A business issues 10-year bonds payable in exchange for common stock. This
transaction would be reported on the statement of cash flows in:
A) operating activities.
B) financing activities.
C) investing activities.
D) a separate schedule.
A wholesale customer returned merchandise having already paid for it within the cash
discount period. The return will be recorded with:
A) a credit to an asset account.
B) a credit to a liability account.
C) a credit to Capital.
D) None of these is correct.
A company purchases a patent for $40,000. The patent will be amortized over 5 years.
The entry to record the amortization in the first year is:
A) debit Patents $40,000; credit Cash $40,000.
B) debit Amortization Expense, Patents $40,000; credit Patents $40,000.
C) debit Amortization Expense, Patents $8,000; credit Patents $8,000.
D) debit Patents $10,000; credit Amortization Expense, Patents $10,000.
The balance sheet columns on the worksheet prepared for Cleveland Foods had
subtotals as follows: debit column, $13,000, and credit column, $10,400. This
information indicates that:
A) the company incurred a net income of $2,600.
B) the company incurred a net loss of $2,600.
C) an error was made when preparing the adjustments in the worksheet.
D) the unadjusted trial balance has an error.
A W-4 form:
A) determines the amount of FICA-OASDI to be withheld.
B) determines the amount of FICA-Medicare to be withheld.
C) provides the number of allowances an employee has claimed.
D) shows total net wages earned for the year.
A debit to an expense account was posted to an asset account. This would cause:
A) assets to be overstated.
B) liabilities to be understated.
C) capital to be understated.
D) expenses to be overstated.
A full endorsement on a check:
A) is the same as a blank endorsement.
B) can be endorsed only by the person or company named in the original endorsement.
C) is the safest endorsement for businesses.
D) does none of the above.
A company has cash of $215,000; short-term investments of $45,000; net receivables of
$75,000; and inventory of $100,000. Current liabilities total $80,000. The current ratio
is:
A) 5.28:1.
B) 4.44:1.
C) 5.44:1.
D) 4.89:1.
The sale and issuance of $400,000, 8% bonds with a market rate of 8% would involving
debiting Cash for:
A) $540,000.
B) $460,000.
C) $400,000.
D) $40,000.
If $6,000 was the beginning inventory, purchases were $10,000 and sales were $7,000.
How much was ending inventory last accounting period?
A) $9,000
B) $6,000
C) $0
D) $3,000
The contra-revenue accounts include:
A) Sales Tax Payable.
B) Sales Returns and Allowances.
C) Sales Discount.
D) Both B and C are correct.
A $12,000, 5% note is dated May 18 and is due in 90 days. Using a 360-day year, the
maturity value would be:
A) $12,000.
B) $12,050.
C) $12,175.
D) $12,150.
The balance in the Allowance for Doubtful Accounts is ignored under which of the
following approaches?
A) Balance sheet approach
B) Income statement approach
C) Direct write-off approach
D) All three approaches
The Discount Lost account is used when the:
A) gross method is used and the discount is not taken.
B) gross method is used and the discount is taken.
C) net method is used and the discount is not taken.
D) net method is used and the discount is taken.
The entry to adjust for bad debts was ignored. This error would cause:
A) total assets to be overstated.
B) total liabilities to be understated.
C) net income to be understated.
D) None of these is correct.
XYZ Corporation issued a four-for-one stock split. The number of outstanding shares
before the split was 20,000 and the par value was $24 per share. After the split, what
was the par value per share and number of shares?
A) 80,000 shares and $24 per share
B) 80,000 shares and $12 per share
C) 80,000 shares and $6 per share
D) 80,000 shares and $18 per share
A corporation sold 20 shares of $20 par value treasury stock for $40 per share. The
treasury stock cost $30 per share to acquire. The entry to record the transaction would
include a:
A) credit to Paid-in Capital from Treasury Stock for $600.
B) debit to Treasury Stock for $800.
C) credit to Paid-in Capital from Treasury Stock for $200.
D) debit to Common Stock for $400.
If Rent Expense has been debited, it is likely that:
A) the rent was paid for three months in advance.
B) a copy of the lease was received.
C) this month’s rent was paid.
D) All of these are possible.
Which method of allocation of profits and losses is based on a percent of initial
investment of the partners?
A) Salary allowance
B) Salary expense
C) Profit and loss ratio
D) Interest allowance
The time frame when customers are allowed to pay their bills and still be eligible for a
discount is the:
A) credit period.
B) discount period.
C) short period.
D) due date.
Sue’s Jewelry sold 20 necklaces for $25 each to a credit customer. The invoice included
a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned
prior to payment. The entry to record the original sale would include:
A) a debit to Accounts Receivable for $530.
B) a debit to Accounts Receivable for $500.
C) a debit to Sales for $530.
D) a debit to Sales for $500.
The entry to replenish the petty cash fund debited Insurance Expense for postage. This
would cause:
A) Petty Cash to be overstated.
B) Petty Cash to be understated.
C) Postage Expense to be overstated.
D) Insurance Expense to be overstated.
If Capital has been credited, it is likely that:
A) services were provided to a cash customer.
B) services were provided to a charge customer.
C) the owner made an investment.
D) a payment was made on account.
The amount the bank charges when it discounts a note is calculated as:
A) bank discount = note principal bank discount rate (discount period /360 days).
B) bank discount = maturity value bank discount rate (original note period /360 days).
C) bank discount = maturity value bank discount rate + original interest rate (discount
period /360 days).
D) bank discount = maturity value bank discount rate (discount period /360 days).
On the balance sheet, Vouchers Payable would be:
A) a special liability account.
B) an asset account.
C) renamed as Accounts Payable.
D) shown as long-term liabilities.
Santa Materials sold goods for $2,000 plus 2% sales tax to a charge customer, terms
n/30. Which entry is required to record this transaction?
A) Debit Accounts Receivable $2,040; credit Sales Tax Payable $140; credit Sales
$2,000
B) Debit Cash $2,000; credit Sales $2,000
C) Debit Accounts Receivable $2,000; credit Sales $2,000
D) Debit Accounts Receivable $2,040; credit Sales $2,040
What is the total gross profit of the company if there are three departments (A, B, and
C) and the net sales are $200,000, $174,000, and $286,000, respectively, and cost of
goods sold is $86,000, $92,000, and $82,000, respectively?
A) $390,000
B) $650,000
C) $400,000
D) $260,000
Applying the interest allowance method, compute Julie and Jennifer’s share of net
income if Julie invested $50,000 and Jennifer invested $35,000 at an 10% interest rate,
with the remainder to be divided equally. Net income was $10,000.
A) Julie $5,000; Jennifer $3,500
B) Julie $5,750; Jennifer $4,250
C) Julie $5,640; Jennifer $4,360
D) None of these answers is correct.
What would be the basis for the following journal entry if it appears on Travis
Company’s records? Travis uses the allowance method.
A) The firm is estimating its uncollectible accounts.
B) The firm is writing off a specific account.
C) The firm is making a collection of a previously written-off account.
D) It is a reversing entry.
The cost of an asset less accumulated depreciation equals:
A) residual value.
B) book value.
C) depreciation expense.
D) depreciable value.
Which of the following would be an example of a contra-asset?
A) Depreciation Expense
B) Residual Value
C) Accumulated Depreciation
D) Discount on Bonds
At the start of the year, Northern Lights had $8,000 worth of merchandise. This is
called:
A) Cost of Goods Sold.
B) beginning inventory.
C) ending inventory.
D) Purchases.
Tricia and Jennifer formed a partnership. Tricia invested $15,000 cash; Jennifer
invested $8,000 cash, equipment with a fair value of $7,000, and $2,000 accounts
payable. The proper entry to record this is:
A) debit Cash $23,000; debit Equipment 7,000; credit Accounts Payable $2,000; credit
Tricia’s Capital $15,000; and credit Jennifer’s Capital $13,000.
B) debit Cash $23,000; debit Equipment 5,000; debit Accounts Payable $2,000; credit
Tricia’s Capital $15,000; and credit Jennifer’s Capital $15,000.
C) debit Cash $23,000; debit Equipment $7,000; credit Tricia’s Capital $15,000; and
credit Jennifer’s Capital $15,000.
D) debit Cash $21,000; debit Equipment $7,000; credit Tricia’s Capital $15,000; and
credit Jennifer’s Capital $13,000.
Individual inventory items are tracked in the:
A) accounts receivable ledger.
B) purchases journal
C) accounts payable ledger.
D) inventory ledger.
Which depreciation method uses twice the straight-line rate?
A) Units-of-production
B) Modified accelerated cost recovery
C) Straight-line
D) Double declining-balance
Calculate the missing figures (a-k) in each of the following independent scenarios.
If a coal deposit has 700,000 tons available and was purchased for $1,750,000, record
the removal of 50,000 tons in year 1 and 70,000 tons in year 2.
Samuel Service Company uses the direct write-off method for recording bad debts.
Journalize the following transactions for Mid-Iowa:
2015
Mar. 13 Wrote off Pat’s account for $500
Apr. 17 Wrote off Cole’s account for $175
Jul. 5 Recovered $55 from Cole
2016
Jan. 9 Recovered $250 from Pat
Journalize the following transactions. All purchases are on account and subject to terms
of 2/10, n/30. The periodic inventory method is used.
Nov. 3 Purchased merchandise with a price of $2,000 from the Bartkowski Inc.
Nov. 5 Purchased merchandise from the Thiesman and Co. with a price of $4,000.
Nov. 7 Purchased merchandise with a price of $2,000 from the Montana Supply Co.
Nov. 10 Paid the amount due to Bartkowski Inc.
Nov. 12 Paid the amount due to Thiesman and Co.
Nov. 23 Paid the amount due to Montana Supply Co.
Journalize the Nov. 12 transaction.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
Given the following payroll items you are to identify whether they are the responsibility
of the employer and/or the employee by placing an X in the appropriate column.
Using the following accounts:
[1] Cash
[2] Bond Sinking fund
[3] Equipment
[4] Building
[5] Land
[6] Accounts payable
[7] Notes payable
[8] Bond payable
[9] Bond interest payable
[10] Premium on bonds payable
[11] Discount on bonds payable
[12] Common stock
[13] Retained earnings
[14] Sinking fund earned
[15] Bond interest expense
[16] Gain on retirement
[17] Loss on retirement
Indicate the account(s) to be debited and credited to record the following transactions.
Accrued interest on bonds which sold at face value.
Debit ________ Credit ________
For each of the following, identify in column 1 the category to which the account
belongs, in column 2 the normal balance for the account, in column 3 the financial
statement that the account in which the account balance is reported, and in column 4 the
account’s nature.
Any change in an already recorded voucher dictates the ________ of that voucher.
For each of the following, identify in Column 1 the balance the account will have in the
adjusted trial balance columns (debit or credit), in Column 2 the financial statement
column(s) in which the account balance will be found (income statement or balance
sheet), and in Column 3 the effect the account will have on the determination of net
income (increase, decrease, or none).
Title passes from the seller to the buyer under F.O.B. ________ when the merchandise
arrives at its destination.
For each of the following, identify in Column 1 the category to which the account
belongs, in Column 2 the normal balance for the account, in Column 3 the financial
statement in which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
From the following information, complete the chart for gross earnings for the week.
Assume an overtime rate of time and a half over 40 hours.
Determine the beginning owner’s equity of a business having an ending owner’s equity
of $6,000, withdrawals of $1,250, and after closing the revenues and expenses, the
Income Summary account has a debit balance of $2,100.
$ ________
The Bixby Co. had the following transactions involving the purchase of merchandise.
Prepare the necessary general journal entries. Any applicable freight costs are prepaid
by the seller. The perpetual inventory method is in use.
June 16 Purchased merchandise having a price of $6,000 from the Shelby
Manufacturing Co.
on account with credit terms 2/10, n/30. Transportation terms F.O.B destination.
June 16 Purchased merchandise having a price of $9,000 from the Ajax Supply House
on account with credit terms 2/10, n/30. Transportation terms F.O.B shipping point.
The freight costs of $175 were added to the invoice. Merchandise was shipped June 16.
June 17 Received the goods from Shelby.
June 17 Received the goods from Ajax.
June 20 Returned for credit merchandise with an invoice price of $800 to Ajax.
June 25 Paid Shelby the amount owed.
June 28 Paid Ajax the amount owed.
June 30 Returned for cash, merchandise with an invoice price of $400 to Shelby.
Prepare the necessary general journal entry for June 20.
__________________________________________ __________ __________
__________________________________________ __________ __________
__________________________________________ __________ __________
After several years of business, Abel, Barney, and Cole are liquidating. The following
are post-closing account balances.
Cash 18,000
Inventory 73,000
Other assets 157,000
Accounts Payable 61,000
Abel, Capital 50,000
Barney, Capital 50,000
Cole, Capital 87,000
Non-cash assets are sold for $305,000. Profits and losses are shared equally.
After all liabilities are paid, divide the remaining cash amongst the partners.