The collection of a $2,000 account beyond the 2 percent discount period would result in
a(n)
A. increase to Cash for $1,960.
B. decrease to Accounts Receivable for $2,000.
C. decrease to Cash for $2,000.
D. increase to Sales Discounts for $40.
When bonds are converted to common stock, which of the following could be part of
the entry?
A. Debit to Loss on Conversion of Bonds
B. Debit to Unamortized Bond Premium
C. Debit to Unamortized Bond Discount
D. Debit to Common Stock
Joan contributes cash of $48,000, and Jamie contributes office equipment that cost
$40,000 but is valued at $32,000 to the formation of a new partnership. The entry to
record the investments in the partnership is:
Which of the following describes the return on assets ratio?
A. Average total assets divided by sales
B. Net sales divided by net income
C. Net income divided by average total assets
D. Average total assets divided by net income
Plant assets used in conjunction with a natural resource typically are depreciated
A. using income tax depreciation.
B. using an accelerated depreciation method.
C. on the same basis as depletion is computed.
D. on a straight-line basis.
Closing entries ultimately will affect
A. total liabilities.
B. the Cash account.
C. the owner’s Capital account.
D. total assets.
The interest on a three-month, 12 percent, $16,200 note receivable is
A. $486.
B. $162.
C. $324.
D. $1,944.
Which of the following items is used in preparing the statement of owner’s equity?
A. Withdrawals.
B. Net income.
C. Additional investments.
D. All of these choices.
Goods totaling $14,000 purchased February 2 on terms of 2/10, n/30 and on which
returns of $2,000 were made on February 10 would be subject to which of the following
discounts if paid for on February 12?
A. $240
B. $280
C. $320
D. $40
In a period of rising prices, which of the following inventory methods generally results
in the highest gross margin figure?
A. Cannot tell without more information
B. LIFO
C. FIFO
D. Average-cost
Which of the following is legally a separate entity from its owner(s)?
A. Sole proprietorship only
B. Sole proprietorship and partnership only
C. Corporation only
D. Partnership only
Which inventory method generally best follows the matching principle?
A. Average-cost
B. LIFO
C. Whichever method is used for tax purposes
D. FIFO
Use this information to answer the following question.
The trial balance for Nowwick Company appears as follows:
If services totaling $250 had been performed but not billed,
A. the adjusting entry would include a credit to Unearned Service Revenue for $250.
B. the adjusted balance in Accounts Receivable would be $1,250.
C. the adjusted balance of Service Revenue would be $750.
D. All of these choices.
The balance in Allowance for Uncollectible Accounts must be considered prior to
end-of-period adjustment when using which of the following methods?
A. Direct charge-off method
B. Both direct charge-off method and percentage of net sales method
C. Percentage of net sales method
D. Accounts receivable aging method
Expensing a building in the year of purchase represents an abuse of which of the
following accounting conventions?
A. Full disclosure
B. Cost-benefit
C. Conservatism
D. Consistency
The other revenues and expenses section of a multistep income statement could include
all the following except
A. interest expense.
B. interest income.
C. dividend income.
D. insurance expense.
Transfer of ownership will affect the continuity of a
A. corporation.
B. sole proprietorship.
C. partnership.
D. sole proprietorship or partnership.
Which of the following is not a commitment?
A. Lease
B. Construction of long-term asset
C. Purchase agreement
D. Guarantee of debt
Use the following information to answer the question below.
When Langston Corporation was formed on January 1, 20×5, the corporate charter
provided for 100,000 shares of $10 par value common stock. The following transactions
were among those engaged in by the corporation during its first month of operation:
1) The corporation issued 400 shares of stock to its lawyer in full payment of the
$10,000 bill for assisting the company in drawing up its articles of incorporation and
filing the proper papers with the state agency.
20 The company issued 16,000 shares of stock at a price of $50 per share.
3) The company issued 14,000 shares of stock in exchange for equipment that had a fair
market value of $320,000.
The entry to record transaction 2 is
A. Cash 800,000
Common Stock 800,000
B. Cash 800,000
Common Stock 160,000
Additional Paid-in Capital 640,000
C. Cash 160,000
Additional Paid-in Capital 640,000
Common Stock 800,000
D. Cash 160,000
A disadvantage of the corporate form of business is
A. lack of mutual agency.
B. professional management.
C. ease of transfer of ownership.
D. tax treatment.
Adele Connor is the manager of Midland Standard Equipment Company. Adele does
not have an accounting degree nor a strong background in accounting. Describe to
Adele how the work sheet and closing entries assist her in managing Midland Standard
Equipment Company.
Preparation of the work sheet and recording closing entries is not just an accounting
task. These steps are important ways to help the company save money and prevent
mistakes. They will also help Adele in understanding Midland Standard’s business by
providing the mechanism for dividing its financial life into accounting periods; thus,
applying the concept of periodicity.
Closing entries are important to managing a business for the following reasons:
a. The owners of the business expect periodic reports of the progress of the business.
b. In planning a business’ future operations, Adele (as a manager) needs to prepare
budgets for future time periods.
c. For Adele to evaluate her company’s process in achieving its profitability goals, it is
necessary to divide the life of the business into relatively short time periods
Foltz Corporation purchased 3,000 shares of Craver Corporation common stock for
$160 per share on January 1, 2013, as a long-term investment. Craver reported net
income of $140,000 and $180,000 for 2013 and 2014, respectively, and paid dividends
of $50,000 and $60,000 during 2013 and 2014, respectively. Craver has a total of
10,000 shares outstanding. Compute the following amounts:
a. Investment income recognized by Foltz Corporation during 2013
b. Balance of Investment in Craver Corporation account at end of 2013
c. Amount of investment income recognized by Foltz Corporation during 2014
d. Balance of Investment in Craver Corporation account at end of 2014
Sinoyianis Realty Company had the following balance sheet accounts and balances:
If, $6,000 of Accounts Payable were paid in cash, what would be the balance of the Flora
Sinoyianis, Capital account?
A. $8,000
B. $28,000
C. $36,000
D. $40,000
Which of the following situations does not involve an accrual?
A. Recording accrued interest.
B. Recording depreciation.
C. Recording unrecorded wages.
D. Recording unrecorded revenue.
When a business reports an asset at an inflated dollar amount, is has violated the
measurement issue of
A. recognition.
B. valuation.
C. classification.
D. realization.
A remittance advice is attached to a(n)
A. receiving report.
B. check.
C. purchase order.
D. invoice.
The entry to record a sales return from a customer would require a(n)
A. decrease to Sales.
B. increase to Sales.
C. decrease to Sales Returns and Allowances.
D. increase to Sales Returns and Allowances.
A truck is purchased for $70,000. It has a five-year life and a $10,000 residual value.
Under the double-declining-balance method, what is the accumulated depreciation after
two years?
A. $38,400
B. $42,400
C. $44,800
D. $51,200
A company records a transaction in which six months’ rent is paid in advance. Which of
the following journal entries records the transaction?
A. Prepaid Rent – Debit; Cash – Credit
B. Rent Receivable – Debit; Cash – Credit
C. Rent Revenue – Debit; Cash – Credit
D. Rent Expense– Debit; Cash – Credit.
Using the following information, calculate for 20×5 (a) net sales, (b) cost of goods sold,
(c) gross margin, and (d) net income.
The post-closing trial balance would not include which of the following accounts?
A. Unearned Legal Fees
B. Accumulated Depreciation–Office Equipment
C. Withdrawals
D. Owner’s Capital
Assume that the $2,000, 90-day, 8 percent note was received on August 31 and that the
fiscal year ended on September 30. The adjusting entry that would be made to record
the interest receivable is (amounts rounded to nearest dollar):
A. Interest Receivable 13
Interest Income 13
B. Notes Receivable 13
Interest Income 13
C. Accounts Receivable 39
Cash 39
D. Interest Income 39
Preparation of closing entries
A. is an optional step in the accounting cycle.
B. is the first step after posting to the general ledger.
C. assist in achieving periodicity and accrual accounting.
D. All of these choices.
Retailers often end their fiscal years .
A. during the slack season.
B. during the peak of the busy season.
C. at different times each year, depending on the tax consequences.
D. on June 30.
Which of the following errors will cause the trial balance to be out of balance?
A. An entire transaction was entered in the general journal as $27 instead of $72.
B. An entire transaction was omitted from the general journal.
C. The balance of an account was incorrectly computed.
D. A debit entry was entered in the wrong debit account.