Accounts and Transactions
Financial accounting and reporting standards in the United States are established primarily by the:
A. Securities and Exchange Commission.
B. Financial Accounting Standards Board.
C. U.S. Congress.
D. International Accounting Standards Board.
B. Financial Accounting Standards Board.
Everyone in the company has an impact on the operations and effectiveness of internal control, but who must take final responsibility?
A. Auditors
B. Top executives
C. The firm’s attorney
D. The majority shareholder
B. Top executives
A perpetual inventory system measures cost of goods sold by:
A. Recording Cost of Goods Sold for all purchases of inventory.
B. Estimating the amount of inventory sold.
C. Counting inventory at the end of the period.
D. Adjusting the Inventory account for each purchase and sale.
D. Adjusting the Inventory account for each purchase and sale.
Which of the following is not a primary source of corporate debt financing?
A. Leases
B. Bonds
C. Stockholders
D. Notes
C. Stockholders
The disadvantages of the corporate form of business include:
A. Additional taxes.
B. Ability to transfer ownership.
C. Ability to raise capital.
D. Limited liability.
A. Additional taxes.
Providing services to customers for cash would have what effect on the accounting equation?
A. Liabilities increase; stockholders’ equity decreases.
B. Liabilities decrease; stockholders’ equity increases.
C. Assets increase; liabilities decrease.
D. Assets increase; stockholders’ equity increases.
D. Assets increase; stockholders’ equity increases.
Which of the following items would cause the balance of cash in the bank statement to be different from the accounting records?
A. Interest earned on the bank balance
B. Checks outstanding
C. Deposits outstanding
D. All of the other answers
D. All of the other answers
The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when:
A. Cash collection from the customer fails to occur.
B. The value of inventory declines below cost.
C. The inventory is purchased.
D. The inventory is sold.
B. The value of inventory declines below cost.
On December 2, 2023, Quebecor Printing received cash from customers for online subscriptions to begin in 2024. What would be the appropriate journal entry at the time cash was received on December 2, 2023?
A. Debit Cash, credit Subscription Revenue
B. Debit Cash, credit Deferred Revenue
C. Debit Subscription Revenue, credit Cash
D. No journal entry is necessary.
B. Debit Cash, credit Deferred Revenue
Preferred stock is called preferred because it usually has two preferences over common stock. These preferences relate to:
A. Distribution of assets if the corporation is dissolved and higher par value.
B. Distribution of assets if the corporation is dissolved and payment of dividends.
C. Payment of dividends and voting rights.
D. Higher par value and payment of dividends.
B. Distribution of assets if the corporation is dissolved and payment of dividends.
Consider the following list of accounts:
a. Accounts Payable; b. Cash; c. Prepaid Rent; d. Common Stock; e. Salaries Payable; f. Equipment; g. Supplies; h. Rent Expense
How many of these accounts have a normal credit balance?
A. Two
B. Three
C. Four
D. Five
B. Three
Which of the following is correct?
A. Cash dividends paid are classified as operating.
B. Cash dividends received on stock investments are classified as operating.
C. A purchase of equipment is classified as financing.
D. Issuance of common stock is classified as investing.
B. Cash dividends received on stock investments are classified as operating.
Which of the following would increase the gross profit ratio?
A. The sales price of a product increases by a higher percentage than does its cost of goods sold.
B. The number of units sold increases.
C. The cost of inventory increases.
D. The company reduces operating expenses.
A. The sales price of a product increases by a higher percentage than does its cost of goods sold.
Which of the following definitions describes a term bond?
A. Supported by specific assets pledged as collateral by the issuer.
B. Secured only by the "full faith and credit" of the issuing corporation.
C. Matures on a single date.
D. Matures in installments.
C. Matures on a single date.
Company A issues 20,000 shares of $1 par common stock at $10 per share. The entry to record the issuance would include which of the following?
A. Debit to cash of $20,000
B. Credit to Common Stock of $200,000
C. Credit to Additional Paid-in Capital of $180,000
D. Credit to Additional Paid-in Capital of $200,000
C. Credit to Additional Paid-in Capital of $180,000
A company provided $1,500 of services to customers during May. The customers paid in June. What would the impact of these transactions be during May on (1) cash-basis N/I, and (2) accrual-basis N/I?
A. (1) +, (2) NE
B. (1) NE, (2) +
C. (1) +, (2) +
D. (1) NE, (2) NE
B. (1) NE, (2) +
Which of the following would be classified as an investing cash flow?
A. Issue bonds
B. Receive cash in advance from a customer
C. Sell a piece of equipment below cost
D. Repurchase the company's own shares of common stock
C. Sell a piece of equipment below cost
The following information relates to inventory for Shoeless Joe Incorporated.
March 1 Beginning Inventory-20@$2
March 7 Purchase-15@$3
March 11 Sale-25@$7
March 12 Purchase-20@4
At what amount would Shoeless report ending inventory using FIFO cost flow assumptions?
A. $55
B. $170
C. $70
D. $110
D. $110 (Ending inventory = ($3 × 10) + ($4 × 20) = $110.)
The acid-test ratio equals:
A. Cash and short-term investments divided by current liabilities.
B. Cash, short-term investments, and accounts receivable divided by current liabilities.
C. Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.
D. Current assets divided by current liabilities.
B. Cash, short-term investments, and accounts receivable divided by current liabilities.
On July 8, Angstrom, Incorporated sold 100 printers to Office Rental Company at $600 each and offered a discount term of 2/10, n/30. On July 15, Office Rental Company paid the full amount in cash. What should Angstrom record on July 15?
A. Dr. Cash 60,000; Cr. Accounts Receivable 60,000
B. Dr. Cash 58,800; Cr.Accounts Receivable 58,800
C. Dr. Cash 58,800; Dr. Sales Discounts 1,200; Cr. Accounts Receivable 60,000
D. Dr. Cash 60,000; Cr. Sales Discounts 1,200; Cr. Sales Revenue 58,800
C. Dr. Cash 58,800; Dr. Sales Discounts 1,200; Cr. Accounts Receivable 60,000
On 5/1/2024, Dooley borrowed $100,000 from Bank by signing a three-year, 6% note payable. Interest is due each May 1. What adjusting entry should Bank record on 12/31/2024?
A. Dr. Interest receivable and Cr. interest revenue for $4,000
B. Dr. Interest receivable and Cr. interest revenue for $2,000
C. Dr. Interest receivable and Cr. interest revenue for $6,000
D. No need for adjusting entry.
A. $4,000 (= $100,000 x 6% x 8/12)
Consider the following items:
(a) Decrease in accounts receivable; (b) Issuance of common stock; (c) Increase in interest receivable; (d) Purchase of land; (e) Decrease in accounts payable
How many of these items would be added to net income when using the indirect method?
A. 2
B. 1
C. 3
D. 4
B. 1 (Decrease in accounts receivable)
The following information relates to inventory for Shoeless Joe Incorporated.
March 1 Beginning Inventory-20@$2
March 7 Purchase-15@$3
March 11 Sale-25@$7
March 12 Purchase-20@4
At what amount would Shoeless report COGS using weighted-average cost flow assumptions with periodic inventory system? (round up)
A. $55
B. $65
C. $61
D. $75
D. $75 (COGS = ($2 x 20 + $3 x 15 + $4 x 20)/55 x 25)=$75)
On May 1, 2024, Dooley borrowed $250,000 from Prime Bank by signing a three-year, 6% note payable. Interest is due each May 1. What adjusting entry, if any, should Dooley record on December 31, 2024?
A. No adjusting entry is necessary
B. Debit Interest Expense and credit Interest Payable for $15,000
C. Debit Interest Expense and credit Interest Payable for $5,000
D. Debit Interest Expense and credit Interest Payable for $10,000
D. Debit Interest Expense and credit Interest Payable for $10,000
Jacobi Landscaping sold lawn equipment for $7,000. The equipment was originally purchased for $16,000 with 5-year useful life and salvage value of $1,000. The equipment was sold at the end of year 4. What is the amount of the gain (or loss) on the sale?
A. $9,000.
B. $5,000.
C. $(3,000).
D. $3,000.
D. $3,000.
(Accumulated Depreciation = ($16,000-$1,000)/5x4 = $12,000;
Book Value = $16,000-$12,000 = $4,000;
Gain = Trading price - Book value = $7,000-$4,000 = $3,000)