accounting 1-10 Flashcards
True or false: a business is an example of a social entity.
False. Social entities = sole proprietorship, partnership, and corporation.
True or false: laws passed by congress in 1933 and 1934 gave the securities and exchange commission (SEC) final say on matters of financial reporting by publicly owned corporations.
True
True or false: the securities and exchange commission (SEC) requires that publicly owned corporations submit financial statements to it each year.
True.
True or false: the death or withdrawal of one partner ends the partnership.
True.
True or false: the financial statements and the auditor’s report must be made available to stockholders of publicly owned corporations.
True.
True or false: the separate entity assumption applies only to the corporation form of business.
False.
True or false: As the first step in the development of generally accepted accounting principles, the FASB writes an exposure draft, which explains the topic under consideration. List the steps.
False. The steps are as follows: (1) write discussion memorandum (2) public hearing (3) exposure draft (4) receives and evaluates public comments (5) vote (6) if 4/5 members agree then the statement is issued.
The financial accounting standards board is responsible for…
Developing generally accepted accoutning principles and they issue Statements of Financial Accounting Standards
The government agency that has final authority over the financial reporting of publicly owned corporations is…
The securities and exchange commission (SEC)
The financial affairs of a business and the financial affairs of the owners should be…
Kept totally separate.
All financial statements submitted to the SEC by publicly owned corporations must include an auditor’s report prepared by…
An independent certified public accountant.
The area of accounting that involves the preparation of internal reports for a firm’s executives and the analysis of the data in these reports to aid in decision making is known as…
Managerial accounting.
The group of accounting educators who offer their opinions about proposed FASB statements, after research has been done to determine the possible effects on financial reporting and the economy, is…
American accounting association (AAA)
The owners are not held responsible for the debts of the form of business organization referred to as…
Corporation.
Accounting is often referred to as the language of…
Business
The results of the accounting process are summarized in periodic reports called financial…
Statements.
The three major legal forms of business entity are the…
Sole proprietorship, partnership, and corporation.
A form of business entity owned by one person is called a…
Sole proprietorship.
The people, companies, or governmental agencies to whom a firm owes money are called…
Creditors.
The owners of a corporation are called…
Stockholders.
True or false: the entire process of analyzing, recording, and reporting business transactions is based on the fundamental accounting equation.
True. (Assets = liabilities + owner’s equity)
True or false: Changes in owner’s equity can result from revenue and expenses.
True.
True or false: when cash is paid to a creditor, the firm’s liability increases.
False. It decreases.
True or false: Revenue is recorded when cash is collected from charge-account clients.
False. Revenue, or income, is the inflow of money or other assets that results from the sales of goods or services or from the use of money or property.
True or false: a net loss for the period decreases owner’s equity.
True.
Amounts that a business must pay in the future are known as…
Accounts payable.
Examples of assets are…
Cash, accounts receivable, supplies, equipment, accumulated depreciation, prepaid insurance/rent/etc., etc.
The income statement shows…
The result of operations over a period of time
If the income statement covered a six-month period ending November 30, 2014, the third line of the income statement heading would read…
Six-Month Period Ended November 30, 2014.
When the owner invests cash in a business…
Assets and owners equity increase
The statement of _______ reports the changes that have occurred in the owners financial interest during the reporting period.
Owners equity
When revenue is greater than expenses, the result is a net…
Income
When revenue and expenses are equal, the firm is said to…
Break even
True or false: owners equity = assets + liabilities
False. Assets = liabilities + owners equity
True or false: Increases in assets and expenses are both recorded with debits.
True.
True or false: Debit is the word used in referring to the left side of asset accounts and to the right of liability and owners equity.
False. right for assets; Left for liability and owners equity.
True or false: the accounts in a chart of accounts are normally arranged in the order that they appear on financial statements.
True
True or false: the normal balance side of the owners drawing account is the credit side.
False. It is the debit side.
True or false: accountants use revenue and expense accounts to classify and summarize changes in owners equity during a period.
True.
True or false: an increase in an expense results in an increase in owners equity.
False. It results in a decrease in assets
True or false: permanent accounts are used to account for the change in owners equity during the accounting period.
False. Statement of owners equity accounts for the changes in owners equity for a period. Permanent accounts transfer from one period to the next.
Debits are used to record…
Increase in assets. Decrease in owners equity, liability, revenue, and expense
A firm paid cash to apply against a debt. To record this transaction, the accountant would…
Debit accounts payable and credit cash
The total of the figures on the left side of a cash account is $25800. The total of the figures on the right side is $14100. The balance of this account is…
$11700 recorded on the left side
Which of the following increase owners equity?
Expenses; revenue; withdrawals; receiving cash from customers.
Revenue
Credits are used to record…
Decrease in assets; increase in liabilities and owners equity.
Debits are used to record increase in…
Assets and expenses
When charge customers pay cash to apply against their accounts, the amount is recorded…
On the left side (Debit) of the cash account and the right side (Credit) of accounts receivable.
When the trial balance totals are not equal, the error may have been caused by recording a debit as a credit if the difference is divisible by…
2
Which of the following accounts is not a permanent account?
Cash; accounts payable; salaries expense; Thomas Bernard, capital.
Salaries expense
The net income or net loss from the income statement is transferred to the…
Statement of owners equity.
Separate written records called _______ are kept for each asset and liability and for the owners equity of a business.
Accounts
A chart of accounts is a list of accounts that makes it possible to easily identify account _______ and names
Numbers.
A(n) __________ account is used to record increase in owners equity from the sale of goods or services.
Revenue
The increase side of an account represents the ___________ balance of the account.
Normal
The error that occurs when the number $5 is written as $50 is called a(n)…
Slide.
True or false: a ledger is sometimes referred to as a record of original entry.
False. That is a journal
True or false: transactions are recorded in either a journal or a ledger but not both.
False. It is recorded in the journal then transferred to the ledger.
True or false: the balance ledger form always shows the current balance of an account.
True.
True or false: the general journal can accommodate all kinds of transactions that a business may have.
True
True or false: a firm should be able to trace amounts through the accounting records and back to their source documents.
True
When an entry is made in the general journal what should be indented?
The accounts to be credited
If a transaction is properly analyzed and recorded….
The total amount debited will equal the total amount credited
A firm purchased telephone equipment for cash. By mistake, the person who recorded the transaction debited utilities expense instead of office equipment. The error was discovered after the data posted. The correcting entry should contain…
A debit to office equipment and a credit to utilities expense.
The accounts payable account has a $3000 credit balance. An entry for the payment of $1000 on the amount owed is recorded and posted. The new balance of the accounts payable account is recorded as…
A $2000 credit balance
The process of transferring data from a journal to a ledger is known as…
Posting
The ____ is a chain of references that makes it possible to trace information about transactions through the accounting process.
Audit trail
Posting is the _______ step in the accounting cycle. What are all the steps?
Third. (1) analyze transactions (2) journalize transactions (3) post to ledger (4) prepare worksheet (5) prepare financial statements (income statement, statement of owners equity, balance sheet) (6) record adjusting entries (7) record closing entries (8) prepare post closing trial balance (9) interpret the financial information
The process of recording transactions in a journal is referred to as…
Journalizing
The number of the _________ is recorded in the posting reference column of the journal.
Ledger account
True or false: the cost of a long-term asset, such a equipment, is transferred to expense as it is used during the month.
True
True or false: Net income is recorded on the worksheet in the Income Statement Debit column and the Balance Sheet Credit column.
True
True or False: If an adjustment for expired rent is not recorded, the firm’s expenses will be overstated.
False
True or False: Generally accepted accounting principles require that the original cost of a long-term asset continue to appear in the asset account until the disposition of the asset.
True
True or false: The balance of the owner’s drawing account is extended to the Income Statement Debit column of the worksheet.
False. It is extended to the Balance Sheet Debit column of the worksheet
On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to…
The Income Statement Credit column
On a worksheet, the adjusted balance of a contra asset account would be extended to…
the Income Statement Debit column
If long-term assets are not adjusted, expenses on the income statement…
will be understated
On November 25, the company paid $24,000 rent in advance for a six-month period (December 20X5 through May 20X6). On December 31, 20X5, the adjustment for expired rent would include…
A $4000 debit to rent expense and a $4000 credit to prepaid rent
When a trial balance is in balance…
The debit accounts balance equals the credit accounts balance.
The process of updating accounts at the end of an account period for previously unrecorded items that belong to the period is referred to as making…
Adjustments (or adjusting entries)
Expense items that are acquired and paid for in advance of their use are called _______ expenses.
Prepaid
If equipment has ________ value, it can be sold for additional use or for scrap.
Salvage
When the ______ method of depreciation is used, an equal amount of depreciation is charged to each accounting period during the asset’s useful.
Straight-line
An accumulated depreciation account has a normal ________ balance.
Credit
True or false: After closing entries are posted, the revenue and expense accounts will have zero balances.
True
True or False: One of the purposes of closing entries is to transfer net income or net loss for the period to the Capital account.
True
True or False: The entry to close the revenue account Fees Income requires a debit to that account.
True
True or False: At the end of each accounting period, asset and liability account balances are reduced to zero.
False
True or False: The Balance Sheet section of the worksheet contains the data that is used to make closing entries.
False- that is the income statement
True or False: The Income Summary account is used only at the end of an accounting period to help with the closing procedure.
True
True or False: Withdrawals by the owner for personal use do not affect net income or net loss of the business.
True
True or False: Interpreting the financial statements is the last step in the accounting cycle.
True
True or False: The postclosing trial balance contains permanent balance sheet accounts only.
True
The entry to close the Income Summary account includes…
(1) debit to Fees Income, credit Income Summary (2) debit to Income Summary, credit to all expenses (3) a debit to Income Summary, credit Capital account.
Which of the following accounts will not normally have a zero balance after the closing entries have been posted?
Income Summary; Fees Income; Capital; Rent Expense
Capital
One purpose of closing entries is to…
transfer results of operations to Owner’s Equity
Which of the following accounts is a permanent account?
Supplies; Supplies Expense; Drawing; Fees Income
Supplies
After the Worksheet had been completed, the next step in the accounting cycle is to…
prepare financial statments
True or False: The capital account is an owner’s equity account.
True
True or False: If two amounts are recorded on the same side of the accounting equation, the equation will no longer be in balance.
False
True or False: A business that performs an activity for a fee is a service business.
True
True or False: A proprietorship is also known as a sole proprietorship.
True
True or False: A business has two types of equities.
True
True or False: When an owner withdraws cash from the business, the transaction affects both assets and owner’s equity.
True
True or False: When cash is paid to the owner for personal use, assets decrease and owner’s equity decreases.
True.
True or False: The right side of a balance sheet present liabilities and assets.
False
True or False: Sandra Stern, Drawing is increased with a credit.
False
True or False: The source document for cash payments is a check.
True
True or False: The Objective Evidence accounting concept requires that there be proof that a transaction did occur.
True.
True or False: A journal shows in one place all the changes in a single account.
False.
True or False: A chart of accounts is a list of account titles and numbers showing the location of each account in a ledger.
True
True or False: If a bank does not receive payment from the person who signed the check, each endorser of the check is individually liable for payment.
True
True or False: Blank endorsements should be used when sending checks through the mail.
False.
True or False: Most banks will accept postdated checks.
False
True or False: Anytime a payment is made from the petty cash fund, a petty cash slip is prepared showing proof of a petty cash payment.
True
True or False: The petty cash slip is the source document for the entry to replenish petty cash.
False- that is the Petty Cash Voucher
True or False: All general ledger account titles are listed on a trial balance even if some accounts do not have a balance.
True
True or False: Making adjustments to general ledger accounts is an application of the Matching Expenses with Revenue accounting concept.
True
True or False: When the Income Statement Credit column total is greater than the Income Statement Debit column total on a work sheet, the business has a net income.
True
True or False: Information needed to prepare the liabilities section of a balance sheet is obtained from the work sheet’s Account Title column and the Balance Sheet Credit column.
True
True or False: The Adequate Disclosure accounting concept is applied when financial statements contain all information necessary to understand a business’s financial condition.
True
True or False: Only revenue accounts and expense accounts are used in preparing the income statements.
True
The net income on an income statement is verified by checking the balance sheet.
False
True or False: An amount written in parentheses on a financial statement indicates an estimate.
False- It makes the number a negative amount to be subtracted
True or False: A balance sheet reports information about the elements of the accounting equation.
True
True or False: A cash sale is a sale in which a credit card is used for the total amount of the sale at the time of the transaction.
False
True or False: A listing of customer accounts, account balances, and total amount due from all customers is a schedule of accounts receivable.
True
True or False: Medicare is funded by the federal government but not under the social security law.
False- it is under the social security law
True or False: Employers in many states are required to withhold state, city, or county income tax from employee earnings.
True
True or False: The information used to prepare payroll checks is taken from a payroll register.
True
True or False: Employers must pay to the government the taxes withheld from employee earnings.
True
True or False: The employer social security tax rate is not the same as the employee social security tax rate.
False
True or False: Work sheets for service and merchandising businesses are very different.
False
True or False: The inventory of supplies at the end of a fiscal period is determined by actually counting the amount of supplies on hand.
True
True or False: Data needed to prepare the liabilities section of a balance sheet are obtained from a work sheet’s Balance Sheet Debit column.
False
True or False: Indicating a source document is not necessary when journalizing adjusting entries.
True
True or False: Amounts needed for the closing entries are obtained from the Trial Balance columns of a work sheet.
False
True or False: Expense accounts are closed by debiting the expense accounts and crediting Income Summary.
False
True or False: Only one type of accounting system can be used to record, summarize, and report a business’s financial information.
False
True or False: The amount on each line of a purchases journal is posted as a credit to the named vendor account in the accounts payable ledger.
True
True or False: When several journals are used, an abbreviation is used in the Post. Ref. column of a ledger to show the journal from which the posting is made.
True
True or False: Purchases on account are recorded in a purchases journal at list price.
False
True or False: A schedule of accounts receivable is prepared before financial statements are prepared to prove the accounts receivable ledger.
True
True or False: A sales invoice is the source document for journalizing a sales on account transaction.
True
True or False: When the allowance account has a previous credit balance, this previous balance is subtracted from the amount of the adjustment for uncollectible accounts expense.
False
True or False: The Realization of Revenue accounting concept explains why failing to collect an account at a later date than the original sale cancels the sale and reduces revenue.
False
True or False: Canceling the balance of a customer account because the customer does not pay a called writing off an account.
True
True or False: When an account is written off, the account balance is transferred to Allowance for Uncollectible Accounts.
False
A business has total cash of $30,000. Then the business pays $1,000 on the account, buys insurance coverage of $750, buys supplies for $1,200, and pays $300 more on account. The balance of the cash account is now____.
$26,750
A business has total cash of $30,000. Then the business pays $1,000 on the account, buys insurance coverage of $750, buys supplies for $1,200, and pays $300 more on account. Total assets are now _____.
$28,700
When the owner withdraws cash for personal use, ____.
assets decrease and owner’s equity decreases.
When the owner invests cash in a business, the owner’s capital account is _____.
increased by a credit.
When a business receives revenue, Sales is ____.
increased by a credit.
Debits must equal credits ______.
in all transactions
The normal balance side of any revenue account is _____.
the credit side
A sale on account ____.
increases an owner’s equity account and increases an asset account
If an error is discovered in a general journal entry, ______.
you should cancel the error by drawing a a neat line through the error, correct the entry by writing the correct item above the canceled error, and do not erase the incorrect item.
When the previous balance of an account is zero and a credit amount is posted to the account, the new balance is ______.
a credit
When the previous balance of an account is a debit amount and a debit amount is posted to the account, the new balance is _____.
a debit
A business form ordering a bank to pay cash from a bank account is _____.
a check
An endorsement on the back of a check consisting only of a signature is _____.
a blank endorsement.
A lost check with a blank endorsement on it can be cashed by _____.
anyone who has the check
On a work sheet, the balance of Cash is extended to the _____.
Balance Sheet Debit column
If the Trial Balance columns are not equal and the difference is 1, the error often is ______.
in addition.
If the Trial Balance columns are not equal and the difference can be divided evenly by 9, the error most likely is _____.
in transposed numbers or a “slide”
The sections of an income statement are _____.
heading, revenue, expenses, and net income or net loss.
After the adjusting entry for Prepaid Insurance has been posted, Insurance Expense has an up-to-date balance, which is the ______.
value of insurance premiums used during the fiscal period.
Temporary accounts begin each new fiscal period with a _____.
zero balance.
When the total expenses are greater than the total revenue, _____.
the income summary account has a debit balance.
The journal entry to close the expense accounts is ______.
debit Income Summary for the total expenses; credit each expense account.
Information needed to journalize a closing entry for the owner’s drawing account is obtained from the ______.
work sheet’s Balance Sheet Debit column
The last step in the accounting cycle is _____.
to interpret the financial information.
Keeping the reports and financial records of a business separate from the personal records of the partners is an application of the accounting concept ______.
Business Entity
The entry to journalize a purchase of merchandise on account is _____.
debit Purchases; credit Accounts Payable.
An increase in revenue resulting from a sale on account should be recorded ______.
at the time of the sale
A sale for which cash will bee received at a later date is a _____.
sale on account
A subsidiary ledger containing only accounts for vendors from whom items are purchased or bought on account is ______.
an accounts payable ledger
An account in a general ledger that summarizes all accounts in a subsidiary ledger is _____.
a controlling account.
The special amount column totals of the cash receipts journal are _____.
posted to the general ledger controlling account at the end of each month.
A general ledger sorts and summarizes all information affecting _____.
income statement and balance sheet accounts.
The period covered by a salary payment is a _____.
pay period
A business form used to record payroll information is ______.
a payroll register
When a semimonthly payroll is paid, the credit to Cash is equal to the _____.
net pay of all employees.
To record the total federal tax payment for employee income tax, social security tax and Medicare tax, the account credited is ____.
Cash
To record the payment of federal unemployment tax, the account debited is ____.
a liability account
Preparing a worksheet at the end of each fiscal period is an application of the accounting concept _____.
Accounting Period Cycle
The amount of goods on hand for sale to costumers is _____.
a merchandise inventory
On a work sheet, Accounts Payable is extended to the _____.
Balance Sheet Credit column
When a work sheet is completed, a net loss will appear in the ______.
Income Statement Credit and Balance Sheet Debit columns
Acceptable component percentages should be determined _____.
based on industry standards and comparisons with prior fiscal periods.
The two types of journal entries needed to change general ledger account balances at the end of the fiscal period are ____.
adjusting and closing entries.
To close the revenue account, the revenue account balance for the fiscal period is transferred into _______.
the income summary account
Each unit of ownership in corporation is ______.
a share of stock
Total shares of ownership in a corporation is _____.
capital stock
Using a copy of the sales invoice as a source document for recording a sale on account transaction is an application of the accounting concept _____.
Objective Evidence.
When the percentage of total sales on account method is used, the estimated uncollectible accounts expense is calculated by ______.
multiplying total sales on account times the percentage.
Estimating uncollectible accounts expense at the end of a fiscal period is an application of the accounting concept _____.
Matching Expenses with Revenue.
The journal entry to reopen an account that has been written off is debit Accounts Receivable and credit ______.
Allowance for Uncollectible Accounts.
True or False: A sales return or a sales allowance is usually recorded in the sales journal.
False
True or False: The balance of the Sales Returns and Allowances account is subtracted from the balance of the Accounts Receivable account in the Assets section of the balance sheet.
False.
True or False: To provide an adequate audit trail, sales on credit should be recorded in both the sales journal and the general journal.
False.
True or False: The individual amounts in the Accounts Receivable Debit column of a sales journal should be posted to the accounts receivable subsidiary ledger, and the column total should be posted to the Accounts Receivable account in the general ledger.
True.
True or False: When a business makes a sale on a bank credit card, the business is responsible for collecting from the customer.
False.
In a firm that uses special journals, credit sales of merchandise are recorded in
the sales journal.
The Sales account is classified as
a revenue account.
A firm that sells goods that it purchases for resale is a
merchandising business.
In a firm that uses special journals, cash collected from credit customers is
recorded in the cash receipts journal.
A wholesale business sells goods with a list price of $800 and a trade discount of 40 percent. The net price is
$480
The source document for an entry in the sales journal is a(n) _______.
sales slip (or sales invoice)
A list of all unpaid balances in the accounts receivable subsidiary ledger is called a(n) ________ of accounts receivable.
schedule
A(n) _________ is a business form that is issued to a credit customer upon acceptance of the return of damaged goods.
credit memorandum
To indicate that an amount has been posted from the sales journal to the accounts receivable subsidiary ledger, a(n) ______ is placed in the Posting Reference column of the journal.
check mark.
A business that sells goods and services directly to individual customers is called a(n) _________ business.
retail.
List the accounts used in recording the transaction and indicate whether they will be debited or credited: Sold merchandise on credit. The transaction involved a sales tax.
Debit Accounts Receivable; credit Sales and Sales Tax Payable.
List the accounts used in recording the transaction and indicate whether they will be debited or credited: Sold merchandise for cash. The transaction involved sales tax.
Debit Cash; credit Sales and Sales Tax Payable.
Calculate the amount the firm will use to record each sales in the sales journal: List price of $800 and trade discount of 45 percent.
$800-$360=$440
Calculate the amount the firm will use to record each sales in the sales journal: List price of $2,000 and trade discount of 40 percent.
$2,000-$800=$1,200
Calculate the amount the firm will use to record each sales in the sales journal: List price of $3,000 and trade discounts of 30 and 15 percent.
$3,000-$900=$2,100-$315=$1,785
List price of $1,400 and trade discounts of 25 and 15 percent.
$1,400-$350=$1,050-$157.50=$892.50
True or False: A credit purchase of equipment for use in the business would be recorded in the purchases journal.
False
True or False: At the end of the accounting period, the Purchases and Freight In accounts are closed to the Income Summary account.
True
True or False: The Purchases Returns and Allowances account has a normal debit balance.
False
True or False: A firm’s accounts payable ledger may include accounts for creditors who are not suppliers of merchandise.
True
True or False: To show that the totals of the amount columns in the purchases journal were posted, the appropriate account numbers are written in parentheses below the totals.
True
After a supplier of merchandise is selected, the purchasing department issues a form called
a purchase order.
Freight charges on merchandise purchases should be debited to
the Freight In account.
To record a return of merchandise purchased on credit, the accountant would
debit Accounts Payable and credit Purchases Returns and Allowances.
Purchases of merchandise on credit should be recorded in
the purchases journal.
The amount of the purchases for a period is presented in
the Cost of Goods Sold section of the income statement.
A firm had purchases of $114,800, freight charges of $200, and purchases returns and allowances of $1,000 during one month. Its net delivered cost of purchases was
$114,000
Posting to the accounts payable ledger should be made
daily.
Whenever a sales department needs goods, it sends the purchasing department a form called a(n) ______.
Purchase requisition
The Freight In account should have a(n) _______ balance.
Debit
A list of creditors and the balances owed to them is called a schedule of _______.
Accounts Payable
Purchases of merchandise on credit should be recorded in the ______ journal.
Purchases
Credit terms of 2/10, n/30 indicate a maximum allowable credit period of ______ days.
30
After damaged goods are returned, the supplier issues a(n) ______ memorandum.
Credit
In a small firm, the creditor accounts are placed in _____ order in the accounts payable ledger.
alphabetical
True or False: The entry to replenish petty cash includes a debit to Petty Cash Fund and a credit to Cash.
False
True or False: The endorsement on each canceled check should be examined to make sure that it agrees with the name of the payee.
True
True or False: If the cash is over, it is entered in the Other Account Credit column of the cash receipts journal and the figure is circled.
False
True or False: Purchases Discount is a contra cost account.
True
True or False: Grouping all transactions involving cash payments together in the cash payments journal strengthens the audit trail.
True
The entry to record an additional cash investment by the owner is recorded in
the cash receipts journal.
On the bank reconciliation statement, you would find all of the following except: (a) a list of canceled checks. (b) a list of NSF checks. (c) a list of outstanding checks. (d) the bank service charge.
(a) a list of canceled checks.
After a bank reconciliation statement is completed, a firm may have to make an entry in its accounting records for
NSF checks.
Which of the following would not be shown as an adjustment to the book balance on a bank reconciliation statement: (a) bank service charges. (b) NSF checks. (c) deposits in transit. (d) a charge for printing new checks.
(c) deposits in transit.
If a check written by a firm is not canceled by the bank and returned with the month’s bank statement, the firm should
consider this check as outstanding when preparing the bank reconciliation.
A(n) _______ is a written promise to pay a specified amount of money at a specified time.
promissory note
If the amount of cash available for deposit is _____ than the amount listed on the audit tape taken from the cash register, the Cash Short or Over account is debited.
less
The entry to record the issuance of a check in settlement of an interest-bearing promissory note includes a debit to Notes Payable, a debit to _______, and a credit to Cash.
Interest Expense
To record payment of sales tax owed, the accountant would debit Sales Tax _______ and credit Cash.
Payable
The person or firm that issues a check is called the ________, or payor.
drawer
A(n) _______ check is a check dated some time in the future.
postdated
Determine the accounts to be debited and credited: Collected cash in settlement of a $300 promissory note plus interest of $6.
debit Cash; credit Notes Receivable and Interest Income.
Determine the accounts to be debited and credited: Judy Wilson, the owner, made an additional cash investment of $9,000.
debit Cash; credit Judy Wilson, Capital.
Determine the accounts to be debited and credited: Sold merchandise for $2,000 in cash plus sales tax of $120. There was a cash overage of $3.
debit Cash; credit Sales, Sales Tax Payable, and Cash Short or Over.
Determine the accounts to be debited and credited: Issued a check for $5,125 to pay a $5,000 note plus interest of $125.
debit Notes Payable and Interest Expense; credit Cash.
Determine the accounts to be debited and credited: Issued a check for $900 to pay the monthly rent.
debit Rent Expense; credit Cash.
Which of the following is not a service typically provided by a public accounting firms? (a) Tax accounting (b) Management advisory services (c) Auditing (d) Investing services
Investing services
The entity that has final authority over the financial reporting of publicly owned corporations is the
Securities and Exchange Commission (SEC)
An independent accountant who performs financial audits is a
Certified Public Accountant (CPA)
The business entity that is separate from its owners is a
corporation
The following are all government agencies except: (a) Securities and Exchange Commission (SEC) (b) Internal Revenue Service (IRS) (c) American Institute of Certified Public Accountants (AICPA) (d) Federal Bureau of Investigation (FBI)
(c) American Institute of Certified Public Accountants (AICPA)
The group of accounting educators who perform research to determine the possible effects on financial reporting and the economy and then offer their opinions about proposed FASB statements is the
American Accounting Association (AAA)
An act passed in response to the wave of corporate accounting scandals is the
Sarbanes-Oxley Act.
The review of financial statements to assess their fairness and adherence to GAAP is
auditing
True or False: When using the fundamental accounting equation, an accountant must make sure that total assets are always equal to total liabilities and owner’s equity.
True
True or False: Changes in owner’s equity can result from revenue and expenses.
True
True or False: When cash is collected from accounts receivable, the total amount of assets increases.
False
True or False: When cash is paid to a creditor, the firm’s liabilities decrease.
True
True or False: Revenue is recorded when cash is collected from charge-account clients.
False
The balance sheet shows
The financial position of a business at a given time.
The rent paid for future months is a(n)
asset
The review of financial statements to assess their fairness and adherence to GAAP is
auditing
True or False: When using the fundamental accounting equation, an accountant must make sure that total assets are always equal to total liabilities and owner’s equity.
True
True or False: Changes in owner’s equity can result from revenue and expenses.
True
True or False: When cash is collected from accounts receivable, the total amount of assets increases.
False
True or False: When cash is paid to a creditor, the firm’s liabilities decrease.
True
True or False: Revenue is recorded when cash is collected from charge-account clients.
False
The balance sheet shows
The financial position of a business at a given time.
The rent paid for future months is a(n)
asset
Which of the following is NOT part of the process of accounting for financial information? Recording; Classifying; Communicating; Identifying
Identifying
True or False: The SEC uses financial information to determine a company’s tax base.
False
Tax planning includes
suggesting actions to reduce tax liability
The Sarbanes-Oxley Act includes rules on
auditor rotation
An example of an economic entity is
a business
A form of the partnerships business entity is
LLP
The FASB develops Statements of Financial Accounting Standards in what order?
issues a discussion memorandum, obtains responses to the discussion memorandum, issues an exposure draft, obtains responses to the exposure draft, issues a statement of principle
A special journal used to record all transactions involving cash receipts or increases is called…
Cash receipts journal
What is the second step in the closing process?
close debit balances in expense accounts to income summary.
Expenditures that add to the utility of fixed assets for more than one accounting period are called…
capital expenditures
Those things that one wants to accomplish are called…
financial goals.
The _______ is a multiple step procedure that results in the preparation and analysis of the major financial statements.
accounting cycle
Owner’s equity is the amount remaining after…
the amount of liabilities is subtracted from the amount of assets.
When the perpetual inventory system is used, the inventory sold is shown on the income statement as…
cost of merchandise sold.
A trial balance is prepared to…
summarize the account balances to help prepare financial statements.
When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at…
a discount.
The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is called…
declining-balance.
True or False: Payroll accounting relates only to earnings of those individuals classified as employees.
True
A(n) _____ is hired by and works under the control and direction of the ______.
Employee; Employer
True or False: examples of employees are the company president, the bookkeeper, the sales clerk, and the warehouse worker.
True
In contrast to an employee, a(n) ________ is paid by the company to carry out a specific task or job, but is not under the direct supervision or control of the company.
independent contractor
True or False: many employers do not pay time and a half for overtime if the federal law does not apply to them.
False- Even if the federal law doesn’t apply to them, many employers pay time and a half for overtime because of union contracts or simply as good business practice.
The Federal Insurance Contributions Act (FICA) is commonly referred to as the _______.
Social Security Act.
What benefits does the Social Security Act provide?
Retirement benefits, or pension, when a worker reaches age 62. Benefits for the dependents of the retired worker. Benefits for the worker and the worker’s dependents when the worker is disabled.
Retirement and disability benefits are paid by the ______, sometimes calld the ______.
social security tax; FICA tax.
True or False: both the employer and the employee pay an equal amount of social security tax.
True
The _______ is a tax levied equally on employees and employers to provide medical care for the employee and the employee’s spouse after each has reached 65.
Medicare tax
True or False: The Medicare tax has an earnings bas limit, but the social security tx does not.
False- social security tax does, Medicare tax doesn’t.
True or False: The Medicare tax applies to all earnings paid during the year.
True
True or False: State and Local taxes require seperate general ledger accounts in the firm’s accounting system.
True
The ______ provides benefits for employees who become unemployed.
Federal Unemployment Tax Act (FUTA)
Taxes levied by the federal government against employers to benefit unemployed workers are called_____.
federal unemployment taxes (FUTA)
True or False: Employees pay all of the state unemployment taxes (SUTA)
False- Employers do
True or False: The Net FUTA tax is the FUTA tax rate minus the SUTA tax.
True
______ is not a tax, but insurance that protects employees against losses from job-related injuries or illnesses, or compensates their families if death occurs in the course of the employment.
Workers’ compensation insurance
True or False: Many companies outsource payrool duties to professional payroll companies.
True
_____ is the world’s largest provider of payroll services and employee information systems.
ADP, Inc.
For each employee the employer must keep a record of…
the employee’s name, address, social security number, and date of birth; hours worked eahc day and week, and wages paid at the regular and overtime rates; cumulative wages paid throughout the year; amount of taxes withheld for each pay period, proof of emplyee’s citizenship or valid work permit.
_______ workers earn a stated rate per hour.
Hourly rate basis
______workers earn an agreed-upon amount for each week, month, or other period.
Salary basis
_______ workers, usually ______, earn a percentage of net sales.
Commission basis; sales people.
_________ manufacturing workers are paid based on the number of units produced.
Piece-rate basis
Martinez (an hourly employee) worked 40 hours. She earns $6 an hour. her gross pay is what?
$240
The way to determine the gross pay of an employee who works overtime is what? Determine the gross pay of an employee who earns $9 an hour and works 40 hours and 5 hours at time and a half. (use the method that determines how much the employee earned by working overtime.
Gross Pay = (Regular hours x regular rate) + (Overtime hours x (regular rate x 1.5)); $427.5
What are the three deductions from employee’s gross pay that are required by federal law?
FICA (social security) tax, Medicare tax, and fedral income tax withholding.
True or False: the social security tax is levied on employee only.
False- it is levied on both employer and employee
_______ are earnings in excess of the base amount set by the Social Security Act and are not subject to FICA withholding.
Tax-exempt wages
Define Purchase requisition. Who is it signed by?
lists items to be ordered; signed by someone with authority to approve requests for merchandise, usually the manager/sales department.
Define Purchase Order. Who is it signed by?
specifies the exact items, quantity, price, and credit terms for purchases; signed by someone with authority to approve purchases, usually the purchasing agency.
True or False: If an employee works for more than one employer during the year, the FICA tax is deducted and matched by each employer
True
True or False: When a firm records its payroll, the amount of federal income tax withheld from employees is entered as a liability.
True
True or False: The amount of social security tax withheld depends on an employee’s gross earnings, marital status, and number of withholding allowances.
False
True or False: Federal law requires that social security, Medicare, and federal income taxes be deducted from the gross pay of most employees.
True
True or False: Medicare taxes are levied in an equal amount on both employers and employees.
True
True or False: Once an employee’s year-to-date wages reach a certain amount prescribed by law, social security tax is no longer withheld.
True
True or False: The gross pay of an hourly employee is determined by subtracting the overtime premium from the regular earnings.
False
True or False: The net amount due employees for their wages is recorded as a debit to Salaries and Wages Payable.
False
True or False: Employees submit Form W-4 to their employers to show the number of withholding allowances they claim for federal income tax withholding purposes.
True
True or False: Publication 15, Circular E contains federal income tax withholding tables.
True
True or False: A company is required to withhold various employee taxes from amounts paid independent contractors.
False
True or False: The accountant who performs the independent audit for a company is an employee of the company.
False
True or False: All employees must be paid at the minimum wage rate set by the Fair Labor Standards Act.
False
True or False: Disability benefits for the worker and the worker’s dependents are provided by the Federal Insurance Contributions Act.
True
True or False: The Medicare tax is levied to provide medical care for the employee and the employee’s spouse after they reach age 65.
True
True or False: The maximum base for the sociial security tax is the same as that for the medicare tax.
False
True or False: The employee’s marital status is one factor that determines the amount of federal income tax withheld by the employer.
True
True or False: The FUTA tax is used to finance benefits for employees who become unemployed.
True
True or False: The federal unemployment tax rate can be reduced by the state unemployment tax rate an employer must pay.
True
True or False: Time sheets or time cards are used to keep a record of hours worked each day by each employee paid on an hourly basis.
True
True or False: The overtime rate is one and one-half times the regular hourly rate.
True
True or False: If an employee whose regular hourly rate is $9 and whose overtime rate is 1.5 times the regular rate works 42 hours in one week, the employee’s gross pay is $378.
False
True or False: Earnings in excess of the social security base amount are not taxed.
True
True or False: If an employee works for more than one employer during the year, the social security tax is deducted and matched by only one employer.
False
True or False: Withholding for federal income taxes places employees on pay-as-you-go basis.
True
True or False: Salaried employees who hold supervisory or managerial positions generally are not subject to wage and hour laws.
True
The employer records the amount of federal income tax withheld from employees as…
Employee Income Tax Payable.
Which of the following is a factor in the determination of the amount of social security tax to withhold from an employee’s pay? (a) hours worked during the pay period (b) marital status (c) withholding allowances claimed on Form W-4 (d) gross wages
Gross Wages
Lisa Ramos has a regular hourly rate of $10.75. In a week when she worked 40 hours and had deductions of $55 for federal income tax, $26.75 for social security tax, and $6.25 for Medicare tax, her net pay was…
$342
All details related to an employee’s earnings, deductions, and net pay throughout the year would be found in…
the individual earnings record.
An employee whose regular hourly rate is $10 and whose overtime is 1.5 times the regular rate worked 44 hours in one week. In the payroll register, the emlpoyer should record an overtime premium of…
$20
The column totals in a payroll register are used in the ______ to record the payroll.
journal entry
The amount debited to Wages Expense when a payroll is recorded is the…
total gross earning
When checks are issued to employees after the entry to record the payroll has been made, the accountnat would…
debit Salaries and Wages Payable and credit Cash
Publication 15, Circular E contains withholding information…
for federal income taxes only
Assuming a Medicare tax rate of 1.45% and monthly gross wages of $2,500, the entry to record in Medicare Tax Payable for one quarter is…
a credit for $108.75
Salespeople who are paid a percentage of net sales are paid on…
the commission basis
An employee whose regular hourly rate is $9 and whose overtime rate is 1.5 times the regular rate worked 44 hours one week. The employee’s gross pay was…
$414
Each type of deduction made from the employees’ earnings is recorded in a separate…
liability account
It is best not to pay wages and salaries by…
cash
Federal law requires that the employer withhold from the employee’s pay…
federal income tax, social security tax, and Medicare tax.
True or False: The frequency of deposits of federal income taxes withheld and social security and Medicare taxes is determined by the amount owed.
True
True or False: A business pays the social security tax at the same rate and on the same taxable wages as its employees.
True
True or False: The entry to record the social security and Medicare taxes levied on a business includes a debit to Payroll Taxes Expense.
True
True or False: Form 941, which is used to report employee earnings, the federal income taxes withheld, and the social security and Medicare taxes payable, must be filed each time a firm makes a required deposit of the taxes due.
False
True or False: FUTA tax, like social security tax, is levied on both the employer and the employee and so is withheld from employee’s pay.
False
True or False: For the purpose of internal control, only the person who prepared them should distribute payroll checks.
False
True or False: The entry to record the employer’s payroll taxes would include a debit to an expense account and a credit to one or more liability accounts.
True
True or False: Form 940, which is used to report the employer’s federal unemployment tax, must be filed quarterly.
False
True or False: The information for preparing Form W-2 is obtained from the employees’ individual earnings records.
True
True or False: The accountant obtains information about wages subject to payroll taxes from the payroll register.
True
True or False: Most commercial banks are authorized to accept the employee’s tax deposits for federal income taxes withheld and the employer’s and employees’ shares of social security taxes.
True
True or False: Payroll tax deposits can be made electronically or using a Federal Tax Deposit Coupon Form 8109.
True
True or False: At the end of each calendar quarter, the individual earnings records are totaled for the quarter.
True
True or False: The employer must issue each employee a Form W-2 by January 15 of the next year.
False
True or False: If an employee leaves the firm before the end of the year, the employee may ask for and receive Form W-2 before January 31 of the next year.
True
True or False: Form 941 is often referred to as a withholding statement.
False
True or False: An employee must attach one copy of Form W-2 to his or her personal federal income tax return.
True
True or False: The employer sends one copy of the Form W-2 for each employee to the Internal Revenue Service.
False
True or False: Sending copies of Form W-2 to each employee marks the end of the payroll procedures for the year.
False
True or False: The unemployment compensation tax program is often called the unemployment insurance program.
True
True or False: A few states levy an unemployment tax on the employee that must be withheld from the employee’s pay.
True
True or False: One of the purposes of the unemployment insurance program is to stabilize employment and reduce unemployment.
True
True or False: The reduction of state unemployment taxes because of favorable experience ratings reduces the credit allowable against the federal unemployment tax.
False
True or False: To achieve internal control over payroll operations, no changes in employee pay rates should be made without written authorization from management.
True
Employees’ payments for federal income taxes withheld and social security and Medicare taxes are periodically…
deposited in a government-authorized financial institution.
The frequency of deposits of federal income taxes withheld and social security and Medicare taxes is most dependent on…
the amount owed
Which of the following taxes is not withheld from the employee’s pay? (a) Federal income tax (b) Social security tax (c) FUTA tax (d) Medicare tax
FUTA tax
On Form 941, the Employer’s Quarterly Federal Tax Return, a firm calculates its liability for the quarter for…
federal income taxes withheld and social security and Medicare taxes.
To record the deposit of FUTA tax, the accountant would…
debit Federal Unemployment Tax Payable and credit Cash.
Both the employer and the employee are responsible for paying…
social security and Medicare taxes.
Each employee of a firm will receive several copies of Form W-2, the Wage and Tax Statement, from…
the employer once a year.
To record a deposit of federal income taxes withheld and social security and Medicare taxes, the accountant would…
debit one or more liability accounts and credit an asset account.
A copy of the Form W-2 for each employee is submitted to the Social Security Administration along with…
Form W-3
Form 941 is filed…
quarterly
Employers usually record unemployment taxes…
at the end of each payroll
Most states require that the employer file the state return for unemployment taxes…
quarterly
The entry to record the payment of SUTA tax would include…
a debit to State Unemployment Tax Payable and a credit to Cash
If at the end of the year a firm owes a balance for workers’ compensation insurance, the udjusting entry includes…
a debit to Workers’ Compensation Insurance Expense.
The base earnings subject to unemployment taxes is…
smaller than the base for social security.
True or False: Accrued expenses represent expense items that have been paid for and used in the current period.
False
True or False: Income that has been earned but not yet received is called accrued income.
True
True or False: Unerned Subscription Income is a liability account.
True
True or False: Under the accrual basis of accounting, revenue is recognized and recorded in the period when it is earned regardless of when cash related to the transaction is received.
True
True or False: When the accrual basis of accounting is used, expenses are recognized only in the period during which they are paid.
False
Employers usually record unemployment taxes…
at the end of each payroll
Most states require that the employer file the state return for unemployment taxes…
quarterly
The entry to record the payment of SUTA tax would include…
a debit to State Unemployment Tax Payable and a credit to Cash
If at the end of the year a firm owes a balance for workers’ compensation insurance, the udjusting entry includes…
a debit to Workers’ Compensation Insurance Expense.
The base earnings subject to unemployment taxes is…
smaller than the base for social security.
True or False: Accrued expenses represent expense items that have been paid for and used in the current period.
False
True or False: Income that has been earned but not yet received is called accrued income.
True
True or False: Unerned Subscription Income is a liability account.
True
True or False: Under the accrual basis of accounting, revenue is recognized and recorded in the period when it is earned regardless of when cash related to the transaction is received.
True
True or False: When the accrual basis of accounting is used, expenses are recognized only in the period during which they are paid.
False
True or False: Under the accrual basis of accounting, the expense for uncollectible accounts is estimated and recorded before specific accounts are actually written off.
True
True or False: A debit to Interest Receivable and a credit to Interest Income are needed to record interest that has been earned but not yet received.
True
True or False: The objective of matching revenues and expenses to specific fiscal periods is most nearly attained when revenues and expenses are recognized in the period during which cash related to the transactions is received or paid.
False
True or False: The adjusting entry to allocate the cost of equipment to operations includes a debit to Accumulated Depreciation–Equipment and a credit to Depreciation Expense–Equipment.
False
True or False: The balance The balance of the Merchandise Inventory account that appears in the Trial Balance section of the worksheet represents the stock of goods on hand at the beginning of the current period.
True
True or False: The Merchandise Inventory account is debited when goods are purchased for resale and credited when goods are sold and delivered to customers.
False
True or False: The balance of the Merchandise Inventory account is shown in the Adjusted Trial balance section of the worksheet is extended to the Balance Sheet Debit column of the worksheet.
True
True or False: Adjustments for accrued income always involve a credit to an income account.
True
True or False: On the worksheet, the amount of the ending merchandise inventory is shown in the Income Statement Credit column and the Balance Sheet Debit column.
True
True or False: On the worksheet, the totals of the Income Statement columns should equal the totals of the Balance Sheet columns.
False
On the worksheet, if debits exceed credits in the Adjusted Trial Balance section, the difference represents a net loss.
False
True or False: The debit and credit amounts for the Income Summary account are combined into one number in the Income Statement section of the worksheet.
False
True or False: Merchandise inventory is adjusted in two steps because both the beginning and ending inventory figures are needed to prepare the income statement.
True
True or False: To take the beginning inventory off the books, the Income Summary account is credited for the amount of the beginning inventory.
False
True or False: Uncollectible Accounts Expense is a contra asses account.
False
True or False: The cost less the salvage value equals the depreciable base of a long-term asset.
True
True or False: Each adjustment for an accrued expense includes a credit to a liability account.
True
True or False: If a firm records prepaid expense items in expense account when they pay for them, their adjustment at the end of the period to record the unexpired portion would include a debit to an asset account and a credit to an expense account.
True
True or False: The adjustment to record a firm’s commission on sales tax decreases the firm’s liability for the sales tax owed to the state.
True
True or False: Income that is received before it is earned is called unearned, or deferred, income.
True
The adjusting entry for uncollectible accounts requires…
a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts
On November 1, 20–, a firm accepted a 4-month, 10 percent note for $900 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 20–, is…
$15
With the accrual basis of accounting, it is appropriate to recognize revenue from a credit sale…
on the date of the sale
Accrued income is income that has been…
earned but not received
The adjusting entry to record accrued interest on a note payable requires…
a debit to Interest Expense and a credit to Interest Payable.
Allowance for Doubtful Accounts is reported in…
the Assets section of the balance sheet.
On May 1, 20–, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 20– is…
$1,200
On January 2, 20–, a firm purchased equipment for $8,500. Depreciation expense for 20–, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is…
$1,400
An adjusting entry is usually not required for an expense item when it is…
paid for, recorded, and used in one period.
If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is…
a $500 debit.
The net income for an accounting period appears on the worksheet in..
the Income Statement Debit and the Balance Sheet Credit.
Purchases of merchandise are…
debited to Purchases.
The ending merchandise inventory is recorded on the worksheet in…
the Income Statement Credit and the Balance Sheet Debit columns
On the financial statements prepared at the end of an accounting period, the ending merchandise inventory is shown…
on both the income statement and the balance sheet.
Allowance for Doubtful Accounts is…
subtracted from Accounts Receivable in the Assets section of the balance sheet.
True or False: Under the accrual basis of accounting, the expense for uncollectible accounts is estimated and recorded before specific accounts are actually written off.
True
True or False: A debit to Interest Receivable and a credit to Interest Income are needed to record interest that has been earned but not yet received.
True
True or False: The objective of matching revenues and expenses to specific fiscal periods is most nearly attained when revenues and expenses are recognized in the period during which cash related to the transactions is received or paid.
False
True or False: The adjusting entry to allocate the cost of equipment to operations includes a debit to Accumulated Depreciation–Equipment and a credit to Depreciation Expense–Equipment.
False
True or False: The balance The balance of the Merchandise Inventory account that appears in the Trial Balance section of the worksheet represents the stock of goods on hand at the beginning of the current period.
True
True or False: The Merchandise Inventory account is debited when goods are purchased for resale and credited when goods are sold and delivered to customers.
False
True or False: The balance of the Merchandise Inventory account is shown in the Adjusted Trial balance section of the worksheet is extended to the Balance Sheet Debit column of the worksheet.
True
True or False: Adjustments for accrued income always involve a credit to an income account.
True
True or False: On the worksheet, the amount of the ending merchandise inventory is shown in the Income Statement Credit column and the Balance Sheet Debit column.
True
True or False: On the worksheet, the totals of the Income Statement columns should equal the totals of the Balance Sheet columns.
False
On the worksheet, if debits exceed credits in the Adjusted Trial Balance section, the difference represents a net loss.
False
True or False: The debit and credit amounts for the Income Summary account are combined into one number in the Income Statement section of the worksheet.
False
True or False: Merchandise inventory is adjusted in two steps because both the beginning and ending inventory figures are needed to prepare the income statement.
True
True or False: To take the beginning inventory off the books, the Income Summary account is credited for the amount of the beginning inventory.
False
True or False: Uncollectible Accounts Expense is a contra asses account.
False
True or False: The cost less the salvage value equals the depreciable base of a long-term asset.
True
True or False: Each adjustment for an accrued expense includes a credit to a liability account.
True
True or False: If a firm records prepaid expense items in expense account when they pay for them, their adjustment at the end of the period to record the unexpired portion would include a debit to an asset account and a credit to an expense account.
True
True or False: The adjustment to record a firm’s commission on sales tax decreases the firm’s liability for the sales tax owed to the state.
True
True or False: Income that is received before it is earned is called unearned, or deferred, income.
True
The adjusting entry for uncollectible accounts requires…
a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts
On November 1, 20–, a firm accepted a 4-month, 10 percent note for $900 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 20–, is…
$15
With the accrual basis of accounting, it is appropriate to recognize revenue from a credit sale…
on the date of the sale
Accrued income is income that has been…
earned but not received
The adjusting entry to record accrued interest on a note payable requires…
a debit to Interest Expense and a credit to Interest Payable.
Allowance for Doubtful Accounts is reported in…
the Assets section of the balance sheet.
On May 1, 20–, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 20– is…
$1,200
On January 2, 20–, a firm purchased equipment for $8,500. Depreciation expense for 20–, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is…
$1,400
An adjusting entry is usually not required for an expense item when it is…
paid for, recorded, and used in one period.
If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is…
a $500 debit.
The net income for an accounting period appears on the worksheet in..
the Income Statement Debit and the Balance Sheet Credit.
Purchases of merchandise are…
debited to Purchases.
The ending merchandise inventory is recorded on the worksheet in…
the Income Statement Credit and the Balance Sheet Debit columns
On the financial statements prepared at the end of an accounting period, the ending merchandise inventory is shown…
on both the income statement and the balance sheet.
Allowance for Doubtful Accounts is…
subtracted from Accounts Receivable in the Assets section of the balance sheet.
True or False: The direct charge-off method of recording losses from uncollectible accounts is an application of the matching principle.
False
True or False: The allowance method involves anticipating losses from uncollectible accounts by recognizing an expense for the losses before the actual accounts are written off.
True
True or False: The adjusting entry to record the estimated loss from uncollectible accounts includes a crdit to Accounts Receivable.
False
True or False: When the estimate of the losses from uncollectible accounts is based on the aging method, the primary concern is proper valuation of the accounts receivable on the balance sheet.
True
True or False: When losses from uncollectible accounts are provided for in advance, the entry to record the write-off of a particular customer’s account includes a debit to Uncollectible Accounts Expense.
False
True or False: Allowance for Doubtful Accounts may, at times, have a debit balance.
True
True or False: Losses from uncollectible accounts can be estimated by analyzing sales or account receivable.
True
True or False: The balance of Allowance for Doubtful Accounts is deducted from the balance of Accounts Receivable on the balance sheet.
True
True or False: To achieve good internal control over accounts receivable, it is important to separate the recording of accoutns receivable transactions and the collection of cash from customers.
True
True or False: The use of the direct charge-off method of recording losses from uncollectible accounts usually results in the balance in the Accounts Receivable account being overstated.
True
True or False: The balance of Uncollectible Accounts Expense appears among the operating expenses on the income statement.
True
True or False: When the allowance method of recognizing losses from uncollectible accounts is used, the net value of accounts receivable on the balance sheet will more nearly reflect the amount that will ultimately be collected.
True
True or False: The adjusting entry to record estimated losses from uncollectible accounts consists of a debit to Allowance for Doubtful Accounts.
False
True or False: If the estimate of loss from uncollectible accounts is based on sales, any existing balance in Allowance for Doubtful Accounts is added to the percentage of sales to determine the amount of the adjustment.
False
True or False: The experience of other firms in the same line of business may be used in estimating losses from uncollectible account for a new firm.
True
True or False: Allowance for Doubtful Accounts may be used for the valuation of all types of receivables.
True
True or False: The collection of an account previously written off is recorded in the cash receipts journal only.
False
True or False: Some firms prefer to record the amount collected from an account previously written off as a credit to an Other Income account called Uncollectible Accounts Recovered.
True
True or False: When there is a partial collection of a balance previously written off, the reinstatement entry will be for the entire amount of the write-off.
False
True or False: Some businesses show Uncollectible Accounts Expense as a deduction from sales revenue on the income statement.
True
True or False: The direct charge-off method of recording losses from uncollectible accounts is the preferred method.
False
True or False: The allowance method must be used to record bad debt losses for income tax purposes.
False
True or False: Uncollectible Accounts Expense can be called Loss from Uncollectible Accounts.
True
True or False: Allowance for Doubtful Accounts is a liability account.
False
True or False: When losses from uncollectible accounts are recorded as they occur, Uncollectible Accounts Expense is debited and Accounts Receivable and the customer/ accounts are credit
True
True or False: To be considered a nogotiable instrument, a promissory not must specify an interest rate.
False
True or False: The entry to record the insurance of a promissory note includes a credit to interest Payable for the amount of interest that will accrue on the note until it is paid at maturity.
False
True or False: The Notes Payable account is always debited or credited for the face value of a note.
True
True or False: A 2-month note dated January 1, 20–, will mature on the same date as a 60-day note dated January 1, 20–.
False
The amount shown on a note is called the face value.
True
True or False: The interest on a $5,000 face value, 3-month note bearing interest at 9 percent a year would be $1,350.
False
True or False: A company that issued a 6-month note payable would report its face value on the balance sheet as a long-term liability.
False
True or False: Interest Expense usually appears on the income statement as a nonoperating expense.
True
True or False: The entry to record the issuance of a promissory note includes a crdit to the Notes Payable accoutn.
True.
True or False: Upon payment fo the amount due on a $4,000 face value, 60-day, 6 percent note, the accountant will record an entry that includes a debit to Notes Payable for $4,000.
True
True or False: The Interest Expense account usually has a credit balance.
False
True or False: The entry to record the collection of the amound due on the maturity date of a note includes a debit to Notes Receivable.
False
True or False: Even if an interest-bearing note receivable is dishonored, interest income due on the note should be recorded.
True
True or False: When a note receivable is discounted, the proceeds are computed by subtracting the discount from the maturity value of the note.
True
True or False: The face value of a noninterest-bearing note is its maturity value.
True
True or False: The entry to record the dance of a not receivable may result in the recognizing of interest income.
True
True or False: Notes Receivable Discounted is usually shown in the Current Liabilities section of the balance sheet.
False
True or False: Interest earned on a promissory note is recorded by debiting the Interest Income account.
False
True or False: When a note is discounted at a bank, the proceeds are always less than the maturity value of the note.
True
True or False: Interest Income is classified as a current asset
False
True or False: Since notes receivable are negotiable, internal control procedures must be devised to protect them against fraud and theft.
True
True or False: If the proceeds of a discounted not are less than the face amount, the difference is debited to Interest Expense.
True
True or False: The notes Receivable account usually has a credit balance.
False
True or False: An ordinary check is one form of draft
True
True or False: If the amount of a note is not collected at maturity, the accountant should debit Uncollectible Accounts Expense and credit Notes Receivable.
False
True or False: A firm that buys one-of-a-kind items with a large unit cost would find it difficult to account for its inventory by the specific identification method.
False
True or False: The LIFO method of inventory valuation focuses on the income statement and is consistent with the matching principle.
True
True or False: In a period of rising prices, the LIFO method of inventory valuation results in a lower reported net income than the FIFO method.
True
True or False: The FIFO method of inventory valuation focuses on the blance sheet; the most current costs are in ending inventory.
True
True or False: The LIFO method of inventory valuation assigns the cost of the most recent purchases to the ending inventory.
False
True or False: The use of the FIFO method of inventory valuation results in a matching of current inventory costs against current sales revenue.
False
True or False: Inventory cannot be valued at the lower of cost or market if the inventory cost was determined using the FIFO methods.
False
True or False: Under the gross profit method of estimating inventory, the ending inventory is determined by subtracting the estimated cost of goods sold from the cost of goods available for sale.
True
True or False: When the retail method of estimating inventory is used, it is possible to determine the retail value of an ending inventory but not its cost.
False
True or False: Inventory valuation directly affects the amount of net income or net loss reported for the accounting period.
True
True or False: It is necessary to count the goods on hand to estimate the inventory cost under the retail method.
False
True or False: If a company’s inventory is composed of many similar items, the average cost of all the similar items can be used to value the ending inventory.
True
True or False: The average cost method of inventory valuation is sometimes referred to as the weighted average method.
True
True or False: The average cost method of inventory valuation will always result in the lowest reported net income.
False
True or False: Following the consistency principle, once a firm adopts a method of inventory valuation, it should use that method consistenctly from one period to the next.
True
True or False: If a firm uses the FIFO method of inventory valuation for tax purposes, it must use the FIFO method for financial accounting.
False
True or False: The most conservative method of applying the lower of cost or market rule is to use the lower of total cost or total market by groups.
False
True or False: When the replacement cost of an item is below its original purchase cost, it is necessary to value the inventory at market price in order to reflect the lower current value in the firm’s financial records.
True
True or False: The fundamental assumption of the gross profit method of estimating inventory is that the rate of gross profit on sales is about the same from period to period.
True
True or False: Markon is the difference between the cost and the established retail price of merchandise.
True
True or False: When the retail method of inventory valuation is used, the total merchandise available for sale at retail is divided by the total merchandise available for sale at cost to determine the cost ratio.
False
True or False: Many retail stores take a periodic inventory at retail values, using the sales price marked on the merchandise.
True
True or False: A physical inventory should be taken at least annually to verify the goods on hand.
True
True or False: Inventory valuation is very important in computing federal income tax because the value placed on the inventory determines the net income reported.
True
True or False: For internal control, unit figures used to compute the inventory should be verified through spot checks.
True
True or False: Salvage value should be ignored when the sum-of-the-years’-digits method of depreciation is used.
False
True or False: Land purchased for a future building site or as an investment would not be shown in the Property, Plant, and Equipment section of the balance sheet.
True
True or False: The recorded cost of an asset should include both the net invoice price and all transportation na dintallation costs.
True
True or False: Use of the sum-of-the-years’-digits method of depreciation results in lower depreciation charges in the early years of an asset’s life and higher charges in the later years.
False
True or False: The cost of land is not depreciated.
True
True or False: The sale of a depreciable asset for an amount less than its cost always requires the recognition of a loss in the financial records of the company.
False
True or False: Under the declining-balance method of depreciation, the accountant applies an appropriate percentage to the book value of an asset to obtain the depreciation charge for each year.
True
True or False: For financial accounting purposes, when an asset is traded in for a similar asset, a gain is reported if the trade-in allowance excees the book value of the asset traded in.
False
True or False: The acquisition cost of an intangible asset should be charged to expense over the shorter of its legal or useful life.
True
True or False: Land and land improvements are examples of tangible personal property.
False
True or False: Property, plant, and equipment are often referred to as fixed assets or capital assets.
True
True or False: Patents and copyrights are intangible assets.
True
True or False: Accumulated Depreciation is classified as a contra asset account.
True
True or False: Depletion is the name given to the periodic allocation of the costs of assets created by human effort.
True
True or False: The adjustment for the annual depreciation expense on equipment includes a debit to Accumulated Depreciation–Equipment.
False
True or False: The salvage value is the value that the asset is expected to have at the end of its useful life.
True
True or False: The book value of an asset is usually the same as the fair market value of the asset.
False
True or False: The declining-balance method is an accelerated method of computing depreciation.
True
True or False: When the sum-of-the-years’-digits method of depreciation is used, the denominator (bottom part) of the fraction for any year is the number of the years remaining in the useful life of the asset.
False
True or False: When the units-of-output method is used to compute depreciation, the useful life of an asset is the number of units of work the asset will perform.
True
True or False: The modified accelerated cost recovery system (MARCS) is acceptable for financial accounting purposes because it matches the costs of assets with the revenues produced by those assets.
False
True or False: The balance of an Accumulated Depletion account is subtracted from the related natural resource account to determine the book value of the natural resource.
True
True or False: When an asset is sold, the first thing an accountant must do is record the depreciation to the date of sale.
True
True or False: The adjusting entry to record depletion for the period includes a credit to the Depletion Expense account.
False
True or False: The entry to record the amortization of acquisition cost of an intangible asset includes a credit directly to the intangible asset account.
True
True or False: Each general partner has unlimited liability for the debts of a partnership.
True
True or False: Federal income tax is levied on the net income of a partnership and on the earnings of the individual partners when the net income is distributed to them.
False
True or False: The general ledger of a partnership will include a single capital account, whose balance represents the combined equity of all the partners.
False
True or False: The assets of a sole proprietorship are revalued before they are assumed by a partnership.
True
True or False: Any general partner can make valid contracts for a partnership and can otherwise conduct its affairs.
True
True or False: Past-due accounts receivable should not be transferred from the financial records of a sole proprietorship to a newly formed partnership.
False
True or False: The financial records of a new partnership are opened with a memorandum entry in the general journal.
True
True or False: A partnership has a limited life. It ends with the death or withdrawal of a partner.
True
True or False: If there is no specific agreement on the division of partnership profits and losses, they are divided equally among the partners.
True
True or False: If partners consider their cash withdrawals to be compensation for the work they do for the partnership, the amounts of the withdrawals should be charged to Salaries Expense.
False
True or False: The journal entry to record the division of a partnership profit consists of a debit to each partner’s capital account and a credit to Cash.
False
True or False: Salary and interest allowances for partners are treated as expenses of the firm and are used in the determination of net income.
False
True or False: Salary and interest allowances are considered in distributing net income to partners but not in distributing a net loss.
False
True or False: The dissolution of a partnership and the formation of a new partnership are legal and financial matters and may have no noticeable effect on the continuing of operations of the business.
True
True or False: If a new partner invests cash in an existing partnership and a bonus is given to a new partner, the old partners’ capital accounts decrease.
True
True or False: If a new partner purchases an interest in a partnership firm directly from an existing partner, the Cash account is debited and the new partner’s capital is credited.
False
True or False: When a new partner is admitted to an existing partnership upon an investment of cash, the new partner’s capital accounts may appropriately be credited for an amount other than the amount of cash invested.
True
True or False: The entry to close a partner’s drawing account at the end of a fiscal period includes a debit to the partner’s drawing account.
False
True or False: The cost of merchandise withdrawn by a partner for personal use is recorded as a debit to the partner’s drawing account and credited to the Purchases account.
True
True or False: Some partners, known as limited partners, may not be personally liable for the debts of the partnership.
True
True or False: If a salary is allowed to one partner, other partners also must receive a salary allowance.
False
True or False: A legal partnership does not exist unless there is a written partnership agreement.
False
True or False: Investments by a partner are credited to that partner’s capital account.
True
True or False: It is customary for a partnership’s income statement to show how the net income or loss for the year has been divided between the partners.
True
True or False: A gain or loss on revaluation of assets should be allocated to the partners according to the balances of their capital accounts.
False
True or False: The partnership agreement should include steps to follwo if a partner withdraws from the partnership.
True
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$800
True or False: Upon withdrawal, the withdrawing partner(s) may receive less than their capital account balances.
True
Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The credit balance of Allowance for Doubtful Accounts immediately after the write-off is…
$700
A firm using the allowance method to provide for losses from uncollectible accounts collected the cash due from a customer whose account was previously written off. The entry to reinstate the customer’s account from a customer whose account was previously written off. The entry to reinstate the customer’s account included a credit to…
Allowance for Doubtful Accounts
The adjusting entry to record estimated losses from uncollectible accounts consists of…
a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts.
When the allowance method of recognizing losses from uncollectible accounts is used, the entry to record the write-off of a specific account consists of…
a debit to Allownace for Doubtful Accounts and a credit to Accounts Receivable
The method of accounting for losses from uncollectible accounts that produces a proper valuation of the accounts receivable on the blanace sheet is…
the allowance method based on aging the accounts receivable.
The balance of Allowance for Doubtful Accounts is reported as…
a deduction from Accounts Receivable on the balance sheet.
a firm reported sales fo $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectibel accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for…
$1,500
When a firm uses the allowance method to provide for losses, the collecting of an account previously written off as uncollectible requires an entry to…
reinstate the account receivable.
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a debit balacne of $400. An aging of the accounts receivable produces an estimate of $2,600 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$3,000
Which of the follwoing methods must be used to record bad debt losses for tax purposes? (a) The allowance method (b) The direct charge-off method
B- Direct Charge-Off Method
True or False: The assets of a sole proprietorship are revalued before they are assumed by a partnership.
True
An existing balance in Allowance for Doubtful Accounts is not considered if the estimate of loss is based on…
a percent of net credit sales.
True or False: The assets of a sole proprietorship are revalued before they are assumed by a partnership.
True
True or False: The general ledger of a partnership will include a single capital account, whose balance represents the combined equity of all the partners.
False
True or False: The general ledger of a partnership will include a single capital account, whose balance represents the combined equity of all the partners.
False
True or False: Any general partner can make valid contracts for a partnership and can otherwise conduct its affairs.
True
True or False: Past-due accounts receivable should not be transferred from the financial records of a sole proprietorship to a newly formed partnership.
False
True or False: Any general partner can make valid contracts for a partnership and can otherwise conduct its affairs.
True
True or False: Past-due accounts receivable should not be transferred from the financial records of a sole proprietorship to a newly formed partnership.
False
True or False: The financial records of a new partnership are opened with a memorandum entry in the general journal.
True
True or False: A partnership has a limited life. It ends with the death or withdrawal of a partner.
True
True or False: The financial records of a new partnership are opened with a memorandum entry in the general journal.
True
True or False: If partners consider their cash withdrawals to be compensation for the work they do for the partnership, the amounts of the withdrawals should be charged to Salaries Expense.
False
True or False: A partnership has a limited life. It ends with the death or withdrawal of a partner.
True
True or False: If partners consider their cash withdrawals to be compensation for the work they do for the partnership, the amounts of the withdrawals should be charged to Salaries Expense.
False
True or False: If there is no specific agreement on the division of partnership profits and losses, they are divided equally among the partners.
True
True or False: If there is no specific agreement on the division of partnership profits and losses, they are divided equally among the partners.
True
True or False: The journal entry to record the division of a partnership profit consists of a debit to each partner’s capital account and a credit to Cash.
False
True or False: Salary and interest allowances for partners are treated as expenses of the firm and are used in the determination of net income.
False
True or False: The journal entry to record the division of a partnership profit consists of a debit to each partner’s capital account and a credit to Cash.
False
True or False: Salary and interest allowances for partners are treated as expenses of the firm and are used in the determination of net income.
False
True or False: Salary and interest allowances are considered in distributing net income to partners but not in distributing a net loss.
False
True or False: Salary and interest allowances are considered in distributing net income to partners but not in distributing a net loss.
False
True or False: The dissolution of a partnership and the formation of a new partnership are legal and financial matters and may have no noticeable effect on the continuing of operations of the business.
True
True or False: If a new partner purchases an interest in a partnership firm directly from an existing partner, the Cash account is debited and the new partner’s capital is credited.
False
True or False: The dissolution of a partnership and the formation of a new partnership are legal and financial matters and may have no noticeable effect on the continuing of operations of the business.
True
True or False: If a new partner purchases an interest in a partnership firm directly from an existing partner, the Cash account is debited and the new partner’s capital is credited.
False
True or False: If a new partner invests cash in an existing partnership and a bonus is given to a new partner, the old partners’ capital accounts decrease.
True
True or False: If a new partner invests cash in an existing partnership and a bonus is given to a new partner, the old partners’ capital accounts decrease.
True
True or False: When a new partner is admitted to an existing partnership upon an investment of cash, the new partner’s capital accounts may appropriately be credited for an amount other than the amount of cash invested.
True
True or False: The entry to close a partner’s drawing account at the end of a fiscal period includes a debit to the partner’s drawing account.
False
True or False: When a new partner is admitted to an existing partnership upon an investment of cash, the new partner’s capital accounts may appropriately be credited for an amount other than the amount of cash invested.
True
True or False: The entry to close a partner’s drawing account at the end of a fiscal period includes a debit to the partner’s drawing account.
False
True or False: The cost of merchandise withdrawn by a partner for personal use is recorded as a debit to the partner’s drawing account and credited to the Purchases account.
True
True or False: The cost of merchandise withdrawn by a partner for personal use is recorded as a debit to the partner’s drawing account and credited to the Purchases account.
True
True or False: Some partners, known as limited partners, may not be personally liable for the debts of the partnership.
True
True or False: A legal partnership does not exist unless there is a written partnership agreement.
False
True or False: Some partners, known as limited partners, may not be personally liable for the debts of the partnership.
True
True or False: A legal partnership does not exist unless there is a written partnership agreement.
False
True or False: If a salary is allowed to one partner, other partners also must receive a salary allowance.
False
True or False: If a salary is allowed to one partner, other partners also must receive a salary allowance.
False
True or False: Investments by a partner are credited to that partner’s capital account.
True
True or False: Investments by a partner are credited to that partner’s capital account.
True
True or False: It is customary for a partnership’s income statement to show how the net income or loss for the year has been divided between the partners.
True
True or False: A gain or loss on revaluation of assets should be allocated to the partners according to the balances of their capital accounts.
False
True or False: It is customary for a partnership’s income statement to show how the net income or loss for the year has been divided between the partners.
True
True or False: The partnership agreement should include steps to follwo if a partner withdraws from the partnership.
True
True or False: A gain or loss on revaluation of assets should be allocated to the partners according to the balances of their capital accounts.
False
True or False: The partnership agreement should include steps to follwo if a partner withdraws from the partnership.
True
True or False: Upon withdrawal, the withdrawing partner(s) may receive less than their capital account balances.
True
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$800
True or False: Upon withdrawal, the withdrawing partner(s) may receive less than their capital account balances.
True
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$800
Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The credit balance of Allowance for Doubtful Accounts immediately after the write-off is…
$700
Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The credit balance of Allowance for Doubtful Accounts immediately after the write-off is…
$700
A firm using the allowance method to provide for losses from uncollectible accounts collected the cash due from a customer whose account was previously written off. The entry to reinstate the customer’s account from a customer whose account was previously written off. The entry to reinstate the customer’s account included a credit to…
Allowance for Doubtful Accounts
A firm using the allowance method to provide for losses from uncollectible accounts collected the cash due from a customer whose account was previously written off. The entry to reinstate the customer’s account from a customer whose account was previously written off. The entry to reinstate the customer’s account included a credit to…
Allowance for Doubtful Accounts
The adjusting entry to record estimated losses from uncollectible accounts consists of…
a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts.
The adjusting entry to record estimated losses from uncollectible accounts consists of…
a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts.
When the allowance method of recognizing losses from uncollectible accounts is used, the entry to record the write-off of a specific account consists of…
a debit to Allownace for Doubtful Accounts and a credit to Accounts Receivable
When the allowance method of recognizing losses from uncollectible accounts is used, the entry to record the write-off of a specific account consists of…
a debit to Allownace for Doubtful Accounts and a credit to Accounts Receivable
The balance of Allowance for Doubtful Accounts is reported as…
a deduction from Accounts Receivable on the balance sheet.
The balance of Allowance for Doubtful Accounts is reported as…
a deduction from Accounts Receivable on the balance sheet.
The method of accounting for losses from uncollectible accounts that produces a proper valuation of the accounts receivable on the blanace sheet is…
the allowance method based on aging the accounts receivable.
The method of accounting for losses from uncollectible accounts that produces a proper valuation of the accounts receivable on the blanace sheet is…
the allowance method based on aging the accounts receivable.
a firm reported sales fo $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectibel accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for…
$1,500
a firm reported sales fo $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectibel accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for…
$1,500
When a firm uses the allowance method to provide for losses, the collecting of an account previously written off as uncollectible requires an entry to…
reinstate the account receivable.
When a firm uses the allowance method to provide for losses, the collecting of an account previously written off as uncollectible requires an entry to…
reinstate the account receivable.
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a debit balacne of $400. An aging of the accounts receivable produces an estimate of $2,600 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$3,000
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a debit balacne of $400. An aging of the accounts receivable produces an estimate of $2,600 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$3,000
Which of the follwoing methods must be used to record bad debt losses for tax purposes? (a) The allowance method (b) The direct charge-off method
B- Direct Charge-Off Method
Which of the follwoing methods must be used to record bad debt losses for tax purposes? (a) The allowance method (b) The direct charge-off method
B- Direct Charge-Off Method
An existing balance in Allowance for Doubtful Accounts is not considered if the estimate of loss is based on…
a percent of net credit sales.
An existing balance in Allowance for Doubtful Accounts is not considered if the estimate of loss is based on…
a percent of net credit sales.
True or False: If a firm uses the FIFO method of inventory valuation for tax purposes, it must use the FIFO method for financial accounting.
False
True or False: When the replacement cost of an item is below its original purchase cost, it is necessary to value the inventory at market price in order to reflect the lower current value in the firm’s financial records.
True
True or False: The most conservative method of applying the lower of cost or market rule is to use the lower of total cost or total market by groups.
False
True or False: The fundamental assumption of the gross profit method of estimating inventory is that the rate of gross profit on sales is about the same from period to period.
True
True or False: Markon is the difference between the cost and the established retail price of merchandise.
True
True or False: When the retail method of inventory valuation is used, the total merchandise available for sale at retail is divided by the total merchandise available for sale at cost to determine the cost ratio.
False
True or False: Many retail stores take a periodic inventory at retail values, using the sales price marked on the merchandise.
True
True or False: Inventory valuation is very important in computing federal income tax because the value placed on the inventory determines the net income reported.
True
True or False: A physical inventory should be taken at least annually to verify the goods on hand.
True
True or False: For internal control, unit figures used to compute the inventory should be verified through spot checks.
True
True or False: Salvage value should be ignored when the sum-of-the-years’-digits method of depreciation is used.
False
True or False: Land purchased for a future building site or as an investment would not be shown in the Property, Plant, and Equipment section of the balance sheet.
True
True or False: The recorded cost of an asset should include both the net invoice price and all transportation na dintallation costs.
True
True or False: The cost of land is not depreciated.
True
True or False: Use of the sum-of-the-years’-digits method of depreciation results in lower depreciation charges in the early years of an asset’s life and higher charges in the later years.
False
True or False: Under the declining-balance method of depreciation, the accountant applies an appropriate percentage to the book value of an asset to obtain the depreciation charge for each year.
True
True or False: The sale of a depreciable asset for an amount less than its cost always requires the recognition of a loss in the financial records of the company.
False
True or False: For financial accounting purposes, when an asset is traded in for a similar asset, a gain is reported if the trade-in allowance excees the book value of the asset traded in.
False
True or False: The acquisition cost of an intangible asset should be charged to expense over the shorter of its legal or useful life.
True
True or False: Property, plant, and equipment are often referred to as fixed assets or capital assets.
True
True or False: Land and land improvements are examples of tangible personal property.
False
True or False: Patents and copyrights are intangible assets.
True
True or False: Accumulated Depreciation is classified as a contra asset account.
True
True or False: Depletion is the name given to the periodic allocation of the costs of assets created by human effort.
True
True or False: The adjustment for the annual depreciation expense on equipment includes a debit to Accumulated Depreciation–Equipment.
False
True or False: The book value of an asset is usually the same as the fair market value of the asset.
False
True or False: The salvage value is the value that the asset is expected to have at the end of its useful life.
True
True or False: The declining-balance method is an accelerated method of computing depreciation.
True
True or False: When the sum-of-the-years’-digits method of depreciation is used, the denominator (bottom part) of the fraction for any year is the number of the years remaining in the useful life of the asset.
False
True or False: When the units-of-output method is used to compute depreciation, the useful life of an asset is the number of units of work the asset will perform.
True
True or False: The modified accelerated cost recovery system (MARCS) is acceptable for financial accounting purposes because it matches the costs of assets with the revenues produced by those assets.
False
True or False: The adjusting entry to record depletion for the period includes a credit to the Depletion Expense account.
False
True or False: The balance of an Accumulated Depletion account is subtracted from the related natural resource account to determine the book value of the natural resource.
True
True or False: When an asset is sold, the first thing an accountant must do is record the depreciation to the date of sale.
True
True or False: The entry to record the amortization of acquisition cost of an intangible asset includes a credit directly to the intangible asset account.
True
True or False: Each general partner has unlimited liability for the debts of a partnership.
True
True or False: Federal income tax is levied on the net income of a partnership and on the earnings of the individual partners when the net income is distributed to them.
False
True or False: The assets of a sole proprietorship are revalued before they are assumed by a partnership.
True
True or False: The general ledger of a partnership will include a single capital account, whose balance represents the combined equity of all the partners.
False
True or False: Any general partner can make valid contracts for a partnership and can otherwise conduct its affairs.
True
True or False: Past-due accounts receivable should not be transferred from the financial records of a sole proprietorship to a newly formed partnership.
False
True or False: The financial records of a new partnership are opened with a memorandum entry in the general journal.
True
True or False: A partnership has a limited life. It ends with the death or withdrawal of a partner.
True
True or False: If partners consider their cash withdrawals to be compensation for the work they do for the partnership, the amounts of the withdrawals should be charged to Salaries Expense.
False
True or False: If there is no specific agreement on the division of partnership profits and losses, they are divided equally among the partners.
True
True or False: The journal entry to record the division of a partnership profit consists of a debit to each partner’s capital account and a credit to Cash.
False
True or False: Salary and interest allowances for partners are treated as expenses of the firm and are used in the determination of net income.
False
True or False: Salary and interest allowances are considered in distributing net income to partners but not in distributing a net loss.
False
True or False: The dissolution of a partnership and the formation of a new partnership are legal and financial matters and may have no noticeable effect on the continuing of operations of the business.
True
True or False: If a new partner purchases an interest in a partnership firm directly from an existing partner, the Cash account is debited and the new partner’s capital is credited.
False
True or False: If a new partner invests cash in an existing partnership and a bonus is given to a new partner, the old partners’ capital accounts decrease.
True
True or False: When a new partner is admitted to an existing partnership upon an investment of cash, the new partner’s capital accounts may appropriately be credited for an amount other than the amount of cash invested.
True
True or False: The entry to close a partner’s drawing account at the end of a fiscal period includes a debit to the partner’s drawing account.
False
True or False: The cost of merchandise withdrawn by a partner for personal use is recorded as a debit to the partner’s drawing account and credited to the Purchases account.
True
True or False: Some partners, known as limited partners, may not be personally liable for the debts of the partnership.
True
True or False: A legal partnership does not exist unless there is a written partnership agreement.
False
True or False: If a salary is allowed to one partner, other partners also must receive a salary allowance.
False
True or False: Investments by a partner are credited to that partner’s capital account.
True
True or False: It is customary for a partnership’s income statement to show how the net income or loss for the year has been divided between the partners.
True
True or False: A gain or loss on revaluation of assets should be allocated to the partners according to the balances of their capital accounts.
False
True or False: The partnership agreement should include steps to follwo if a partner withdraws from the partnership.
True
True or False: Upon withdrawal, the withdrawing partner(s) may receive less than their capital account balances.
True
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$800
Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The credit balance of Allowance for Doubtful Accounts immediately after the write-off is…
$700
A firm using the allowance method to provide for losses from uncollectible accounts collected the cash due from a customer whose account was previously written off. The entry to reinstate the customer’s account from a customer whose account was previously written off. The entry to reinstate the customer’s account included a credit to…
Allowance for Doubtful Accounts
The adjusting entry to record estimated losses from uncollectible accounts consists of…
a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts.
When the allowance method of recognizing losses from uncollectible accounts is used, the entry to record the write-off of a specific account consists of…
a debit to Allownace for Doubtful Accounts and a credit to Accounts Receivable
The balance of Allowance for Doubtful Accounts is reported as…
a deduction from Accounts Receivable on the balance sheet.
The method of accounting for losses from uncollectible accounts that produces a proper valuation of the accounts receivable on the blanace sheet is…
the allowance method based on aging the accounts receivable.
a firm reported sales fo $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectibel accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for…
$1,500
When a firm uses the allowance method to provide for losses, the collecting of an account previously written off as uncollectible requires an entry to…
reinstate the account receivable.
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a debit balacne of $400. An aging of the accounts receivable produces an estimate of $2,600 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$3,000
Which of the follwoing methods must be used to record bad debt losses for tax purposes? (a) The allowance method (b) The direct charge-off method
B- Direct Charge-Off Method
An existing balance in Allowance for Doubtful Accounts is not considered if the estimate of loss is based on…
a percent of net credit sales.
A firm reported net credit sales of $225,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Pprior to adjustments, Allowance for Doubtful Accounts has a debit balance of $100. The firm estimates its losses from uncollectible accounts to be one-half of 1 percent of net credit sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for…
$1,125
On December 31, prior to adjustments, the balance of Accounts Receivable is $16,000 and Allowance for Doubtful Accounts has a credit balance of $95. The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$705
On December 31, prior to adjustments, the balance of Accounts Receivable is $26,000 and Allowance for Doubtful Accounts has a debit balance of $300. The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for…
$1,600
A firm purchased equipment for $6,000 on credit and issued a 120-day note bearing iterest at 9% a year as evidence of the debt. To record this transaction, the accountant would…
debit Equipment for $6,000 and credit Notes Payable for $6,000
The total that must be paid when a note becomes due is known as…
the maturity value
When a company issues a promissory note, the accountant records an entry that includes a credit to Note Payable for…
the face value of the note
A 30-day note dated October 15, 20–, would be due on…
November 14, 20–
How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9% a year?
$300
On March1, a firm purchased equipment for $5,000, signing a 30-day note bearing interest at 12% a year. The entry to record the payment of the amount due on March 31 will include…
a debit to Notes Payable for $5,000, a debit to Interest Expense for $50, and a credit to Cash for $5,050.
Notes payable due within one year are usually shown…
in the Current Liabilities section of the balance sheet.
The maturity value of a 90-day note for $4,000 that bears interest at 10 percent a year is…
$4,100
Upon collection of the amount due on a $6,000 face value, 90-day note with interest at 10 percent a year, the Note Receivable account is…
credited for $6,000
The Interest Income account usually has a _____ balance
credit
If the amount due on a note receivable is not collected at maturity…
the note is said to be dishonored.
A 60-day note dated April 1 was turned over to the bank for discounting on April 21. The number of days used in computing the dollar amount of the discount is…
40
The Notes Receivable Discounted account…
is shown as a deduction from Notes Receivable on the balance sheet.
If the proceeds of a note discounted at a bank are greater than the face value of the note, the difference is recognized as…
interest income.
The Jiminez Company accepted an interest-bearing note to settle a past-due account originating from a sale of merchandise. When the note is collected, the interest earned should be credited to…
Interest Income
In periods of rising prices, the inventory valuation procedure that results in the highest net income is…
the FIFO method
If other items remain the same, the larger the ending inventory valuation…
the higher the reported net income
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $28,000. Early in the year, 10,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 3,000 units?
$27,000
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000. Early in the year, 8,00 units were purchased at $6 each. Using LIFO, what is the value of the ending inventory of 2,000 units?
$8,000
Which of the following inventory costing procedures requires a physical count of merchandise? (a)The retail method (b) The average cost method (c) the gross profit method (c) The lower of cost or market method
B- The average cost method
The gross profit method of determining ending inventory cost…
can be used without taking a physical count of merchandise
The accountant for a company whose inventory was destroyed by fire determined from undamaged records that the cost of goods available for sale was $100,000 and the net sales were $80,000 up to the date of the fire. The accountant also determined that the company’s normal gross profit rate is 40 percent of net sales. From this data, the accountant estimated the cost of the inventory destroyed by the fire to be…
$52,000
The merchandise available for sale cost a company $90,000 and was marked to sell at a retail price of $125,000. Sales during the period totaled $80,000. If the retail method is used, the estimated cost of the ending inventory is…
$32,400
The weighted average cost of an inventory item is calculated by…
dividing the cost of goods available for sale by the number of units available during the period.
The modifying convention of conservatism requires that inventory be presented on the balance sheet at…
either cost or market value, whichever is lower.
The cost of the earliest merchandise purchased is assigned to ending inventory when a company uses…
the LIFO method.
A matching of the most recent costs to revenue results from the use of…
the LIFO method
The use of the FIFO method of inventory valuation…
results in the most current costs in ending inventory.
The use of the LIFO method of inventory valuation…
results in the lowest reported net income in a time of rising prices.
The firm had a beginning inventory of 50 units with a unit cost of $10. Purchases during the year were as follows: March–50 units with a unit cost of $12; July–60 units with a unit cost of $15. If the average cost method is used, the value of the ending inventory of 45 units is…
$563
Which method of depreciation is seldom, if ever, acceptable for financial accounting purposes?
the modified accelerated cost recovery system (MARCS)
A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years an a salvage value of $5,000. Under the double-declining-balance method, the depreciation expense for the first year of the asset’s useful life is…
$20,000
The entry to record the sale of equipment used in a business may include a debit to…
the Accumulated Depreciation–Equipment account.
The method of depreciation that results in the same amount of depreciation expense each year is the…
Straight-line method.
The book value of an asset is…
the portion of the asset’s cost that has not yet been charged to expense.
An asset that cost $14,000 was sold for $9,000 cash. Accumulated depreciation on the asset was $7,000. The entry to record this transaction includes the recognition of…
a gain of $2,000
Assume that a business trades in an old cash register for a new one. Under the income tax method…
the cost of the new asset is recorded as the book value of the old asset plus the cash amount paid or to be paid.
Equipment that cost $20,000 was sold for $12,000 cash. Accumulated depreciation on the asset was $14,000. The entry to record the sale includes a credit to the Equipment account for…
$20,000
The cost of an intangible asset…
Should be immediately charged to expense if the cost was incurred to develop the intangible asset.
A company purchased equipment for $16,000 cash. In addition, the company paid $1,000 to have the equipment delivered and $500 to have it installed. The cost of this asset for financial accounting purposes is…
$17,500
An example of real property is… (a) machinery. (b) factory equipment. (c) computer equipment. (d) buildings.
D- Buildings
The allocation of the costs of natural resources, such as minerals, to the units produced is referred to as…
depletion
Use of the declining-balance method results in…
higher depreciation charges in the early years of an asset’s life.
The denominator of the fraction that is used in the sum-of-the-years’-digits method of depreciation for an asset with a useful life of seven years is…
28
When computing depreciation, the salvage value should be ignored if a company uses…
the declining-balance method
The amount of a long-term asset’s impairment is…
the amount by which the asset’s book value exceeds its market value.
Federal income tax is levied…
on the partners for their individual shares of the reported partnership income.
The entry to record the investment of cash in a partnership by one partner would consist of…
a debit to Cash and a credit to the partner’s capital account.
Ryan Fuller, a sole proprietor, entered into partnership with another individual. Fuller’s investment in the partnership included equipment that cost $32,000 when it was purchased. The equipment has a book value of $13,000 and a net agreed-on value of $16,000. In the financial records of the partnership, this equipment and its accumulated depreciation should be recorded at…
$16,000 and $0, respectively
When the owner of a sole proprietorship accepts a partner, the assets of the proprietorship…
may be adjusted to reflect current values before being transferred to the partnership.
The amount that each partner withdraws from a partnership…
should be specified in the partnership agreement.
If an individual invests more cash for an interest in an existing partnership than the book value of his or her interests, an entry is made to…
debit Cash and credit the capital account of each existing partner.
The general ledger of a partnership…
Will contain a separate capital account for each partner
The salary and interest allowances in a partnership profit-sharing agreement can best be described as…
a means of distributing net income in relation to the services provided and the capital invested by each partner.
The entry to record the equal distribution of net income between two partners consists of…
a debit to Income Summary and a credit to each partner’s capital account.
The entry to record a partner’s salary allowance consists of…
a debit to Income Summary and a credit to the partner’s capital account.
Partnership net income of $33,000 is to be divided between two partners, Elan Chan and Roy Anderson, according to the following arrangement: There will be salary allowances of $20,000 for Chan and $10,000 for Anderson, with the remainder divided equally. How much of the net income will be distributed to Chan and Anderson, respectively?
$21,500 and $11,500
Danny Ortiz and Angela Hufford are partners, and each has a capital balance of $25,000. To gain admission to the partnership, Derek Peters pays $15,000 directly to Ortiz for one-half of his equity. After the admission of Peters, the total partners’ equity in the records of the partnership will be…
$50,000
If no other method of dividing net income or net loss is specified in the partnership agreement, it is divided…
equally
The partners’ salary and interest allowances are recorded in…
capital accounts
All of the following are included on the statement of partners’ equities except… (a) withdrawals (b) additional investments (c) salary allowances (d) share of net income or net loss
C- Salary Allowances.
Define Qualitiative Characteristics.
The qualities that make accounting information useful for decision making by investors, creditors, and other users.
Define Relevance.
Accounting information is capable of making a difference in a decision by the report user.
Define Predictive Value.
If information is relevant, it will help statement users in making predictions about the meaning and ultimate outcome of events giving rise to the information.
Define Feedback Value.
Information that helps the statement user confirm fulfillment or nonfulfillment of prior expectations or decisions is said to have feedback value.
Define Timeliness.
Information is timely only if it is presented soon enough after events are reported to be useful in decision making.
Define Reliability.
The information should be dependable; it is verifiable, a faithful representation of the company’s financial affairs, and resonably free of error and bias.
Define Verifiability.
Verifiability is indicated when independent measures obtain similar results.
Define Representational Faithfulness.
The concept that data shown in the financial reports reflect what really happened.
Define Neutrality or Objectivity.
The idea that the financial statements are not prepared in a way to favor one group of users over other groups.
Define Comparability.
The financial data is presented in such a manner that it can be meaningfully compared with the same data for other companies.
Define Consistency.
An entity uses the same accounting treatment for similar events and data from period to period.
Define Separate Economic Entity Assumption.
Assumes that the business is separate from its owners.
Define Going Concern.
Transactions are recorded and finacial statements are prepared; it will continue indefinitely.
Define the two aspects of Monetary Unit Assumption.
1- the idea that expressing financial facts and events is meaningful only when they can be expressed in monetary terms. 2- the value of money is stable.
Define Periodicity of Income Assumption.
The activities of the business can be separated into time periods with revenues and expenses being assigned on a logical basis to those periods.
Define Historical Cost Basis.
the amount of consideration, expressed in monetary terms, involved in a transaction through dealings in the market between the business and outsiders.
Define Revenue Recognition Principle.
Revenue is recognized when it is both earned and realized.
Define Realization.
Deemed to occur at the point at which a sale is made or a service is rendered to an outsider and delivery has been made. The point at which new assets are created in the form of money or in claims against others.
Define Matching Principle.
To properly measure income, revenue must be matched against expired costs incurred in earning the revenue.
Define Accrual Basis.
Calls for recognizing revenues or expenses in the period to which they apply, rather than in some later period when the cash is received or paid.
Define Full Disclosure Principle
Requires that all information that might affect the user’s interpretation of the profitability and the financial position of a business must be disclosed in the financial statments or in notes to the statements.
Define Transparency.
Information provided in the financial statements and notes accompanying them should provide a clear and accurate picture of the financial affairs of the company.
Define Materiality.
The significance of an item of financial data in relation to other financial data.
Define Cost-Benefit Test.
If accounting concepts suggest a particular accounting treatment for an item but it appears that the theoretically correct treatment would require an unreasonable amount of work, the accountant may analyze the benefits gained from its adoption is justified by the cost.
Define Conservatism.
“when in doubt, take the conservative action.” Thus, if there is no clear evidence of how a transaction or situation should be accounted for or if there are two or more equally acceptable treatments of the transaction, the accountant should choose the conservative approach.
Define Industry Practice.
In few limited cases unusual operating characteristics of an industry, usually based on risk, for which special accounting principles and procedures have been developed. These may not conform completely with GAAP for other industries.
In a firm that uses special journals, a sale of merchandise on credit is recorded in the ______ journal.
sales
In a firm that uses special journals, the acceptance of a return of merchandise from a credit costumer is recorded in the _____ journal.
general
In a firm that uses special journals, the sale of merchandise for cash is recorded in the _____ journal.
cash receipts
In a firm that uses special journals, the purchase of merchandise on credit is recorded in the ______ journal.
purchases
In a firm that uses special journals, an allowance given for damaged merchandise is recorded in the _____ journal.
general
In a firm that uses special journals, the collection of sums on account from credit customers is recorded in the _____ journal.
cash receipts
In a firm that uses special journals, an additional cash investment received from the owner is recorded in the _____ journal.
cash receipts
In a firm that uses special journals, the issuance of a check to pay a creditor on account is recorded in the _____ journal.
cash payments
The Sales account is classified as a _____ account. (liability, asset, revenue, or contra)
revenue.
A firm that sells goods that it purchases for re-sale is what kind of business? (service, merchandising, manufacturing, or non-profit)
Merchandising.
Merchandise is sold on credit for $600 plus 5 percent sales tax. The entry in the sales journal will include a debit to Accounts Receivable for…
$630
In a sales journal used to record taxable sales, the total of the Accounts Receivable column should equal…
The sum of the totals of the Sales Tax Payable column and the Sales column.
True or False: If the firm must collect sales tax on retail transactions, the sales journal should have a Sales Tax Payable Debit column.
False- credit column
True or False: Postings to the accounts receivable subsidiary ledger are usually made once a month on the last day of the month.
False
To find the balance due from an individual customer, the accountant would refer to…
the Accounts Receivable subsidiary ledger.
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes…
A debit to Sales Retruns and Allowances and a credit to Accounts Receivable.
If a firm does not have a Sales Retruns and Allowances Journal, the entries for these transactions are made in…
the general journal
The Sales Retruns and Allowances account is classified as a(n) ______ account. (asset, contra asset, expense, contra revenue)
contra revenue
The Sales Retruns and Allowances account is presented on which financial statement as a deduction/addition to what account?
on the income statement as a deduction from Sales.
After all postings have been made, the total of the scheduel of accounts receivable should equal…
the balance of the Accounts Receivable account int the general ledger.
The amount used by wholesalers to record sales in its sales journal is the _____ price.
net
Sales Returns and Allowances can best be described as a ________ account with a normal _________ balance
Contra Revenue; Debit
The amount of the trade discount taken by the customer is recorded as a…
Sales recorded net of trade discounts
What is the equation to find net delivered cost of purchases?
Purchases + Freight Charges - Purchases Returns and Allowances = Net Delivered Cost of Purchases.
What is the equation to calculate the Delivered cost of purchases?
Purchases + Freight In = Delivered Cost of Purchases.
True or False: In accounting, the term “cash includes checks, money orders, and funds on deposit in a bank as well as currency and coins.
True
True or False: The cash register proof is used to enter the cash sales and sales tax in the cash receipts journal.
True
True or False: The entry to record the receipt of a promissory not to replace an open account is recorded in the cash receipts journal.
False
The cash receipts journal has separate columns for debits to Cash, credits to Accounts Receivable, and credits to Sales and Sales Tax Payable.
True
A cash sale of merchandise would be recorded in the _______ journal.
cash receipts
The entry to record an additional cash investment by the owner is recorded in the _______ journal.
cash receipts
The entry to replenish a petty cash fund includes…
debits to various expense accounts and a credit to Cash
The most appropriate form of endorsement of a check for business purposes is…
The restrictive endorsement.
On a bank reconcilliation statement, you would find all of the following except… (a) a list of canceled checks. (b) a list of NFS checks. (c) a list of outstanding checks. (d) the bank service charge.
A- a list of canceled checks.
To arrive at an accurate balance on a bank reconciliation statement, outstanding checks should be.
deducted from the bank statement balance.
To arrive at an accurate balance on a bank reconciliation statement, a credit memorandum from the bank for the collection of a note and interest should be…
added to the book balance.
A check issued for $890 to pay a vendor on account was recorded in the firm’s records as $980; the canceled check was properly listed on the bank statement at $890. To arrive at an accurate balance on a bank reconciliation statement, the error should be…
added to the book balance.
If a check written by a firm is not canceled by the bank and returned with the month’s bank statement, the firm should…
consider this check as outstanding when preparing the bank reconciliation.
Mechandise costing $5,600 with terms of 1/10, n/30, with transportation costs of $320 included on the invoice (not included in the $5,600) is sold on account. If the bill is paid within ten days, the amount of the purchase discount is…
$56
The employer records the amount of federal income tax withheld from employees as…
Employee Federal Income Tax Payable
Salespeople who are paid a percentage of net sales are paid on…
commission basis
Publication 15, Circular E contains withholding information for…
federal income taxes only.
The Social Security Tax Payable account will normally have a…
credit balance
The column totals in a payroll register are…
used in the journal entry to record the payroll
The amount debited to Wages Expense when a payroll is recorded is the…
total gross earnings
When checks are issued to employees after the entry to record the payroll has been made, the accountant would…
debit Salaries and Wages Payable and credit Cash
Each type of deduction made from the employee’s earnings is recorded in a separate ________ account.
liability
For which tax is there no limit on the amount of annual earnings subject to the tax?
Federal Income Tax
The Payroll Tax Expense account is used to record which tax?
Federal unemployment compensation tax
Whic of the following is NOT typically an employee payroll withholding? (a) federal income taxes (b) state unemployment taxes (c) union dues (d) medical insurance
B- state unemployment taxes
FICA taxes are paid by…
both the employee and employer
Rick O’Shea, the only employee of Hunter Furniture Company, makes $30,000 per year and is paid once a month. For the month.For the month of July, his federal income taxes withheld are $180, state income taxes withheld are $37, social security is 6.2%, Medicare tax is 1.45%, State Unemployment Tax is 4%, and Federal Unemployment tax is .8%. What is Rick’s net pay for July?
$2,091.75
Rick O’Shea, the only employee of Hunter Furniture Company, makes $30,000 per year and is paid once a month. For the month of July, his federal income taxes withheld are $180, state income taxes withheld are $37, social security is 6.2%, Medicare tax is 1.45%, State Unemployment Tax is 4%, and Federal Unemployement tax is .8%. What is the total amount of employer payroll taxes for the month of July for Hunter Furniture Company? (Assume all earnings are subject to employer payroll taxes.)
$311.25
The total amount earned by the employee is called the…
gross pay
In order to ensure that they are meaningful and useful, financial statements should be prepared…
using generally accepted accounting principles (GAAP)
True or False: The Securities and Exchange Commission (SEC) issues the Statements of Financial Accounting Standards.
False
The Statements of Financial Accounting Standards that automatically become generally accepted accounting principles are issued by…
the FASB
The Financial Accoutning Standards Board is…
an independent organization.
Which of the following important types of documents are not issued by the Accounting Standards Executive Committee? (a) Accounting and auditing guides (b) statements of position (c) Pratice bulletins (d) tax authority guidelines.
D- Tax authority guidelines.
In its conceptual framework, the FASB concluded that finacnial reporting rules should concentrate on providing information that is helpful to…
Current and potential investors and creditors in making investments and credit decisions.
Investors and creditors expect to recieve a cash flow from the business entity…
directly from the distribution of the company’s earnings and indirectly through the disposition of their interest for cash.
Financial report users need information about…
profits, economic resources (assets), and claims against the assets (liabilities and owner’s equity)
The SEC’s 2003 report to the Congress on “principles-based” accounting observed that the first characteristic of objectives-based standards, as dictated by the Sarbanes-Oxley Act, is that any standard must be based on…
an improved and consistently applied framework.
Accounting information that is capable of making a difference in a decision by the user of the report is…
relevant
The Cervantes Company uses the same method of depreciation for its equipment in each fiscal period. This practice is an example of…
consistency
The four assumptions financial statment users hsould be able to assume that preparers of the statements have made in preparing the statements that are listed by the FASB’s conceptual framework are…
separate economic entity, going concern, monetary unit, and periodicity of income.
Each year there was an increase in the market value of some stock owned by the Mudstream Company, but the accountant didn’t record the increase in asset value and equity until the stock was sold. In this situation, the accountant followed/violated what principle?
followed the realization principle.
Depreciating equipment over its useful life is an example of…
applying the matching principle
The The financial statements in the annual report of a corporation contain footnotes explaining the methods used to depreciate the firm’s equipment. This practice is an example of…
the full disclosure principle.
The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of…
realization principle.
A deviation from generally accepted accounting principles is permissible if…
the amount involved is immaterial.
An accountant charged the Repairs Expense account for a tool that cost $12. The tool had an estimated useful life of 5 years; however, the accountant did not choose to depreciate it. The modifying convention that the accountant followed was…
materiality
Paige Turner Publishing’s employees worked the last 3 days of December 2013, but they will not be paid for until January 2014. According to the matching principle, Paige Turner Publishing should recognize the wages expense for the last 3 days of 2013 in…
2013 when the employees worked.
True or False: Interpreting the financial statements can only be performed by auditors.
False
