If the liabilities of a business increased $75,000 during a period of time and the equity in the business decreased
$30,000 during the same period, the assets of the business must have:
A) Decreased $105,000.
B) Decreased $45,000.
C) Increased $30,000.
D)
D) Increased $45,000.
A company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the
accounting equation?
A) Assets, $30,000 increase; liabilities, no effect; equity, $30,000 increase.
B) Assets, $30,000 decrease; liabilities,
B) Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.
Determine the net income of a company for which the following information is available.
Employee salaries expense... $180,000
Interest expense................... 10,000
Rent expense ....................... 20,000
Consulting revenue .............. 400,000
A) $190,000.
According to generally accepted accounting principles, a company's balance sheet should show the company's assets
at the cash equivalent value of what was given up. This is known as the:
A) Objectivity Principle
B) Monetary Unit Principle
C) Business Enti
E) Cost Principle
A company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the
accounting equation are:
A) Total assets decrease and equity increases.
B) Both total assets and total liabilities decrease.
C) Total assets,
C) Total assets, total liabilities, and equity are unchanged.
How would the accounting equation of a company be affected by the billing of a client for $10,000 of consulting
work completed?
A) +$10,000 accounts receivable, -$10,000 accounts payable.
B) +$10,000 accounts receivable, +$10,000 accounts payable.
C) +$10
D) +$10,000 accounts receivable, +$10,000 revenue.
On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the
account was debited for a total of $12,200 and credited for a total of $11,500. What must have been the balance in
the Cash account on September 1?
A)
B) A $4,300 debit balance.
Wisconsin Rentals purchased office supplies on credit. The general journal entry made by Wisconsin Rentals will
include a:
A) Debit to Accounts Payable.
B) Debit to Accounts Receivable.
C) Credit to Cash.
D) Credit to Accounts Payable.
E) Credit to Retain
D) Credit to Accounts Payable
Zed Bennett opened an art gallery and as a dealer and completed these transactions:
1. Started the gallery, Artery, by investing $40,000 cash and equipment valued at $18,000 in exchange for common
stock.
2. Purchased $70 of office supplies for cash.
3. Pa
C) $43,230.
Of the following errors, which one by itself will cause the trial balance to be out of balance?
A) A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense.
B) A $100 cash receipt from a customer in payment of his ac
B) A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $10 credit to
Accounts Receivable.
A company purchased a new car for $10,000 by trading in an old car which had a recorded net cost and value of
$2,000. They also paid cash of $3,000, and signed a note for the remaining balance. The journal entry to record this
transaction will NOT include
E) Debit Accounts Payable $5,000
An asset created by prepayment of an expense is:
A) Recorded as a debit to a prepaid expense account.
B) Recorded as a debit to an unearned revenue account.
C) Recorded as a credit to an unearned revenue account.
D) Recorded as a credit to a prepaid expen
A) Recorded as a debit to a prepaid expense account
ABC Co. leased a portion of its store to another company for eight months beginning on October 1, 2004. This other
company paid the entire rent of $6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The
journal entry made by ABC Co. at y
D) A credit to Rent Earned for $2,400.
Prior to recording adjusting entries, the Office Supplies account had a $359 normal balance. A physical count of the
supplies showed $105 of unused supplies. The required adjusting entry is:
A) Debit Office Supplies $105 and credit Office Supplies Expense
C) Debit Office Supplies Expense $254 and credit Office Supplies $254.
A company purchased a new truck at a cost of $42,000 on July 1, 2004. The truck is estimated to have a useful life of
6 years and a salvage value of $3,000. Which of the following will be included in the journal entry recorded on
December 31, 2004?
A) Deb
B) Credit Accumulated Depreciation $3,250.
On April 30, 2004, a three-year insurance policy was purchased for $18,000 cash with coverage to begin
immediately. What is the amount of Prepaid Insurance that would appear on the company's financial statements for
the year ended December 31, 2004?
A) $
D) $14,000.
The Retained Earnings account has a credit balance of $17,000 before closing entries are made. If total revenues for
the period are $55,200, total expenses are $39,800, and dividends are $9,000, what is the ending balance in the
Retained Earnings account
A) $23,400.
A company pays its two employees every Friday $500 each for a five-day workweek that begins on Monday. If the
monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end
adjusting entry is:
A) Debit Unpaid
E) Debit Salaries Expense $400 and credit Salaries Payable $400.
Andy Store sold merchandise in the amount of $5,800 to a customer on October 1, with credit terms of 2/10, n/30.
The cost of the items sold is $4,000. Andy uses the perpetual inventory system. The journal entries that Andy will
make on October 1 will incl
D) Credit to Merchandise Inventory for $4,000
Jennifer Store sold merchandise in the amount of $5,800 to a customer on October 1, with credit terms of 2/10, n/30.
The cost of the items sold is $4,000. Jennifer uses the perpetual inventory system. On October 4, the customer returns
some of the merchan
C) Debit to Merchandise Inventory for $500
Lindsay Store sold merchandise in the amount of $5,800 to a customer on October 1, with credit terms of 2/10, n/30.
The cost of the items sold is $4,000. Jennifer uses the perpetual inventory system. On October 4, the customer returns
some of the merchand
E) Debit Sales Discounts $106
Tyler Company purchased merchandise in the amount of $4,800 from Sam's Store, with credit terms of 1/10, n/45 on
October 1. Tyler uses the perpetual inventory system. On October 4, Tyler returns some of the merchandise, which
were not defective, and recei
B) Credit to Merchandise Inventory $33
Maya Company reports the following amounts for the year ending on December 31, 2004:
Merchandise Inventory, January 1, 2004 : $70,000
Cost of Transportation : $2,300
Invoice Cost of Merchandise Purchases : $195,000
Purchase Returns and Allowances: $4,650
A) $117,750
Stephen Company had the following partial list of account balances at year-end:
Accounts Receivable: $9,000
Cost of Goods Sold: $34,100
Sales Revenue : $57,200
Accounts Payable: $7,500
Sales Discounts: $1,600
Merchandise Inventory: $5,900
Operating Expens
C) $ 17,200
Alex Company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at
$13 per unit. On August 12 they purchased another 12 units at $11 per unit. On August 15, they sold 30 units. Using
the FIFO perpetual invent
C) $77.
During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:
A) Specific identification method.
B) Average cost method.
C) Weighted-average method.
D) FIFO method.
E) LIFO method.
E) LIFO method.
Bonnie Company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10
units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55
each. Using the LIFO perpetual inve
D) $276
Chris Company uses the perpetual inventory system and had the following activity during the current monthly period.
November 1: Beginning Inventory of 100 units @$20
November 5: Purchased 100 units @ $22
November 8: Purchased 50 units @$23
November 16: So
B) $2,320.
Daniel Company uses the perpetual inventory system to account for its merchandise. The beginning balance of the
inventory and its transactions during January were as follows:
January 1: Beginning Balance of 18 units at $13 each
January 12: Purchased 15 un
A) $786.
Frank Company has the following per unit original costs and replacement costs for its inventory:
Part A: 50 units with a cost of $5, and replacement cost of $4.50
Part B: 75 units with a cost of $6, and replacement cost of $7.00
Part C: 160 units with a c
C) Credit Inventory for $185
Timothy Company sold merchandise to a customer on October 17 of 2004. They accepted a $4,800, 90-day, 10% note
as payment. If Timothy Company's accounting period ends on December 31, 2004 [Oct 17 to Dec 31 = 75 days],
Timothy Company's journal entry on Ja
D) Credit to Interest Receivable for $100
Charles company used the percent of sales method to determine its bad debts exp ense. At the end of the current year,
the company's unadjusted trial balance reported the following selected amounts:
Accounts Receivable $245,000 debit
Allowance for doubtful
C) $240,200
Dennis Company's Allowance for Doubtful Accounts, showed a credit balance of $950 on January 1, 2004. During
the year, the company wrote off $3,200 of uncollectible accounts, and reinstated $1,300 of previously written off
accounts. The Dec 31, 2004 balan
E) $6,800
Mark Company uses the allowance method of accounting for uncollectible accounts. On May 3, they wrote off the
$3,000 uncollectible account of its customer, P. Basu. On July 10, Mark received a check for $2,000 from Basu. On
July 10, Mark Company's books w
B) Credit to Allowance for Doubtful Accounts $2,000
Nancy Company has a balance of $15,000 in accounts receivable on December 31, of which $1,500 is more than 30
days overdue. The company has a beginning debit balance of $45 in the Allowance for Doubtful Accounts. They
estimate the uncollectible accounts t
E) $330 credit to Allowance for Doubtful Accounts
Karen Company had the following account balances prior to the write off of a $100 customer account:
Accounts receivable $9,500
Allowance for doubtful accounts 400
The net realizable value of the receivables before and after the write-off was:
BEFORE AFTER
BEFORE AFTER
A) $9,100 $9,100
Cara Company purchased a vehicle for $23,000, and estimated its useful life to be 8 years and its salvage value to be
$4,000. After 6 years of straight-line depreciation, Cara decided to do a major overhaul at a cost of $9,500, which are
expected to exten
B) $ 2,321
Ashley Company paid $150,000, plus a 6% commission and $4,000 in closing costs for a property. The property
included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500.
What should be the allocation of t
C) Land $81,500; Land Improvements, $32,600; Building, $48,900.
Regina Company purchased a Cash register on January 1 for $5,400. This register has a useful life of 10 years and a
salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the
double-declining-balance met
E) $864.
Edward Company purchased a bulldozer on July1 , 2003.for $120,000, and estimated the useful life of the bulldozer
to be 60,000 hours of use, and a salvage value of $30,000. In 2003, they used the bulldozer for 12,000 hours, and in
2004, it was used for 16
B) credit to gain on disposal of $2,000
Craig Company's old machine that cost $40,000 and had accumulated depreciation of $30,000 was traded in for a new
machine of like purpose having an estimated 20-year life with an invoice price of $50,000. The company also paid
$43,000 cash, along with its
A) $50,000.
Gilbert Company purchased a mineral deposit for $800,000. It expects this property to produce 1,200,000 tons of ore
and to have a salvage value of $50,000. In the current year, the company mined and sold 90,000 tons of ore. Its
depletion expense for the c
D) $ 56,250.
Justin Company invested in 100 shares of Sara Company's common stock on January 2, 2004, and classified them as
Trading Securities. Justin purchased the stock for $30 a share, and paid brokerage fees of $150. On October 20, 2004,
Justin sells 60 shares of
C) Debit to Loss on Sale of Investments of $310
On September 15, 2003, Donny Corporation purchased investments classified as Available-for-sale at a cost of
$100,000. The proper adjusting entry on December 31, 2003, included a debit to Market Adjustment - Available for
Sale Securities (A.F.S.) for $2,6
B) credit to M arket Adjustment - A.F.S. of $1,200
On June 30, 2003, Paula Company purchased some stock for $5,000. This investment was worth $6,000 on December
31, 2003, and was worth $5,500 on December 31, 2004. The investment has been properly classified as a trading
investment since it was purchased.
A) credit of $500 to an account that would be reported as Other Gains and Losses
Lorraine Corporation's investment portfolio at the end of the year is as follows:
Classification Security Cost Market Value
Trading WalMart $5,0000 $8,000
Available for Sale Delta $5,000 $1,000
Trading Disney $5,000 $3,000
Available for Sale Microsoft $5,
E) an Unrealized Gain of $2,000.
Charlene owns 40% of Liu's common stock. Liu pays $97,000 in total cash dividends to its shareholders. Charlene's
entry to record this transaction should include a:
A) Debit to Dividends for $97,000.
B) Credit to Dividend Revenue for $38,800.
C) Debit to
D) Credit to Long-Term Investments for $38,800.
Clark Company purchased 40% of Irene Company's stock for $125,000 on January 1. On May 20 of the same year,
Irene Company declared total cash dividends of $30,000. At year-end, Irene Company reported net income of
$150,000. The balance in Clark Company's
C) $173,000.
Carl Company has a monthly gross payroll of $6,000, which is subject to unemployment taxes (federal at 0.8% and
state at 5.4%). All earnings are subject to 6.2% FICA taxes for Social Security, and 1.45% FICA Taxes for Medicare.
Income tax (Federal and Sta
A) Credit to FICA - Medicare Taxes payable of $87
Julie Convenience Store sold merchandise for cash to a customer, and recorded a debit to Cash for $371, which
included a 6% Sales tax. In the same transaction, they must also:
A) credit Sales Revenue for 300
B) credit Sales Tax Payable for $22.26
C) credi
C) credit Sales Tax Payable for $21
Molly Company has a monthly gross payroll of $6,000, which is subject to unemployment taxes (federal at 0.8% and
state at 5.4%). All earnings are subject to 6.2% FICA taxes for Social Security, and 1.45% FICA Taxes for Medicare.
Income tax withholdings (F
B) credit to FICA- Social Security Taxes Payable of $372
Dale Company sells computers at a selling price of $1,800 each. Each computer has a 2 year warranty that covers
replacement of defective parts. It is estimated that 2% of all computers sold will be repaired under the warranty at an
average cost of $150 ea
E) $64,000
An employee earns two weeks' paid vacation for every 50 weeks of work in a year. The employee is paid weekly, and
earns an annual salary of $35,360. What is the total weekly Salary Expense for the employer?
A) $680.00
B) $707.20
C) $736.67
D) $27.20
E) $2
B) $707.20
Martin Company signed a $5,000, 3-month, 6% note payable, on December 1, 2004, with the principle plus interest
due on March 1, 2005. If the accounting period ends on December 31, which of the following statements is TRUE?
A) On December 31, 2004, Martin
D) On March 1, 2005, Martin will debit Interest Payable for $25
Alex Company issued 5-year, 7% bonds with a par value of $100,000. The company received $101,137 cash for the
bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest
period is:
A) $3,386.30.
B) $3,5
A) $3,386.30.
Alexa Company issued 5-year, 7% bonds with a par value of $100,000. The company received $97,947 for the
bonds. Using the straight-line method, the amount of interest expense for the first semiannual interest period is:
A) $3,294.70.
B) $3,500.00.
C) $3,7
C) $3,705.30.
Kathleen Company issues a $30,000, 6%, 3-year installment note payable on January 1, 2004. The note requires that
$10,000 of principal plus accrued interest be paid at the end of each year on December 31. The issuer's journal entry
to record the second an
B) A debit to Interest Expense for $1,200.
Marla Company borrowed $100,000 on a 10-year, 7% installment note payable on January 1, 2005. The terms of the
note require Marla to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general
journal entry to record the first pay
E) a debit to Notes Payable of $7,238
Michael Company issued 8% bonds with a par value of $1,000,000, receiving a $20,000 premium. On the interest
date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation
purchased the entire issue o
D) $22,000 gain.
Matthew Company issued 10-year, 7% bonds (paying semiannual interest) with a par value of $100,000. The market
rate of interest when the bonds were issued was 6%. Compute the price of the bonds when they were issued.
A) $107,360.70
B) $93,206.05
C) $107,4
C) $107,441.25
67.Henry Company's Accounts Receivable increased by $800 during the year. If they also reported Net Credit Sales of
$29,800, how much cash was received from their credit customers?
A) $26,400.
B) $29,000.
C) $29,800.
D) $30,600.
E) $32,400.
B) $29,000.
Maria Company showed the following information in its Statement of Cash Flows for 2004:
Cash Flows from Financing Activities $114,000
Cash Flows from Investing Activities (82,000)
Net Increase in Cash 154,000
Determine the Cash Flows from Operating Activi
C) $122,000.
Teresa Company reported the following for the year of 2005:
Salaries Expense . . . . . . . . . . . . . . . $168,000
Salaries Payable, January 1 . . . . . . . . . .6,400
Salaries Payable, December 31 . . . . . . 10,600
Calculate the cash paid for salaries
E) $163,800.
Lynette Company's Inventory balance at 12/31/04 was $200,000 and was $188,000 at 12/31/05. Its Accounts Payable
balance at 12/31/04 was $80,000 and was $84,000 at 12/31/05, and its cost of goods sold for 2005 was $720,000. The
company's total amount of ca
A) $704,000.
Billy Company's income statement showed the following: net income, $124,000; depreciation expense, $30,000; and
gain on sale of plant assets, $14,000. An examination of the company's current assets and current liabilities showed
the following changes as a
D) $141,000.
Dennis Company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired,
resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:
A) $ (3,000).
B) $(60,000).
C) $(57,000
B) $(60,000).