Bobby Darin is the only employee of Atlantic Records, Inc. During the first week of
January, Darin earned $800 and had federal and state income tax withholdings of $40
and $15, respectively. FICA taxes are 7.65 percent on wages up to $100,000. State and
federal unemployment taxes for the period are $50 and $8, respectively.
Use the information above to answer the following question. What is the employer’s
payroll tax expense for the week?
A. $113.00
B. $119.20
C. $174.20
D. $235.40
Answer:
As of September 30, 2013, which source provided more financing for Anonymous,
Inc.?
A. owners
B. creditors
C. both provided equal financing
D. neither provided any financing
Answer:
A 4-month, $6,500, 9% note payable incurs total interest of
A. $585
B. $292
C. $146
D. $195
Answer:
The following transactions occurred during July:
1. Received $800 cash for services rendered during July.
2. Received $5,000 from issuance of stock to investors.
3. Received $400 from a customer in payment of accounts receivable from the prior
month.
4. Billed customers for services performed in July, $3,500.
5. Borrowed $2,500 from the bank, giving a promissory note in exchange.
6. Received $1,000 from a customer for services to be performed next year.
As a result of these transactions, the cash account will increase by:
A. $9,700.
B. $13,200.
C. $2,200.
D. $7,200.
Answer:
Show journal entries for each of the following January activities, and post results to the
relevant T-accounts. Compute the ending balance of each T-account. Beginning
balances have been entered.
A. Paid $689 on account for December’s utilities.
B. Bought $423 of supplies for cash.
C. Paid $3,500 legal fees in advance for legal services to be received over the next six
months.
D. Bought $15,000 of new equipment, signing a promissory note.
E. Provided $26,000 of services. $17,000 was received in cash and $9,000 was
provided on credit.
F. Paid workers $8,300 for work done in January.
Answer:
The new CEO of a company takes over on December 10, 2013. He is promised a
significant bonus for every percent he can increase net income in 2014 over 2013
results.
Which of the following actions would aid the CEO in making 2014 net income results
look more impressive?
A. Overstating the cost of machinery purchased in 2014.
B. Prepaying 2014 expenses in 2013.
C. Deferring 2014 expenses to 2015 and accruing revenues in 2014 that don’t exist.
D. Recording 2014 revenue as unearned revenue.
Answer:
A company purchased land for its natural resources at a cost of $1,500,000. It expects to
mine 2,000,000 tons of ore from this land. The residual value of the land is estimated to
be $250,000. What is the amount of depletion per ton of ore?
A. $0.75
B. $0.875
C. $1.14
D. $0.625
Answer:
The following information is available for a company at the end of the year:
What was the amount of write-offs during the year?
A. $62,000
B. $0
C. $55,000
D. $40,000
Answer:
The LIFO inventory costing method assumes that the cost of the units most recently
purchased is:
A. the last to be assigned to cost of goods sold.
B. the first to be assigned to ending inventory.
C. the first to be assigned to cost of goods sold.
D. the last to be assigned to units available for sale.
Answer:
The Extra Surplus Company’s Balance Sheet for December 31, 2013 and the Income
Statement for 2014 are shown below.
Additional Data for 2014:
Sales were $13,000; $8,000 in cash was received from customers.
Bought new land for cash, $10,000.
Sold other land for its book value of $5,000.
Paid $1,000 principal on the long-term note payable and $1,000 in interest.
Issued new shares of stock for $10,000 cash.
$1,000 of dividends were declared and paid.
Paid $5,500 on accounts payable.
No inventory purchases were made; other expenses were incurred on account.
All wages were paid in cash.
Other expenses were on account.
a. Prepare the statement of cash flows for the year ended December 31, 2014 using the
direct method.
b. Prepare a balance sheet at December 31, 2014.
Answer:
Cash flows from financing activities:
A. are always negative because the company pays dividends as well as interest and
principal on debt.
B. includes all cash inflows and outflows between a company and its stockholders.
C. includes all cash inflows and outflows associated with a company’s lending
activities.
D. are always positive unless the company is experiencing serious financial trouble.
Answer:
When a company that uses the allowance method writes off an actual bad debt:
A. total assets decrease.
B. total liabilities increase.
C. total expenses increase and total revenues increase.
D. total assets, revenues, and expenses remain the same.
Answer:
In a period of rising prices, the inventory costing method that will cause the company to
have the lowest income taxes is
A. LIFO.
B. FIFO.
C. Weighted average.
D. Specific identification.
Answer:
Each of the following independent companies is missing numerical data. Use your
knowledge of the financial statement equations and their interrelationships to fill in the
missing amounts.
Answer:
Your company buys a $2 million warehouse paying $300,000 in cash and issuing $1.7
million in promissory notes. This will be posted as:
A. $2 million credited and $300,000 debited to assets; $1.7 million debited to liabilities.
B. $2 million debited to assets and $2 million credited to liabilities.
C. $2 million debited and $300,000 credited to assets; $1.7 million credited to
liabilities.
D. $2 million credited to assets and $2 million debited to liabilities.
Answer:
E. Flynn Company makes a sale and collects a total of $378, which includes an 8%
sales tax. The amount to be credited to Sales Revenue is
A. $378
B. $350
C. $406
D. $348
Answer:
Which of the following analysis techniques does not pertain to changes over time?
A. Trend analysis.
B. Horizontal analysis.
C. Time-series analysis.
D. Vertical analysis.
Answer:
A company’s financial records at the end of the year were as follows:
What is the amount of net income on the income statement for the year?
A. $30,000
B. $38,000
C. $88,000
D. $47,000
Answer:
Which of the following accurately describes how accruing advertising expense incurred
but not yet paid would affect the ratios indicated?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
If a publicly traded company is trying to appear attractive to external users, the
company is most likely to understate which of the following on its balance sheet?
A. Assets.
B. Liabilities.
C. Retained earnings.
D. Contributed capital.
Answer:
During its first year of operations, Widgets Incorporated reported sales revenue of
$386,000 but collected only $303,000 from customers. The amount to be reported as
accounts receivable at the end of the year is
A. $689,000.
B. $386,000.
C. $303,000.
D. $83,000.
Answer:
A company issued $300,000, 10-year, 10 percent bonds at
Use the information above to answer the following question. What is the issue price of
these bonds?
A. $300,000
B. $285,000
C. $315,000
D. $330,000
Answer:
On July 1, B. Darin Company sold merchandise costing $4,500 to S. Dee Company for
$6,000, terms 2/10, n/30. Both companies use a perpetual inventory system. What is the
journal entry that S. Dee Company will make on July 1?
A. Option A
B. Option B
C. Option C
D. Option D
Answer:
An error is indicated if the following account appears on the post-closing trial balance
with a positive balance.
A. Office equipment.
B. Contributed capital.
C. Accumulated depreciation.
D. Depreciation expense.
Answer:
An adjusted trial balance should be prepared immediately:
A. after the financial statements, but before closing.
B. before posting adjusting entries.
C. after posting adjusting entries.
D. after journalizing adjusting entries.
Answer:
A corporate charter specifies that the company may sell up to 20 million shares of
stock. The company sells 12 million shares to investors and later buys back 3 million
shares. The number of authorized shares after these transactions are accounted for is:
A. 12 million shares.
B. 20 million shares.
C. 9 million shares.
D. 17 million shares.
Answer:
A $15,000 overstatement of the 2014 ending inventory was discovered after the
financial statements for the year were prepared. How would that inventory error impact
the 2014 financial statements?
A. Current assets were overstated and net income was understated.
B. Current assets were understated and net income was understated.
C. Current assets were overstated and net income was overstated.
D. Current assets were understated and net income was overstated.
Answer:
Which of the following groups of accounts contains only those that normally have
credit balances?
A. Accounts Payable; Retained Earnings; Service Revenue.
B. Equipment; Cash; Contributed Capital.
C. Notes Payable; Wages Payable; Rent Expense.
D. Accounts Receivable, Retained Earnings, Cash.
Answer:
The undepreciated cost of an asset is referred to as
A. residual value.
B. book value.
C. market value.
D. sales value.
Answer:
The right to exclude others from making or using an invention is a
A. patent.
B. copyright.
C. franchise.
D. licensing right.
Answer:
Cash flows from financing activities include all of the following except
A. payment of long-term debt.
B. interest expense.
C. proceeds from stock issuance.
D. dividends paid to stockholders.
Answer:
The following data are for the Grass is Greener Company at the end of 2014, after
adjustments, except for the calculation of income tax expense.
Required:
A) Calculate the income before income tax.
B) Calculate the income tax owed by the company if its tax rate is 40%.
C) Calculate the net income.
Answer:
