1) under the sarbanes-oxley act, accounting firms are allowed to audit a public company
and provide certain consulting services for the same client.
2) when a seller grants a sales allowance, the customer does not return any goods to the
seller.
3) source documents provide the evidence and data for accounting transactions.
4) an annual report provides information about a company’s financial condition.
5) a reduction in the amount of cash received from a customer for early payment is
known as a sales discount.
6) for good controls over cash payments, the person who orders goods from a supplier
should always be different from the person who approves the payment.
7) purchase discounts are calculated on the amount of the merchandise purchased
including transportation costs.
8) green services inc. invests its excess cash in creative technologies inc. and acquires
1,000 shares for $53.25 per share. green services inc. owns less than 1% of creative’s
voting stock and plans to hold the stock for two years. while preparing the journal entry
to record this transaction, ________.
a) long-term investmentsavailable-for-sale will be debited for $53,250
b) long-term investmentsheld-to-maturity will be debited for $53,250
c) long-term investmentstrading investments will be credited for $53,250
d) long-term investmentssignificant interest investments will be debited for $53,250
9) wellington inc. uses the direct method to prepare its statement of cash flows. refer to
the following financial statement information for the year ended december 31, 2015:
wellington inc.
comparative balance sheet
december 31, 2015 and 2014
on wellington’s statement of cash flows, using the direct method, what amount will be
shown for payments to suppliers for inventory and other operating expenses? (assume
accrued liabilities relate to other operating expense.)
a) $197,000
b) $176,000
c) $21,000
d) $200,000
10) corel sales sold its old office furniture for $5,000. its original cost was $10,000 and
at the time of sale, it had accumulated depreciation of $7,000. what was the effect of the
transaction?
a) gain of $5,000
b) gain of $2,000
c) loss of $2,000
d) loss of $5,000
11) a company has a petty cash fund amount of $300. when replenished, it has petty
cash receipts of $30 for gas expense, $32 for postage expense, $16 for supplies expense,
and $10 for miscellaneous expenses. assume the cash balance is not over or short. in the
journal entry, cash would be credited with ________.
a) $88
b) $72
c) $62
d) $78
12) a company that uses the perpetual inventory system purchased 500 pallets of
industrial soap for $7,000 and paid $750 for the freight-in. the company sold the whole
lot to a supermarket chain for $13,000 on account. the company uses the
specific-identification method of inventory costing. which of the following entries
correctly records the cost of goods sold?
a)
b)
c)
d)
13) when a company invests in a bond which has a maturity greater than one year and
pays cash, ________.
a) equity remains unchanged
b) current asset increases
c) liabilities increase
d) total assets increases
14) the matching principle states that ________.
a) financial statements can be prepared for specific periods
b) a business’s activities can be sliced into small time segments
c) all expenses should be recorded when they are incurred during the period
d) companies should record revenue when it has been earned
15) revenues and expenses are transferred to the ________ account before their final
transfer into the retained earnings account.
a) net income
b) income summary
c) dividends
d) assets
16) posting a transaction means ________.
a) calculating the balance in an account
b) transferring data from the journal to the ledger
c) preparing a summary of account balances
d) finding the account number in the chart of accounts
17) the accounts receivable account is a(n) ________ account and carries a ________
normal balance.
a) liability; debit
b) asset; debit
c) liability; credit
d) asset; credit
18) in an accounting cycle, which of the following steps takes place only at the end of
the accounting period?
a) start with the beginning account balances
b) journalize transactions that occur
c) analyze transactions as they occur
d) journalize adjusting entries
19) a merchandiser had sales returns and allowances of $300, sales discounts of $700,
cost of goods sold of $12,000, and all other expenses of $4,500. the merchandiser uses a
perpetual inventory system. the second entry in the closing process would include
________.
a) a debit to income summary for $17,500
b) a credit to income summary for $16,500
c) a debit to income summary for $4,500
d) a debit to income summary for $16,500
20) which of the following is true of comprehensive income?
a) all items included in comprehensive income enter into the determination of net
income
b) payment of dividend is not included in the determination of comprehensive income,
even though it results in a decrease in total stockholders’ equity
c) comprehensive income includes company’s change in total stockholders’ equity from
all sources including owners’ investments
d) comprehensive income cannot be combined with a traditional income statement into
a combined statement of comprehensive income for reporting purposes
21) on the date of record of dividends, the company ________.
a) issues new shares of stock on that date
b) disburses dividend payments to stockholders on that date
c) records the dividend payable amount on that date
d) determines who owns the shares of stock on that date
22) when inventory costs are declining, which of the following inventory costing
methods will result in the highest cost of goods sold?
a) first-in, first-out
b) last-in, first-out
c) weighted-average
d) specific identification
23) the following information is from the records of armadillo camera shop:
bad debts expense is estimated by the aging-of-accounts-receivables method.
management estimates that $2,850 of accounts receivable will be uncollectible.
calculate the amount of net accounts receivable after the adjustment for bad debts.
a) $17,750
b) $17,150
c) $16,550
d) $13,000
24) which of the following is the first step in the purchasing and payment process?
a) the purchaser receives an invoice for the goods shipped by the supplier
b) the purchaser sends a check to the supplier
c) the purchaser sends a purchase order to the supplier
d) the purchase receives the inventory and prepares a receiving report
25) which of the following is true of the fair value adjustment account for trading
investments?
a) it will always have a credit balance
b) it will always have a debit balance
c) it is considered as an adjunct account if it has a credit balance
d) it is considered as an adjunct account if it has a debit balance
26) refer to the following trial balance.
prepare a multi-step income statement:
27) steel rolling corp. purchased a mine on january 1, 2015, for $500,000 and it
estimated that 30,000 tons of iron ore can be extracted from it. it has no residual value.
the corporation has extracted 2,500 tons of ore in 2015. give the journal entry to record
depletion expense for the year 2015. (do not round your intermediate calculations.)
28) the partial worksheet of ruth furniture is as follows:
ruth furniture
worksheet
december 31, 2014
unadjusted trial adjusted trial
balanceadjustmentsbalance
account namesdebitcreditdebitcreditdebitcredit
cash$6,500
accounts receivable2,000$3,000
office supplies1,800$500
equipment15,000
accumulated
depreciationequipment$8,7001,200
common stock15,000
dividends3,000
service revenue10,6003,000
salaries expense4,000
rent expense2,000
depreciation expense
equipment1,200
supplies expense____________500_____
total$34,300$34,300$4,700$4,700
calculate and enter the amounts for the adjusted trial balance columns.
29) avatar company uses the indirect method to prepare its statement of cash flows.
using the worksheet shown below, enter the adjustments needed to record the
acquisition of plant assets for $52,000 cash.
avatar company
spreadsheet for statement of cash flows
year ended december 31, 2014
30) an adjusted trial balance of a merchandiser is given below.
provide journal entries to close the income summary account and the dividends account.
31) avatar company uses the indirect method to prepare its statement of cash flows.
using the worksheet shown below, enter the adjustments needed to record the increases
and decreases in current assets (other than cash) and current liabilities.
avatar company
spreadsheet for statement of cash flows
year ended december 31, 2014
