accounting final

Which of the following statements is true?
None of these answer choices are correct.
Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson’s retained earnings at the end of the year?
$410,000
Which of the following groups uses accounting information to determine whether the company can pay its obligations?
Creditors
Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?
Both Jack and Jill are personally liable for the business debt.
The primary purpose of the statement of cash flows is to report
information about cash receipts and cash payments of a company.
Notes to the financial statements include all of the following except
statistics needed to understand the statements.
The partnership form of business organization
is a common form of organization for service-type businesses.
In the annual report, where would a financial statement reader find out if the company’s financial statements give a fair depiction of its financial position and operating results?
Auditor’s report
The best definition of assets is the
resources belonging to a company that have future benefit to the company.
If the retained earnings account decreases from the beginning of the year to the end of the year, then
net income is less than dividends.
In order for accounting information to be relevant, it must
help predict future events or confirm prior expectations.
Ace Company is a retail store. Due to competition, it is having trouble selling its products. Thus, inventory has been building up. Ace’s current ratio has not changed for the past three years, in spite of the inventory build up. Which of the following statements is true?
The management of Ace should consider the effect of slow moving inventory on its liquidity.
Mitchell Corporation has current assets of $1,600,000 and current liabilities of $750,000. If they issue $100,000 of new stock what will their new current ratio be? (rounded)
2.13:1
A company using the same accounting principles from year to year is an application of
consistency.
Dawson Corporation has the following information available for 2014: (graph)
$605
Trademarks would appear in which balance sheet section?
Intangible assets
Working capital is a measure of
solvency.
A current asset is
expected to be converted to cash or used in the business within a relatively short period of time.
Liabilities are generally classified on a balance sheet as
current liabilities and long-term liabilities.
On a classified balance sheet, companies usually list current assets
in the order in which they are expected to be converted into cash.
In recording accounting transactions, evidence that a transaction has taken place is obtained from
source documents.
If a company has overdrawn its bank balance, then
its Cash account will show a credit balance.
Which account below is not a subdivision of stockholders’ equity?
Liabilities
Which statement is incorrect?
Dividends are shown on the income statement.
Why are expenses increased with a debit?
They decrease stockholders’ equity thus they increase with a debit.
Barnes Company showed the following balances at the end of its first year:
$36,400
When collection is made on Accounts Receivable,
total assets will remain the same.
Which statement is incorrect?
Stockholders’ Equity is an account that is included in the chart of accounts.
Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner?
Dividends and Interest Revenue
A credit to a liability account
indicates an increase in the amount owed to creditors.
A gift shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $30,000 with annual interest of 6%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?
Interest Expense
Interest Payable 300/300
The Accounts Receivable account has a beginning balance of $52,000 and an ending balance of $69,000. If $42,000 was sold on account during the year, what were the total collections on account?
$25,000
The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the:
book value of the asset.
A furniture factory’s employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in:
either January or February depending on when the pay period ends.
The periodicity assumption states that
the economic life of a business can be divided into artificial time periods.
Walton Company collected $9,600 in May of 2013 for 4 months of service which would take place from October of 2013 through January of 2014. The revenue reported from this transaction during 2013 would be:
$7,200.
Adjusting entries affect at least:
one income statement account and one balance sheet account
The worksheet is:
none of these answer choices are correct.
Accrued expenses are:
incurred but not yet paid or recorded.
Green Realty Company received a check for $30,000 on July 1 which represents a 6 month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $30,000. Financial statements will be prepared on July 31. Green Realty should make the following adjusting entry on July 31:
debit Unearned Rent Revenue, $5,000; credit Rent Revenue, $5,000
Indicate which one of the following would not appear on both a single-step income statement and a multiple-step income statement.
Gross profit
As an incentive for customers to pay their accounts promptly, a business may offer its customers
a sales discount.
Which of the following expressions is incorrect?
Net income + Operating expenses = Gross profit
The credit terms offered to a customer by a business firm were 2/10, n/30, which means
the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.
Tony’s Market recorded the following events involving a recent purchase of inventory: Received goods for $40,000, terms 2/10, n/30.
Returned $800 of the shipment for credit.
Paid $200 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company’s inventory
increased by $38,616.
The collection of a $700 account beyond the 2 percent discount period will result in a
credit to Accounts Receivable for $700.
Turner Corporation returned $150 of goods originally purchased on credit from Morgan Industries. Using the periodic Inventory approach, Turner would record this transaction as:
Accounts Payable
Purchase Returns and Allowances 150/150
All of the following statements are true regarding the periodic inventory system except
Under the periodic system, a company uses separate accounts to record freight costs, returns, and discounts.
The operating cycle of a merchandising company is
ordinarily longer than that of a service company
As the president of Harter Company, you notice that no discounts have been taken when settling accounts payables. What would be an acceptable explanation?
All invoices have credit terms of n/30.
The following information was available for Camara Company at December 31, 2014: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $560,000; and sales $800,000. Camara’s inventory turnover in 2014 was
5.6 times.
Dobler Company uses a periodic inventory system. Details for the inventory account for the month of January 2014 are as follows:
$1,188
Redeker Company had the following records:
5.6 times
Which of the following companies would most likely have the highest inventory turnover?
A bakery.
Days in inventory is calculated by dividing 365 days by
the inventory turnover.
The inventory turnover is calculated by dividing cost of goods sold by
average inventory.
Olympus Climbers Company has the following inventory data:
$1,340
Inventory costing methods place primary reliance on assumptions about the flow of
costs.
Barnett Company had the following records:
48.0 days
Clear Clarinets has the following inventory data:
$11,022
Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates
segregation of duties is violated.
What causes the balance on the bank statement to differ from the cash balance in the general ledger?
All of these answer choices are correct.
Which of the following is not a necessary internal control procedure for the replenishment of the petty cash fund?
Employee background check
Internal control measures
are in place to safeguard assets.
Which of the following would not be subtracted from the balance per books on a bank reconciliation?
Check printing charge
All of the following bank reconciliation items would result in an adjusting entry on the company’s books except
fee for collection of note by bank.
A company maintains the asset account, Cash in Bank, on its books, while the bank maintains a reciprocal account that is
a liability account.
Which of the following is an appropriate internal control activity for cash?
The amount of cash on hand should be kept to a minimum.
Electronic funds transfer (EFT) is a disbursement system that transfers cash from one location to another using
a telephone, telegraph, or computer.
Which of the following would be added to the balance per bank on a bank reconciliation?
Deposits in transit.
When customers make purchases with a national credit card, the retailer
is not involved in the collection process.
Using the allowance method, the uncollectible accounts for the year is estimated to be $40,000. If the balance for the Allowance for Doubtful Accounts is a $9,000 debit before adjustment, what is the amount of bad debt expense for the period?
$49,000
A note receivable is executed in December. When the note is paid the following February, the payee’s entry includes (assuming a calendar-year accounting period and no reversing entries) a
debit to Notes Receivable.
Which of the following would probably be the most significant type of a claim held by a company?
accounts receivable
Which one of the following is not a principle of sound accounts receivable management?
Delay cash receipts from receivables if necessary.
A company regularly sells its receivables to a factor who assesses a 2% service charge on the amount of receivables purchased. Which of the following statements is true for the seller of the receivables?
The other expenses section of the income statement will increase each time accounts are sold.
The net amount expected to be received in cash from receivables is termed the
cash realizable value.
When an account is written off using the allowance method, accounts receivable
decreases and the allowance account decreases.
The interest rate for a three-month loan would normally be stated in terms of which of the following rates of interest?
Annual
The receivable that is usually evidenced by a formal instrument of credit is a(n)
note receivable.
Stine Company purchased machinery with a list price of $64,000. They were given a 10% discount by the manufacturer. They paid $400 for shipping and sales tax of $3,000. Stine estimates that the machinery will have a useful life of 10 years and a residual value of $20,000. If Stine uses straight-line depreciation, annual depreciation will be
$4,100
On January 1, a machine with a useful life of four years and a residual value of $9,000 was purchased for $57,000. What is the depreciation expense for year 2 under straight-line depreciation?
$24,000.
A factory machine was purchased for $70,000 on January 1, 2014. It was estimated that it would have a $14,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. If the actual number of machine hours ran in 2014 was 4,000 hours and the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2014 would be
$5,600
Bates Company purchased equipment on January 1, 2013, at a total invoice cost of $900,000. The equipment has an estimated salvage value of $22,500 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at December 31, 2014, if the straight-line method of depreciation is used?
$351,000.
Equipment costing $40,000 with a salvage value of $8,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for Year 3 would be
$4,800
An asset that cannot be sold individually in the market place is
goodwill.
Burke Company purchases land for $90,000 cash. Burke assumes $2,500 in property taxes due on the land. The title and attorney fees totaled $1,000. Burke has the land graded for $2,200. They paid $10,000 for paving of a parking lot. What amount does Burke record as the cost for the land?
$105,700.
Which of the following is not an intangible asset that is reported on the balance sheet?
Employees
In recording the acquisition cost of an entire business
goodwill is recorded as the excess of cost over the book value of identifiable net assets.
A company has the following assets:
$23,000,000.
On January 1, 2014, $2,000,000, 10-year, 10% bonds, were issued for $1,940,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is
$1,616.
Molina Corporation issues 4,000, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 103. The journal entry to record the issuance will show a
debit to Cash of $4,000,000.
On January 1, 2014, Keisler Company, a calendar-year company, issued $700,000 of notes payable, of which $175,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2014, is
Current liabilities, $175,000; Long-term Debt, $525,000.
A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $420,000, what is the amount of the sales taxes owed to the taxing agency?
$21,000
The adjusted trial balance for Hamilton Corp. at the end of the current year, 2014, contained the following accounts.
$1,550,000
Bond discount should be amortized to comply with
the expense recognition principle.
The following totals for the month of March were taken from the payroll records of Kern Company
debit to Salaries and Wages Expense for $34,074.
Liabilities are classified as current or long-term based on their
due date.
As interest is recorded on an interest-bearing note, the Interest Expense account is
increased; the Interest Payable account is increased.
If the market rate of interest is greater than the contractual rate of interest, bonds will sell
at a discount.
The par value of a stock
is indicative of the worth of the stock.
Johnson Company issued 900 shares of no-par common stock for $15,300. Which of the following journal entries would be made if the stock has no stated value?
Cash – Common Stock – No-Par Value-15,300
Information that is not generally reported for each class of stock on the balance sheet is
the market value
Alt Corp. issues 3,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:
Common Stock $30,000 and Paid-in Capital in Excess of Par Value $12,000.
S. Lawyer performed legal services for E. Corp. Due to a cash shortage, an agreement was reached whereby E. Corp. would pay S. Lawyer a legal fee of approximately $15,000 by issuing 8,000 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $1.80 per share. Given this information, the best journal entry for E. Corp. to record for this transaction is
Legal Expense
Common Stock
Paid-in Capital in Excess of Par – Common

14400, 8000, 6400

Outstanding stock of the West Corporation included 40,000 shares of $5 par common stock and 10,000 shares of 6%, $10 par non-cumulative preferred stock. In 2013, West declared and paid dividends of $4,000. In 2014, West declared and paid dividends of $12,000. How much of the 2014 dividend was distributed to preferred shareholders?
$6,000.
Which of the following statements about treasury stock is true?
Purchasing treasury stock is done to eliminate hostile shareholder buyouts.
Which of the following represents the largest number of common shares?
Authorized shares.
A corporate board of directors does not generally
execute policy.
All of the following statements about preferred stock are true except
preferred stock can be either par value or no-par value.
In Jackson Jones Company, land decreased $180,000 because of a cash sale for $180,000, the equipment account increased $60,000 as a result of a cash purchase, and Bonds Payable increased $200,000 from issuance for cash at face value. The net cash provided by investing activities is
$120,000
The statement of cash flows will not report the
amount of checks outstanding at the end of the period.
The cash debt coverage is computed by dividing net cash provided by operating activities by
average total liabilities.
Peninsula Company reported net income of $260,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is
$275,000
If accounts receivable have increased during the period
revenues on an accrual basis are greater than revenues on a cash basis.
Which of the following would be added to net income using the indirect method?
Depreciation expense.
Westwind Corporation shows income tax expense of $180,000. There has been a $20,000 decrease in federal income taxes payable and a $28,000 increase in state income taxes payable during the year. Using the direct method of reporting cash flows from operating activities, what was Westwind ‘s cash payment for income taxes?
$172,000.
Cash generated from operations exceeds investing needs, and the company can begin retiring debt during the
maturity phase.
All of the following adjustments are added to net income in computing net cash provided by operating activities except
an increase in prepaid expenses.
If $2,500,000 of bonds are issued during the year but $4,000,000 of old bonds are retired during the year, the statement of cash flows will show a(n)
increase in cash of $2,500,000 and a decrease in cash of $4,000,000.