Which of the following is true of assets?
A) Assets include Cash, Merchandise Inventory, and Accounts Payable.
B) Assets are something of value the business owns or controls.
C) Assets do not need to provide future benefit to the business.
D) Assets can be recorded at the market value if acquired at a bargain.
Which of the following is true of source documents in an accounting information
system?
A) All journal entries can be considered as source documents in an accounting
information system.
B) Source documents provide control and reliability in an accounting information
system.
C) A manual document cannot be considered as a source document in an accounting
information system.
D) In a manual accounting information system, source documents refer to financial
statements.
Wisconsin, Inc. owed one of its creditors $350,000, but it did not have enough cash to
repay the debt. Following lengthy negotiations, the parties agreed that Wisconsin, Inc.
would issue 50,000 shares of common stock to settle the debt. On the statement of cash
flows, this transaction is shown in the ________.
A) investing activities section
B) financing activities section
C) operating activities section
D) non-cash investing and financing activities section
Which of the following is a plant asset?
A) Equipment
B) Patents
C) Trademark
D) Accounts Receivable
Under International Financial Reporting Standards (IFRS), which of the following
statements regarding the lower-of-cost-or-market rule is incorrect?
A) It is not necessary to record inventory at the lower-of-cost-or-market.
B) The market value is defined as net realizable value.
C) If the historical cost is higher than the net realizable value, the inventory must be
written down.
D) The IFRS approach results in fewer write-downs of inventory than U.S. GAAP.
Landers, Inc. has 7 units in inventory on December 31. The units were purchased in
November for $180 each. The price lists from suppliers indicate the current replacement
cost of the item to be $174 each. What is the effect on gross profit if Landers values its
ending merchandise inventory using the lower-of-cost-or-market rule?
A) The gross profit would increase by $6.
B) The gross profit would not be affected.
C) The gross profit would decrease by $42.
D) The gross profit would increase by $42.
Jackson Enterprises is a new corporation. The following transactions occurred during
the first month of business.
Prepare journal entries and post the journal entries to T-accounts.
Prepare a trial balance at the end of the first month using the following transactions.
a) Received $15,000 cash and issued common stock.
b) Paid the first month’s rent with $800 cash.
c) Purchased equipment by paying $4,000 cash and executing a note payable for
$4,000.
d) Purchased office supplies for $200 cash. The supplies remain at the end of the month.
e) Billed clients for a total of $7,000 for design services rendered.
f) Received $1,000 cash from clients for services rendered above.
On January 1, 2019, Triangle Corp. has the following account balances:
Accounts Receivable
Allowance for Bad Debts
Bad Debts Expense
During the year, Triangle has $155,000 of credit sales, collections of credit sales of
$142,000, and write-offs of $3,400. It records bad debts expense at the end of the year
using the aging-of-receivables method. At the end of the year, the aging analysis shows
that $2,000 is the estimate of uncollectible accounts. Before the year-end entry to adjust
the bad debts expense is made, the balance in the Allowance for Bad Debts is ________.
A) a debit of $1,800
B) a credit of $5,000
C) a zero balance
D) a debit of $3,400
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 purchaser receives the inventory and prepares a receiving report.
Which of the following entries is necessary to close the appropriate depreciation
account at the end of the year?
A) debit Accumulated Depreciation and credit Income Summary
B) debit Depreciation Expense and credit Income Summary
C) debit Income Summary and credit Accumulated Depreciation
D) debit Income Summary and credit Depreciation Expense
Boulevard, Inc. uses the direct method to prepare its statement of cash flows. Use the
following information reported for 2019:
Sales Revenue, $45,000
Interest Revenue, $800
Accounts Receivable, beginning balance, $13,100
Accounts Receivable, ending balance, $27,000
There were no amounts reported for Interest Receivable.
Compute the total cash receipts.
A) $27,000
B) $58,100
C) $31,900
D) $13,100
Revenue that has been earned but not yet collected in cash is called a(n) ________.
A) accrued revenue
B) deferred expense
C) deferred revenue
D) accrued expense
Which of the following is used by both internal and external users?
A) Chart of Accounts
B) Trial Balance
C) Balance Sheet
D) Costing Reports
At the time the transaction occurred, which of the following would result in an increase
in net income under the accrual basis of accounting, but would not result in an increase
in net income under cash basis accounting?
A) purchase of supplies for cash
B) performance of services on account
C) use of supplies purchased earlier
D) receipt of cash for services that were performed earlier on account
For no significant influence equity investments, provide the following:
a. Accounting method:
b. Balance Sheet effects:
c. Income Statement effects:
A company made net sales revenue of $500,000, and cost of goods sold totaled
$300,000. Calculate its gross profit percentage.
A) 40%
B) 60%
C) 125%
D) 325%
Which of the following is an expense that results from the usage of a natural resource?
A) depletion
B) amortization
C) depreciation
D) obsolescence
The role of the credit department includes ________.
A) approving all credit applications in order to avoid losing sales
B) evaluating customers’ credit applications to determine whether they meet the
company’s approval standards
C) following unwritten approval standards for processing customers’ credit applications
D) collecting cash from customers
Match the benefit of an effective accounting information system with the
definition.
A) Provides information that will improve decision making and reduce uncertainty.
B) Benefits received outweigh the cost of the system.
C) Works smoothly with the business’s employees and organization structure.
D) Can accommodate changes in the business over time.
E) Provides safeguards for a business’s assets and reduces the likelihood of fraud and
errors.
Positive cost/benefit relationship
Accumulated Depreciation is a(n) ________ account and carries a normal ________
balance.
A) revenue; debit
B) expense; debit
C) contra asset; credit
D) liability; credit
On January 1, All City Services has the following balances:
Accounts Receivable $25,000
Bad Debts Expense $0
All City has the following transactions during January: Credit sales of $120,000,
collections of credit sales of $81,000, and write-offs of $18,000. All City uses the direct
write-off method. The amount of Bad Debts Expense for January is ________.
A) $25,000
B) $26,667
C) $12,150
D) $18,000
City Advertising Services hired a new accounting manager. He signed a contract for a
new accounting information system, but his position did not specify whether he was
authorized to do so or not. Which internal control procedure needs strengthening?
A) assignment of responsibilities
B) competent, reliable, and ethical personnel
C) separation of duties
D) documents
The two methods of accounting for uncollectible accounts receivable are ________.
A) the direct write-off method and the liability method
B) the asset method and the sales method
C) the allowance method and the liability method
D) the allowance method and the direct write-off method
Commons, Inc. provides the following information for 2018:
The company has no preferred stock outstanding. Calculate the dividend yield for common
stock. (Round your answer to two decimal places.)
A) 4.38%
B) 1.50%
C) 2.88%
D) 4.58%
The Great Lakes Company issues $503,000 of 10%, 10-year bonds at 107 on March 31,
2018. The bond pays interest on March 31 and September 30. Assume that the company
uses the straight-line method for amortization. The journal entry to record the first
interest payment on September 30, 2018 includes a ________. (Round your
intermediate answers to the nearest dollar.)
A) debit to Cash for $25,150
B) debit to Interest Expense for $26,911
C) debit to Interest Expense for $23,389
D) credit to Premium on Bonds Payable for $1761
The allowance method of accounting for uncollectible receivables ________.
A) is used to measure bad debts
B) violates the matching principle
C) records bad debt expense in the period the accounts receivable is written off
D) requires the use of a contra liability account.
A company decides to ignore a very small error in its inventory balance. This is an
example of the application of the ________.
A) conservatism
B) materiality concept
C) disclosure principle
D) consistency principle
Atlanta Company sold equipment for cash. The income statement shows a gain on the
sale of $1020. The net book value of the asset was $3710. Which of the following
statements describes the cash effect of the transaction?
A) negative cash flow of $4730 for financing activities
B) negative cash flow of $2690 for operating activities
C) positive cash flow of $4730 from investing activities
D) positive cash flow of $2690 from investing activities
On October 1, 2019, Springfield, Inc. made a loan to one of its customers. The customer
signed a 6-month note for $140,000 at 15%. How much interest revenue did the
company record in 2020 for this note? (Round any intermediate calculations to two
decimal places, and your final answer to the nearest dollar.)
A) $7,000
B) $3,500
C) $5,250
D) $10,500
Ballpark has 61,000 shares of $16.00 par common stock outstanding. Ballpark
announces a stock split of 4-for-1. What is the effect of the split?
A) par stays at $16.00; total shares increase to 15,250
B) par drops to $8.00; total shares stay at 61,000
C) par drops to $4.00; total shares increase to 244,000
D) par goes to $64.00; total shares increase to 244,000
Which of the following financial statements would be most useful if an analyst wants to
know the likelihood of repayment of business debts?
A) income statement
B) balance sheet
C) statement of retained earnings
D) statement of cash flows