A prior period adjustment for understatement of net income will
A Be credited to the Retained Earnings account
B Be debited to the Retained Earnings account
C Show as a gain on the current year's Income Statement
D Show as an asset on the current year's Balance Sheet
Question: Outstanding stock of the Colt Corporation included 20,000 shares of $5 par common stock and 5,000 shares of 5%, $10 par noncumulative preferred stock. In 2009, Colt declared and paid dividends of $2,000. In 2010, Colt declared and paid dividends of $6,000. How much of the 2010 dividend was distributed to preferred shareholders?
D None of the above
Question: At December 31, 2010, before any year-end adjustments, Cable Car Company's Insurance Expense account had a balance of $1,450 and its Prepaid Insurance account had a balance of $3,800. It was determined that $3,000 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be
Question: Kershaw Bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:
Date Purchases Sales
Jan. 14 375@$28
Jan. 17 250@$20
Jan. 25 250@$22
Jan. 29 250@$32
Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units were on hand at January 31. The cost of the inventory at January 31, under the FIFO method is
Question: The cost of land includes all of the following except
A Real estate brokers’ commissions
B Closing costs
C Accrued property taxes
D Parking lots
Question: During August, 2010, Joe’s Supply Store generated revenues of $30,000. The company’s expenses were as follows: cost of goods sold of $12,000 and operating expenses of $2,000. The company also had rent revenue of $500 and a gain on the sale of a delivery truck of $1,000. Joe’s nonoperating income (loss) for the month of August, 2010 is
Question: Graham Company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows:
Units Per unit priceTotal
Balance, 1/1/10 200 5.00 1,000
Purchase, 1/15/10 100 5.30 530
Purchase, 1/28/10 100 5.50 550
An end of the month (1/31/10) inventory showed that 120 units were on hand. If the company uses LIFO, what is the value of the ending inventory?
Question: The maturity value of a $4,000, 9%, 60-day note receivable dated February 10th is
Question: Each of the following is correct regarding treasury stock except that it has been
B Fully paid for
Question: Y-B-2 Inc. pays its rent of $120,000 annually on January 1. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true?
A Failure to make the adjustment does not affect the February financial statements
B Expenses will be overstated by $10,000 and net income and owner’s equity will be understated by $10,000
C Assets will be overstated by $20,000 and net income and owner’s equity will be understated by $20,000
D Assets will be overstated by $10,000 and net income and owner’s equity will be overstated by $10,000
Question: Bee-In-The-Bonnet Company purchased office supplies costing $6,000 and debited (increased) Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be
A Debit (decrease) Office Supplies Expense, $2,400; Credit (decrease) Office Supplies, $2,400.
B Debit (increase) Office Supplies, $3,600; Credit (increase) Office Supplies Expense, $3,600.
C Debit (decrease) Office Supplies Expense, $3,600; Credit (decrease) Office Supplies, $3,600.
D Debit (increase) Office Supplies, $2,400; Credit (increase) Office Supplies Expense, $2,400.
Question: Looper, Inc. has 25,000 shares of 6%, $100 par value, noncumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2010. There were no dividends declared in 2009. The board of directors declares and pays a $250,000 dividend in 2010. What is the amount of dividends received by the common stockholders in 2010?
Question: A company purchased factory equipment on June 1, 2010, for $48,000. It is estimated that the equipment will have a $3,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2010, is
Question: The accounting equation for Gudgeyes Enterprises is as follows
$120,000= $60,000 + $60,000
If Gudgeyes purchases office equipment on account for $12,000, the accounting equation will change to
A AssetsLiabilitiesOwner's Equity
$120,000= $60,000 + $60,000
B AssetsLiabilitiesOwner's Equity
$132,000= $60,000 + $72,000
C AssetsLiabilitiesOwner's Equity
$132,000= $66,000 + $66,000
D AssetsLiabilitiesOwner's Equity
$132,000= $72,000 + $60,000
Question: The balance in the Prepaid Rent account before adjustment at the end of the year is $15,000, which represents three months' rent paid on December1. The adjusting entry required on December 31 is to
A debit (increase) Rent Expense, $5,000; credit (decrease) Prepaid Rent, $5,000.
B debit (increase) Rent Expense, $10,000; credit (decrease) Prepaid Rent, $10,000.
C debit (increase) Prepaid Rent, $5,000; credit (decrease) Rent Expense, $5,000.
D debit (increase) Prepaid Rent, $10,000; credit (decrease) Rent Expense, $10,000.
Question: If stock is issued for a noncash asset, the asset should be recorded on the books of the corporation at
A Fair market value
D A nominal amount
Question: Notes payable is
A A liability reported on the Income Statement.
B A liability reported on the Balance Sheet.
C Reported only when paid.
D An expense reported on the Income Statement.
Question: A contingent liability need only be disclosed in the financial statement notes when the likelihood of the contingency is
A Reasonably possible
Question: The interest on a $2,000, 6%, 90-day note receivable is
Question: The following information is for Acme Auto Supplies:
The total dollar amount of assets to be classified as current assets is
Question: If a company has sales of $420,000, net sales of $400,000, and cost of goods sold of $260,000, the gross profit rate is
Question: A corporation purchases 30,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders’ equity?
A Increase by $1,050,000
B Decrease by $600,000
C Decrease by $1,050,000
D Increase by $600,000
Question: Merchandise inventory is
A reported under the classification of Property, Plant, and Equipment on the balance sheet.
B often reported as a miscellaneous expense on the income statement.
C reported as a current asset on the balance sheet.
D generally valued at the price for which the goods can be sold.
Question: In a period of inflation, the cost flow method that results in the lowest income taxes is the
A FIFO method
B LIFO method
C Average-cost method
D Gross profit method
Question: A cash register tape shows cash sales of $1,500 and sales taxes of $120. The journal entry to record this information is
Question: If total liabilities increased by $14,000 during a period of time and owner’s equity decreased by $6,000 during the same period, then the amount and direction (increase or decrease) of the period’s change in total assets is a(n)
A $14,000 increase
B $20,000 increase
C $8,000 decrease
D $8,000 increase
Question: On March 8, Fernetti Company bought office supplies on account from the Flint Company for $880. Fernetti Company incorrectly debited Office Equipment for $800 and credited Accounts Payable for $800. The entries have been posted to the ledger. The correcting entry should be
Question: A company purchased a piece of equipment for its manufacturing facility valued at $150,000 by executing a note payable. In the current period:
A The $150,000 is an expense that will be reported on the Income Statement.
B The $150,000 is recorded as an asset that will affect the Balance Sheet.
C Because the company is not purchasing the equipment for resale, it is not necessary to record the transaction.
D Because the company did not pay cash for the equipment, it will not be recorded until the note is paid in full.
Question: Elton Manufacturing Corporation purchased 4,000 shares of its own previously issued $10 par common stock for $92,000. As a result of this event
A Elton’s Common Stock account decreased $40,000
B Elton’s total stockholders’ equity decreased $92,000
C Elton’s Paid-in Capital in Excess of Par Value account decreased $52,000
D All of the above
Question: Martin’s Mail Service purchased equipment for $2,500. Martin paid $500 in cash and signed a note for the balance. Martin debited the Equipment account, credited Cash and
A Nothing further must be done
B Debited the Martin, Capital account for $2,000
C Credited another asset account for $500
D Credited a liability account for $2,000
Question: The interest charged on a $50,000 note payable, at the rate of 6%, on a two-month note would be
Question: During 2010, its first year of operations, Yaspo’s Bakery had revenues of $60,000 and expenses of $33,000. The business had owner drawings of $18,000. What is the amount of owner’s equity at December 31, 2010?
B $18,000 debit
C $9,000 credit
D $27,000 credit
Question: Martin's Mail Service purchased equipment for $2,500. Martin paid $500 in cash and signed a note for the balance. Martin debited (increased) the Equipment account, credited (decreased) the Cash account and
A nothing further must be done.
B debited (increased) the Martin, Capital account for $2,000.
C credited (reduced) some other asset account for $2,000.
D credited (increased) a liability account for $2,000.
Question: When expenses for a reporting period exceed revenue for the period:
A Equity is reduced.
B The company must borrow money to remain in business.
C An expense is created.
D This does not happen.
Question: Don Jones is the proprietor (owner) of Donny's, a retailer of golf apparel. When recording the financial transactions of Donny's, Don does not record an entry for a car he purchased for personal use. Don took out a personal loan to pay for the car. What accounting concept guides Don's behavior in this situation?
A Pay back concept
B Economic entity assumption
C Cash basis concept
D Monetary unit assumption
Question: A sales discount does not
A Provide the purchaser with a cash saving
B Reduce the amount of cash received from a credit sale
C Increase a contra-revenue account
D Increase an operating expense account
Question: At January 1, 2010, LeAnna Industries reported owner’s equity of $130,000. During 2010, LeAnna had a net loss of $30,000 and owner drawings of $20,000. At December 31, 2010, the amount of owner’s equity is
Question: When a note receivable is dishonored
A Interest revenue is never recorded
B Bad debts expense is recorded
C The maturity value of the note is written off
D Accounts Receivable is debited if eventual collection is expected
Question: Paid-in capital from treasury stock would appear on a balance sheet under the category
A Capital stock
B Treasury stock
C Additional paid-in capital
D Contra to owners' equity
Question: Valerie's Salon has total receipts for the month of $16,430 including sales taxes. If the sales tax rate is 6%, what are Valerie's sales for the month?
D It cannot be determined
Question: Dillon Corporation splits its common stock 2 for 1, when the market value is $40 per share. Prior to the split, Dillon had 50,000 shares of $10 par value common stock issued and outstanding. After the split, the par value of the stock
A Remains the same
B Is reduced to $2 per share
C Is reduced to $5 per share
D Is reduced to $20 per share
Question: Which of the following is an optional step in the accounting cycle?
A Adjusting entries
B Closing entries
C Correcting entries
D Reversing entries
Question: Becki Jean Corporation issued a one-year, 9%, $200,000 note on April 30, 2010. Interest expense for the year ended December 31, 2010 was
Question: The following selected amounts are available for Sanders Company.
Retained earnings (beginning) $800
Net loss 100
Cash dividends declared 100
Stock dividends declared 50
What is its ending retained earnings balance?
Question: On January 1, Castagno Corporation had 800,000 shares of $10 par value common stock outstanding. On March 31, the company declared a 15% stock dividend. Market value of the stock was $15/share. As a result of this event
A Castagno’s Paid-in Capital in Excess of Par Value account increased $600,000
B Castagno’s total stockholders’ equity was unaffected
C Castagno’s Retained Earnings account decreased $1,800,000
D All of the above
Question: If a resource has been consumed but a bill has not been received at the end of the accounting period, then
A An expense should be recorded when the bill is received
B An expense should be recorded when the cash is paid out
C An adjusting entry should be made recognizing the expense
D It is optional whether to record the expense before the bill is received
Question: Cost of goods sold
A Goes on the balance sheet as a liability.
B Is the value of all goods purchased in the current period intended for resale.
C Is reported on the Income Statement and represents the value of merchandise sold during the reporting period.
D Is reported only on internal reports.
Question: Equipment was purchased for $75,000. Freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $15,000 salvage value at the end of its five-year useful life. Depreciation expense each year using the straight-line method will be
Question: Retained earnings are occasionally restricted
A To set aside cash for dividends
B To keep the legal capital associated with paid-in capital intact
C Due to contractual loan restrictions
D If preferred dividends are in arrears