dollar value bias is the bias one sees from comparing numbers in relative (dollars)
rather than absolute (percentage) terms.
The cost of land does not include the cost of fencing and paving.
In counting the number of days in a note term, omit the date the note was issued.
The operating cycle is the process by which companies produce their financial
statements for a specific period.
The security measures are the same for any type of cash receipts.
The difference between mortgages payable and notes payable is that notes payable are
always secured by specific assets.
Days' sales in receivables is also called the collection period.
The primary objective of financial reporting is to ensure that all investment decisions
are risk free.
The direct write-off method of accounting for uncollectible receivables is primarily
used by small, nonpublic companies.
Investors who want to know the amount of cash a company has available for new
opportunities, such as expanding into a new sales region, should analyze the company's
free cash flow.
Stated value stock is no-par stock that has been assigned an amount similar to par value.
Investments in equity securities are classified into three specific types based on the
investor's level of influence over the investee company.
Credit department employees must have access to cash in order to exercise effective
internal control over receivables.
The rate of return on total assets is calculated by first subtracting interest expense from
net income and then dividing the result by average total assets.
If preferred stock is noncumulative, the company is required to pay dividends that were
passed in previous years.
The disclosure principle states that a company should report enough information for
outsiders to make knowledgeable decisions about the company.
The non-cash investing and financing activities section of the statement of cash flows
appears as a separate schedule of the statement of cash flows or in the notes to the
financial statements.
The account Paid-In Capital from Treasury Stock Transactions has a credit balance of
$2,000. The corporation resells 450 shares of its treasury stock. These shares were
acquired for $10 per share and sold for $3 per share. The entry to record the sale of
treasury stock includes a debit to Retained Earnings of $3,150.
Following is a list of advantages and disadvantages of the corporate form of business.
Identify each characteristic as either an advantage (A) or a disadvantage (D).
Arkansas Company is preparing its statement of cash flows using the indirect method.
Refer to the following information:
1. Repayments on Long-term Notes Payable $60,000
2. New borrowing on Long-term Notes Payable $23,000
Which of the following statements is correct?
A) Net cash used for financing activities is $(37,000).
B) Net cash used for investing activities will is $60,000.
C) Net cash provided by financing activities is $37,000.
D) Net cash provided by investing activities is $37,000.
Which of the following are NOT included in a post-closing trial balance?
A) Assets and liabilities
B) Retained Earnings and assets
C) Common Stock and liabilities
D) Revenues and expenses
An equity security ________.
A) represents a credit relationship with another company or governmental entity
B) is a standardized contract between two parties to acquire various forms of
investments
C) represents stock ownership in another company and sometimes pays dividends
D) is a financial instrument that entitles the holder to receive periodic interest
Which of the following statements is true of a bond that is issued at a discount?
A) The bond will be issued at par.
B) The stated interest rate is higher than the prevailing market interest rate.
C) At maturity, the bond will repay an amount that is less than the face value.
D) The bond will be issued for an amount less than the face value.
Which of the following statements is true if a bond's stated interest rate is higher than
the market rate?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount lower than the maturity value.
The following information is needed to reconcile the cash balance for Gourmet
Catering Services.
• A deposit of $5,600 is in transit.
• Outstanding checks total $1,000.
• The book balance is $6,400 at February 28, 2019.
• The bookkeeper recorded a $1,800 check as $17,200 in payment of the current
month's rent.
• The bank balance at February 28, 2019 was $17,410.
• A deposit of $400 was credited by the bank for $4,000.
• A customer's check for $3,300 was returned for nonsufficient funds.
• The bank service charge is $90.
What was the adjusted book balance?
A) $18,500
B) $18,410
C) $18,590
D) $17,500
The Bridal Gift Shop, Inc. has 14 units in ending merchandise inventory on December
31. The units were purchased in November for $165 each. The price lists from suppliers
indicate the current replacement cost of the item to be $171 each. What would be the
amount reported as Merchandise Inventory on the balance sheet?
A) $2,310
B) $4,704
C) $336
D) $2,394
Which of the following adjusted balances would appear in the balance sheet credit
column of a worksheet?
A) Rent Revenue
B) Insurance Expense
C) Salaries Payable
D) Equipment
The trend analysis report of Poplar, Inc. is given below (in millions):
Which of the following is a correct conclusion from the above analysis?
A) Net income for 2019 is 175% of net income for 2015.
B) Net income for 2018 is 152% of the previous year.
C) Net income for 2018 decreased by 152% from 2017.
D) Net income for 2019 increased by 175% from 2018.
When a company is using the direct write-off method, and an account is written off, the
journal entry consists of a ________.
A) debit to Accounts Receivable and a credit to Cash
B) credit to Accounts Receivable and a debit to Bad Debts Expense
C) debit to the Allowance for Bad Debts and a credit to Accounts Receivable
D) credit to Accounts Receivable and a debit to Interest Expense
Diamond, Inc. had the following transactions during June:
Performed services for $2,000 on account; received cash on account, $8,000; paid $700
for repair expense; paid $1,800 to a supplier that it owed from the previous month.
What is the combined effect on Cash of these June transactions?
A) $5,500 increase
B) $5,500 decrease
C) $8,000 increase
D) $2,500 decrease
Prepaid Rent is a(n) ________ account and has a normal ________ balance.
A) asset; debit
B) liability; credit
C) liability; debit
D) asset; credit
Pizza, Inc. provides the following data:
For the year ending December 31, 2019:
Calculate the asset turnover ratio for 2019. There are no cash sales. (Round your answer to
two decimal places.)
A) 4.05 times
B) 1.01 times
C) 0.64 times
D) 2.01 times
August, Inc. had the following transactions in 2018, its first year of operations:
• Issued 22,000 shares of common stock. The stock has a par value of $3.00 per share
and was issued at $16.00 per share.
• Issued 1800 shares of $160 par value preferred stock at par.
• Earned net income of $37,000.
• Paid no dividends.
At the end of 2018, what is total stockholders' equity?
A) $677,000
B) $354,000
C) $286,000
D) $640,000
Gulfcoast, Inc. purchased a van on January 1, 2019, for $930,000. Estimated life of the
van was five years, and its estimated residual value was $93,000. Gulfcoast uses the
straight-line method of depreciation. Calculate the book value of the van at the end of
2019.
A) $755,625
B) $871,875
C) $837,000
D) $762,600
When determining how businesses record or do not record contingent liabilities, which
is not one of the three likelihoods that that are considered?
A) remote
B) reasonably probable
C) probable
D) reasonably possible
Equipment was acquired for $258,000 and has accumulated depreciation of $188,000.
The business exchanges this equipment for new equipment. The new equipment has a
market value of $206,000 and the business pays $150,000 cash. Assume the exchange
has commercial substance. The exchange results in a ________.
A) loss of $14,000
B) gain of $14,000
C) gain of $136,000
D) loss of $136,000
A business borrows cash by signing a note payable. Which of the following accounts is
credited?
A) Notes Payable
B) Accounts Payable
C) Notes Receivable
D) Cash
Which of the following would be included in the journal entry to record the payment of
sales tax payable?
A) a debit to Sales Tax Payable
B) a credit to Sales Tax Expense
C) a debit to Sales Tax Expense
D) a credit to Sales Tax Payable
Which of the following is a measure for discouraging theft for a retail store that accepts
cash receipts over the counter?
A) A receipt is issued for each transaction to ensure that each sale is recorded.
B) At the end of the day, the sales clerk proves the cash by comparing the cash in the
drawer against the machine's record of cash sales.
C) The sales clerk uses the machine tape to record the journal entry for cash receipts
and sales revenue.
D) The store clerk deposits the cash in the bank.
Which of the following is an example of debt securities?
A) preferred stocks
B) real estate
C) common stocks
D) corporate bonds
At the maturity of a note payable, a borrower will pay ________.
A) the principal plus interest
B) the principal amount only
C) the interest amount only
D) the principal minus interest
Which of the following requires a formal journal entry?
A) selection of a new CEO
B) stock dividend distribution
C) stock split
D) date of record for cash dividends
Jason Repair Corporation incurred $1,500 as advertising expense and promised to pay
the advertising agency within 30 days. Which of the following will decrease as a result
of this transaction?
A) Assets
B) Stockholders' equity
C) Liabilities
D) Revenues
When posting entries from a purchases journal to the general ledger, ________.
A) posting references are not shown in the subsidiary ledger
B) the Accounts Payable balance in the general ledger will be less than the sum of the
individual vendor balances in the subsidiary ledger
C) the amounts in the Other Accounts DR column are posted individually to the specific
accounts
D) entries are posted on a daily basis for all the accounts
Following is an extract of account balances of Aztec Moving Services as of December
31, after the first year of operation.
What is the amount of total assets at the end of the year?
A) $17,000
B) $35,300
C) $22,000
D) $29,300
Lark had net income for 2018 of $104,000. Lark had 32,000 shares of common stock
outstanding at the beginning of the year and 48,000 shares of common stock
outstanding at the end of the year. There were 5000 shares of preferred stock
outstanding all year. During 2018, Lark declared and paid preferred dividends of
$30,000. On December 31, 2018, the market price of Lark's common stock is $30 per
share and the market price of its preferred stock is $57 per share. What is Lark's
price/earnings ratio at December 31, 2018? (Round any intermediate calculations and
your final answer to the nearest cent.)
A) 30.81
B) 11.54
C) 13.85
D) 16.22
Which of the following is an example of a source document in a computerized
accounting information system?
A) statement of cash flows
B) balance sheet
C) bank checks
D) general ledger
Which of the following is NOT a liability that must be estimated?
A) warranties
B) vacation pay
C) bonus plans
D) promissory notes
The amount of net income is transferred from ________ to ________.
A) the income statement; the statement of retained earnings
B) the balance sheet; the statement of cash flows
C) the balance sheet; the income statement
D) the income statement; the statement of expenditures
A company that uses the perpetual inventory system purchased 500 pallets of industrial
soap for $10,000 and paid $950 for the freight-in. The company sold the whole lot to a
supermarket chain for $13,000 on account. Which of the following entries correctly
records the sale?
A)
B)
C)
D)
Refer to the following trial balance.
How much is the gross profit?
A) $193,000
B) $56,000
C) $51,000
D) $45,000
Roadside, Inc. had the following balances and transactions during 2018:
What is the amount of the company's ending Merchandise Inventory, as disclosed in the
December 31, 2018 balance sheet, using the periodic LIFO inventory costing method?
A) $480
B) $560
C) $640
D) $420
Josh Baker works for Jones Restaurant Supply all year and earns a monthly salary of
$8,000. There is no overtime pay and Jones withholds income taxes at 12% of gross
pay. Jones deducts $200 monthly for the co-payment of the health insurance premium.
Employees are paid on the fifth day of each month. As of October, 31, Josh had $80,000
of cumulative earnings. Journalize the accrual of salaries expense on October 31. Omit
explanations.
There are numerous ways to label an employee's pay. Complete the table to show how
each type of employee pay is generally labeled.
Provide a definition of each of the follow accounting terms.
On January 1, 2018, Milton Tools Company purchases machinery with a fair value of
$300,000 by paying $50,000 in cash and signing a 10-year mortgage note at 13% for
the balance. Prepare the journal entry for January 1, 2018. Omit explanation.
Employees worked and a business paid salaries of $6,000 in cash. Record the
transaction in the journal.
List the four basic rights of stockholders.
For each of the following statements, indicate whether it applies to:
the cash basis of accounting (cash basis)
the accrual basis of accounting (accrual basis)
both the cash and accrual basis of accounting (both)
neither the cash nor the accrual basis of accounting (neither).
Your response should be cash basis, accrual basis, both, or neither.
Provide definitions for the following:
On January 1, Cooper Corp. accepted a one-year note for $5,000 at 4% from one of its
customers. When the note matured on December 31, the customer was unable to pay,
and the company treated it as a dishonored note. Prepare the journal entry that Cooper
will make to record the dishonored note. Omit explanation.
MacMann Corp. purchased a mine on January 1, 2018, for $500,000. The mine is
estimated to contain 30,000 tons of iron ore. There is no residual value. The business
has extracted and sold 2,500 tons of ore in 2018. Prepare the journal entry to record
depletion expense for 2018. (Round your intermediate calculations to the nearest cent.)
Omit explanation.
On March 21, 2019, the bond accounts of Fitzhugh Sales showed the following
balances.
Fitzhugh Sales retires the bonds for $66,150. Prepare the journal entry to record the
retirement of the bonds. Omit explanation.
Perry Service Company had the following unadjusted balances at December 31, 2018:
Salaries Payable, $0; Salaries Expense, $12,000. The following transactions took place
on December 31, 2018:
Accrued Salaries Expense, $5,000
Closed the Salaries Expense account.
The following transaction took place on January 4, 2019:
Paid salaries of $6,000. This payment included $5,000 that was accrued on December
31, 2018 and $1,000 for the first few days in January 2019.
Prepare the journal entry for January 4, 2019, assuming that reversing entries were not
made. Omit explanation.
Wylie Company has just completed operations for the year ended December 31, 2018.
This is the second year of operations for the company. The following data have been
assembled for the business.
Prepare the balance sheet at December 31, 2018. Use a proper heading.
The following transactions of Windsor Enterprises occurred in 2018 and 2019:
Journalize the transactions in Windsor's general journal. Explanations are not required.
Round to the nearest dollar.
What are two ways in which a company can improve its debt ratio?
