Of two departments, the men’s department has 8,000 square feet and the women’s
department has 22,000 square feet. Depreciation is divided by square footage. If total
depreciation is $50,000, the total amount allocated to the men’s department would be
approximately $36,667.
Generally Accepted Accounting Principles are the procedures and guidelines that must
be followed during the accounting process.
Under the periodic inventory method, the beginning and ending inventories are
combined to determine the balance sheet inventory amount.
To use the gross profit method to estimate inventory, you need to know the goods
available for sale at retail.
All employees must contribute to Federal and State income tax.
Bad Debts Expense is recorded in the year the sale was earned when using the income
statement approach.
The Articles of Incorporation are submitted to the President of the United States.
Posting is the process of entering amounts in the journal.
The employer pays the same amount as the employee for Federal Unemployment taxes.
A corporation is required to pay dividends.
A banking day is any day that the bank is open to the public for business.
A profit and loss ratio must be based on capital contributions.
The controlling account is found in the subsidiary ledger and it summarizes or controls
the general ledger account.
Withdrawals are considered an expense of doing business.
An invoice approval form is used by accounting to check the invoice before approving
it for payment.
A vertical analysis of an income statement automatically provides the return on sales
ratio and the gross profit ratio.
When a bank credits your account, it is decreasing the balance.
Number of preferred shares times market value per share times dividend rate is the
formula used to determine the dividends to be paid.
When a commercial bank discounts a note on the date of issue, the interest is deducted
when the note matures.
When an account receivable is exchanged for a note receivable, a shift in equity occurs.
An appropriation to retained earnings reduces total shareholders’ equity.
If the retiring partner’s interest is sold to one of the remaining partners, the retiring
partner’s equity is split equally between the remaining partners.
Vouchers are recorded in the voucher register at the time the liability is incurred.
The amount withheld for FICA is based on the W-4 form.
Expenses are recorded as costs of doing business whether cash was paid or not.
Not all adjusting entries can be reversed.
When a stock subscription is received, Common Stock subscribed is debited for the
total par value of the stock.
Closing entries are found in the adjustment columns of the worksheet.
A net loss would occur if the contribution margin is less than indirect expenses.
The average time it takes to buy and sell merchandise and collect Accounts Receivable
is the sales cycle for a business.
Closing entries will update the Capital account to the same figure that is on the balance
sheet for that date.
To be meaningful, a small business should compare ratios with large companies.
If there are repairs needed in the process of installation of machine, this should not be
charged to the cost of the machine.
The account Freight-In accumulates the shipping costs to the seller.
The inventory method that assumes the recent goods are sold first is:
A) LIFO.
B) FIFO.
C) weighted-average.
D) specific invoice.
Antiques.com Corporation’s outstanding stock is 75 shares of $60, 8% cumulative
nonparticipating preferred stock and 2,000 shares of $10 par value common stock.
Antiques paid $2,760 cash dividends during the year. Common stockholders received:
A) $2,400.
B) $360.
C) $2,040.
D) $0.
Which of the following transactions would cause one asset to decrease and another
asset to increase?
A) The business provided services to a cash customer.
B) The business bought supplies for cash.
C) The owner withdrew cash from the business.
D) The business bought supplies on account.
The first step in determining total manufacturing costs is to calculate:
A) the raw material used for the month.
B) the direct labor cost for the month.
C) factory overhead cost for the month.
D) None of these answers is correct.
Carrying value is the same thing as:
A) fair market value.
B) discount value.
C) premium value.
D) book value.
The formula for cost of goods manufactured is:
A) raw materials plus direct labor minus overhead plus beginning work-in-process
inventory plus ending work-in-process inventory.
B) raw materials minus direct labor plus overhead plus beginning work-in-process
inventory plus ending work-in-process inventory.
C) beginning work-in-process plus total manufacturing cost minus ending
work-in-process.
D) raw materials plus direct labor less overhead plus beginning work-in-process
inventory less ending work-in-process inventory.
On a bank reconciliation, deposits added to the bank side are called:
A) deposits in transit.
B) bank collections.
C) deposits on hold.
D) outstanding deposits.
Unearned Rent Revenue results because:
A) no fee has been paid, and the service is not complete.
B) the fee is earned but not collected.
C) the fee has been collected before the service has been provided.
D) the fee has been paid, and the service is complete.
After closing the revenue, expense, and withdrawal accounts, the capital increased by
$2,000. Which of the following situations could have occurred?
A) The company had a net income.
B) The owner invested an additional amount.
C) The owner made a withdrawal.
D) All of these answers are correct.
The contract rate for a bond is:
A) the annual interest rate based on selling price.
B) the annual interest rate based on market value.
C) the annual interest rate based on face value.
D) None of these answers is correct.
The maturity date for a 77-day note dated June 28 is:
A) September 15.
B) September 14.
C) September 13
D) September 16.
On the worksheet the beginning Merchandise Inventory account appears in:
A) the adjustment column.
B) the trial balance and the balance sheet columns.
C) the trial balance and adjustment columns.
D) All of these answers are correct.
What type of account is a Bad Debts Expense?
A) Asset
B) Expense
C) Contra Asset
D) Liability
If total assets are $50,000 and total liabilities are $22,000, Capital must equal:
A) $28,000.
B) $18,000.
C) $8,000.
D) $20,000.
In a comparative balance sheet, the ending Cash for 2015 was $315,000 and is
$262,395 for 2016. The net increase or decrease from 2015 to 2016 is:
A) 86.0%.
B) 14.3%.
C) 26.4%.
D) (16.7%).
If Prepaid Rent Expense for the period is NOT adjusted:
A) assets will be overstated and expenses will be overstated.
B) assets will be overstated and expenses will be understated.
C) assets will be understated and expenses will be overstated.
D) revenue will be understated and expenses will be understated.
The entry to record selling 400 shares of no-par common stock with a stated value of
$60 for $70 would be to:
A) debit Cash $28,000; credit Common Stock $28,000.
B) debit Cash $24,000; credit Common Stock $24,000.
C) debit Cash $24,000; credit Common Stock $28,000; debit Paid-in Capital in Excess
of Par Value-Common $4,000.
D) debit Cash $28,000; credit Common Stock $24,000; credit Paid-in Capital in Excess
of Stated Value-Common $4,000.
Under the perpetual inventory method, merchandise inventory is assigned to Cost of
Goods Sold when a company:
A) receives the inventory.
B) purchases the inventory.
C) sells the inventory.
D) makes payment on the inventory.
A company is not able to reasonably estimate its bad debts expense. The method it may
use is:
A) net realizable value method.
B) direct write-off method.
C) aging method.
D) income statement method.
The adjustment that is made to allocate the cost of a building over its expected life is
called:
A) depreciation expense.
B) residual value.
C) accumulated depreciation.
D) None of these answers is correct.
Which of the following columns of the worksheet are referred to when preparing
closing entries to the Income Summary?
A) Adjusted trial balance columns
B) Balance sheet columns
C) Adjustments columns
D) Income statement columns
There was a utility bill received but not paid. How would this nonpayment affect the
statement of cash flows operations sectionindirect method?
A) It is already included in the net income.
B) It would affect the operations section positively.
C) It would affect the operations section negatively.
D) Does not affect the cash flow from operations.
The capital balance amount shown in the balance sheet column of the worksheet
represents:
A) the beginning capital plus net income interest.
B) the beginning capital plus net income less withdrawal.
C) the beginning capital less withdrawals.
D) the beginning capital plus any investments to capital that occurred during the period.
The entry to record the payment of an extraordinary repair of $5,000 that will extend
the life of the machine 5 years, when the machine cost $30,000, and has accumulated
depreciation of $26,000, is to:
A) debit Machinery $5,000; credit Accumulated Depreciation $5,000.
B) debit Accumulated Depreciation $5,000; credit Cash $5,000.
C) debit Accumulated Depreciation $1,000; credit Cash $1,000.
D) debit Machinery $1,000; credit Cash $1,000.
Indirect expenses are those expenses that:
A) can be controlled by the department manager.
B) can be identified with a specific department.
C) are incurred for the general benefit of a company.
D) All of these answers are correct.
The ending figure for capital, used on the balance sheet, will be obtained from:
A) balance sheet credit column of the worksheet.
B) the statement of owner’s equity.
C) balance sheet debit column of the worksheet.
D) credit column of the income statement.
Adjusting entries from the worksheet:
A) are journalized and posted to the ledger.
B) are posted directly to the ledger.
C) are closed to the Income Summary account.
D) affect only income statement accounts.
A checkmark in the PR column in the general journal means:
A) the entry was recorded correctly.
B) the amount was posted to the controlling account.
C) the amount was recorded in the subsidiary ledger.
D) the customer paid in the discount period.
The trial balance columns on the worksheet are populated using the:
A) general journal.
B) general ledger.
C) subsidiary ledger.
D) None of the above
Which of the following is prepared to explain the change in the amount of retained
earnings between successive balance sheet dates?
A) Income statement
B) Statement of stockholders’ equity
C) Balance sheet
D) None of the above
The inside columns on the financial statements are used to:
A) show debits.
B) show credits.
C) show subtotals.
D) None of these answers is correct.
Returned merchandise for credit under the perpetual inventory method. This will be
recorded with:
A) a debit to Accounts Payable and a credit to Purchases Returns and Allowances.
B) a debit to Purchase Returns and Allowances and a credit to Merchandise Inventory.
C) a credit to Accounts Payable and a debit to Merchandise Inventory.
D) a debit to Accounts Payable and a credit to Merchandise Inventory.
Riley’s Limousines’ entry to establish a $75 petty cash fund for the office would include
a:
A) debit to Cash for $75.
B) credit to Petty Cash for $75.
C) credit to Cash for $75.
D) debit to Office Expense for $75.
Income Summary:
A) is a temporary account.
B) is a permanent account.
C) summarizes revenues and expenses and transfers the balance to Capital.
D) Both A and C are correct.
The ________ system of accounting for inventory does not provide information about
the balance in merchandise inventory on a transaction-by-transaction basis.
Under the ________ inventory system, entries are made to the merchandise inventory
or cost of goods sold account during the year.
Given the following accounts:
[1] Cash
[2] Accounts receivable
[3] Allowance for doubtful accounts
[4] Merchandise inventory
[5] Store supplies
[6] Store equipment
[7] Accumulated depreciation
[8] Notes payable
[9] Accounts payable
[10] Able Partner’s, Capital
[11] Baker Partner’s, Capital
[12] Able Partner’s, withdrawals
[13] Baker Partner’s, withdrawals
[14] Income summary
[15] Service revenue
[16] Gain on realization
[17] Loss on realization
Indicate the account(s) to be debited and credited to record the following transaction.
Closed the income summary, there is a net loss.
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 (permanent/temporary).
Kristi’s Mentoring had the following information for the pay period ending September
30:
Assume:
FICA-OASDI applied to the first $117,000 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Employees contribute to their retirement fund at a rate of 5.5% of their gross earnings
Compute the total retirement.
Identify whether the entries below are an adjusting entry (AE) or a closing entry (CE).
________
Given the following accounts:
[1] Cash in bank
[2] Petty cash
[3] Supplies
[4] Equipment
[5] Notes payable
[6] Vouchers payable
[7] FICA payable
[8] Wages payable
[9] Purchases
[10] Purchase discounts
[11] Discounts lost
[12] Repairs expense
[13] Interest expense
[14] Delivery expense
Indicate the account(s) to be debited and credited to record the following transactions.
The company uses the periodic inventory method.
Borrowed $4,000, signing a 5%, 60 day promissory note.
Debit ________ Credit ________
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.
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 on which the account balance is reported, and in Column 4 the account’s
nature (permanent/temporary).
Given the following accounts:
[1] Cash in bank
[2] Petty cash
[3] Supplies
[4] Equipment
[5] Notes payable
[6] Vouchers payable
[7] FICA payable
[8] Wages payable
[9] Purchases
[10] Purchase discounts
[11] Discounts lost
[12] Repairs expense
[13] Interest expense
[14] Delivery expense
Indicate the account(s) to be debited and credited to record the following transactions.
The company uses the periodic inventory method.
Prepared and recorded voucher #422 for the purchase of merchandise (gross method) of
$5,000 with credit terms of 2/10, n/30.
Debit ________ Credit ________
Alpha-Omega Industries has 30,000 shares of $12 par common stock and 15,000 shares
of $50 par, 5% preferred stock outstanding. Total dividends available are $162,000.
Compute the dividends to be distributed to preferred and common stockholders under
the following condition.
The preferred stock is participating and non-cumulative with no dividends distributed
last year.
Given the following accounts:
[1] Cash in bank
[2] Petty cash
[3] Supplies
[4] Equipment
[5] Notes payable
[6] Vouchers payable
[7] FICA payable
[8] Wages payable
[9] Purchases
[10] Purchase discounts
[11] Discounts lost
[12] Repairs expense
[13] Interest expense
[14] Delivery expense
Indicate the account(s) to be debited and credited to record the following transactions.
The company uses the periodic inventory method.
Paid voucher #419 which was issued to reimburse petty cash for the purchase of
supplies, $35, and delivery expense of $50.
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 (temporary/permanent).
Prepare the journal entry to record the partners’ investment in the company.
Todd and Dillon combine their two businesses and enter into a partnership. Todd invests
$10,000 cash and equipment on his books at $8,000 with accumulated depreciation of
$3,000. The fair market value of the equipment is $7,000. Dillon is investing $6,000
cash and $500 accounts payable.
For each of the following items, indicate by placing an X in the appropriate column
whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column
3) debt, or (column 4) profitability.
Name and discuss the two most important internal control principles embedded in the
voucher system.
From the following data, determine the FUTA tax liability for Sims Company for the
first quarter. The FUTA tax rate is 0.6% on the first $7,000 of earnings. (Assume all
quarters have 13 weeks.)
Prepare the general journal entry to record the payment of the retirement fund
withholdings.
___________________________________________ _________ _________
___________________________________________ _________ _________
___________________________________________ _________ _________
___________________________________________ _________ _________
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).