Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Questions
Q:
Generally accepted accounting principles require companies to use a specific format for the financial statements.
Q:
Accounting and reporting for merchandise purchases and sales are treated identically under both GAAP and IFRS.
Q:
Operating expenses are classified into two categories: selling expenses and cost of goods sold.
Q:
A multiple-step income statement format shows detailed computations of net sales and other costs and expenses and reports subtotals for various classes of items.
Q:
The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.
Q:
In a perpetual inventory system, the merchandise inventory account must be closed at the end of the accounting period.
Q:
Sales Discounts, Sales Returns and Allowances, and Cost of Goods Sold are all closed to the Income Summary account with debits.
Q:
A perpetual inventory system is able to directly measure and monitor inventory shrinkage.
Q:
A journal entry with a debit to cash of $980, a debit to Sales Discounts of $20, and a credit to Accounts Receivable of $1,000 means that a customer has taken a 10% cash discount for early payment.
Q:
When a credit customer returns merchandise, a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.
Q:
Sales discounts on credit sales can benefit a seller by decreasing the delay in receiving cash and reducing future collection efforts.
Q:
Each sales transaction of a seller that uses a perpetual system involves recognizing both revenue and cost of merchandise sold.
Q:
A buyer did not take advantage of a supplier's credit terms of 2/10, n/30, but instead paid the invoice in full at the end of 30 days. By not taking the discount, the buyer lost the equivalent of 18% annual interest on the amount of the purchase.
Q:
If goods are shipped FOB shipping point, the seller does not record revenue from the sale until the goods arrive at their destination because the transaction is not complete until that point.
Q:
The seller is responsible for paying shipping charges and bears the risk of damage or loss in transit if goods are shipped FOB destination.
Q:
If a company sells merchandise with credit terms 2/10, n/60, the credit period is 10 days and the discount period is 60 days.
Q:
In a perpetual inventory system, the merchandise inventory account reflects the cost of goods available for sale.
Q:
Sellers always offer a discount to buyers for prompt payment toward purchases made on credit.
Q:
With credit terms of 2/10, n/30, the seller is offering the purchaser a 2% cash discount if the amount is paid within 10 days of the invoice date. Otherwise, the full amount is due in 30 days.
Q:
Under the perpetual inventory system, the cost of merchandise purchased is accumulated in the Merchandise Inventory account.
Q:
Under the perpetual inventory system, the cost of merchandise purchased is recorded in the Purchases account.
Q:
Purchase allowances refer to merchandise a buyer acquires but then returns to the seller.
Q:
Purchase returns refer to merchandise a buyer acquires but then returns to the seller.
Q:
Credit terms include the specifics regarding the amount owed and timing of payments from a buyer to a seller.
Q:
Trade discounts are recorded in a Trade Discounts account in the accounting system.
Q:
Cost of goods sold is reported on both the income statement and the balance sheet.
Q:
The Merchandise Inventory account balance at the end of one period is equal to the amount of beginning merchandise inventory for the next period.
Q:
J.C. Penney had net sales of $24,750 million, cost of goods sold of $16,150 million, and net income of $837 million. Its gross margin ratio equals 3.4%.
Q:
A company had net sales of $340,500, its cost of goods sold was $257,000, and its net income was $13,750. The company's gross margin ratio equals 24.5%.
Q:
The gross margin ratio reflects the relation between sales and cost of goods sold.
Q:
The profit margin ratio is gross margin divided by total assets.
Q:
The gross margin ratio is defined as gross margin divided by net sales.
Q:
Successful use of a just-in-time inventory system can narrow the gap between the acid-test and the current ratio.
Q:
A common rule of thumb is that a company's acid-test ratio should be at least 2 or a company may face financial problems in the near future.
Q:
The acid-test ratio is defined as current assets divided by current liabilities.
Q:
Quick assets include cash, inventory, and current receivables.
Q:
Beginning merchandise inventory plus the net cost of purchases is equal to the merchandise available for sale.
Q:
A perpetual inventory system continually updates accounting records for inventory transactions.
Q:
A perpetual inventory system requires updating of the inventory account only at the beginning of an accounting period.
Q:
Assets tied up in inventory are referred to as nonproductive assets.
Q:
Cash sales shorten the operating cycle for a merchandiser; credit purchases lengthen operating cycles.
Q:
Merchandise inventory is reported in the long-term assets section of the balance sheet.
Q:
A merchandising company's operating cycle begins with the sale of merchandise and ends with the collection of cash from the sale.
Q:
A company had a gross profit of $300,000 based on sales of $400,000, which means its cost of goods sold is equal to $700,000.
Q:
A company had net sales of $545,000 and cost of goods sold of $345,000, which means its gross margin is equal to $200,000.
Q:
A company had sales of $350,000 and cost of goods sold of $200,000, which means gross profit is equal to $550,000.
Q:
Cost of goods sold represents the value of merchandise sold to customers.
Q:
A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.
Q:
A wholesaler is an intermediary that buys products from manufacturers or other wholesalers and sells them to consumers.
Q:
Gross profit is the same as gross margin.
Q:
Merchandise inventory consists of products that a company acquires to resell to customers.
Q:
Accounting for Merchandising Operations
Q:
Based on the adjusted trial balance, prepare a balance sheet for Martin Sky Taxi Services. MARTIN SKY TAXI SERVICES Adjusted Trial Balance For the year ended December 31 Cash
$ 28,000 Accounts receivable
14,200 Office supplies
1,700 Airplanes
100,000 Accumulated depreciation Airplanes 45,000 Accounts payable 11,500 Common stock 25,000 Retained earnings 46,900 Dividends
40,000 Fees earned 150,000 Rent expense
13,000 Office supplies expense
2,000 Utilities expense
2,500 Depreciation Expense Airplanes
15,000 Salary expense
50,000 Fuel expense
12,000 Totals
$278,400
$278,400
Q:
Based on the adjusted trial balance, prepare a statement of retained earnings for Martin Sky Taxi Services. MARTIN SKY TAXI SERVICES Adjusted Trial Balance For the year ended December 31 Cash
$ 28,000 Accounts receivable
14,200 Office supplies
1,700 Airplanes
100,000 Accumulated depreciation Airplanes 45,000 Accounts payable 11,500 Common stock 25,000 Retained earnings 46,900 Dividends
40,000 Fees earned 150,000 Rent expense
13,000 Office supplies expense
2,000 Utilities expense
2,500 Depreciation Expense Airplanes
15,000 Salary expense
50,000 Fuel expense
12,000 Totals
$278,400
$278,400
Q:
From the adjusted trial balance, prepare an income statement for Martin Sky Taxi Services. MARTIN SKY TAXI SERVICES Adjusted Trial Balance For the year ended December 31 Cash
$ 28,000 Accounts receivable
14,200 Office supplies
1,700 Airplanes
100,000 Accumulated depreciation Airplanes 45,000 Accounts payable 11,500 Common stock 25,000 Retained earnings 46,900 Dividends
40,000 Fees earned 150,000 Rent expense
13,000 Office supplies expense
2,000 Utilities expense
2,500 Depreciation Expense Airplanes
15,000 Salary expense
50,000 Fuel expense
12,000 Totals
$278,400
$278,400
Q:
Prepare a balance sheet from the adjusted trial balance of Hanson Storage. HANSON STORAGE Adjusted Trial Balance December 31 Cash
$ 3,050 Accounts receivable
400 Prepaid insurance
830 Office supplies
80 Office equipment
4,200 Accumulated depreciation office equipment $ 1,100 Buildings
98,000 Accumulated depreciation buildings 28,000 Land
115,000 Wages payable 880 Property taxes payable 1,400 Interest payable 2,200 Unearned rent 460 Long-term notes payable 150,000 Common stock 15,000 Retained earnings 25,340 Dividends
21,000 Rent earned 57,500 Wages expense
25,000 Utilities expense
1,900 Property taxes expense
2,400 Insurance expense
800 Office supplies expense
250 Depreciation expense office equipment
400 Depreciation expense buildings
5,570 Interest expense
3,000 Totals
$281,880
$281,880
Q:
Prepare a statement of retained earnings from the adjusted trial balance of Hanson Storage. HANSON STORAGE Adjusted Trial Balance December 31 Cash
$ 3,050 Accounts receivable
400 Prepaid insurance
830 Office supplies
80 Office equipment
4,200 Accumulated depreciation office equipment $ 1,100 Buildings
98,000 Accumulated depreciation buildings 28,000 Land
115,000 Wages payable 880 Property taxes payable 1,400 Interest payable 2,200 Unearned rent 460 Long-term notes payable 150,000 Common stock 15,000 Retained earnings 25,340 Dividends
21,000 Rent earned 57,500 Wages expense
25,000 Utilities expense
1,900 Property taxes expense
2,400 Insurance expense
800 Office supplies expense
250 Depreciation expense office equipment
400 Depreciation expense buildings
5,570 Interest expense
3,000 Totals
$281,880
$281,880
Q:
Prepare an income statement from the adjusted trial balance of Hanson Storage. HANSON STORAGE Adjusted Trial Balance December 31 Cash
$ 3,050 Accounts receivable
400 Prepaid insurance
830 Office supplies
80 Office equipment
4,200 Accumulated depreciation office equipment $ 1,100 Buildings
98,000 Accumulated depreciation buildings 28,000 Land
115,000 Wages payable 880 Property taxes payable 1,400 Interest payable 2,200 Unearned rent 460 Long-term notes payable 150,000 Common stock 15,000 Retained earnings 25,340 Dividends
21,000 Rent earned 57,500 Wages expense
25,000 Utilities expense
1,900 Property taxes expense
2,400 Insurance expense
800 Office supplies expense
250 Depreciation expense office equipment
400 Depreciation expense buildings
5,570 Interest expense
3,000 Totals
$281,880
$281,880
Q:
Use the following information to prepare the adjusted trial balance for Bella's Beauty Salon. Bellas Beauty Salon's unadjusted trial balance for the current year follows: BELLAS BEAUTY SALON Trial Balance December 31 Cash
$ 4,200 Prepaid insurance
1,480 Shop supplies
990 Shop equipment
3,860 Accumulated depreciation shop equipment $ 770 Building
57,500 Accumulated depreciation building 3,840 Land
55,000 Unearned rent 1,600 Long-term notes payable 50,000 Common stock 10,000 Retained earnings 39,860 Rent earned 2,400 Fees earned 23,400 Wages expense
3,200 Utilities expense
690 Property taxes expense
600 Interest expense
4,350 Totals
$131,870
$131,870 Additional information:
a. An insurance policy examination showed $1,240 of expired insurance.
b. An inventory count showed $210 of unused shop supplies still available.
c. Depreciation expense on shop equipment, $350.
d. Depreciation expense on the building, $2,220.
e. A beautician is behind on space rental payments and this $200 of accrued revenue was unrecorded at the time the trial balance was prepared..
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months' property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.
i. One month's interest on the note payable, $600, has accrued but is unrecorded.
Q:
Based on the following information, prepare the adjusting journal entries for Bella's Beauty Salon. Bellas Beauty Salon's unadjusted trial balance for the current year follows: BELLAS BEAUTY SALON Trial Balance December 31 Cash
$ 4,200 Prepaid insurance
1,480 Shop supplies
990 Shop equipment
3,860 Accumulated depreciation shop equipment $ 770 Building
57,500 Accumulated depreciation building 3,840 Land
55,000 Unearned rent 1,600 Long-term notes payable 50,000 Common stock 10,000 Retained earnings 39,860 Rent earned 2,400 Fees earned 23,400 Wages expense
3,200 Utilities expense
690 Property taxes expense
600 Interest expense
4,350 Totals
$131,870
$131,870 Additional information:
a. An insurance policy examination showed $1,240 of expired insurance
b. An inventory count showed $210 of unused shop supplies still available
c. Depreciation expense on shop equipment, $350
d. Depreciation expense on the building, $2,220
e. A beautician is behind on space rental payments and this $200 of accrued revenue was unrecorded at the time the trial balance was prepared.
f. $800 of the Unearned Rent account balance was earned by year-end.
g. The one employee, a receptionist, works a five-day workweek at $50 per day. The employee was paid last week but has worked four days this week for which she has not been paid.
h. Three months' property taxes, totaling $450, have accrued. This additional amount of property taxes expense has not been recorded.
i. One month's interest on the note payable, $600, has accrued but is unrecorded.
Q:
In general journal form, record the December 31 adjusting entries for the following transactions and events. Assume that December 31 is the end of the annual accounting period.
a. The Prepaid Insurance account shows a debit balance of $2,340, representing the cost of a three-year fire insurance policy that was purchased on October 1 of the current year.
b. The Office Supplies account has a debit balance of $400; a year-end inventory count reveals $80 of supplies still on hand.
c. On November 1 of the current year, Rent Earned was credited for $1,500. This amount represented the rent earned for a three-month period beginning November 1.
d. Estimated depreciation on office equipment is $600.
e. Accrued salaries amount to $400.
Q:
Black Company's unadjusted and adjusted trial balances on December 31 of the current year are as follows Unadjusted Trial Balance
Adjusted Trial Balance Cash
4,000 4,000 Prepaid insurance
1,600 1,200 Equipment
9,000 9,000 Accumulated depreciation Equipment 900 1,800 Salaries payable 1,000 Unearned repair fees 2,500 600 Repair fees earned 10,000 11,900 Salaries expense
3,500 4,500 Depreciation expense Equip 900 Insurance expense
700 1,100 Common stock 5,000 5,000 Retained earnings 400 400 18,800
18,800
20,700
20,700 Present the four adjusting journal entries that were recorded by Black Company.
Q:
The following unadjusted and adjusted trial balances were taken from the current year's accounting system for High Point, Inc. HIGH POINT, INC. Trial Balances For Year Ended December 31 Unadjusted Trial Balance
Adjusted Trial Balance Debit
Credit
Debit
Credit Cash
11,300 11,300 Accounts receivable
16,340 17,140 Office supplies
1,045 645 Prepaid advertising
1,100 450 Building
26,700 26,700 Accumulated depreciation -- Building 1,300 6,300 Accounts payable 3,320 3,500 Unearned services revenue 4,410 3,010 Common stock 10,000 10,000 Retained earnings 7,905 7,905 Services revenue 72,400 74,600 Salaries expense
34,500 34,500 Utilities expense
5,450 5,630 Advertising expense
2,900 3,550 Supplies expense 400 Depreciation expense building 5,000 Totals
99,335
99,335
105,315
105,315 In general journal form, present the six adjusting entries that explain the changes in the account balances from the unadjusted to the adjusted trial balance.
Q:
During the current year ended December 31, clients paid fees in advance for accounting services amounting to $25,000. These fees were recorded in an account called Unearned Accounting Fees. If $3,500 of these fees are still unearned on December 31 of this year, prepare the December 31 adjusting entry .
Q:
Western Company had $500 of store supplies available at the beginning of the current year. During the year Western Company purchased $2,750 worth of store supplies. On December 31 of this year, $375 worth of store supplies remained.
a. Calculate the amount of Western Company's store supplies expense for the current year. (Show your calculations.)
b. Prepare the journal entry to adjust the supplies account.
Q:
Show the December 31 adjusting entry to record $750 of earned but unpaid salaries of employees at the end of the current accounting period.
Q:
Compute the missing amounts:
(1) The Prepaid Insurance account had a $455 debit balance at the beginning of the current year; $650 of insurance premiums were paid during the year; and the year-end balance sheet showed $420 of prepaid insurance; consequently, the income statement for the year must have shown $______________ of insurance expense.
(2) The Office Supplies account began the current year with a $235 debit balance; the income statement for the year showed $475 of office supplies expense; and the year-end balance sheet showed the current asset, office supplies, at $225; consequently, if all supplies were accounted for, $____________ of office supplies must have been purchased during the year.
Q:
Day Co. leases an office to a tenant at the rate of $5,000 per month. The tenant contacted Day and arranged to pay the rent for December 2014 on January 8, 2015. Day agrees to this arrangement.
a. Prepare the journal entry that Day must make at December 31, 2014, to record the accrued rental revenue.
b. Prepare the journal entry to record the receipt of the rent on January 8, 2015.
Q:
An asset that cost $50,000 was purchased on January 1. The asset has an estimated useful life of three years and an estimated salvage value of $3,200. Using the straight-line method, prepare the necessary adjusting journal entry for the end of the year.
Q:
July 31, 2013, the end of the quarter is on a Wednesday. Employees get paid each Friday for the week worked. Abel Co. has five employees who earn $100 per day each. Assuming the proper adjusting journal entry was made on June 30, prepare the journal entry to record the payment of wages on August 2.
Q:
July 31, 2013, the end of the quarter is on a Wednesday. Employees get paid each Friday for the week worked. Abel Co. has five employees who earn $100 per day each. Make the necessary adjusting journal entry for June 30.
Q:
During the year, Able Co. purchased $39,600 worth of supplies, at the end of the year, the balance sheet showed a balance of $1,760 in the Supplies account. Prepare the necessary adjusting entry.
Q:
During the year, Able Co. purchased $23,750 worth of supplies, at the end of the year, the supplies expense on the adjusted trial balance was $29,340 and the balance sheet showed a balance of $810 in the supplies account. What was the supplies balance at the beginning of the year?
Q:
On December 31, Connelly Company had performed $5,000 of management services for clients that had not yet been billed. Prepare Connelly's adjusting entry to record these fees earned.
Q:
On December 14 Bench Company received $3,700 cash for consulting services that will be performed in January. Bench records all such prepayments in a liability account. Prepare a general journal entry to record the $3,700 cash receipt.
Q:
Calculate the current ratio in each of the following separate cases. Current Assets
Current Liabilities Case 1
$ 75,000
$ 30,000 Case 2
$161,500
$ 85,000 Case 3
$ 45,000
$ 53,000 Case 4
$132,000
$127,000 Case 5
$ 99,000
$110,000
Q:
The following information is available for the Wooden Company: 2013
2012
2011 Net income
$ 2,630
$ 2,100
$ 1,850 Net sales
36,500
32,850
31,200 Total assets
400,000
385,000
350,000 From the information provided, calculate Wooden's profit margin ratio for each of the three years. Comment on the results, assuming that the industry average for the profit margin ratio is 6% for each of the three years.
Q:
Using the following table indicate the impact of the following errors made during the adjusting entry process. Use a "+" for overstatements, a "-" for understatements and a "0" for no effect. The first one is provided as an example: Error Revenues Expenses Assets Liabilities Equity Ex. Did not record depreciation for this period 0 - + 0 + 1. Did not record unpaid utility bill 2. Did not adjust unearned revenue account for revenue earned this period. 3. Did not adjust office supplies for supplies used this period. 4. Did not accrue employees wages for this period. 5. Recorded rent expense with a debit to salary expense and a credit to rent payable.
Q:
On December 31, 2012, a company forgot to record $7,000 of depreciation on office equipment. What would be the effect on the assets, net income, and equity when it comes to the 2012 financial statements?
Q:
The calendar year-end adjusted trial balance for Acosta Co. follows: ACOSTA CO. Adjusted Trial Balance December 31 Cash
$ 100,000 Accounts receivable
7,000 Prepaid rent
15,000 Prepaid Insurance
9,000 Office supplies
3,300 Office equipment
8,000 Accumulated depreciation Equipment $ 3,200 Building
350,000 Accumulated depreciation Building 42,000 Land
700,000 Accounts payable 5,800 Salaries payable 14,500 Interest payable 2,500 Long-term note payable 52,000 Common stock 50,000 Retained earnings 960,000 Dividends
200,500 Service fees earned 370,800 Salaries expense
90,000 Insurance expense
5,200 Rent expense
5,000 Depreciation expense Equipment
800 Depreciation expense Building
7,000 Totals
$1,500,800
$1,500,800 Required:
a. Prepare a classified year-end balance sheet. (Note: A $7,000 installment on the long-term note payable is due within one year.)
b. Calculate the current ratio.