question

A general ledger should be arranged in statement order beginning with the balance sheet accounts.

answer

true

question

A trial balance does not prove that all transactions have been recorded or that the ledger is correct.

answer

true

question

For each transaction, debits MUST ALWAYS equal credits.

answer

true

question

Dollar signs are only used in the trial balance and financial statements, NOT in the journal or ledger.

answer

true

question

To add a T-account for the cash account that has a balance of $500 and you then subsequently spend $300, ....

answer

$300 is credited and your end result is a debit of $200

question

A journal provides

answer

a chronological record of transactions.

question

An account consists of

answer

a title, a debit side, and a credit side.

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Another name for journal is

answer

book of original entry

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A number in the reference column in a general journal indicates

answer

that the entry has been posted to a particular account.

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The normal balance for an asset is a ---- and to increase the asset account it is ---- and to decrease the asset account, the account is -----.

answer

DR. Debited, Credited

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Posting

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should be performed in account number order.

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The usual ordering of accounts in the general ledger is

answer

assets, liabilities, stockholders' equity, revenues, and expenses.

question

The usual sequence of steps in the recording process is to

answer

analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts.

question

Which of the following correctly identifies normal balances of accounts?

answer

Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit

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Expense recognition often follows revenue recognition.

answer

true

question

Rent received in advance and credited to a rent revenue account which is still unearned at the end of the period, will require an adjusting entry crediting a liability account for the amount still unearned.

answer

true

question

The cost of a depreciable asset less accumulated depreciation reflects the book value of the asset.

answer

true

question

Monthly and quarterly time periods are known as interim periods.

answer

true

question

Accounts often need to be adjusted because

answer

many transactions affect more than one time period.

question

A gift shop, located in a hotel, 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 $60,000 with annual interest of 12%. 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?

answer

interest Expense 1,200 Interest Payable 1,200

question

An adjusting entry

answer

affects a balance sheet account and an income statement account.

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Depreciation is the process of

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allocating the cost of an asset to expense over its useful life in a rational and systematic manner.

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Prepaid expenses are

answer

paid and recorded in an asset account before they are used or consumed.

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The fiscal year of a business is usually determined by

answer

the business

question

The revenue recognition principle dictates that revenue should be recognized in the accounting records

answer

when it is earned

question

Depreciation expense for a period is computed by taking the

answer

cost of the asset ÷ useful life.

question

If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the accounting period, then failure to make an adjusting entry will cause

answer

revenues to be overstated.

question

The Larkin Hotel purchased $7,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the hotel on June 30 is

answer

Debit Laundry Supplies Expense, $5,500; Credit Laundry Supplies, $5,500.

question

After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances.

answer

true

question

Closing entries are journalized after adjusting entries have been journalized.

answer

true

question

Correcting entries are made any time an error is discovered even though it may not be at the end of an accounting period.

answer

true

question

If total credits in the income statement columns of a work sheet exceed total debits, the enterprise has net income.

answer

true

question

The accounting cycle begins at the start of a new accounting period.

answer

true

question

A company's liquidity is concerned with the relationship between long-term investments and long-term debt.

answer

true

question

A liability is classified as a current liability if it is to be paid from current assets within the next year or operating cycle, whichever is longer.

answer

true

question

The completed work sheet is NOT a substitute for formal financial statements.

answer

true

question

A correcting entry

answer

may involve any combination of accounts.

question

An intangible asset

answer

derives its value from the rights and privileges it provides the owner.

question

Closing entries

answer

cause the revenue and expense accounts to have zero balances.

question

Closing entries are journalized and posted

answer

after the financial statements are prepared.

question

In preparing closing entries

answer

each expense account will be credited.

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The balance in the Income Summary account before it is closed will be equal to

answer

the net income or loss on the income statement.

question

The closing entry process consists of closing

answer

all temporary accounts.

question

The purpose of the post-closing trial balance is to

answer

prove the equality of the balance sheet account balances that are carried forward into the next accounting period.

question

When using a work sheet, adjusting entries are journalized

answer

after the work sheet is completed and after financial statements have been prepared.

question

Which of the following depicts the proper sequence of steps in the accounting cycle?

answer

Prepare a trial balance, prepare adjusting entries, prepare financial statements

question

Generally, the most important category on the statement of cash flows is cash flows from

answer

operating activities.

question

If a company has both an inflow and outflow of cash related to property, plant, and equipment, the

answer

cash inflow and cash outflow should be reported separately in the investing activities section.

question

Meyer Deli reported net income of $40,000 for the year. During the year, accounts receivable increased by $14,000, accounts payable decreased by $6,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is

answer

$30,000.

question

Once all departmental income statements are put together, added, and summarized, the company now has:

answer

a consolidated income statement.

question

On the statement of cash flows using the indirect method, patent amortization expense will

answer

be added to net income in the operating section.

question

Significant noncash transactions would not include

answer

treasury stock acquisition.

question

Which of the following would be added to net income using the indirect method?

answer

Depreciation expense

question

A consolidated income statement is a summary statement of all the departmental income statements of a property.

answer

true

question

The payment of interest on bonds payable is classified as a cash outflow from operating activities.

answer

true

question

The amortization of a patent is added back to net income to arrive at net cash provided by operating activities.

answer

true

question

Inflows and outflows from investing and financing activities should be reported separately on the statement of cash flows.

answer

true

question

A statement of cash flows starts with net income and adds (or deducts) items that did not affect cash to arrive at net cash provided by operating activities if the indirect method is used.

answer

true

question

Which of the following would decrease net cash provided by operating activities?

answer

Decrease in short-term notes payable.

question

Which of the following is reported on both a multiple-step and single-step income statement?

answer

Net sales.

question

Profit margin, return on assets, and return on common stockholders' equity are profitability ratios.

answer

true

question

The formula for computing times interest earned is income before income taxes and interest expense divided by interest expense.

answer

true

question

Sales (in millions) for a three year period are: Year 1: $6 Year 2: $6.9 Year 3: $7.5 Using Year 1 as the base year, the percentage increase in sales in Years 2 and 3 are, respectively...

answer

115% and 125%

question

current ratio=

answer

current ratio= current assets / current liabilities

question

receivables turnover=

answer

receivables turnover= net credit sales / average net receivables

question

payout ratio=

answer

payout ratio= cash dividends / net income

question

The acid-test ratio:

answer

measures immediate short-term liquidity

question

Comparative balance sheets are usually prepared for:

answer

two years

question

Assume the following sales data for a company: 2008 $1,000,000 2007 $ 900,000 2006 $ 750,000 2005 $ 500,000 If 2005 is the base year, what was the percentage increase in sales from 2005 to 2007?

answer

80%

question

Vertical analysis is also called:

answer

common size analysis

question

Stockholders are most interested in evaluating:

answer

profitability and solvency

question

In ratio analysis, the ratios are never expressed as a

answer

negative figure.

question

__________ reveal the ability of a hospitality establishment to meet its short term obligations.

answer

Liquidity Ratios

question

The _____________ is one example of a Liquidity Ratio

answer

current ratio

question

All of the following are limitations of the balance sheet except:

answer

It fails to reflect many elements of value to the operation

question

In performing a vertical analysis, the base for sales revenues on the income statement is

answer

net sales

question

The formula for horizontal analysis of changes since the base period is the current year amount

answer

minus the base year amount divided by the base year amount.

question

Stockholders are most interested in evaluating

answer

profitability and solvency.

question

Retailers and wholesalers are both considered merchandisers.

answer

true

question

For a merchandiser, all accounts that affect the determination of income are closed to the Income Summary account.

answer

true

question

The revenue recognition principle applies to merchandisers by recognizing sales revenues when they are earned.

answer

true

question

The Sales Returns and Allowances account is classified as a(n)

answer

contra revenue account.

question

net income =

answer

Sales - cost of goods sold - operating expenses = net income Gross profit - operating expenses = net income

question

gross profit =

answer

Net income + operating expenses = gross profit

question

The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit

answer

merchandise inventory

question

A merchandiser that sells directly to consumers is a

answer

retailer.

question

The operating cycle of a merchandiser is

answer

generally longer than it is for a service company.

question

Russo Company purchased merchandise with an invoice price of $3,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?

answer

18%

question

When goods are returned that relate to a prior cash sale,

answer

the Cash account will be credited.

question

Which of the following accounts has a normal credit balance?

answer

sales

question

Hill Company sells merchandise on account for $3,000 to Karr Company with credit terms of 2/10, n/30. Karr Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

answer

2,450

question

A Sales Returns and Allowances account is NOT debited if a customer

answer

utilizes a prompt payment incentive.

question

In preparing closing entries for a merchandiser, the Income Summary account will be credited for the balance of

answer

sales

question

The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are

answer

credit, debit, debit.

question

Trane Company purchased merchandise inventory with an invoice price of $4,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Trane Company pays within the discount period?

answer

3,920

question

The primary source of revenue for a wholesaler is

answer

the sale of merchandise

question

Barnett Restaurant Equipment has a beginning merchandise inventory of $20,000. During the period, purchases were $60,000; purchase returns, $2,000; and freight-in $5,000. A physical count of inventory at the end of the period revealed that $10,000 was still on hand. The cost of goods available for sale was

answer

83,000

question

In periods of inflation, phantom or paper profits may be reported as a result of using the

answer

FIFO costing assumption.

question

Related selling activities do not include

answer

ordering the merchandise.

question

Selection of an inventory costing method by management does not usually depend on

answer

the fiscal year end

question

The Freight-in account

answer

increases the cost of merchandise purchased.

question

The journal entry to record a return of merchandise purchased on account under a periodic inventory system would be

answer

Accounts Payable Purchase Returns and Allowances

question

The LIFO inventory method assumes that the cost of the latest units purchased are

answer

the first to be allocated to cost of goods sold.

question

Under a periodic inventory system, acquisition of merchandise is debited to the

answer

purchases account

question

Which of the following statements is true regarding inventory cost flow assumptions?

answer

A company may use more than one costing method concurrently.

question

The data below are for Parrett Pasta: Beginning inventory 200 units at $2.00 Purchase—August 500 units at $1.50 Purchase—October 200 units at $3.00 A periodic inventory system is used; ending inventory is 440 units. What is the ending inventory under FIFO?

answer

960

question

When a company uses the periodic method of accounting for inventories the

answer

inventory balance does not change until the end of the year.

question

When prices are rising, FIFO results in a higher ending inventory than LIFO.

answer

true

question

If a company changes its inventory valuation method, the effect of the change on net income should be disclosed in the financial statements.

answer

true

question

The First-in, First-out (FIFO) inventory method results in an ending inventory valued at the most recent cost.

answer

true

question

Inventory turnover is calculated by dividing cost of goods sold by

answer

average inventory

question

A bank statement

answer

shows the activity which increased or decreased the depositor's account balance

question

A check returned by the bank marked "NSF" means

answer

no sufficient funds

question

Blank checks

answer

should be safeguarded

question

Checks received through the mail should

answer

immediately be endorsed "For Deposit Only."

question

Control over cash disbursements is generally more effective when

answer

payments are made by check

question

For accounting purposes, postdated checks (checks payable in the future) are considered to be

answer

accounts recievable

question

In preparing a bank reconciliation, outstanding checks are

answer

deducted from the balance per bank.

question

Internal controls are concerned with

answer

safeguarding assets

question

The custodian of a company asset should

answer

not have access to the accounting records for that asset.

question

The following information is available for Starr Company at December 31, 2003: Beginning inventory $ 80,000 Ending inventory 120,000 Cost of goods sold 900,000 Sales 1,200,000 Starr's inventory turnover in 2004 is

answer

9 times

question

All reconciling items in determining the adjusted cash balance per books require the depositor to make adjusting journal entries to the Cash account.

answer

true

question

The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit.

answer

true

question

A check is a written order signed by the depositor directing the bank to pay a specified sum of money to a designated recipient.

answer

true

question

An effective system of internal control will segregate functions between individuals to reduce the potential for errors and fraud.

answer

true

question

Independent internal verification should be made periodically and should be done by an employee who is independent of the employee responsible for the information.

answer

true

question

The lack of agreement between the balance per books and the balance per bank is due to time lags and errors by either party.

answer

true

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