Week 5, Quiz1. Cost of goods
sold is determined only at the end of the accounting period in
A). neither a
perpetual nor a periodic inventory system.
B). a perpetual
a periodic inventory system.
D). both a
perpetual and a periodic inventory system
2. A sales invoice
is a source document that
evidence of incurred operating expenses.
provides evidence of credit sales.
C). serves only as
a customer receipt.
support for goods purchased for resale.
information is presented below:
Sales Returns and
Sales Discounts 6,000
Sales Revenue 160,000
Cost of Goods Sold
The gross profit
rate would be
4. The Sales
Returns and Allowances account is classified as a(n)
contra revenue account.
B). contra asset
D). asset account.
5. On October 4,
2013, JT Corporation had credit sales transactions of $3,200 from merchandise
having cost $1,900. The entries to record the day’s credit transactions include
A). credit of
$1,900 to Cost of Goods Sold.
credit of $3,200 to Sales Revenue.
C). debit of
$1,900 to Inventory.
D). debit of
$3,200 to Inventory.
income under IFRS
unrealized gains and losses included in net income, in contrast to GAAP.
includes unrealized gains and losses included in net income, similar to GAAP.
unrealized gains and losses included in net income, similar to GAAP.
unrealized gains and losses included in net income, in contrast to GAAP
7. If a company
has net sales of $700,000 and cost of goods sold of $490,000, the gross profit
8. The consistent
application of an inventory costing method is essential for
9. The inventory
turnover ratio is computed by dividing cost of goods sold by
D). 365 days.
10. Switzer, Inc.
has 5 computers which have been part of the inventory for over two years. Each
computer cost $600 and originally retailed for $900. At the statement date,
each computer has a current replacement cost of $400. How much loss should
Switzer, Inc., record for the year?
11. Which one of
the following inventory methods is often impractical to use?
D). Average cost
ending inventory will overstate all of the following except
A). net income.
cost of goods sold.
13. Under IFRS,
companies can choose which inventory system?
14. The lower-of-cost-or-market (LCM) basis may
be used with all of the following methods except
The LCM basis may be used with all of these.
D). average cost.
items on an assembly line in various stages of production are classified as
A). Raw materials.
Work in process.
Week 7, Quiz1. A company has
the following assets:
Equipment, less accumulated depreciation of $2,000,000 $ 7,600,000
accumulated depletion of $2,800,000 4,800,000
The total amount
reported under Property, Plant, and Equipment would be
2. Expenditures that
maintain the operating efficiency and expected productive life of a plant asset
expensed when incurred.
B). not recorded
until they become material in amount.
C). capitalized as
a part of the cost of the asset.
D). debited to the
Accumulated Depreciation account
3. A gain or loss
on disposal of a plant asset is determined by comparing the
A). original cost
of the asset with the proceeds received from its sale.
B). book value of
the asset with the asset’s original cost.
book value of the asset with the proceeds received from its sale.
cost of the asset with the asset’s original cost.
4. Salem Company
hired Kirk Construction to construct an office building for Â£8,000,000 on land
costing Â£2,000,000, which Salem Company owned. The building was complete and
ready to be used on January 1, 2013 and it has a useful life of 40 years. The
price of the building included land improvements costing Â£600,000 and personal
property costing Â£750,000. The useful lives of the land improvements and the
personal property are 10 years and 5 years, respectively. Salem Company uses
component depreciation, and the company uses straight-line depreciation for
other similar assets. What is the net amount reported for the building on Salem
Company’s December 31, 2013 statement of financial position?
5. Yocum Company
purchased equipment on January 1 at a list price of $100,000, with credit terms
2/10, n/30. Payment was made within the discount period and Yocum was given a
$2,000 cash discount. Yocum paid $5,000 sales tax on the equipment, and paid
installation charges of $1,760. Prior to installation, Yocum paid $4,000 to
pour a concrete slab on which to place the equipment. What is the total cost of
the new equipment?
6). A company
purchased factory equipment for $350,000. It is estimated that the equipment
will have a $35,000 salvage value at the end of its estimated 5-year useful
life. If the company uses the double-declining-balance method of depreciation,
the amount of annual depreciation recorded for the second year after purchase
7. On a balance
sheet, natural resources may be described more specifically as all of the
A). oil reserves.
8). On January 1,
2013, Donahue Company, a calendar-year company, issued $500,000 of notes
payable, of which $125,000 is due on January 1 for each of the next four years.
The proper balance sheet presentation on December 31, 2013, is
Current Liabilities, $125,000; Long-term Debt, $375,000.
Liabilities, $375,000; Long-term Debt, $125,000.
D). Long-term Debt
9). When an
interest-bearing note matures, the balance in the Notes Payable account is
less than the total amount repaid by the borrower.
B). the difference
between the maturity value of the note and the face value of the note.
C). equal to the
total amount repaid by the borrower.
D). greater than
the total amount repaid by the borrower
10. From the
standpoint of the issuing company, a disadvantage of using bonds as a means of
long-term financing is that
interest must be paid on a periodic basis regardless of earnings.
bondholders do not have voting rights.
C). income to
stockholders may increase as a result of trading on the equity.
D). bond interest
is deductible for tax purposes.
11). The times
interest earned ratio is computed by dividing
A). income before
interest expense by interest expense.
B). net income by
income before income taxes and interest expense by interest expense.
D). income before
income taxes by interest expense.
12. If the market
interest rate is greater than the contractual interest rate, bonds will sell
at a discount.
B). only after the
stated interest rate is increased.
C). at face value.
D). at a premium.
13). The market
interest rate is often called the
A). coupon rate.
C). stated rate.
14. On October 1, Steve’s
Carpet Service borrows $250,000 from First National Bank on a 3-month,
$250,000, 8% note. The entry by Steve’s Carpet Service to record payment of the
note and accrued interest on January 1 is
A). Notes Payable
255,000 Cash 255,000
Notes Payable 250,000 Interest
Payable 5,000 Cash 255,000
C). Notes Payable
250,000 Interest Payable
20,000 Cash 270,000
D). Notes Payable
250,000 Interest Expense
15. Most companies
pay current liabilities
A). by creating
out of current assets.
C). by issuing
interest-bearing notes payable.
D). by issuing
Week 3, Quiz1. Transactions in
a journal are recorded in
B). dollar amount
D). account number
2. In the first
month of operations, the total of the debit entries to the cash account
amounted to $900 and the total of the credit entries to the cash account
amounted to $600. The cash account has a(n)
A). $300 credit
B). $900 debit
C). $600 credit
$300 debit balance.
3. Which of the
following statements is true?
decrease assets and decrease liabilities.
increase assets and increase liabilities.
Credits decrease assets and increase liabilities.
decrease liabilities and decrease assets
4). The final step
in the recording process is to transfer the journal information to the
A). trial balance.
D). file cabinets.
5. The usual
sequence of steps in the transaction recording process is:
analyze? journal ? ledger.
ledger ? analyze.
journal ? analyze.
analyze ? ledger.
6). Which one of the
following represents the expanded basic accounting equation?
A). Assets =
Liabilities + Common Stock + Retained Earnings + Dividends â Revenue â
Assets + Dividends + Expenses = Liabilities + Common Stock + Retained Earnings
C). Assets â
Liabilities â Dividends = Common Stock + Retained Earnings + Revenues â
D). Assets =
Revenues + Expenses â Liabilities.
7. A trial balance
may balance even when each of the following occurs except when
a transposition error is made.
B). a journal
entry is posted twice.
accounts are used in journalizing.
D). a transaction
is not journalized.
8). An accounting
time period that is one year in length, but does not begin on January 1, is
referred to as
a fiscal year.
B). an interim
C). the time
D). a reporting
9). Which of the
following reflect the balances of prepayment accounts prior to adjustment?
A). Balance sheet
accounts are understated and income statement accounts are understated.
B). Balance sheet
accounts are overstated and income statement accounts are overstated.
C). Balance sheet
accounts are understated and income statement accounts are overstated.
Balance sheet accounts are overstated and income statement accounts are
10). Crue Company
had the following transactions during 2013: â¢ Sales of $4,500 on account â¢
Collected $2,000 for services to be performed in 2014 â¢ Paid $1,625 cash in
salaries â¢ Purchased airline tickets for $250 in December for a trip to take
place in 2014 What is Crueâs 2013 net income using cash basis accounting?
statement is correct?
A). The cash basis
of accounting is objective because no one can be certain of the amount of
revenue until the cash is received.
B). As long as
management is ethical, there are no problems with using the cash basis of
C). As long as a
company consistently uses the cash basis of accounting, generally accepted
accounting principles allow its use.
The use of the cash basis of accounting violates both the revenue recognition
and expense recognition principles.
A). net income is
calculated by matching cash outflows against cash inflows.
B). the ledger
accounts must be adjusted to reflect a cash basis of accounting before
financial statements are prepared under generally accepted accounting
C). cash must be
received before revenue is recognized.
events that change a company’s financial statements are recognized in the
period they occur rather than in the period in which cash is paid or received.
13). Expenses paid
and recorded as assets before they are used are called
A). accrued expenses.
14). The adjusted
trial balance is prepared
financial statements are prepared.
after adjusting entries have been journalized and posted.
C). before the trial
D). to prove the
equality of total assets and total liabilities
usually desires ________ financial statements and the IRS requires all
businesses to file _________ tax returns.
D). annual, annual
Week 6, Quiz1. A bank
A). is a bill from
the bank for services rendered.
B). is a credit
reference letter written by the depositor’s bank.
shows the activity which increased or decreased the depositor’s account
D). lets a
depositor know the financial position of the bank as of a certain date.
2. The principles
of internal control activities are used in the
internationally but not in the U.S.
B). in the U.S.
and Canada but not globally.
D). U.S.but not
3. Postage stamps
on hand are considered to be
B). petty cash.
C). a prepaid
4. Tangible frauds
D). All of these.
5. All of the following requirements about
internal controls were enacted under the Sarbanes- Oxley Act except;
outside auditors must eliminate redundant internal controls.
outside auditors must attest to the level of internal control.
C). companies must
develop sound internal controls over financial reporting.
companies must continually assess the functionality of internal controls.
6. A deposit made
by a company will appear on the bank statement as a
7. In large
companies, the independent internal verification procedure is often assigned to
D). outside CP
8. An aging of a
company’s accounts receivable indicates that $10,000 are estimated to be
uncollectible. If Allowance for Doubtful Accounts has a $1,100 credit balance,
the adjustment to record bad debts for the period will require a
debit to Bad Debts Expense for $8,900.
B). credit to
Allowance for Doubtful Accounts for $10,000.
C). debit to Bad
Debts Expense for $10,000.
D). debit to
Allowance for Doubtful Accounts for $8,900.
9. A reasonable amount
of uncollectible accounts is evidence
A). that the
credit policy is too strict.
B). of poor
judgments on the part of the credit manager.
C). that the
credit policy is too lenient.
of a sound credit policy.
Corporation’s unadjusted trial balance includes the following balances (assume
Receivable $ 750,000
Doubtful Accounts 15,000
Bad debts are
estimated to be 6% of outstanding receivables. What amount of bad debts expense
will the company record?
11. Using the
percentage-of-receivables basis, the uncollectible accounts for the year is
estimated to be $31,000. If the balance for the Allowance for Doubtful Accounts
is a $7,000 debit before adjustment, what is the amount of bad debts expense
for the period?
12. Using the
receivable $ 525,000
Allowance (35,000 )
value $ 490,000
During 2013, sales
on account were $145,000 and collections on account were $100,000. Also during
2013, the company wrote off $8,000 in uncollectible accounts. An analysis of
outstanding receivable accounts at year end indicated that uncollectible
accounts should be estimated at $40,000. Bad debts expense for 2013 is
13. If a retailer
regularly sells its receivables to a factor, the service charge of the factor
should be classified as a(n)
A). contra asset.
B). other expense.
14. During 2013,
Alfred Inc. had sales on account of $132,000, cash sales of $54,000, and
collections on account of $84,000. In addition, they collected $1,450 which had
been written off as uncollectible in 2012. As a result of these transactions,
the change in the accounts receivable balance indicates a
15. A 5%, 120-day
note receivable is received from a customer to settle an existing account
receivable of $75,000. Assuming a 360 day year, the accounting entry for
acquisition of the note will include a
debit to Notes Receivable for $75,000 and no entry for interest.
B). debit to Notes
Receivable for $76,250.
C). debit to Notes
Receivable for $78,720.
D). credit to
Interest Revenue for $1,250.
Week 9, Quiz1. Eck Corporation
sells 250 shares of common stock being held as an investment. The shares were acquired
six months ago at a cost of $25 a share. Eck sold the shares for $40 a share.
The entry to record the sale is
Gain on Sale of Stock Investments 3,750
B). Stock Investments 10,000
C). Cash 10,000
Stock Investments 10,000
D). Cash 6,250
Loss on Sale of Stock Investments 3,750
Stock Investments 10,000
2. On January 1,
Talent Company purchased as a short-term investment a $1,000, 8% bond for
$1,050. The bond pays interest on January 1 and July 1. The bond is sold on
October 1 for $1,200 plus accrued interest. Interest has not been accrued since
the last interest payment date. What is the entry to record the cash proceeds
at the time the bond is sold?
A). Cash 1,200
Debt Investments 1,200
Debt Investments 1,050
Gain on Sale of Debt Investments 150
Interest Revenue 20
C). Cash 1,220
Debt Investments 1,200
Interest Revenue 20
D). Cash 1,200
Debt Investments 1,050
Gain on Sale of Debt Investments 150
3. At the end of its
first year, the trading securities portfolio consisted of the following common
$ 46,400 $ 50,000
Barnes Inc. 60,000 55,800
In the following
year, the Barnes common stock is sold for cash proceeds of $56,000. The gain or
loss to be recognized on the sale is a
loss of $4,000.
B). gain of
C). gain of $200.
D). loss of
4. At the time of
acquisition of a debt investment,
A). the Stock
Investments account is debited when bonds are purchased.
B). the Investment
account is credited for its cost plus brokerage fees.
C). no journal
entry is required.
the cost principle applies.
5. The account,
Stock Investments, is
a general ledger control account.
B). another name
for Debt Investments.
C). a subsidiary
D). a long-term
6. Tan Company had
these transactions pertaining to stock investments: Feb. 1 Purchased 3,000 shares
of Norton Company (10%) for $48,800 cash plus brokerage fees of $1,400.
June 1 Received
cash dividends of $2 per share on Norton stock. Oct. 1 Sold 1,200 shares of
Norton stock for $24,000 less brokerage fees of $600. The entry to record the
purchase of the Norton stock would include a
A). credit to Cash
B). debit to Stock
Investments for $48,800.
debit to Stock Investments for $50,200.
D). debit to
Investment Expense for $1,400.
7. Mission Inc.
earns $450,000 and pays cash dividends of $150,000 during 2013. Cox Corporation
owns 70,000 of the 210,000 outstanding shares of Mission. How much revenue from
investment should Cox report in 2013?
8. Which of the
following reasons best explains why a company that experiences seasonal
fluctuations in sales may purchase investments in debt or stock securities?
The company may have excess cash.
B). The company
may invest for speculative reasons to increase the value in pension funds.
C). The company
may generate a significant portion of its earnings from investment income.
D). The company
may invest for the strategic reason of establishing a presence in a related
9. The balance
sheet presentation of an unrealized loss on a non-trading security is similar
to the statement presentation of
B). discount on
D). allowance for
10. A company that
acquires less than 20% ownership interest in another company should account for
the stock investment in that company using
B). the equity
the cost method.
11. Which of the
following is not a true statement regarding short-term debt investments?
are frequently government or corporate bonds.
B). The securities
usually pay interest.
C). This type of
investment must be currently traded in the securities market.
Debt investments are recorded at the price paid less brokerage fees.
12. Revenue is
recognized when cash dividends are received under
the cost method.
B). the equity
controlling interest method.
D). both the cost and
13. An unrealized
loss on non-trading securities is
A). closed-out at
the end of the accounting period.
B). deducted from
the cost of the investment.
reported as a separate component of stockholders’ equity.
D). reported under
Other Expenses and Losses in the income statement.
14. Mission Inc.
earns $600,000 and pays cash dividends of $150,000 during 2013. Cox Corporation
owns 70,000 of the 210,000 outstanding shares of Mission. What amount should
Cox show in the investment account at December 31, 2013 if the beginning of the
year balance in the account was $40,000?
contra-account, Fair value Adjustment, is also called a(n)
B). offset account.
Week 10, Quiz1. Which one of
the following affects cash during a period?
Payment of an accounts payable
C). Write-off of
an uncollectible account receivable
D). Declaration of
a cash dividend
2. Land acquired
from the issuance of common stock is reported
A). as a financing
in a separate schedule at the bottom of the statement.
C). as an
D). as an
3. The information
to prepare the statement of cash flows usually comes from each of the following
comparative balance sheet.
B). the current
the retained earnings statement.
4. The statement of
cash flows will not report the
amount of checks outstanding at the end of the period.
B). change in the
cash balance for the current period.
C). sources of
cash in the current period.
D). uses of cash
in the current period.
5. Starting with
net income and adjusting it for items that affected reported net income but
which did not affect cash is called the
B). direct method.
6. In developing
the cash flows from operating activities, most companies in the U. S.
A). prepare the
operating activities section on the accrual basis.
B). use the direct
use the indirect method.
D). present both
the indirect and direct methods in their financial reports.
7. Carrot Company
issued common stock for proceeds of $381,000 during 2013. The company paid
dividends of $90,000 and issued a long-term note payable for $95,000 in
exchange for equipment during the year. The company also purchased treasury
stock that had a cost of $18,000. The financing section of the statement of
cash flows will report net cash inflows of
8. Each of the
following items may be classified as operating or financing activities under
C). interest paid.
D). All of these
may be classified as such.
receivable arising from sales to customers amounted to $45,000 and $50,000 at the
beginning and end of the year, respectively. Income reported on the income
statement for the year was $160,000. Exclusive of the effect of other
adjustments, the cash flows from operating activities to be reported on the
statement of cash flows is
10. The statement
of cash flows will not provide insight into
A). whether cash
flow is greater than net income.
B). why dividends
were not increased.
the exact proceeds of a future bond issue.
D). how the
retirement of debt was accomplished.
11. Which one of
the following items is not necessary in preparing a statement of cash flows?
Determine the cash in all bank accounts
B). Determine the
change in cash
C). Determine the
cash provided by operations
D). Determine cash
from financing and investing activities
12. If a company
reports a net loss, it
A). will not be
able to pay cash dividends.
may still have a net increase in cash.
C). will not be
able to get a loan.
D). will not be
able to make capital expenditures.
13. In Flagg
Company, net income is $280,000. If accounts receivable increased $145,000 and
accounts payable decreased $50,000, net cash provided by operating activities
using the indirect method is:
14. The category
that is generally considered to be the best measure of a company’s ability to
continue as a going concern is
different from year to year.
cash flows from operating activities.
C). cash flows
from investing activities.
D). cash flows
from financing activities.
A). cash receipts
from sales of goods and services.
B). acquiring and
disposing of productive long-lived assets.
C). lending money
to other entities and collecting on those loans.
long-term liability and owners’ equity items.
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