Question 1

A necessary element of internal control is

Accepted Answer

information and communication

Question 2

An example of a preventive control is

Accepted Answer

separation of the Purchasing Department and Accounting Department personnel

Question 3

Under the voucher system, every transaction is recorded at the time of

Accepted Answer

incurring

Question 4

A debit or credit memorandum describing entries in the depositor\'s bank account may be enclosed with the bank statement. An example of a credit memorandum is

Accepted Answer

a promissory note left for collection

Question 5

Journal entries based on the bank reconciliation are required in the depositor\'s accounts for

Accepted Answer

book errors

Question 6

Accompanying the bank statement was a credit memorandum for a short-term note collected by the bank for the customer. What entry is required in the depositor\'s accounts?

Accepted Answer

debit Cash; credit Notes Receivable

Question 7

Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. What entry is required in the depositor\'s accounts?

Accepted Answer

debit Accounts Receivable; credit Cash

Question 8

Which of the following would be subtracted from the balance per bank on a bank reconciliation?   of the following would be subtracted from the balance per bank on a bank reconciliation?  a. Outstanding checks  b. Deposits in transit  c. Notes collected by the bank  d. Service charges

Accepted Answer

Outstanding checks

Question 9

Marcus Company developed the following reconciling information in preparing its September bank reconciliation:    Cash balance per bank, 9/30 $11,000  Note receivable collected by bank 6,000  Outstanding checks 9,000  Deposits-in-transit 4,500  Bank service charge 75  NSF 1,200     Using the above information, determine the cash balance per books (before adjustments) for the Marcus Company.

Accepted Answer

$1,775

Question 10

A $100 petty cash fund contains $92 in petty cash receipts, and $6.50 in currency and coins. The journal entry to record the replenishment of the fund would include a

Accepted Answer

debit to Cash Short and Over for $1.50

Question 11

In the normal operation of business you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $450 is \"NSF\". The bank also informs you that due to the amount of activity on your business account the monthly service charge is $40.  During a bank reconciliation:

Accepted Answer

subtract both values from balance according to books

Question 12

The receivable that is usually evidenced by a formal instrument of credit is a(n)

Accepted Answer

note receivable

Question 13

The type of account and normal balance of Allowance for Doubtful Accounts is

Accepted Answer

contra asset, credit

Question 14

If the direct write-off method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer\'s account as uncollectible?

Accepted Answer

Accounts Receivable

Question 15

. An estimate based on an analysis of receivables shows that $780 of accounts receivables are uncollectible. The Allowance for Doubtful Accounts has a debit balance of $110. After preparing the adjusting entry at the end of the year, the balance in the Allowance for Doubtful Accounts is

Accepted Answer

$780

Question 16

If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer\'s account as uncollectible?

Accepted Answer

Accounts Receivable

Question 17

The balance in Allowance for Doubtful Accounts must be carefully considered prior to the end of the year adjustment when applying which method?

Accepted Answer

estimate based on an analysis of receivables

Question 18

An aging of a company\'s accounts receivable indicates that $3,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 credit balance, the adjustment to record bad debts for the period will require a

Accepted Answer

debit to Bad Debts Expense for $1,800

Question 19

A 60-day, 10% note for $8,000, dated April 15, is received from a customer on account. The face value of the note is

Accepted Answer

$8,000

Question 20

The journal entry to record a note received from a customer to apply on account is

Accepted Answer

debit Notes Receivable; credit Accounts Receivable

Question 21

Pane Company receives a $3,000, 3-month, 6% promissory note from Dag Company in settlement of an open accounts receivable. What entry will Pane Company make upon receiving the note?

Accepted Answer

Notes Receivable   debit 30000 Accounts ReceivableâDag Company credit 3,000

Question 22

A 60-day, 12% note for $10,000, dated May 1, is received from a customer on account. If the note is discounted on May 21 at 15%, the proceeds are

Accepted Answer

$10,030

Question 23

Land acquired so it can be resold in the future is listed in the balance sheet as a(n)

Accepted Answer

investment

Question 24

A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $2,000, would have a cost basis of

Accepted Answer

$92,000

Question 25

In a lease contract, the party who legally owns the asset is the

Accepted Answer

lessor

Question 26

Equipment with a cost of $160,000 has an estimated residual value of $10,000 and an estimated life of 5 years or 12,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours?

Accepted Answer

$30,000

Question 27

Equipment with a cost of $80,000, an estimated residual value of $5,000, and an estimated life of 15 years was depreciated by the straight-line method for 5 years. Due to obsolescence, it was determined that the useful life should be shortened by 5 years and the residual value changed to zero. The depreciation expense for the current and future years is

Accepted Answer

$11,000

Question 28

The proper journal entry to purchase a computer on account to be utilized within the business would be:

Accepted Answer

Jan 2 Office Office Equipment debit 1,250.00  Accounts Payable credit 1,250.00

Question 29

The calculation for annual depreciation using the units-of-production method is

Accepted Answer

(depreciable cost / estimated output) * the actual yearly output

Question 30

A fixed asset with a cost of $42,000 and accumulated depreciation of $38,500 is traded for a similar asset priced at $60,000. Assuming a trade-in allowance of $5,000, the cost basis of the new asset is

Accepted Answer

$58,500

Question 31

The Brock Company acquired new machinery with a price of $15,200 by trading in similar old machinery and paying $12,700. The old machinery originally cost $9,000 and had accumulated depreciation of $5,000. In recording this transaction, Brock Company should record

Accepted Answer

a loss of $1,500

Question 32

On December 31, Reach It Batting Cages Company has decided to discard one of its batting cages. The initial cost of the equipment was $225,000 with an accumulated depreciation of $195,000. Depreciation has been taken up to the end of the year. The following will be included in the entry to record the disposal.

Accepted Answer

Equipment Cr. $225,000

Question 33

Which intangible assets are amortized over their useful life?

Accepted Answer

patents

Question 34

On June 8, Acme Co. issued an $80,000, 6%, 120-day note payable on an overdue account payable to Still Co. Assume that the fiscal year of Acme Co. ends June 30. Which of the following relationships is true?  a. Acme is the creditor and credits Accounts Receivable  b. Still is the creditor and debits Accounts Receivable  c. Still is the borrower and credits Accounts Payable  d. Acme is the borrower and debits Accounts Payable

Accepted Answer

Still is the borrower and credits Accounts Payable

Question 35

The maturity value of a $40,000, 90-day, 6% note payable is

Accepted Answer

$40,600

Question 36

The journal entry a company uses to record the payment of a discounted note is

Accepted Answer

debit Cash; credit Notes Payable

Question 37

Gray County Bank agrees to lend the Starkwood Building Company $100,000 on January 1. Starkwood Building Company signs a $100,000, 9%, 9-month note. What entry will Starkwood Building Company make to pay off the note and interest at maturity assuming that interest has been accrued to September

Accepted Answer

Notes Payable debit 100,000  debit Interest Payable 6,750  credit Cash 106,750

Question 38

The total payroll of a business is usually significant for all the reasons below except:  a. employees are sensitive to payroll errors and irregularities  b. payroll is subject to various federal and state regulations  c. businesses find it difficult to develop and maintain good internal controls on the payroll system   d. payroll and related payroll taxes have a significant effect on the net income of most businesses

Accepted Answer

businesses find it difficult to develop and maintain good internal controls on the payroll system

Question 39

Prior to the last weekly payroll period of the calendar year, the cumulative earnings of employees A and B are $99,350 and $91,000 respectively. Their earnings for the last completed payroll period of the year are $850 each. The amount of earnings subject to social security tax at 6% is $100,000. All earnings are subject to Medicare tax of 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer\'s total FICA tax for this payroll period on the two salary amounts of $850 each?

Accepted Answer

$115.50

Question 40

Manning Company has the following information for the pay period of December 15 - 31, 20xx.  Gross payroll $15,000 Federal income tax withheld $3,000  Social security rate 6% Federal unemployment tax rate .8%  Medicare rate 1.5% State unemployment tax rate 5.4%  Salaries Payable would be recorded for

Accepted Answer

$10,875

Question 41

The following totals for the month of June were taken from the payroll register of ABC Company:    Salaries expense $13,000  Social security and Medicare Taxes withheld 975  Income Taxes withheld 2,600  Retirement Savings   500  Salaries subject to federal and state unemployment   taxes of 6.2 percent 4,000  The entry to record the accrual of employer\'s payroll taxes would include a

Accepted Answer

debit to Payroll Taxes Expense for $1,223

Question 42

An aid in internal control over payrolls that indicates employee attendance is

Accepted Answer

\"clock card\"

Question 43

The journal entry a company uses to record pension rights that have not been funded for its salaried employees, at the end of the year is

Accepted Answer

debit Pension Expense; credit Unfunded Pension Liability

Question 44

During June, CircuitSound sold 800 portable CD players for $50 each. Each CD player cost CircuitSound $25 to purchase and carried a one-year warranty. If 10 percent typically need to be replaced over the warranty period, what amount should CircuitSound debit Product Warranty Expense for in June?

Accepted Answer

$2,000

Question 45

Under the corporate form of business organization  a. ownership rights are easily transferred.  b. a stockholder is personally liable for the debts of the corporation.  c. stockholders\' acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation.  d. stockholders wishing to sell their corporation shares must get the approval of other stockholders.

Accepted Answer

ownership rights are easily transferred.

Question 46

The two ways that a corporation can be classified by ownership are

Accepted Answer

for profit or not-for-profit.

Question 47

The entry to record the issuance of 150 shares of $5 par common stock at par to an attorney in payment of legal fees for organizing the corporation includes a credit to

Accepted Answer

Common Stock

Question 48

Alliance Corp. issues 1,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to:

Accepted Answer

Common Stock $10,000 and Paid-in Capital in Excess of Par Value $4,000.

Question 49

The journal entry to issue 1,000,000 shares of $5 par common stock for $6.25 per share on January 2nd would be:

Accepted Answer

Jan 2 Cash debit 6,250,000  Common Stock credit 5,000,000  credit  Paid-In Capital in Excess of Par - C/S 1,250,000

Question 50

Which of the following is not a prerequisite to paying a cash dividend?  a. formal action by the board of directors  b. market value in excess of par value per share  c. sufficient cash  d. sufficient retained earnings

Accepted Answer

market value in excess of par value per share

Question 51

A corporation purchases 10,000 shares of its own $10 par common stock for $25 per share, recording it at cost. What will be the effect on total stockholders\' equity?

Accepted Answer

decrease, $250,000

Question 52

changes are summarized in the retained earnings statement

Accepted Answer

Retained earnings

Question 53

When a corporation completes a 3-for-1 stock split   a. the ownership interest of current stockholders is decreased  b. the market price per share of the stock is decreased  c. the par value per share is decreased  d. b and c

Accepted Answer

d. b and c

Question 54

If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect of this action is to  a. decrease total assets and total stockholders\' equity.  b. reduce the amount of retained earnings available for dividend declarations.  c. increase stockholders\' equity and to decrease total liabilities.  d. decrease total retained earnings and increase total liabilities.

Accepted Answer

b. reduce the amount of retained earnings available for dividend declarations.

Question 55

55. Which of the following is an example of a temporary difference between taxable income and reported income?  a. using the installment method of determining revenue for taxable income and for income statement reporting  b. using the straight-line depreciation method for income statement reporting and MACRS depreciation for taxable income  c. using the straight-line depreciation method for some assets and MACRS depreciation for other assets  d. including tax-exempt municipal bond interest in net income and not including any tax-exempt municipal bond interest in taxable income

Accepted Answer

b. using the straight-line depreciation method for income statement reporting and MACRS depreciation for taxable income

Question 56

Income tax allocation procedures are justified by what concept?

Accepted Answer

Matching

Question 57

ABC Company has incurred a period income tax expense of $500,000. The tax accountants inform the financial accountants that 60% of this value will be paid on March 15th, 2 1/2 months away, while the balance will be paid in 14 1/2 months. The journal entry to recognize these obligations is:

Accepted Answer

Dec 31    debit   Income Tax Expense 500,000  credit  Income Tax Payable - Current 300,000  credit  Income Tax Payable - Non Current 200,000

Question 58

Which of the following items should be classified as an extraordinary item on a corporate income statement?  a. Gain on the retirement of a bond payable  b. Gain from land condemned for public use  c. Loss due to an discontinued operation  d. Selling treasury stock for more than the company paid for it

Accepted Answer

Gain from land condemned for public use

Question 59

For the year that just ended, a company reports net income of $3,200,000. There are 750,000 shares authorized, 600,000 shares issued, and 500,000 shares of common stock outstanding. What is the earnings per share?

Accepted Answer

$6.40

Question 60

The Lange Company has a simple capital structure. The company has 20,000 shares of common stock outstanding. Net income for the year was $65,000. Lange declared and paid a preferred stock dividends of $4,000 during the year. Earnings per share for the year is:

Accepted Answer

$3.05

Question 61

Long-term investments are held for all of the listed reasons below except   a. their income  b. long-term gain potential  c. influence over another business entity  d. meet current cash needs

Accepted Answer

d. meet current cash needs

Question 62

Bean Corporation purchased 35% of the outstanding shares of common stock of Williams Corporation as a long-term investment. Subsequently, Williams Corporation reported net income and declared and paid cash dividends. What journal entry would Bean Corporation use to record its share of the earnings of Williams Corporation?

Accepted Answer

debit Investment in Williams Corporation; credit Income of Williams Corporation

Question 63

For 2008, net income is $240,000, shares outstanding are 80,000, and the market price is $24. What is the price-earnings ratio on common stock (round to one decimal point?)

Accepted Answer

8.0

Question 64

For accounting purposes, the method used to account for investments in common stock is determined by

Accepted Answer

the extent of an investor\'s influence over the operating and financial affairs of the investee.

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